UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
Wahlco Environmental Systems, Inc.
(NAME OF ISSUER)
Common Stock, Par Value $.01 Per Share
(TITLE OF CLASS OF SECURITIES)
930569108
(CUSIP NUMBER)
Arthur H. Amron, Esquire
WEXFORD MANAGEMENT LLC
411 W. Putnam Avenue, Greenwich, Connecticut 06830 (203) 862-7000
and
Stephen B. Selbst, Esquire
McDermott, Will & Emery, 50 Rockefeller Plaza, New York, N.Y. 10020, (212) 547-
5400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS)
May 15, 1998 and June 19, 1998
(DATES OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box / /.
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 930569108
1 NAME OF REPORTING PERSON: WES Acquisition Corp.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (Intentionally
Omitted)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(d) or (e) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY None
OWNED BY EACH
REPORTING
PERSON WITH
8 SHARED VOTING POWER
None
9 SOLE DISPOSITIVE POWER
None
10 SHARED DISPOSITIVE POWER
None
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 shares
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0 %
14 TYPE OF REPORTING PERSON
CO
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD MANAGEMENT LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
CONNECTICUT
7 SOLE VOTING POWER
NUMBER OF
SHARES NONE
BENEFICIALLY OWNED BY
EACH REPORTING
PERSON WITH
8 SHARED VOTING POWER
13,310,876 SHARES AND 1,174,845 WARRANTS
TO PURCHASE 1,174,845 SHARES
9 SOLE DISPOSITIVE POWER
NONE
10 SHARED DISPOSITIVE POWER
13,310,876 SHARES AND 1,174,845 WARRANTS
TO PURCHASE 1,174,845 SHARES
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,310,876 SHARES AND 1,174,845 WARRANTS TO PURCHASE 1,174,845
SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
82.79 %
14 TYPE OF REPORTING PERSON
OO; IA
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD SPECIAL SITUATIONS 1996, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
SHARES 1,263,698 SHARES AND 786,089 WARRANTS TO
BENEFICIALLY PURCHASE 786,089 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
1,263,698 SHARES AND 786,089 WARRANTS TO
PURCHASE 786,089 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,263,698 SHARES AND 786,089 WARRANTS TO PURCHASE 786,089
SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.98 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD SPECIAL SITUATIONS 1996
INSTITUTIONAL , L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
SHARES 234,760 SHARES AND 146,033 WARRANTS TO
BENEFICIALLY PURCHASE 146,033 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
234,760 SHARES AND 146,033 WARRANTS TO
PURCHASE 146,033 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
234,760 SHARES AND 146,033 WARRANTS TO PURCHASE 146,033 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.31 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD SPECIAL SITUATIONS 1996, LIMITED
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
CAYMAN ISLANDS
7 SOLE VOTING POWER
NUMBER OF
SHARES 64,025 SHARES AND 39,827 WARRANTS TO
BENEFICIALLY PURCHASE 39,827 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
64,025 SHARES AND 39,827 WARRANTS TO
PURCHASE 39,827 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
64,025 SHARES AND 39,827 WARRANTS TO PURCHASE 39,827 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.63 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD-EURIS SPECIAL SITUATIONS 1996,
L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
SHARES 326,170 SHARES AND 202,896 WARRANTS TO
BENEFICIALLY PURCHASE 202,896 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
326,170 SHARES AND 202,896 WARRANTS TO
PURCHASE 202,896 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
326,170 SHARES AND 202,896 WARRANTS TO PURCHASE 202,896 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.20 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD CAPITAL PARTNERS II, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
SHARES 7,995,556 SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
7,995,556 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,995,556 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.98 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: WEXFORD OVERSEAS PARTNERS I, L.P.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF
SHARES 3,426,666 SHARES
BENEFICIALLY
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
3,426,666 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,426,666 SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.99 %
14 TYPE OF REPORTING PERSON
PN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: CHARLES E. DAVIDSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES OF AMERICA
7 SOLE VOTING POWER
NUMBER OF
SHARES 13,310,876 SHARES AND 1,174,845 WARRANTS
BENEFICIALLY TO PURCHASE 1,174,845 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
13,310,876 SHARES AND 1,174,845 WARRANTS
TO PURCHASE 1,174,845 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,310,876 SHARES AND 1,174,845 WARRANTS TO PURCHASE 1,174,845
SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
82.79 %
14 TYPE OF REPORTING PERSON
IN
SCHEDULE 13D
CUSIP NO. 930569108
1 NAME OF REPORTING PERSON: JOSEPH M. JACOBS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: (INTENTIONALLY
OMITTED)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) / /
(B) /X/
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS (2)(D) OR (E) / /
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES OF AMERICA
7 SOLE VOTING POWER
NUMBER OF
SHARES 13,310,876 SHARES AND 1,174,845 WARRANTS
BENEFICIALLY TO PURCHASE 1,174,845 SHARES
OWNED BY EACH
REPORTING PERSON
WITH
8 SHARED VOTING POWER
NONE
9 SOLE DISPOSITIVE POWER
13,310,876 SHARES AND 1,174,845 WARRANTS
TO PURCHASE 1,174,845 SHARES
10 SHARED DISPOSITIVE POWER
NONE
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,310,876 SHARES AND 1,174,845 WARRANTS TO PURCHASE 1,174,845
SHARES
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
82.79 %
14 TYPE OF REPORTING PERSON
IN
SCHEDULE 13D
This Amendment No. 1 amends the Statement dated June 16, 1995
("Schedule 13D") with respect to the shares of common stock, par value $.01 per
share (the "Wahlco Common Stock"), of Wahlco Environmental Systems, Inc., a
Delaware corporation (the "Issuer"), filed by WES Acquisition Corp. ("WESAC").
This Amendment No. 1 is filed in order to amend Items 2, 3, 4, 5, 6, and 7.
Accordingly, Schedule 13D is amended as follows:
ITEM 2. IDENTITY AND BACKGROUND.
This Amendment No. 1 is filed by:
(a) WES ACQUISITION CORP., a corporation formed under the laws of
Delaware, having its principal business and office address at 411 West
Putnam Avenue, Greenwich, CT 06830.
(b) WEXFORD MANAGEMENT LLC, a limited liability company formed under
the laws of the State of Connecticut ("Wexford Management"), having its
principal business and office address at 411 West Putnam Avenue, Greenwich,
CT 06830.
(c) WEXFORD SPECIAL SITUATIONS 1996, L.P., a Delaware limited
partnership ("Wexford Special Situations"), having its principal business
and office address at 411 West Putnam Avenue, Greenwich, CT 06830.
(d) WEXFORD SPECIAL SITUATIONS 1996 INSTITUTIONAL, L.P., a Delaware
limited partnership ("Wexford Special Institutional"), having its principal
business and office address at 411 West Putnam Avenue, Greenwich, CT 06830.
(e) WEXFORD SPECIAL SITUATIONS 1996, LIMITED, a Cayman Islands
exempted company partnership ("Wexford Special Limited"), having its
principal business and office address at 411 West Putnam Avenue, Greenwich,
CT 06830.
(f) WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P., a Delaware limited
partnership ("Wexford-Euris"), having its principal business and office
address at 411 West Putnam Avenue, Greenwich, CT 06830.
(g) WEXFORD CAPITAL PARTNERS II, L.P., a Delaware limited partnership
("Capital Partners"), having its principal business and office address at
411 West Putnam Avenue, Greenwich, CT 06830.
(h) WEXFORD OVERSEAS PARTNERS I, L.P., a Delaware limited partnership
("Overseas Partners"), having its principal business and office address at
411 West Putnam Avenue, Greenwich, CT 06830.
(i) Charles E. Davidson
(j) Joseph M. Jacobs
(the individuals and entities in (a) - (j) individually, each a "Reporting
Person" and collectively, the "Reporting Persons") with respect to the Wahlco
Common Stock.
Charles E. Davidson is Chairman and a controlling member of Wexford
Management. Mr. Davidson is also a controlling member or an investor in a
number of private companies, including Capital Partners, Overseas Partners,
Wexford Special Situations, Wexford Special Institutional, Wexford Special
Limited, and Wexford-Euris. His principal business address is c/o Wexford
Management LLC, 411 West Putnam Avenue, Greenwich, CT 06830. He is a citizen of
the United States of America.
Joseph M. Jacobs is President, managing member, and a controlling
member of Wexford Management. Mr. Jacobs is also a controlling member or an
investor in a number of private companies, including Capital Partners, Overseas
Partners, Wexford Special Situations, Wexford Special Institutional, Wexford
Special Limited, and Wexford-Euris. His principal business address is c/o
Wexford Management LLC, 411 West Putnam Avenue, Greenwich, CT 06830. He is a
citizen of the United States of America.
Henry N. Huta and his spouse Sharon L. Huta are no longer part of the
Reporting Persons' filing group. Mr. Huta resigned from his position as an
employee of the Issuer in May 1996, and no Reporting Person has any
understanding or agreement with Mr. and Mrs. Huta with respect to the stock of
the Issuer that they own or may own in the future.
C. Stephen Beal is no longer part of the Reporting Persons' filing
group. Mr. Beal was previously deemed included in the Reporting Persons' filing
group because of an agreement between Mr. Beal and the Reporting Persons. That
agreement has been superseded and terminated by its terms by an employment
agreement between Mr. Beal and the Issuer. No Reporting Person has any
understanding or agreement with Mr. Beal with respect to the stock of the Issuer
that he owns or may own in the future.
None of the Reporting Persons has during the last five years been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree, or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violations with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the Restructuring Agreement (referred to in Item 7 below
and attached hereto as Exhibit 6, the "Restructuring Agreement"):
(a) In connection with the consummation of the Restructuring Plan,
effective May 18, 1998, the Issuer affected a ten-for-one reverse stock split
(the "Reverse Stock Split") as described in the Issuer's prospectus (the
"Prospectus") dated February 4, 1998. All share numbers reported herein give
effect to the Reverse Stock Split.
(b) Pursuant to their commitment in the Restructuring Agreement (the
"Stand-by Commitment"), Capital Partners and Overseas Partners purchased 446,508
and 191,361 shares of Wahlco Common Stock, respectively, representing all shares
not purchased in the Issuer's rights offering described in the Prospectus. As
compensation for the Stand-by Commitment, the Issuer paid Capital Partners and
Overseas Partners fees of $70,000 and $30,000, respectively, in the form of
38,483 and 16,492 shares of Wahlco Common Stock, respectively.
(c) Approximately $11,791,999 of debt the Issuer owed to WESAC was
converted into 11,791,999 shares of Wahlco Common Stock.
(d) As an element of the restructuring plan described in the
Prospectus (the "Restructuring Plan"), WESAC has distributed its 13,217,999
shares of Wahlco Common Stock to its creditors and stockholders as follows (as
described in the Prospectus, the "WESAC Liquidation"), and WESAC will be
liquidated:
(1) 7,510,565 shares to Capital Partners
(2) 3,218,813 shares to Overseas Partners
(3) 1,263,698 shares to Wexford Special Situations
(4) 234,760 shares to Wexford Special Institutional
(5) 64,025 shares to Wexford Special Limited
(6) 326,170 shares to Wexford-Euris
(7) 266,860 shares to C. Stephen Beal
(8) 266,860 shares to Henry Huta
(9) 59,341 shares to Maarten Hemsley
(10) 3,454 shares to Deborah Louise Hemsley-Schultz
(11) 3,453 shares to Rebecca Hemsley
ITEM 4. PURPOSE OF TRANSACTION.
To improve the financial condition of the Issuer, WESAC, Wexford
Management, Capital Partners, Overseas Partners, Wexford Special Situations,
Wexford Special Institutional, Wexford Special Limited, Wexford-Euris, C.
Stephen Beal, Henry N. Huta, Maarten D. Hemsley, Deborah Louise Hemsley-Schultz,
Rebecca Hemsley, and the Issuer entered into the Restructuring Agreement as of
January 30, 1998. The Restructuring Plan was consummated on May 15, 1998.
The Filing Persons intend to consider and recommend to the Board of
Directors of the Issuer transactions which they believe will enhance the value
of the Issuer. The Filing Persons do not at the present time have any specific
plans or proposals for any particular transaction.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) (1) WESAC received 13,217,999 shares of Wahlco Common Stock as part of
the Restructuring Plan. Such shares of Wahlco Common Stock represented
approximately 80.98% of the outstanding common stock of the Issuer. Pursuant to
the WESAC Liquidation, as of June 19, 1998, WESAC has distributed all of the
shares of the Issuer that it owned in accordance with Item 3 above. WESAC does
not currently own any Wahlco Common Stock. On June 19, 1998, after giving
effect to the WESAC Liquidation, WESAC ceased to be the beneficial owner of more
than five percent of a class of securities of the Issuer.
(2) Wexford Management controls Capital Partners, Overseas
Partners, Wexford Special Situations, Wexford Special Institutional, Wexford
Special Limited, and Wexford-Euris. Accordingly, each of Wexford Management,
Charles E. Davidson, and Joseph M. Jacobs may be deemed the beneficial owner of
the 13,310,876 shares of Wahlco Common Stock held for the accounts of Capital
Partners, Overseas Partners, Wexford Special Situations, Wexford Special
Institutional, Wexford Special Limited, and Wexford-Euris, and the 1,174,845
warrants, exercisable at $1.36 per share for 1,174,845 shares of Wahlco Common
Stock, held for the accounts of Wexford Special Situations, Wexford Special
Institutional, Wexford Special Limited, and Wexford-Euris. The sum of such
shares and warrants represents approximately 82.79% of the sum of all
outstanding shares of Wahlco Common Stock and such warrants.
(3) Pursuant to the WESAC Liquidation, Wexford Special Situations
acquired and beneficially owns 1,263,698 shares of Wahlco Common Stock.
Together with the 786,089 warrants, exercisable at $1.36 per share for 786,089
shares of Wahlco Common Stock, acquired by Wexford Special Situations on August
28, 1996, the sum of such shares and warrants beneficially owned by Wexford
Special Situations represents approximately 11.98% of the sum of all outstanding
shares Wahlco Common Stock and such warrants.
(4) Pursuant to the WESAC Liquidation, Wexford Special
Institutional acquired and beneficially owns 234,760 shares of Wahlco Common
Stock. Together with the 146,033 warrants, exercisable at $1.36 per share for
146,033 shares of Wahlco Common Stock, acquired by Wexford Special Institutional
on August 28, 1996, the sum of such shares and warrants beneficially owned by
Wexford Special Institutional represents approximately 2.31% of the sum of all
outstanding shares Wahlco Common Stock and such warrants.
(5) Pursuant to the WESAC Liquidation, Wexford Special Limited
acquired and beneficially owns 64,025 shares of Wahlco Common Stock. Together
with the 39,827 warrants, exercisable at $1.36 per share for 39,827 shares of
Wahlco Common Stock, acquired by Wexford Special Limited on August 28, 1996, the
sum of such shares and warrants beneficially owned by Wexford Special Limited
represents approximately 0.63% of the sum of all outstanding shares Wahlco
Common Stock and such warrants.
(6) Pursuant to the WESAC Liquidation, Wexford-Euris acquired and
beneficially owns 326,170 shares of Wahlco Common Stock. Together with the
202,896 warrants, exercisable at $1.36 per share for 202,896 shares of Wahlco
Common Stock, acquired by Wexford-Euris on August 28, 1996, the sum of such
shares and warrants beneficially owned by Wexford-Euris represents approximately
3.20% of the sum of all outstanding shares Wahlco Common Stock and such
warrants.
(7) Pursuant to the Stand-by Commitment and the WESAC
Liquidation, Capital Partners acquired and beneficially owns 7,995,556 shares of
Wahlco Common Stock. Such shares represent approximately 48.98% of the
outstanding Wahlco Common Stock.
(8) Pursuant to the Stand-by Commitment and the WESAC
Liquidation, Overseas Partners acquired and beneficially owns 3,426,666 shares
of Wahlco Common Stock. Such shares represent approximately 20.99% of the
outstanding Wahlco Common Stock.
Pursuant to the terms of various management contracts relating to
WESAC, Wexford Management, Wexford Special Situations, Wexford Special
Institutional, Wexford Special Limited, Wexford-Euris, Capital Partners, and
Overseas Partners, and as a result of the positions held by Mr. Davidson and Mr.
Jacobs with Wexford Management, each of Wexford Management, Mr. Davidson and Mr.
Jacobs may be deemed to have shared power to direct any disposition and voting
of the shares held for the account of WESAC, Wexford Management, Wexford Special
Situations, Wexford Special Institutional, Wexford Special Limited, Wexford-
Euris, Capital Partners, and Overseas Partners.
(b) Except for the transactions effected by the Restructuring Agreement
described above, there have been no transactions with respect to the shares of
common stock of the Issuer since 60 days prior to the date hereof by any of the
reporting persons.
(c) The shareholders, partners, and members of WESAC, Wexford Management,
Wexford Special Situations, Wexford Special Institutional, Wexford Special
Limited, Wexford-Euris, Capital Partners, and Overseas Partners have the right
to participate in the receipt of any dividends from, or proceeds from the sale
of, the shares held in accordance with their ownership interests in those
respective entities.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as described in Item 4 above with respect to the Restructuring
Agreement, there are no contracts, arrangements, understandings, or
relationships (legal or otherwise) with respect to securities of Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 6. Restructuring Agreement, dated as of January 30, 1998, among
Wahlco Environmental Systems, Inc., WES Acquisition Corp., Wexford Management
LLC, Wexford Capital Partners II, L.P., Wexford Overseas Partners I, L.P.,
Wexford Special Situations 1996, L.P., Wexford Special Situations 1996
Institutional, L.P., Wexford Special Situations 1996 Limited, Wexford-Euris
Special Situations 1996, L.P., C. Stephen Beal, Henry N. Huta, Maarten D.
Hemsley, Deborah Louise Hemsley-Schultz, and Rebecca Hemsley
SIGNATURE
After reasonable inquiry and to the best of each of the undersigned's
knowledge and belief, each of the undersigned certifies that the information set
forth in this statement is true, complete and correct.
June 19, 1998
WEXFORD MANAGEMENT LLC
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Member and Chief Financial Officer
WES ACQUISITION CORP.
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD CAPITAL PARTNERS II, L.P.
By Wexford Capital II, L.P.,
its General Partner
By Wexford Capital Corp.,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD OVERSEAS PARTNERS I, L.P.
By Wexford Capital Overseas II, L.P.,
its General Partner
By Wexford Capital Limited,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By Wexford Advisors LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996,
INSTITUTIONAL, L.P.
By Wexford Advisors LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996,
LIMITED
By Wexford Advisors LLC,
its Investment Advisor
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD-EURIS SPECIAL SITUATIONS
1996, L.P.
By Wexford-Euris Advisors, LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
CHARLES E. DAVIDSON
/S/ Charles E. Davidson
JOSEPH M. JACOBS
/S/ Joseph M. Jacobs
EXHIBIT I
Pursuant to Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the general Rules
and Regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, the undersigned agree that the statement to
which this Exhibit is attached is filed on behalf of each of them in the
capacities set forth below.
June 19, 1998
WEXFORD MANAGEMENT LLC
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Member and Chief Financial Officer
WES ACQUISITION CORP.
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD CAPITAL PARTNERS II, L.P.
By Wexford Capital II, L.P.,
its General Partner
By Wexford Capital Corp.,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD OVERSEAS PARTNERS I, L.P.
By Wexford Capital Overseas II, L.P.,
its General Partner
By Wexford Capital Limited,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By Wexford Advisors LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996,
INSTITUTIONAL, L.P.
By Wexford Advisors LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD SPECIAL SITUATIONS 1996,
LIMITED
By Wexford Advisors LLC,
its Investment Advisor
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
WEXFORD-EURIS SPECIAL SITUATIONS
1996, L.P.
By Wexford-Euris Advisors, LLC,
its General Partner
By: /S/ Jay Maymudes
Name: Jay Maymudes
Title: Vice President
CHARLES E. DAVIDSON
/S/ Charles E. Davidson
JOSEPH M. JACOBS
/S/ Joseph M. Jacobs
EXHIBIT 6
[EXECUTION COPY]
RESTRUCTURING AGREEMENT
THIS RESTRUCTURING AGREEMENT, dated as of January 30, 1998 (this
"Restructuring Agreement"), is entered into by and among WAHLCO ENVIRONMENTAL
SYSTEMS, INC., a Delaware corporation (the "Company"), and WES ACQUISITION
CORP., a Delaware corporation ("WESAC"); WEXFORD MANAGEMENT LLC, a Connecticut
limited liability company ("Wexford Management"); WEXFORD CAPITAL PARTNERS II,
L.P., a Delaware limited partnership ("Capital Partners"); WEXFORD OVERSEAS
PARTNERS I, L.P., a Delaware limited partnership ("Overseas Partners"); WEXFORD
SPECIAL SITUATIONS 1996, L.P., a Delaware limited partnership ("Wexford Special
Situations"); WEXFORD SPECIAL SITUATIONS 1996 INSTITUTIONAL, L.P., a Delaware
limited partnership ("Wexford Special Institutional"); WEXFORD SPECIAL
SITUATIONS 1996 LIMITED, a Cayman Islands exempted company partnership ("Wexford
Special Limited"); and WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P., a Delaware
limited partnership ("Wexford Euris"); C. Stephen Beal, an individual, Henry N.
Huta, an individual, Maarten Hemsley, an individual, Deborah Louise Hemsley-
Schultz, an individual, and Rebecca Hemsley, an individual (each, an "Individual
Party," and collectively, the "Individual Parties").
RECITALS
A. The Company has experienced losses for each of the past six years and
as of September 30, 1997, the consolidated stockholders' equity of the Company
was approximately negative $5.2 million.
B. The Wexford Funds have been the principal sources of working capital
and loans to the Company since May 1995.
C. In order to improve the financial condition of the Company, the
Company has devised the Restructuring Plan, which contemplates the Rights
Offering, the Silicon Valley Bank Repayment, the WESAC Debt Conversion, the New
1998 Credit Agreement, the Reverse Stock Split, the Funding Debt Conversion and
the WESAC Liquidation.
D. The parties acknowledge that the consummation of each constituent
transaction in the Restructuring Plan is contingent upon the consummation of
each other constituent transaction.
E. Approval of certain of the constituent transactions in the
Restructuring Plan requires the approval of the stockholders of the Company, and
the Reverse Stock Split requires the approval of the New York Stock Exchange.
F. The Restructuring Plan has been approved by the board of directors of
the Company as being in the best interests of the Company and its stockholders,
and the board of directors has recommended approval by the stockholders of the
Company of each constituent transaction that requires stockholder approval.
G. On the terms and subject to the conditions contained herein, the
parties desire to implement the Restructuring Plan.
1. Definitions.
1.1 "Agent" means Wexford Management, in its capacity as agent for the
lenders pursuant to the 1998 Credit Agreement.
1.2 "Average Closing Price" means the average of the closing price for the
Company's Common Stock on the New York Stock Exchange for the 20 trading days
prior to the effective date of the Reverse Stock Split.
1.3 "Basic Subscription Privilege" has the meaning assigned to such term
in Section 2.1(c) hereof.
1.4 "Capital Partners" has the meaning assigned to such term in the
recitals to this Restructuring Agreement.
1.5 "Capital Stock" shall mean any class or series of capital stock of the
Company.
1.6 "Closing Date" is that date on which all of the transactions
contemplated by this Restructuring Agreement, other than the Rights Offering,
the Reverse Stock Split and the WESAC Liquidation are simultaneously
consummated, at a closing to be held on April 15, 1998 at 10:00 a.m. at a
location to be designated by Wexford or at such other time as the parties hereto
shall agree.
1.7 "Company" means Wahlco Environmental Systems, Inc., a Delaware
corporation.
1.8 "Conversion Debt" means the aggregate sum of approximately $11,606,000
million, which the Company will owe to WESAC as of March 31, 1998, together with
interest accruing thereon after such date at the rate of approximately $125,000
per month through the Closing Date.
1.9 "Cross-Receipt" means a cross-receipt in form and substance
satisfactory to the Agents, by which the Company certifies to the Agent that the
Restructuring Conditions have been duly met.
1.10 "Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including any arbitrator with
authority to bind a party at law).
1.11 "Liquidation Debt" means loans or advances made by each WESAC Lender
to WESAC which evidence an aggregate of $10,434,080 in funds advanced by the
WESAC Lenders to WESAC, together with interest to the Closing Date.
WESAC Lender Amounts Advanced
Capital Partners $5,959,000
Overseas Partners $2,553,857
Wexford Special Situations $1,026,453
Wexford Special Institutional $ 190,686
Wexford Special Limited $ 52,005
Wexford Euris $ 264,936
C. Stephen Beal $ 172,500
Henry Huta $ 172,500
Maarten Hemsley $ 42,143
1.12 "Liquidation Plan" means the Plan of Liquidation adopted by the board
of directors and approved by the stockholders and creditors of WESAC, in
substantially the form of Exhibit A attached hereto.
1.13 "1998 Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of January 30, 1998, in the form attached hereto as Exhibit B
among the Company, the parties named as Lenders therein, and Wexford Management,
as Agent.
1.14 "1998 Loan Documents" means each document or agreement required to be
executed and delivered in connection with the execution and delivery of the 1998
Credit Agreement.
1.15 "Overseas Partners" has the meaning assigned to such term in the
recitals to this Restructuring Agreement.
1.16 "Oversubscription Privilege" has the meaning assigned to such term in
Section 2.3 hereof.
1.17 "Permitted Investments" means (a) direct obligations of the United
States of America (including obligations issued or held in book-entry form on
the books of the Department of the Treasury of the United States of America) or
obligations the timely payment of the principal of, or interest on, which are
fully guaranteed by the United States of America; (b) obligations, debentures,
notes or other evidence of indebtedness issued or guaranteed by any of the
following: Export-Import Bank of the United States, Federal Housing
Administration or other agency or instrumentality of the United States; (c)
repurchase agreements with financial institutions or savings and loan
associations having a combined capital surplus of at least $500,000,000 fully
secured by collateral security described in clauses (a) or (b) of this
definition and continuously having a market value of at least equal to the
amount so invested; (d) interest-bearing demand or time deposits (including
certificates of deposit) which are either (i) insured by the Federal Deposit
Insurance Corporation, or (ii) held in banks and savings and loan associations,
having general obligations rated at least "AA" or equivalent by S&P or Moody's,
or if not so rated, secured at all times, in the manner and to the extent
provided by law, by collateral security described in clauses (a) or (b) of this
definition, of a market value of no less than the amount of moneys so invested;
(e) commercial paper rated (on the date of acquisition thereof) at least A-1 or
P-1 or equivalent by S&P or Moody's, respectively (or an equivalent rating by
another nationally recognized credit rating agency of similar standing if
neither of such corporations is then in the business of rating commercial
paper), maturing not more than 90 days from the date of creation thereof; and
(f) any corporate evidence of indebtedness rated at least "A-" or equivalent by
S&P or Moody's, maturing, not more than 90 days from the date of creation
thereof.
1.18 "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.19 "Post-Split Common Stock" means the Common Stock of the Company after
giving effect to the Reverse Stock Split.
1.20 "Pre-Split Common Stock" means the Common Stock of the Company before
giving effect to the Reverse Stock Split.
1.21 "Proposal 2" means that proposal to the Stockholders of the Company
set forth in the Prospectus/Proxy Statement whereby the Stockholders approve two
amendments to the Company's Certificate of Incorporation, which approval is a
condition precedent to the Rights Offering and the Reverse Stock Split.
1.22 "Proposal 3" means that proposal to the Stockholders of the Company
set forth in the Prospectus/Proxy Statement whereby the Stockholders authorize
the Company to issue and sell additional shares of Post-Split Common Stock in
order to effect the Rights Offering and the Funding Debt Conversion.
1.23 "Prospectus/Proxy Statement" means the combined Registration Statement
on Form S-1 and Proxy Statement filed pursuant to Rule 14a-6, of the Company as
filed with the Securities and Exchange Commission ("SEC") on December 19, 1997
and amended on February 4, 1998.
1.24 "Restructuring Plan" means the plan of financial restructuring devised
by the Company in order to improve its financial condition, and which
contemplates the Rights Offering, the Silicon Valley Bank Repayment, the WESAC
Debt Conversion, the 1998 Credit Agreement, the Reverse Stock Split, and the
WESAC Liquidation.
1.25 "Reverse Stock Split" means the 1-for-10 reverse stock split which the
Company intends to effect with respect to its Common Stock after completion of
the Rights Offering.
1.26 "Rights" has the meaning assigned to such term in Section 2.1(a)
hereof.
1.27 "Rights Certificates" has the meaning assigned to such term in Section
2.1(a) hereof.
1.28 "Rights Holders" means has the meaning assigned to such term in
Section 2.1 hereof.
1.29 "Rights Offering" means the offer to existing stockholders of the
Company (other than WESAC) of rights to purchase an aggregate of 27,112,000
shares of the Pre-Split Common Stock at an exercise price of $.10 per share.
1.30 "Rights Record Date" means March 3, 1998.
1.31 "SEC Documents" means the Prospectus/Proxy Statement in final form and
all exhibits filed together therewith.
1.32 "Silicon Valley Bank Repayment" means the repayment by the Company
from the proceeds of the Rights Offering of all cash borrowings for loans under
the SVB Facility and the deposit of cash collateral for all outstanding letters
of credit issued by SVB pursuant to the SVB Facility.
1.33 "Special Meeting" means the special meeting of stockholders of the
Company to be held on March 2, 1998, or such later date to which such special
meeting may be adjourned.
1.34 "Stand-By Commitment" has the meaning assigned to such term in Section
2.1 (d) hereof.
1.35 "Stand-By Commitment Fee" means a fee of $100,000, payable in 549,752
shares of Pre-Split Common Stock.
1.36 "Stand-By Purchasers" means Capital Partners and Overseas Partners, in
their capacity as purchasers of unsubscribed shares of Pre-Split Common Stock in
the Rights Offering.
1.37 "Subscription Agent" means ChaseMellon Shareholder Services LLC as the
Company's transfer agent and as subscription agent for the Rights Offering.
1.38 "Subscription Price" means $.10 per share of Pre-Split Common Stock.
1.39 "SVB" means Silicon Valley Bank.
1.40 "SVB Facility" means the Amendment and Forbearance Agreement, dated as
of May 9, 1996, between SVB and the Company, as amended to date, and the "Loan
Agreements" (as defined therein) as modified thereby.
1.41 "Tranche A Line" means the commitment by the Lenders under the 1998
Credit Agreement to lend the Company an aggregate principal amount of up to
$3,000,000 from time to time prior to the Closing Date under this Restructuring
Agreement. To the extent not prepaid from proceeds of the Rights Offering, the
unpaid principal balance of the Tranche A Line shall have a scheduled maturity
date of December 31, 2000, shall bear interest and shall be governed by the
terms and conditions of the 1998 Credit Agreement.
1.42 "Tranche B Line" means the commitment by the Lenders under the 1998
Credit Agreement to lend the Company an aggregate principal amount of up to
$2,500,000 from time to time after the Closing Date under this Restructuring
Agreement to fund the Company's working capital needs.
1.43 "Transaction Documents" means all of the agreements among the several
parties hereto, which are intended to effect and consummate the transactions
contemplated by this Restructuring Agreement.
1.44 "Unsubscribed Shares" means any shares of Pre-Split Common Stock
offered in the Rights Offering and not purchased through exercise of the Basic
Subscription Privilege or the Oversubscription Privilege.
1.45 "WESAC" means WES Acquisition Corp., a Delaware corporation.
1.46 "WESAC Debt Liquidation" has the meaning assigned to such term in
Section 2.2 hereof.
1.47 "WESAC Lenders" means each of Capital Partners, Overseas Partners, the
Wexford 1996 Funds, C. Stephen Beal, Henry Huta and Maarten Hemsley, in each
case in such party's capacity as a lender to WESAC.
1.48 "WESAC Liquidation" means the liquidation of WESAC pursuant to the
Liquidation Plan, which will become effective on the Closing Date by the
execution, delivery and filing with the Secretary of State of Delaware of a
Certificate of Liquidation substantially in the form attached to the Liquidation
Plan as Annex 1.
1.49 "Wexford Funds" means the Wexford 1995 Funds and the Wexford 1996
Funds, collectively.
1.50 "Wexford Fee" shall have the meaning assigned to such term in Section
5.5(g) hereof.
1.51 "Wexford 1995 Funds" means Capital Partners and Overseas Partners,
collectively.
1.52 "Wexford 1996 Funds" means Wexford Special Situations, Wexford Special
Institutional, Wexford Special Limited and Wexford Euris, collectively.
1.53 "Wexford Parties" means WESAC, the Wexford 1995 Funds, the Wexford
1996 Funds and Wexford Management, collectively.
2. The Restructuring Plan.
2.1 Rights Offering. Set forth below are the principal terms and
conditions of the Rights Offering. In addition to the terms and conditions set
forth below, the Rights Offering will be conducted on the terms and conditions
contained in the Prospectus/Proxy Statement under the heading "THE RIGHTS
OFFERING," which additional terms and conditions are hereby incorporated by
reference as if set forth herein in full; provided, however, that in the event
of any inconsistency between the terms of this Agreement and the provisions of
the Prospectus/Proxy Statement, the terms of this Agreement shall control.
(a) Distribution of Rights. After upon approval of Proposal 2 and
Proposal 3 at the Special Meeting, the Company shall distribute to the
stockholders of record (other than WESAC) on the Rights Record Date (such
recipients or their transferees being hereinafter referred to as the "Rights
Holders"), eight (8) rights, each exercisable to purchase, on the terms and
conditions hereinafter set forth, one share of Pre-Split Common Stock (the
"Rights") at a price of $.10 per share (the "Subscription Price") for each share
of Pre-Split Common Stock held by such Rights Holder on the Rights Record Date.
The Rights shall be (1) evidenced by transferable rights certificates (the
"Rights Certificates"), and (ii) distributed at no cost to the Rights Holders.
(b) Expiration of Rights. The Rights will expire on the Expiration
Date; provided, however, that the Rights Offering may be extended for up to 30
additional days by the board of directors of the Company in its sole and
absolute discretion.
(c) Subscription Privileges. Each Rights Holder is entitled to
subscribe for all or any portion of the shares of Pre-Split Common Stock that
may be purchased upon exercise of the Rights (the "Basic Subscription
Privilege"). Each Right also entitles the Rights Holder to oversubscribe for
any shares not sold to Rights Holders exercising the Basic Subscription
Privilege, not to exceed one additional share of Pre-Split Common Stock for each
share of Pre-Split Common Stock purchased under the Basic Subscription Privilege
(the "Oversubscription Privilege"). Only Rights Holders who exercise Rights
under the Basic Subscription Privilege will be entitled to exercise the
Oversubscription Privilege. If the shares of Pre-Split Common Stock not
subscribed for by Rights Holders through exercise of the Basic Subscription
Privilege are not sufficient to satisfy all oversubscriptions, available shares
will be allocated pro rata (subject to the elimination of fractional shares)
among oversubscribing Rights Holders in proportion to the number of shares of
Pre-Split Common Stock each oversubscribing Rights Holder has subscribed for
under the Basic Subscription Privilege.
(d) Stand-By Commitment. On the terms and conditions of this
Restructuring Agreement and this Section 2. 1 (d), the Stand-By Purchasers
agree, severally and not jointly, to purchase all of the Unsubscribed Shares on
the Closing Date, at the Exercise Price (the "Stand-By Commitment"). Pursuant
to the Stand-By Commitment, Capital Partners shall purchase 70% of the
Unsubscribed Shares and Overseas Partners shall purchase 30% of the Unsubscribed
Shares. At least five days prior to the Closing Date, the Company shall notify
each Stand-By Purchaser of the number of shares to be purchased by it hereunder
and shall identify the bank account into which the purchase price shall be
paid. On the Closing Date, against payment of the applicable purchase price
by wire transfer of immediately available funds to the bank account
designated by the Company, the Company shall deliver to each Stand-By
Purchaser one or more stock certificates representing the number of shares of
Pre-Split Common Stock purchased by such Stand-By Purchaser hereunder. As
compensation for providing the Stand-By Commitment, on the Closing Date, the
Company shall pay the Stand-By Purchasers the Stand-By Commitment Fee.
2.2 WESAC Debt Conversion. On the Closing Date, WESAC agrees to convert
the Conversion Debt into approximately 11,606,000 shares of Post-Split Common
Stock (the "WESAC Debt Conversion"). On the Closing Date, WESAC will deliver to
the Company the notes and instruments evidencing the Conversion Debt identified
in the definition of such term in this Restructuring Agreement, and upon
issuance of the shares of Post-Split Common Stock to be delivered to WESAC
hereunder, each such note or instrument evidencing the Conversion Debt shall be
marked "canceled;" provided, however, that in the event any note or instrument
evidencing any obligation constituting Conversion Debt shall be lost or unable
to be located, WESAC shall execute and deliver an affidavit of loss and agree to
indemnify the Company against such loss, in which event the Company shall issue
such shares of Post-Split Common Stock to WESAC as if it had delivered the lost
or unlocated note or instrument.
2.3 Reverse Stock Split. Pursuant to the Restructuring Plan, the Company
intends, on the Closing Date, following the completion of the Rights Offering,
but prior to the WESAC Debt Conversion and the WESAC Liquidation, to effect a
one-for-ten reverse stock split, subject to (a) stockholder approval, and (b)
the prior approval of the New York Stock Exchange, which approvals the Company
agrees to seek promptly following the execution and delivery of this
Restructuring Agreement. The Company will not issue any fractional shares of
Post-Split Common Stock after the consummation of the Reverse Stock Split, but
will, in lieu thereof, pay to each stockholder otherwise entitled to receive a
fractional share of Post-Split Common Stock, cash on a fractional per share
basis equal to such fraction multiplied by the greater of the Subscription Price
or the Average Closing Price.
2.4 1998 Credit Agreement. Concurrently with the execution and delivery
of this Restructuring Agreement, the Company, and Capital Partners, Overseas
Partners, and each of the Wexford 1996 Funds, as lenders, and Wexford
Management, as agent, shall enter into the 1998 Credit Agreement and shall
execute and deliver each of the 1998 Loan Documents required to be executed and
delivered pursuant to the 1998 Credit Agreement.
2.5 WESAC Liquidation.
(a) On the Closing Date, but after the consummation of the Rights
Offering, the Reverse Stock Split and the WESAC Debt Conversion, WESAC
Liquidation shall be effected pursuant to the Liquidation Plan.
(b) By his or its execution and delivery of this Agreement, each
stockholder and each WESAC Lender hereby ratifies, confirms, adopts and approves
the terms and conditions of the Liquidation Plan. Pursuant to such Liquidation
Plan, WESAC will cease the active conduct of its business and wind tip its
affairs and, within the meaning of Section 332 of the Internal Revenue Code of
1986, as amended, will liquidate and distribute all of its assets, if any, in
complete liquidation, less any assets retained to meet claims. The Liquidation
Plan shall be consummated promptly, but in any event, within one calendar month
following the Closing Date.
(c) Subject to Section 2.5(d) hereof, each party who, pursuant to the
Liquidation Plan, will receive shares of the Common Stock, agrees that he or it
will not sell more than 25,000 shares of Post-Split Common Stock received by
such party pursuant to the Liquidation Plan in any thirty-day period through
regular-way brokers' sales. The execution and delivery of this Agreement shall
constitute the irrevocable consent of each WESAC Lender to the limitations set
forth in this Section 2.5(c).
(d) The shares of Common Stock of the Company distributed pursuant to
the Liquidation Plan shall not have been registered pursuant to the Securities
Act of 1933, as amended (the "Act"). Each stock certificate representing shares
of Common Stock of the Company distributed pursuant to the Liquidation Plan
shall bear a legend restricting its transferability under the Act. The Company
agrees for the benefit of each WESAC Lender who consents to the limitations set
forth in Section 2.5(c) hereof to use its reasonable best efforts to register
the resale of such shares of Common Stock on Form S-3 within ninety (90) days
following the Closing Date, and to maintain the effectiveness of such
registration statement for at least 90 days thereafter. Any WESAC Lender who
fails to consent to the limitations set forth in Section 2.5(c) hereof shall not
be entitled to have any shares of Common Stock owned by him or it registered for
resale hereunder.
2.6 Use of Proceeds. On the Closing Date, the Company shall use the net
proceeds of the Rights Offering as follows: (a) to pay the costs and expenses of
the Restructuring Plan, (b) to make the payments necessary to effect the Silicon
Valley Bank Repayment, (c) to the extent funds are available therefor, to repay
borrowings under the Chase Facility (as defined in the 1998 Credit Agreement) or
outstanding Tranche A Loans, and (d) for working capital purposes. Pending the
Closing Date, the Company shall invest the proceeds of the Rights Offering in
Permitted Investments.
3. Representations and Warranties.
3.1 Representations and Warranties and of the Company. The Company
represents and warrants to each other party hereto:
(a) Corporate Existence and Standing. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. Each subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The Company and each subsidiary has all requisite corporate
authority to own its property and to conduct its business in each jurisdiction
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary or is
subject to no material liability or disability by reason of the failure to be so
qualified.
(b) Capitalization.
(i) As of the date hereof, the total authorized capitalization
of the Company consists of 10,000,000 shares of preferred stock, none of which
are issued or outstanding, and 50,000,000 shares of common stock, of which
17,649,000 shares are issued and outstanding. All of the outstanding shares of
common stock have been duly and validly issued and are fully paid and non-
assessable.
(ii) Except as required to be disclosed in the SEC Documents,
there are no outstanding subscriptions, warrants, options, calls or commitments
of any character relating to or entitling any person to purchase or otherwise
acquire any of the Capital Stock of the Company or any subsidiary thereof or any
security that is convertible into or exchangeable for such Capital Stock.
Except as disclosed in the SEC Documents, there are no preemptive or similar
rights to subscribe for or to purchase any Capital Stock of the Company, and,
except as disclosed in the SEC Documents, the Company has not entered into any
presently outstanding agreement to register its Capital Stock or debt securities
under the Securities Act of 1933, as amended (the "Securities Act").
(iii) The shares of Capital Stock to be issued pursuant to
the Restructuring Plan have been duly authorized and, when issued in accordance
with this Agreement and the Prospectus/Proxy Statement, will be validly issued,
fully paid and nonassessable, free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company, except
as set forth in this Restructuring Agreement or by operation of law. Except as
set forth in the SEC Documents, the holders of outstanding Capital Stock of the
Company are not and shall not be entitled to preemptive or other rights afforded
by the Company to subscribe for or to purchase the Capital Stock or other
securities of the Company as a result of the transactions to be consummated
pursuant to the Restructuring Plan.
(c) Authorization and Validity. The Company has the power and
authority and legal right to execute and deliver the Transaction Documents to
which it is a party and to perform its obligations thereunder. The execution
and delivery by the Company of the Transaction Documents and the performance of
its obligations thereunder have been duly authorized by all necessary corporate
action on behalf of the Company and no further consent or authorization of its
board of directors or stockholders is required (other than such stockholder
approval of Proposals 1-3 to the extent set forth in the Prospectus/Proxy
Statement). The Transaction Documents to which it is a party have been duly and
validly executed and delivered by the Company and constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
(d) No Violation. Neither the execution and delivery by the Company
of the Transaction Documents to which it is a party nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will (i) violate the Company's or any subsidiary's certificate of incorporation
or by-laws, (ii) violate any judgment, decree, order, statute, law, regulation
or rule of any court or governmental authority to which the Company or any of
its subsidiaries or any of their respective properties may be subject or, (iii)
(A) cause the acceleration of the maturity of any debt or obligation of the
Company or any of its subsidiaries or (B) violate, or be in conflict with, or
constitute a default under, or permit the termination of, or result in the
creation of, any lien upon any property of the Company or any of its
subsidiaries under any agreement or instrument to which such Person is a party
or by which such Person (or its properties) may be bound. Neither the Company
nor any of its subsidiaries is (1) in violation of any term of its respective
certificates of incorporation or by-laws, or (2) in default of or non-compliance
with any material instrument, contract or agreement to which it is a party or of
any judgment, decree, order, statute, rule or governmental regulation which is
applicable to it or its business or properties.
(e) No Consents. Neither the execution and delivery of the
Transaction Documents to which the Company is a party nor the consummation of
the transactions contemplated hereby, requires the consent, approval or
authorization of, or filing, registration or qualification with, any Person or
any governmental authority on the part of the Company or its subsidiaries,
except for (i) the approval of the Reverse Stock Split by the New York Stock
Exchange, and (ii) the approval of Proposals 1-3 by the stockholders of the
Company to the extent set forth in the Prospectus/Proxy Statement.
(f) Litigation. There are no pending or, to the best of the
Company's knowledge, threatened actions or proceedings of any kind, including
actions or proceedings of or before any Governmental Authority, to which the
Company or any subsidiary is a party or is subject, or by which any of them or
any of their properties are bound seeking to challenge or restrain the
consummation of the Restructuring Plan, nor, to the best knowledge of the
Company, is there any basis for any such action or proceeding.
3.2 Representations and Warranties and of the Wexford Parties. The
Wexford Parties represent and warrant to each other party hereto:
(a) Existence and Standing. Each Wexford Party is duly formed,
validly existing and in good standing under the laws of its organization. Each
Wexford Party has all requisite authority to own its property and to conduct its
business in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary or is subject to no material liability or disability by
reason of the failure to be so qualified.
(b) Authorization and Validity. Each Wexford Party has the power and
authority and legal right to execute and deliver the Transaction Documents and
to perform its obligations hereunder and thereunder. The execution and delivery
by each Wexford Party of the Transaction Documents and the performance of its
obligations hereunder and thereunder have been duly authorized by all necessary
corporate, partnership or manager action on behalf of such Wexford Party and no
further consent or authorization of its board of directors, general or limited
partners or members is required. The Transaction Documents to which each
Wexford Party is a party have been duly and validly executed and delivered by
each Wexford Party and constitute the legally valid and binding obligations of
such Wexford Party, enforceable against such Wexford Party in accordance with
their respective terms.
(c) No Violation. Neither the execution and delivery by any Wexford
Party of the Transaction Documents to which it is a party nor the consummation
of the transactions herein or therein contemplated, nor compliance with the
provisions hereof or thereof will (i) violate the Governing Documents of any
Wexford Party, (ii) violate any judgment, decree, order, statute, law,
regulation or rule of any court or governmental authority to which any Wexford
Party or any of their respective properties may be subject, or (iii) violate, or
be in conflict with, or constitute a default under, or permit the termination
of, or result in the creation of, any lien upon any property of any of the
Wexford Parties under any agreement or instrument to which such Wexford Party is
a party or by which such Wexford Party (or its properties) may be bound. None
of the Wexford Parties is (1) in violation of any term of its Governing
Documents, or (2) in default of or non-compliance with any material instrument,
contract or agreement to which it is a party or of any judgment, decree, order,
statute, rule or governmental regulation which is applicable to it or its
business or properties.
(d) No Consents. Neither the execution and delivery of the
Transaction Documents to which any Wexford Party is a party nor the consummation
of the transactions contemplated thereby requires the consent, approval or
authorization of, or filing, registration or qualification with, any Person or
any Governmental Authority on the part of any of the Wexford Parties.
(e) Litigation. There are no pending or, to the best of knowledge of
any Wexford Party, threatened actions or proceedings of any kind, including
actions or proceedings of or before any Governmental Authority, to which any
Wexford Party is a party or is subject, or by which any of them or any of their
properties are bound seeking to challenge the validity of or restrain the
consummation of the transactions contemplated by, the Restructuring Plan, nor to
the knowledge of such Wexford Party, is there any basis for any such action or
proceeding.
3.3 Representations and Warranties of the Individual Parties. Each
Individual Party, severally and not jointly, represents and warrants to each
other party hereto as to only himself or herself:
(a) Authorization and Validity. Each Individual Party has the power
and authority and legal right to execute and deliver the Transaction Documents
to which such Individual Party is a party and to perform his or her obligations
hereunder and thereunder. The Transaction Documents to which such Individual
Party is a party have been duly and validly executed and delivered by such
Individual Party and constitute legal, valid and binding obligations of such
Individual Party, enforceable against such Individual Party in accordance with
their respective terms.
(b) No Violation. Neither the execution and delivery by each
Individual Party of the Transaction Documents to which such Individual Party is
a party nor the consummation of the transactions therein contemplated, nor
compliance with the provisions hereof or thereof will (i) violate any judgment,
decree, order, statute, law, regulation or rule of any court or governmental
authority to which such Individual Party or any of their respective properties
may be subject, or (ii) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or result in the creation of, any lien upon
any property of such Individual Party under any agreement or instrument to which
such Individual Party is a party or by which such Individual Party (or its
properties) may be bound.
(c) No Consents. Neither the execution and delivery of the
Transaction Documents to which each Individual Party or a party, nor the
consummation of the transactions contemplated thereby requires the consent,
approval or authorization of, or filing, registration or qualification with, any
Person or any Governmental Authority on the part of any of the Individual
Parties.
(d) Litigation. There are no pending or, to the best knowledge of
any Individual Party, threatened actions or proceedings of any kind, including
actions or proceedings of or before any Governmental Authority, to which any
Individual Party is a party or is subject, or by which any of them or any of
their properties are bound seeking to challenge the validity of or restrain the
consummation of the transactions contemplated by the Restructuring Plan, nor, to
the best knowledge of any Individual Party, is there any basis for any such
action or proceeding.
4. Covenants of the Company.
4.1 The Company hereby covenants to each of the other parties hereto that
between the date hereof and the Closing Date, it shall employ its reasonable
best efforts to perform all of the following:
(a) SEC Documents. The Company shall cause a final draft of all of
the SEC Documents, including but not limited to, the Prospectus/Proxy Statement
to be prepared, properly filed with the SEC, and if declared effective,
thereafter mailed to all stockholders deemed to be stockholders of record as of
February 2, 1998 (the "Record Date").
(b) Special Meeting. The Company shall notify all stockholders of
record of the Special Meeting, and shall hold the Special Meeting at the time
and place as set forth in such notice.
(c) Approvals. The Company shall obtain all necessary approvals for
each constituent transaction of the Restructuring Plan as may be necessary,
including without limitation (i) the approval of a majority of stockholders for
Proposals 2 and 3 as set forth in the Prospectus/Proxy Statement; and (ii) the
approval of the New York Stock Exchange for the Reverse Stock Split.
(d) Rights Offering. Upon approval of Proposals 2 and 3 at the
Special meeting, the Company shall proceed with the distribution of Rights, in
accordance with the terms of the Rights Offering, pursuant to Section 2.1
hereof.
(e) Reverse Stock Split. Following completion of the Rights
Offering, but prior to the WESAC Debt Conversion and the WESAC Liquidation, the
Company shall effect the Reverse Stock Split pursuant to Section 2.4 hereof.
(f) Actions Before Closing Date. Between the date hereof and the
Closing Date, the Company shall not take any action which shall cause it to be
in breach of any of its representations, warranties, covenants or agreements
contained in this Restructuring Agreement or any other Loan Document. The
Company shall use, at its sole cost and expense, all reasonable best efforts to
perform its obligations and satisfy all conditions to closing as are hereinafter
set forth as soon as practicable, but in no event later than the Closing Date.
5. Conditions Precedent.
The obligations of each of the parties hereto to consummate the
transactions contemplated by this Restructuring Agreement are subject to the
fulfillment, at or before the Closing Date, of the following conditions, any one
or more of which may be waived by all of the other parties hereto in their sole
discretion.
5.1 Representations and Warranties. The representations and warranties of
each party as set forth in this Restructuring Agreement shall be true and
correct in all material respects on and as of the Closing Date as though made on
and as of the Closing Date, and each party shall have received from every other
party a certificate dated the Closing Date and signed by an authorized
representative of such party to that effect.
5.2 Performance of Obligations. Each party shall have performed in all
material respects all obligations required under this Restructuring Agreement to
be performed by such party on or before the Closing Date, and each party shall
have received from every other party a certificate dated the Closing Date and
signed by an authorized representative of such party to that effect.
5.3 Consents and Approvals. All consents, waivers, authorizations and
approvals (including but not limited to, the consent, authorization and approval
of the stockholders of record of the Company to Proposals 2 and 3 as set forth
in the Prospectus/Proxy Statement and the New York Stock Exchange to the Reverse
Stock Split) required or desired in connection with the execution, delivery and
performance of this Restructuring Agreement shall have been duly obtained and
shall be in full force and effect on the Closing Date.
5.4 No Violation of Orders. No preliminary or permanent injunction or
other order issued by any court or other governmental or regulatory authority,
domestic or foreign, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any governmental or regulatory authority,
domestic or foreign, that declares this Restructuring Agreement invalid or
unenforceable in any respect or which prevents the consummation of the
transactions contemplated hereby shall be in effect, and no action or proceeding
before any court or regulatory authority, domestic or foreign, shall have been
instituted or threatened by any government or governmental or regulatory
authority, domestic or foreign, which seeks to prevent or delay the consummation
of the transactions contemplated by this Restructuring Agreement or which
challenges the validity or enforceability of this Restructuring Agreement, and
which in any such case has a reasonable likelihood of success in the opinion of
counsel to the Company or to the Wexford Parties.
5.5 Restructuring Conditions. The following conditions (the
"Restructuring Conditions") shall be conditions precedent to the obligations of
the parties hereunder, and all of such Restructuring Conditions will be effected
as simultaneously as practical.
(a) Tranche A and Tranche B Loans. All conditions precedent to the
funding of the first Tranche A Loan shall have been satisfied, all conditions
precedent to the funding of the first Tranche B Loan shall have been duly
satisfied, and no Event of Default shall exist or be continuing under the 1998
Credit Agreement.
(b) SEC Documents. The final SEC Documents, in a form satisfactory
to WESAC, shall (i) have been filed by the Company with the SEC under the Act
and the Securities Exchange Act of 1934, as amended, and with all necessary or
appropriate state securities commissions, agencies and bureaus, and (ii) such
final SEC Documents shall have been declared effective by the SEC and shall have
been approved or authorized by all requisite state securities commissions,
agencies and bureaus.
(c) Rights Offering. The Rights Offering shall have been duly
approved, authorized and conducted, and all the Rights shall have been
subscribed (by non-Wexford Parties or under the Stand-by Commitment). The
Rights, and the shares of Pre-Split Common Stock deliverable upon subscription
under the Rights, shall have been accepted for listing, upon official notice of
issuance, on the New York Stock Exchange.
(d) Reverse Stock Split. The Reverse Stock Split shall have taken
place:
(i) The Company's Certificate of Incorporation shall have been
duly amended, after all necessary or appropriate approvals or other actions by
the Company's stockholders and its board of directors.
(ii) The New York Stock Exchange, and all other appropriate self-
regulatory organizations, shall have duly approved the Reverse Stock Split as
described in the SEC Documents.
(e) SVB Repayment. All loans made under the SVB Facility shall have
been repaid in full using proceeds of the Rights Offering, and all letter of
credit obligations under the SVB Facility shall have been collateralized with
cash proceeds of the Rights Offering. SVB shall have transferred in immediately
available funds, to the Agent, or to the Agent's order, all cash collateral
previously posted by WESAC or any other Wexford Party under the SVB Facility.
SVB shall have released WESAC and all other Wexford Parties from their
guarantees, and released to the Agent all collateral security owned by the
Company or its subsidiaries posted in SVB's favor securing the SVB Facility.
(f) WESAC Liquidation. The Liquidation Plan shall have been approved
by the holders of a majority of the outstanding shares of Common stock of WESAC.
(g) Certain Fees. The Company shall have (i) paid $100,000 to
Wexford Management, in cash (the "Wexford Fee"), in consideration of its advice
and cooperation in arranging the Restructuring Plan, in immediately available
funds or by its good check to the order of Wexford Management, and (ii)
delivered $100,000 to the order of the Stand-by Purchasers (in the form of
certificates for 549,752 fully paid and non-assessable shares of Pre-Split
Common Stock).
When the Company believes that the conditions precedent to the
Restructuring Plan have been duly satisfied in all particulars, a duly
authorized officer of the Company shall execute and deliver to the Agent the
Company's certificate portion of the cross-receipt. When the Agent is satisfied
that all elements of the Agent's Certificate portion of the cross-receipt are
true, the Agent's duly authorized officer shall countersign the cross-receipt
and deliver a copy to the Company, all on behalf of (and binding upon) all of
the Wexford Parties party hereto.
5.6 Opinion of Counsel to the Company. The Wexford Parties shall have
received an opinion, dated as of the Closing Date, from Roger Barzun, Esq.,
counsel to the Company, substantially in form and substance satisfactory to the
Wexford Parties and their counsel.
6. Agency Provisions.
6.1 Appointment. Each undersigned Wexford Party hereby appoints Wexford
Management as its lawful agent and attorney-in-fact, with full power of
substitution, for all purposes under this Restructuring Agreement, the New
Credit Line and all of the other Loan Documents. This appointment is coupled
with an interest, and the Company as well as the Wexford Parties will rely upon
the irrevocable nature of such appointment.
6.2 Acceptance of Appointment. The Agent hereby accepts such appointment,
and agrees to exercise the powers granted hereunder and pursuant to the Loan
Documents with the same degree of care it would use if the entire risks and
rewards were for its own account.
6.3 Application of Funds. In the event any monies received from the
Company directly or pursuant to any Loan Document is in an amount insufficient
to pay all sums due to every Wexford Party, the Agent shall first apply the sum
received to its own out-of-pocket costs reasonably reimbursable under the terms
of the Loan Documents, and shall pay the balance to the Wexford Parties pro rata
in accordance with the amounts then due and owing to each of them.
6.4 Agent's Liability. The Agent shall not be liable, except for its own
negligence or misconduct, and except with respect to claims based upon such
negligence or misconduct, that are successfully asserted against the Agent, the
Company and the Wexford Parties shall severally indemnify and hold harmless the
Agent, and any Person acting as the successor to the Agent, from and against any
and all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of or in connection
with the Agent's good faith acceptance of or performance of its duties and
obligations under this Restructuring Agreement and/or the Loan Documents. The
Agent shall be under no duty to institute any suit, or to take any remedial
procedures or to enter any appearance or in any way defend any suit in which it
may be made a defendant hereunder until it shall be indemnified as provided
herein. The Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Restructuring Agreement and/or the Loan Documents, and
shall not be liable for any action taken or omitted in accordance with such
advice.
6.5 Resignation of Agent. The Agent (or any successor Agent) may at any
time resign as such by delivering to the Company and the Wexford Parties at
least fifteen days' written notice of such resignation. Within fifteen days
after the giving of such notice, the Agent shall effect a transfer of all funds
still held in such Agent's possession to any successor Agent jointly designated
by the Company and the Wexford Parties in writing, or in the event no such
successor has been designated within such fifteen-day period, to any court of
competent jurisdiction, whereupon the Agent shall be discharged of and from any
and all further obligations arising in connection with this Restructuring
Agreement and/or the Loan Documents. The Agent's sole responsibility following
the delivery of a notice of resignation and prior to the delivery of the funds
still under the Agent's control to a successor Agent or to a court of competent
jurisdiction shall be to safeguard such funds until delivery thereof as
aforesaid or pursuant to a joint written disposition instruction by all the
other parties hereto or a final order of a court of competent jurisdiction.
7. Indemnification.
7.1 Indemnification by the Company. Notwithstanding the closing of the
transactions contemplated hereunder and regardless of any investigation at any
time made by or on behalf of the Wexford Parties or of any knowledge or
information that the Wexford Parties may have, the Company shall indemnify and
fully defend, save and hold the Wexford Parties and their respective directors,
general and limited partners, officers, employees, agents and attorneys (the
"Wexford Indemnitees"), harmless if any Wexford Indemnitee shall at any time or
from time to time suffer any damage, liability, loss, cost, expense (including
all reasonable attorneys', experts' and consultants' fees), deficiency,
interest, penalty, impositions, assessments or fines (collectively, "Losses")
arising out of or resulting from, or shall pay or become obliged to pay any sum
on account of, any Company Event of Breach. As used herein, "Company Event of
Breach" shall be and mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Company or
the breach of any warranty of the Company, including without limitation (i) any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to the Transaction Documents
by the Company (or any of its representatives) to the Wexford Parties (or any
representative of the Wexford Parties) and any misrepresentation in or omission
from any document furnished to the Wexford Parties in correction with the
transactions contemplated by this Restructuring Agreement;
(b) any failure of the Company duly to perform or observe any term,
provision, covenant, agreement or condition contained in the Transaction
Documents on the part of the Company to be performed or observed.
7.2 Indemnification by the Wexford Parties. Notwithstanding the closing
of the transactions contemplated hereunder, the Wexford Parties shall indemnify
and fully defend, save and hold the Company, and its respective directors,
officers, partners, employees, agents and attorneys (the "Company Indemnitees"),
harmless if any Company Indemnitee shall at any time or from time to time suffer
any Losses arising out of or resulting from, or shall pay or become obligated to
pay any sum on account of, any Wexford Event of Breach. As used herein,
"Wexford Event of Breach" shall be and mean any one or more of the following:
(a) any untruth or inaccuracy in any representation of the Wexford Parties or
the breach of any warranty of the Wexford Parties contained in the Transaction
Documents, (b) any failure of the Wexford Parties duly to perform or observe any
term, provision, covenant, agreement or condition contained in the Transaction
Documents on the part of the Wexford Parties to be performed or observed.
7.3 Procedures for Indemnification. If a Company Event of Breach or a
Wexford Event of Breach (a "Party's Event of Breach") occurs or is alleged and
either the Company or the Wexford Indemnitees (a "Party Indemnitee") asserts
that the other party has become obligated to it pursuant to Section 7.1 or 7.2,
or if any claim is begun, made or instituted as a result of which the other
party may become obligated to a Party Indemnitee hereunder, such Party
Indemnitee shall give prompt notice to the other party. The Party Indemnitee
shall permit the other party (at its expense) to assume the defense of any
claim; provided, however, that (a) the counsel for the other party who shall
conduct the defense shall be reasonably satisfactory to the Party Indemnitee,
(b) the Party Indemnitee may participate in such defense at its expense, and (c)
the omission by the Party Indemnitee to give notice as provided herein shall not
relieve the other party of its indemnification obligation except to the extent
that such omission results in a failure of actual notice to the other party and
the other party is materially damaged as a result of such failure to give
notice. Except with the prior written consent of the Party Indemnitee, the
other party shall not, in the defense of any such claim, consent to entry of any
judgment or enter into any settlement that provides for injunctive or other non-
monetary relief affecting the Party Indemnitee or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Party Indemnitee of a release from all liability with respect to such claim or
litigation. In the event that the Party Indemnitee shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
other party might be expected to affect adversely the ability of the Party
Indemnitee to conduct its business, or that the Party Indemnitee may have
available to it one or more defenses or counterclaims that are inconsistent with
one or more of those that may be available to the other party in respect of such
claim relating thereto, the Party Indemnitee shall have the right at all times
to take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the other party
(including without limitation reasonable attorneys' fees and disbursements and
other amounts paid as the result of such claim); provided, however, that if the
Party Indemnitee does so take over and assume control, the Party Indemnitee
shall not settle such claim without the prior written consent of every other
party, such consent not to be unreasonably withheld. In the event that every
other party does not accept and continue the defense of any matter as provided
above, the Party Indemnitee shall have the full right to defend against any such
claim and shall be entitled to settle or agree to pay in full such claim.
8. Termination.
8.1 Conditions of Termination. Notwithstanding anything to the contrary
contained herein, this Restructuring Agreement may be terminated at any time
before the Closing Date: (a) by mutual consent of the parties hereto, (b) by
either the Company or the Wexford Parties if the other party or parties shall
have breached this Restructuring Agreement in any material respect and such
breach continues for a period of ten (10) days after the receipt of a written
notice of the breach from the non-breaching party, (c) by the Company if, at
June 30, 1998, any of the conditions set forth in Section 5 shall not have been
met, unless the Company's breach of this Restructuring Agreement is the reason
for the failure of such conditions to be satisfied, or (d) by the Wexford
Parties if, at June 30, 1998, any of the conditions set forth in Section 5 shall
not have been met, unless the Wexford Parties' breach of this Restructuring
Agreement is the reason for the failure of such conditions to be satisfied.
8.2 Effect of Termination. In the event of termination pursuant to
Section 8.1 this Restructuring Agreement shall become null and void and have no
effect, with no liability on the part of the parties, or their directors,
officers, agents or stockholders, with respect to this Restructuring Agreement,
except for the liability for breach of this Restructuring Agreement, with
respect to which, claims may be made pursuant to Sections 7.1 and 7.2
hereinabove.
9. Miscellaneous.
9.1 Survival of Provisions. The respective representations, warranties,
covenants and agreements of each of the parties to this Restructuring Agreement
made herein or in any certificate or other instrument delivered by one of the
parties to this Restructuring Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date), shall be considered to have been relied upon by the other
party to this Restructuring Agreement, as the case may be, and shall survive the
Closing Date and the consummation of the transactions contemplated by this
Restructuring Agreement.
9.2 Successors and Assigns. Except as otherwise provided in this
Restructuring Agreement, no party hereto shall assign this Restructuring
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties hereto and any such attempted assignment without
such prior written consent shall be void and of no force and effect; provided,
however, that a Wexford Party may assign its rights hereunder, whether before or
after the Closing Date, to one or more of its affiliates and to any party
providing financing in connection with the transactions contemplated hereby;
provided further, that no such assignment shall reduce or otherwise vitiate any
of the obligations of the Wexford Parties hereunder. This Restructuring
Agreement shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of the parties hereto.
9.3 Governing Law; Jurisdiction. This Restructuring Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. The parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with
this Restructuring Agreement, and consent to the jurisdiction of, the courts of
the Southern District of New York.
9.4 Broker's and Finder's Fees. Other than the Stand-by Commitment Fee
and the Wexford Fee to be paid hereunder, each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of
the transactions contemplated by this Restructuring Agreement and insofar as it
knows, no other broker or other person is entitled to any commission or finder's
fee in connection with any of the transactions contemplated hereby.
9.5 Severability. In the event that any part of this Restructuring
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it is
not so declared, and all of the other provisions of this Restructuring Agreement
shall remain in full force and effect.
9.6 Notices. All notices, requests, demands and other communications
under this Restructuring Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given, (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, (iii) on the day
after delivery to an overnight courier service, or (iv) on the fifth day after
mailing, if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid and properly addressed, to the
party as follows:
If to C. Stephen Beal of the Company:
Wahlco Environmental Systems, Inc.
3600 West Segerstrom Avenue
Santa Ana, CA 92704
Attn.: C. Stephen Beal, President and Chief Executive Officer
Telephone: (714) 979-7300
Telecopier: (714) 979-0114
With a copy to:
Roger M. Barzun, Esq.
60 Hubbard Street
Concord, MA 01742
Telephone: (978) 287-4275
Telecopier: (978) 287-4276
If to the Wexford Parties:
Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Mark L. Plaumann
Telephone: (203) 862-7000
Telecopier: (203) 862-7490
If to Huta:
Henry N. Huta
50 Princess Pine Court
East Greenwich, RI 02818
Telephone: (401) 727-1300
Telecopier: (401) 727-8459
If to any of Maarten Hemsley, Deborah Louise Hemsley-Schultz and Rebecca
Hemsley, to:
Maarten Hemsley
Bryanston Management, Ltd.
82 Powder Point Road
Duxbury, Massachusetts 02332
Telephone: (781) 934-2219
Telecopier: (781) 934-0843
With a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Stephen B. Selbst, Esq.
Telephone: (212) 704-0100
Telecopier: (212) 704-0196
Any party may change its address for the purpose of this Section by giving
the other party written notice of its new address in the manner set forth above.
9.7 Amendments; Waivers. This Restructuring Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance.
Any waiver by any party of any condition, or of the breach of any provision,
term, covenant, representation or warranty contained in this Restructuring
Agreement, in any one or more instances, shall not be deemed to be nor construed
as a further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation or warranty of this
Restructuring Agreement.
9.8 Entire Agreement. This Restructuring Agreement and the other
Transaction Documents contain the entire understanding between the parties
hereto with respect to the transactions contemplated hereby and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral or
written, with regard to such transactions.
9.9 Section and Paragraph Headings. The section and paragraph headings in
this Restructuring Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Restructuring Agreement.
9.10 No Third Party Beneficiaries. This Restructuring Agreement does not
create and shall not be construed as creating any rights enforceable by any
Person who or which is not a party to this Restructuring Agreement.
9.11 Gender; Number. As used in this Restructuring Agreement, the
masculine shall include the feminine and the neuter, the singular shall include
the plural and the plural shall include the singular as the context may require.
9.12 Counterparts. This Restructuring Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Restructuring Agreement has been duly executed and
delivered as of the date first above written.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
WES ACQUISITION CORP.
By:
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By:
Its General Partner
WEXFORD SPECIAL SITUATIONS 1996 LIMITED
By:
WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P.
By:
Its General Partner
WEXFORD MANAGEMENT LLC,
individually and as Agent
By:
Name:
Title:
WEXFORD CAPITAL
PARTNERS II, L.P.
By: Wexford Capital Partners, L.P.,
Its General Partner
By: Wexford Capital Corporation,
Its General Partner
By:
Name:
Title:
WEXFORD OVERSEAS
PARTNERS I L.P.
By: Wexford Capital Overseas, L.P.
Its General Partner
By: Wexford Capital Limited
Its General Partner
By:
Name:
Title:
C. Stephen Beal
Henry N. Huta
Maarten D. Hemsley
Rebecca Hemsley
Deborah Louise Hemsley-Schultz
EXHIBIT A
WES ACQUISITION CORP.
PLAN OF LIQUIDATION
1. Restructuring Agreement. This plan of liquidation (the
"Liquidation Plan") of WES Acquisition Corp., a Delaware corporation ("WESAC"),
is being adopted pursuant to Section 2.5 of that certain Restructuring Agreement
dated as of January 30, 1998 (the "Restructuring Agreement"), by and among the
Company, WESAC, Wexford Management, as Agent, Capital Partners, Overseas
Partners, the Wexford 1996 Funds and the Individual Parties. Capitalized terms
used herein, if not separately defined, shall have the meanings assigned to such
terms in the Restructuring Agreement.
2. Approval and Ratification. This Liquidation Plan shall be deemed
adopted by the WESAC Lenders and the stockholders of WESAC upon the execution
and delivery of the Restructuring Agreement by (a) stockholders of WESAC (the
"WESAC Stockholders") holding at least two thirds of the issued and outstanding
shares of common stock of WESAC, and (b) WESAC Lenders holding two-thirds in
amount and at least 50% in number of the outstanding claims against WESAC.
3. Plan of Liquidation. WESAC will cease the active conduct of its
business and wind up its affairs and, within the meaning of Section 332 of the
Internal Revenue Code of 1986, as amended, will liquidate and distribute all of
its assets, if any, in complete liquidation, less any assets retained to meet
claims. The liquidation of WESAC will occur promptly, but in any event within
one calendar month following the Closing Date.
4. Assets and Liabilities. On the Closing Date, after consummation
of the Rights Offering, the Reverse Stock Split and the WESAC Debt Conversion,
the assets of WESAC will consist principally of shares of Company Common Stock.
The liabilities of WESAC will consist of the amounts owed to the WESAC Lenders
listed on Schedule I attached hereto, which carry the contractual rights of
seniority listed thereon, and miscellaneous tax liabilities.
5. Distribution of Assets.
5.1 WESAC Lenders. Promptly following the Closing under the
Restructuring Agreement, WESAC shall distribute to the WESAC Lenders, in order
of contractual seniority in accordance with Schedule I attached hereto, all of
the shares of Company Common Stock owned by WESAC on the Closing Date. For
purposes of such distribution, shares of Company Common Stock shall be valued at
$1.00 per share. To the extent that any class of WESAC Lenders are not paid in
full, payments by WESAC shall be applied first to principal and then to
interest.
5.2 WESAC Stockholders. If, as of the Closing Date, the
liabilities of WESAC exceed its liabilities, the WESAC Stockholders agree that
they shall receive no distribution in respect of their common stock of WESAC,
and that on the Closing Date, such stock shall be canceled.
6. Cancellation of Stock Certificates and Notes. The distributions
in complete liquidation provided for in Section 5 hereof shall be in exchange
and solely for the complete satisfaction of the rights of the WESAC Lenders and
the WESAC Stockholders. On the Closing Date, each WESAC Creditor and each WESAC
Stockholder shall surrender any notes or evidences of indebtedness (in the case
of the WESAC Lenders) or stock certificates (in the case of the WESAC
Stockholders) representing common stock of WESAC.
7. Effective Date; Cessation of Business. The effective date of
this Liquidation Plan shall be the Closing Date under the Restructuring
Agreement. WESAC shall cease doing business immediately upon such Closing Date,
except to the extent required to wind up its affairs. As soon thereafter as
practicable, but within one calendar month following the Closing Date, WESAC
shall make one or more substantial distributions of its assets and liabilities,
so that all of such assets and liabilities are distributed to or for the account
of the WESAC Lenders and the WESAC Stockholders, as the case may be, within such
calendar month. Notwithstanding the foregoing, if the Closing Date under the
Restructuring Agreement does not occur on or before June 30, 1998, this
Liquidation Plan shall be deemed rescinded nunc pro tunc without necessity of
any act or deed on the part of WESAC or any officer, director or WESAC
Stockholder.
8. Dissolution. The officers and directors of WESAC shall proceed
with the voluntary dissolution of WESAC under the laws of the State of Delaware
at such time as they may deem appropriate, and may withdraw WESAC from
qualification in any other state where it may have qualified to do business as a
foreign corporation.
9. Authorization to Execute and File Documents. The officers and
directors of WESAC are authorized, empowered, and directed to execute and file
all documents which they deem necessary or advisable to carry out the purposes
and intentions of this Liquidation Plan, including a certificate of dissolution
under the laws of the State of Delaware, and information returns on the
appropriate Treasury Department forms, together with income tax returns and the
information required by applicable income tax regulations.
10. Further Assurances; Indemnity. The officers and directors of
WESAC are authorized, directed and empowered to do any and all other things in
its name and behalf which they may deem necessary or advisable in order to carry
out the purposes and intentions of this Plan. Such officers and directors shall
be held harmless by WESAC for any action under this Liquidation Plan taken in
good faith.
IN WITNESS WHEREOF, WESAC has caused this Liquidation Plan to be adopted as
of this 30th day of January 1998.
WES Acquisition Corp.
By:_____________________
SCHEDULE I
1. Definitions. As used herein, the following definitions shall apply:
"Administrative Reserve" means an amount of cash sufficient to pay all
reasonably estimated expenses of the WESAC Liquidation.
"Class I Claims" means (i) loans from the Wexford 1995 Funds to WESAC
in the aggregate principal amount of $2,000,000, the proceeds of which were
pledged by the Company to secure the Company's borrowings under the SVB
Facility, plus interest on the loans to the Wexford 1995 Funds at the rate of
fifteen (15%) percent per annum from the date of such loans to the Closing Date,
and (ii) the principal amount of $150,000 evidenced by a note dated May 13,
1996, together with interest at the rate provided therein through the Closing
Date. The Class I Claims are held 70% by Wexford Capital Partners II, L.P. and
30% by Wexford Overseas Partners I, L.P.
"Class II Claims" means (i) the principal amount of $1,500,000 funded
by the Wexford 1996 Funds to enable WESAC to loan funds to the Company pursuant
to the 1996 Line of Credit, together with interest from the date of each such
advance at the rate provided therein to the Closing Date, (ii) $32,000 as a
commitment fee for providing the 1996 Line of Credit and (iii) $2,080 to be
reimbursed for expenses advanced on behalf of WESAC. As of April 15, 1998, the
Class II Claims will be as follows:
Wexford Special Situations 1996, L.P. $1,252,528.19
Wexford Special Situations Institutional, L.P. $ 232,684.58
Wexford Special Situations 1996 Limited $ 63,459.63
Wexford-Euris-Special Situations 1996, L.P. $ 323,287.43
"Class III Claims" means (i) the aggregate principal amount of
$4,900,000, together with interest from the date of such advances at rate of
thirteen percent (13%) per annum, together with interest through the Closing
Date, (ii) the aggregate principal amount of $2,000,000, together with interest
at the rate of thirteen percent (13%) through the Closing Date. As of April 15,
1998, the Class III Claims will be as follows:
C. Stephen Beal $ 240,121.94
Maarten Hemsley $ 58,617.55
Henry Huta $ 240,121.94
Wexford Capital Partners II, L.P. $6,344,136.19
Wexford Overseas Partners I, L.P $2,719,871.09
"1996 Line of Credit" means that certain Agreement dated August 28,
1996 between WESAC and the Company.
2. Payments. The payments to be made by or on behalf of WESAC to the WESAC
Lenders and the WESAC Lenders shall be distributed in the following order of
priority:
2.1 Administrative Reserve. On the Closing Date, the Administrative
Reserve shall be funded.
2.2 Class I Claims. In respect of the Class I Claims, the Wexford
1995 Funds shall be paid an amount of cash equal to the amount of cash repaid to
WESAC by SVB in connection with the Silicon Valley Bank Repayment, less the
amount of cash deposited into the Administrative Reserve (the "Cash Payment").
To the extent that the Cash Payment is insufficient to repay the Class I Claims
in full, the holders of Class I Claims shall receive a number of shares of
Company Common Stock, valued at $1.00 per share, equal to the difference between
the amount of Class I Claims on the Closing Date and the Cash Payment. Any
payments in respect of Class I Claims shall be applied first to principal
amounts due and then to accrued but unpaid interest.
2.3 Class II Claims. After the holders of Class I Claims have been
paid in full, the holders of Class II Claims shall receive a number of shares of
Company Common Stock, valued as $1.00 per share, equal to the amount of the
Class II Claims on the Closing Date. Any payment in respect of Claim II Claims
shall be applied first to principal amounts due and then to accrued but unpaid
interest.
2.4 Class III Claims. After the holders of Class II Claims have been
paid in full, the holders of Class III Claims shall receive all remaining shares
of Company Common Stock owned by WESAC, valued as $1.00 per share, pro rata in
accordance with their interests. Any payments in respect of Class III Claims
shall be applied first to principal amounts due and then accrued but unpaid
interest.
2.5 WESAC Stockholders. The WESAC Stockholders agree that on the
Closing Date, their shares of common stock of WESAC shall be canceled, and such
WESAC Stockholders shall receive no consideration in exchange therefor.
EXHIBIT B
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of January 30, 1998
among
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
as Borrower,
WES ACQUISITION CORP.
and
WEXFORD CAPITAL PARTNERS II, L.P.
WEXFORD OVERSEAS PARTNERS I, L.P.
as the Tranche A Lenders
and
WEXFORD SPECIAL SITUATIONS 1996, L.P.
WEXFORD SPECIAL SITUATIONS 1996 INSTITUTIONAL, L.P.
WEXFORD SPECIAL SITUATIONS 1996 LIMITED
WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P.
and
WEXFORD MANAGEMENT LLC
as Agent for the Lenders
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A-1 - Tranche A Note
Exhibit A-2 - Tranche B Note
Exhibit B - First Amendment to Guaranty
Exhibit C-1 - First Amendment to Patent Assignment
of Wahlco Environmental Systems, Inc.
Exhibit C-2 First Amendment to Patents Assignment of Wahlco, Inc.
Exhibit C-3 First Amendment to Patent Assignment of Wahlco
International, Inc.
Exhibit D - First Amendment to Security Agreement
Exhibit E - First Amendment to Stock Pledge Agreement
Schedule 3.6 Defaults
Schedule 3.10 Taxes
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 30, 1998
(the "1998 Credit Agreement"), among (a) WAHLCO ENVIRONMENTAL SYSTEMS, INC., a
Delaware corporation ("Borrower"); (b) WES ACQUISITION CORP., a Delaware
corporation ("WESAC") and (c) WEXFORD CAPITAL PARTNERS II, L.P., a Delaware
limited partnership ("WCP"), WEXFORD OVERSEAS PARTNERS I, L.P., a Delaware
limited partnership ("WOSP") (WCP and WOSP collectively, the "Tranche A
Lenders"), WEXFORD SPECIAL SITUATIONS 1996, L.P., a Delaware limited
partnership, WEXFORD SPECIAL SITUATIONS 1996 INSTITUTIONAL, L.P., a Delaware
limited partnership, WEXFORD SPECIAL SITUATIONS 1996 LIMITED, a Cayman Islands
exempted company, and WEXFORD-EURIS SPECIAL SITUATIONS 1996, L.P., a Delaware
limited partnership (collectively together with the Tranche A Lenders, the
"Lenders"); and WEXFORD MANAGEMENT LLC, a Connecticut limited liability company,
as administrative and collateral agent for the Lenders (the "Agent").
RECITALS
A. Borrower and WESAC have entered into a series of related credit and
collateral security agreements, starting with the Term Loan Agreement, dated as
of July 28, 1995, related collateral security instruments, the Side Letter dated
May 9, 1996 from the Borrower to WESAC, and the 1996 Financing Letter dated
August 28, 1996 from the Borrower to WESAC; such series, taken as a whole and,
as amended, supplemented or otherwise modified to date (the "Existing Credit
Lines").
B. Pursuant to a Restructuring Agreement of even date herewith (the
"Restructuring Agreement"), on the Closing Date, the Lenders have agreed, among
other things, to convert the Wexford Conversion Debt now outstanding under the
Existing Credit Lines into shares of the Borrower's Common Stock, par value $.10
per share, at the rate of one share of Common Stock for each $1.00 of such
indebtedness.
C. The Lenders are now prepared to make Tranche A Loans and Tranche B
Loans to Borrower on the terms and conditions specified herein.
D. The Lenders require, among other conditions precedent, that certain
Collateral Documents by Borrower in favor of WESAC be amended and restated to
clarify and expressly state that (i) new advances hereunder shall be fully
secured under those Collateral Documents and (ii) all collateral security
interests previously granted to WESAC shall be assigned by WESAC to the Agent
for the benefit of WESAC and the Lenders.
E. It is one of several conditions precedent to such restructuring that
this 1998 Credit Agreement be executed and delivered, to novate the Existing
Credit Lines to replace WESAC as a Lender, and to substitute the Agent for WESAC
as named secured party for the benefit of the Lenders, all as more fully set
forth below.
1. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this 1998 Credit Agreement shall have (unless otherwise provided
elsewhere in this 1998 Credit Agreement) the following respective meanings when
used herein:
1.1. "Account Debtor" shall mean any Person who is or who may
become obligated to Borrower or any of its Subsidiaries under, with respect to,
or on account of, an Account.
1.2. "Accounts" shall mean all accounts, accounts receivable,
other receivables, contract rights, chattel paper, instruments, documents, and
notes, whether now owned or hereinafter acquired by Borrower or any of its
Subsidiaries.
1.3. "Affiliate" shall mean, with respect to any Person, (i) each
Person that, directly or indirectly, owns or controls, whether beneficially, or
as a trustee, guardian or other fiduciary, 5% or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that controls, is controlled by or is under common control with such
Person or any Affiliate of such Person or (iii) each of such Person's officers,
directors, joint venturers and partners. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
1.4. "Ancillary Agreements" shall mean all those agreements as to
which Borrower, the Lenders or the Agent is a party or a beneficiary on the
Closing Date with respect to any of the transactions contemplated by the Loan
Documents or the Restructuring Agreement.
1.5. "Borrower" shall mean Wahlco Environmental Systems, Inc., a
Delaware corporation having an office at 3600 West Segerstrom Avenue, Santa Ana,
California 92704-6495.
1.6. "Business Day" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
1.7. "Capital Expenditures" shall mean all payments for any fixed
assets or improvements or for replacements, substitutions or additions thereto,
that have a useful life of more than one year and which are required to be
capitalized under GAAP.
1.8. "Capital Lease" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as such in a note to such balance sheet, other than, in the case of
Borrower or a Subsidiary of Borrower, any such lease under which Borrower or
such Subsidiary is the lessor.
1.9. "Capital Lease Obligation" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
1.10. "Cash Equivalents" shall have the meaning assigned to
it in Section 7.2 hereof.
1.11. "Charges" shall mean all federal, state, county, city,
municipal, local, foreign or other governmental (including, without limitation,
PBGC) taxes at the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) Borrower's or any of its Subsidiaries' employees, payroll,
income or gross receipts, (iv) Borrower's or any of its Subsidiaries' ownership
or use of any of its assets, or (v) any other aspect of Borrower's or any of the
Subsidiaries' business.
1.12. "Chase" means The Chase Manhattan Bank.
1.13. "Chase Facility" means a non-committed line of credit,
arranged and guaranteed by the Lenders. As at the date hereof, Borrower had
borrowings outstanding aggregating $2.65 million (the "Chase Facility Baseline
Amount").
1.14. "Chase Facility Tranche A Commitment Reduction Amount"
means the excess, if any, of (x) Borrower's aggregate borrowings under the Chase
Facility prior to the Restructuring Date, over (y) the Chase Facility Baseline
Amount.
1.15. "Chase Facility Tranche B Commitment Reduction Amount"
means the excess, if any, of (x) Borrower's aggregate borrowings under the Chase
Facility from and after the Restructuring Date over (y) the amount of Borrower's
borrowings under the Chase Facility on the Restructuring Date.
1.16. "Closing Date" shall mean the date the Lenders make the
initial Tranche A Loan.
1.17. "Code" shall mean the Uniform Commercial Code of the
jurisdiction with respect to which such term is used, as in effect from time to
time.
1.18. "Collateral" shall mean the collateral covered by the
Security Agreement, the Patent Assignments, and the Pledged Collateral covered
by the Stock Pledge Agreement (as such term is defined therein).
1.19. "Collateral Documents" shall mean the Security
Agreement, the Patent Assignments and the Stock Pledge Agreement.
1.20. "Commission" means the Securities and Exchange
Commission or any successor thereto.
1.21. "Commitment Termination Date" shall mean June 30, 1998.
1.22. "Compensation" shall mean, with respect to any Person,
all payments and accruals commonly considered to be compensation, including,
without limitation, all wages, salary, deferred payment arrangements, bonus
payments and accruals, profit sharing arrangements, payments in respect of stock
option or phantom stock option or similar arrangements, stock appreciation
rights or similar rights, incentive payments, pension or employment benefit
contributions or similar payments, made by Borrower to or accrued for the
account of such Person or otherwise for the direct or indirect benefit of such
Person.
1.23. "Default" shall mean any event which, with the passage
of time or notice or both, would, unless cured or waived, become an Event of
Default.
1.24. "Due Date" shall mean the date on which payment is due
with respect to an Account, as indicated on the invoice or statement of Account
rendered to the Account Debtor.
1.25. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974 (or any successor legislation thereto), as amended from
time to time and any regulations promulgated thereunder.
1.26. "Event of Default" shall have the meaning assigned to
it in Section 9.1 hereof.
1.27. "Financials" shall mean the financial statements
referred to in Section 4.6(a) hereof.
1.28. "Fiscal Year" shall mean the calendar year. Subsequent
changes of the fiscal year of Borrower shall not change the term "Fiscal Year,"
unless the Lenders shall consent in writing to such changes.
1.29. "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time to time.
1.30. "Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
1.31. "Guaranteed Indebtedness" shall mean, as to any Person,
any obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
1.32. "Guarantor" shall mean each Subsidiary of Borrower,
each of which is executing and delivering to the Agent on behalf of the Lenders
the Guaranty.
1.33. "Guaranty" shall mean the existing Guaranty dated as of
July 25, 1995, between Borrower and WESAC, as amended by the First Amendment
thereto, and as may be amended from time to time hereafter.
1.34. "Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured, but not including obligations to
trade creditors incurred in the ordinary course of business), (ii) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(iii) all indebtedness created or arising under any conditional sale or other
title retention agreements with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (iv) all Capital Lease Obligations, (v) all Guaranteed Indebtedness,
(vi) all Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (vii) the Obligations, and (viii) all liabilities under
Title IV of ERISA.
1.35. "Inventory" shall mean any and all now owned or
hereafter acquired inventory, goods, merchandise, and other tangible personal
property intended for sale or lease, in the custody or possession, actual or
constructive, of Borrower or any of its Subsidiaries, or in transit to Borrower
or any of its Subsidiaries, including such inventory as is on consignment to
third parties, leased to customers of Borrower or any of its Subsidiaries, or
otherwise temporarily out of the custody or possession of Borrower or any of its
Subsidiaries.
1.36. "IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
1.37. "IRS" shall mean the Internal Revenue Service, or any
successor thereto.
1.38. "Leases" shall mean all of those leasehold estates in
real property now owned or hereafter acquired by Borrower or any Subsidiary of
Borrower, as lessee.
1.39. "Lenders" shall mean the initial Lenders defined in the
Preamble, but excluding WESAC (and the Borrower as successor by merger) from and
after the date the WESAC Merger is effected, and adding or substituting any
assignees or alternate Lender or Lenders the lenders may from time to time
nominate by written notice to the Borrower.
1.40. "Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the Code or comparable law of any
jurisdiction).
1.41. "Loan" or "Loans" shall mean the Tranche A and the
Tranche B Loans.
1.42. "Loan Documents" shall mean this 1998 Credit Agreement,
the Tranche A and Tranche B Notes, the Collateral Documents, the Guaranty, those
other Ancillary Agreements as to which the Lenders or the Agent is a party or a
beneficiary on the Closing Date, and all other agreements, instruments,
documents and certificates, including, without limitation, pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of Borrower
or any of its Affiliates, or any employee of Borrower or any of its Affiliates,
and delivered to the Agent or any Lender in connection with this 1998 Credit
Agreement or the transactions contemplated hereby, and all amendments or
supplements to any of the foregoing.
1.43. "Loan Party" shall mean Borrower and each Subsidiary of
Borrower.
1.44. "Material Adverse Effect" shall mean material adverse
effect on (i) the business, assets, operations, prospects or financial or other
condition of Borrower and its Subsidiaries taken as a whole, (ii) Borrower's and
its Subsidiaries' collective ability to pay the Obligations in accordance with
the terms thereof, or (iii) the Collateral or Lenders' Liens on the Collateral
or the priority of any such Lien.
1.45. "1998 Credit Agreement" shall mean this Agreement, and
all amendments, modifications and supplements hereto and any appendices,
exhibits or schedules to any of the foregoing, and shall refer to this 1998
Credit Agreement as the same may be in effect at the time such reference becomes
operative.
1.46. "Obligations" shall mean all loans, advances, debts,
liabilities, and obligations for monetary amounts (whether or not such amounts
are liquidated or determinable) owing by Borrower or any of its Subsidiaries or
all of them to any Lenders, or any Subsidiary or Affiliate of a Lender, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, whether or not evidenced by any note, agreement or other instrument,
arising under any of the Loan Documents. This term includes, without
limitation, the Wexford Conversion Debt (prior to the Restructuring Date), any
surviving obligations of Borrower under the Existing Credit Lines, the Tranche A
and Tranche B Loans, and any amounts payable to Chase or its affiliates on
account of the Company's obligations under the Chase Facility and any and all
other, future advances, as well as all interest, Commitment Fees, charges,
expenses, attorneys' fees and any other sum chargeable to Borrower or any or all
of its Subsidiaries under any of the Loan Documents.
1.47. "Patent Assignments" shall mean the existing Patent
Assignments, each dated as of July 25, 1995 between Borrower and WESAC, Wahlco,
Inc. and WESAC, and Wahlco International, Inc. and WESAC, in each case as
amended by the First Amendment thereto, substantially in the form of Exhibits C-
1, C-2 and C-3 attached hereto and as may be amended from time to time
hereafter.
1.48. "Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other governmental charges
or levies, either not yet due and payable or to the extent that nonpayment
thereof is permitted by the terms of this 1998 Credit Agreement; (ii) pledges or
deposits securing obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar legislation;
(iii) pledges or deposits securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which Borrower or any of its
Subsidiaries is a party as lessee made in the ordinary course of business;
(iv) deposits securing public or statutory obligations of Borrower or any of its
Subsidiaries; (v) workers', mechanics', suppliers', carriers', warehousemen's or
other similar liens arising in the ordinary course of business and securing
indebtedness aggregating not in excess of $100,000 at any time outstanding, not
yet due and payable; (vi) deposits securing or in lieu of surety, appeal or
customs bonds in proceedings to which Borrower or any of its Subsidiaries is a
party; (vii) any attachment or judgment lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay; (viii) zoning
restrictions, easements, licenses, or other restrictions on the use of real
property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the use, value, or
marketability of such real property, leases or leasehold estates; and (ix) Liens
on cash and Cash Equivalents to secure Letter of Credit Obligations, and (x)
prior to the Restructuring Date, Liens in favor of Silicon Valley Bank.
1.49. "Person" shall mean any individual, sole proprietor-
ship, partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
1.50. "Plan" shall mean, with respect to Borrower or any
ERISA Affiliate, at any time, an employee benefit plan, as defined in Section
3(3) of ERISA, which Borrower or any of its Subsidiaries maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any of them.
1.51. "Required Lenders" shall mean, as of any date, the
holders of Notes evidencing at least a majority of the aggregate unpaid
principal amount of the Loans; provided, however, that any amendment to,
modification of or supplement to this 1998 Credit Agreement or waiver of a
Default or an Event of Default hereunder that would have the effect of
reinstating the obligations to make Loans from and after the date such
obligations have been terminated or changing the terms of, amount of or
obligation to make Loans shall require the affirmative consent thereto of each
Lender whose obligations would be so increased.
1.52. "Reserves" shall mean such reserves for doubtful
accounts, returns, allowances and the like as may be established by Borrower or
any Subsidiary or as may otherwise be required in accordance with GAAP.
1.53. "Restricted Lease" shall mean, as at any date, any
lease of property (whether real, personal or mixed) other than Capital Leases.
1.54. "Restricted Payment" shall mean (i) the declaration of
any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Borrower's Stock
or (ii) any payment on account of the purchase, redemption or other retirement
of Borrower's Stock or any other payment or distribution made in respect
thereof, either directly or indirectly.
1.55. "Restructuring Date" means the closing date under the
Restructuring Agreement.
1.56. "SEC Documents" means each report or filing made by
Borrower with the Commission.
1.57. "Security Agreement" shall mean the Security Agreement
dated as of July 25, 1995, between Borrower and WESAC, as amended by the First
Amendment thereto, and as may be amended from time to time hereafter.
1.58. "Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or other equivalents
(regardless of how designated) of or in a corporation, partnership or equivalent
entity whether voting or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended).
1.59. "Stock Pledge Agreement" shall mean the Stock Pledge
Agreement dated as of July 25, 1995, between Borrower and WESAC, as amended by
the First Amendment thereto, and as may be amended from time to time hereafter.
1.60. "Subsidiary" shall mean, with respect to any Person,
(a) any corporation of which an aggregate of more than 50% of the outstanding
Stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, Stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, and (b) any partnership in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
50%.
1.61. "Termination Date" shall mean the date on which all
Existing Credit Lines and any other Obligations hereunder have been completely
discharged and Borrower shall have no further right to borrow any monies
hereunder.
1.62. "Tranche A Commitment" shall mean the Lenders'
commitment to make the Tranche A Loans under Section 2.2.
1.63. "Tranche A Commitment Termination Date" shall mean the
earliest of (a) the Restructuring Closing Date, (b) June 30, 1998, or (c) the
date Tranche A Commitment terminates pursuant to Section 8.2.
1.64. "Tranche A Loan" shall have the meaning assigned in
Section 2.2(a).
1.65. "Tranche A Note" shall have the meaning assigned in
Section 2.2(b).
1.66. "Tranche B Commitment" shall mean the Lenders'
commitment to make the Tranche B Loans under Section 2.2.
1.67. "Tranche B Commitment Termination Date" shall mean the
earlier of (a) December 31, 2000, or (b) the date the Tranche B Commitment is
terminated pursuant to Section 8.2.
1.68. "Tranche B Loan" shall have the meaning assigned in
Section 2.2(a).
1.69. "Tranche B Note" shall have the meaning assigned in
Section 2.2(b).
1.70. "Wexford Conversion Debt" shall mean all Obligations
owed or accrued as of the Closing Date under the Existing Credit Lines.
1.71. "Welfare Plans" shall mean any welfare plan, as defined
in Section 3(1) of ERISA, which is maintained or contributed to by Borrower, any
of its Subsidiaries or any ERISA Affiliate.
1.72. "Withdrawal Liability" means, at any time, the
aggregate amount of the liabilities, if any, pursuant to Section 4201 of ERISA,
and any increase in contributions pursuant to Section 4243 of ERISA with respect
to all Multiemployer Plans.
1.73. Accounting Terms. Any accounting term used in this
1998 Credit Agreement shall have, unless otherwise specifically provided herein,
the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP consistently applied.
That certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing. All
other undefined terms contained in this 1998 Credit Agreement shall, unless the
context indicates otherwise, have the meanings provided for by the Code as in
effect in the State of New York to the extent the same are used or defined
therein. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this 1998 Credit Agreement as a whole, including the
Exhibits and Schedules hereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or
clause contained in this 1998 Credit Agreement.
1.74. Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1. Wexford Conversion Debt The Existing Credit Lines and all
the obligations of Borrower and each Loan Party with respect thereto shall
continue in full force and effect as regards the Wexford Conversion Debt, and
shall govern the amount and terms of the Wexford Conversion Debt, unless and
until the conversion thereof into Common Stock of Borrower is consummated
pursuant to Section 2.2 of the Restructuring Agreement, whereupon the Wexford
Conversion Debt shall be paid and discharged in accordance with the terms
thereof, subject to the survival of all existing indemnities of Borrower, which
shall henceforth run in favor of Agent on behalf of all the Lenders.
2.2. Tranche A Line (a) Upon and subject to the terms and
conditions hereof, the Tranche A Lenders agree to make available until the
Tranche A Commitment Termination Date, for Borrower's use one or more loans
(each a "Tranche A Loan") in an aggregate amount not to exceed (x) $3,000,000,
minus (y) the Chase Facility Tranche A Commitment Reduction Amount from time to
time in effect (the "Tranche A Line").
(b) Each Tranche A Loan made by the Tranche A Lenders shall be
evidenced by a promissory note to be executed and delivered by Borrower at the
time of the first Tranche A Loan, the form of which is attached hereto and made
a part hereof as Exhibit A-1 (the "Tranche A Note"). The stated maturity of the
Tranche A Note shall be the Restructuring Closing Date, provided that if the
Tranche A Loans are not prepaid in full from the proceeds of the Rights Offering
as set forth in Section 2.1 of the Restructuring Agreement, the unpaid principal
balance of the Tranche A Note shall have a stated maturity of December 31, 2000.
2.3. Tranche B Line. (a) Upon and subject to the terms and
conditions hereof, the Lenders agree to make available, from the Restructuring
Closing Date to and including the Tranche B Commitment Termination Date, for
Borrower's use one or more advances (each a "Tranche B Loan") in an aggregate
amount not to exceed (x) $2,500,000, minus (y) the Chase Facility Tranche B
Commitment Reduction Amount from time to time in effect (the "Tranche B Line").
(b) Each Tranche B Loan made by the Lenders shall be evidenced
by a promissory note to be executed and delivered by Borrower at the time of the
first Tranche B Advance, the form of which is attached hereto and made a part
hereof as Exhibit A-2 (the "Tranche B Note"). The Tranche B Note shall have a
stated maturity of December 31, 2000.
2.4. Optional Prepayment. Borrower shall have the right at
any time, on ten days' prior written notice to Lenders, to prepay first the
Tranche A Loans, and then the Tranche B Loans, in minimum amounts of $50,000 and
integral multiples thereof, without premium or penalty. Amounts prepaid may not
be reborrowed. Each prepayment shall be accompanied by accrued but unpaid
interest on the amount prepaid.
2.5. Notice of Borrowing; Use of Proceeds. Each Tranche A Loan
or Tranche B Loan shall be made on not less than three Business Days' Notice to
the Agent, and shall be accompanied by a proposed use of proceeds, which use of
proceeds shall be reasonably acceptable to the Agent. Borrower shall use the
proceeds of the Tranche A and Tranche B Loans made hereunder for purposes
specified in the applicable notice of borrowing.
2.6. Interest. The unpaid principal balance of the Tranche A
Loans and the Tranche B Loans shall bear interest at the rate of 13% per annum
until maturity, and any amount not paid when due shall bear interest at the rate
of 15% per annum, in either case based upon a year of 365 or 366, as the case
may be, days for actual days elapsed. Interest shall be payable semi-annually
in arrears on the last day of each June and January, commencing on June 30,
1998.
2.7. Assignment of Security Interest. Effective upon the
execution and delivery of this Agreement, WESAC hereby assigns to the Agent, for
the benefit of all the Lenders, all Liens and security interests held by WESAC
as of the date hereof. Borrower consents to such assignment and agrees that
such Liens and security interests shall secure all Obligations under the
Existing Credit Liens and under this 1998 Credit Agreement.
2.8. Receipt of Payments. Borrower shall make each payment under
this 1998 Credit Agreement not later than 3:00 P.M. (New York City time) on the
day when due in lawful money of the United States of America in immediately
available funds to Lenders' depository bank as designated by the Agent on behalf
of the Lenders from time to time for deposit in Lenders' depository account.
For purposes only of computing interest hereunder, all payments shall be applied
by Lenders on the day payment has been credited by Lenders' depository bank to
Lenders' account in immediately available funds.
2.9. Indemnity. Borrower shall indemnify and hold Lenders and
the Agent harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and disbursements, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by any of them as the result of its having entered into any of the Loan
Documents or extended credit hereunder; provided, however, that Borrower shall
not be liable for such indemnification to any Lender or the Agent to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from such Lender's or the Agent's gross negligence or willful
misconduct.
2.10. Access. The Agent, the Lenders and any of their
officers, employees and/or agents shall have the right, exercisable as
frequently as the Agent or the Lenders reasonably determine to be appropriate,
during normal business hours (or at such other times as may reasonably be
requested by the Agent and the Lenders, to inspect the properties and facilities
of Borrower and the Subsidiaries and to inspect, audit and make extracts from
all of Borrower's and such Subsidiaries' records, files and books of account.
Borrower shall deliver any document or instrument reasonably necessary for the
Agent and the Lenders, as any of them may reasonably request, to obtain records
from any service bureau maintaining records for Borrower or its Subsidiaries,
and shall maintain duplicate records or supporting documentation on paper or
other media, including, without limitation, computer tapes and discs owned by
Borrower and its Subsidiaries. Borrower shall instruct its and its
Subsidiaries' banking and other financial institutions to make available to the
Agent and the Lenders such information and records as the Agent and Lenders may
reasonably request.
3. REPRESENTATIONS AND WARRANTIES
To induce each Lender to make the Tranche A and Tranche B Loans, as
herein provided for, Borrower makes the following representations and warranties
to Lenders, each and all of which shall be true and correct as of the date
hereof, and shall survive the execution and delivery of this 1998 Credit
Agreement:
3.1. Corporate Existence; Compliance with Law. Borrower and each
Subsidiary of Borrower (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation; (ii) is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification (except for jurisdictions in which such
failure to so qualify or to be in good standing would not have a Material
Adverse Effect); (iii) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease, and to conduct its
business as now, heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals from or by, and has made all material
filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its certificate or articles of
incorporation and by-laws; and (vi) is in compliance with all applicable
provisions of law where the failure to comply would have a Material Adverse
Effect.
3.2. Subsidiaries. The Borrower's Subsidiaries have been
disclosed in its SEC Documents.
3.3. Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by Borrower and its Subsidiaries of the
Loan Documents, Ancillary Documents and all instruments and documents to be
delivered by Borrower and its Subsidiaries, to the extent they are parties
thereto, hereunder and thereunder and the creation of all Liens provided for
herein and therein: (i) are within Borrower's and its Subsidiaries' corporate
power; (ii) have been, or by the Closing Date will be, duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of Borrower's or its Subsidiaries' respective certificates or articles
of incorporation or by-laws; (iv) will not violate any law or regulation, or any
order or decree of any court or governmental instrumentality; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which Borrower or any of its
Subsidiaries is a party or by which Borrower or any of its Subsidiaries or any
of their property is bound; (vi) will not result in the creation or imposition
of any Lien upon any of the property of Borrower or any of its Subsidiaries
other than those in favor of the Agent and the Lenders, all pursuant to the Loan
Documents; and (vii) do not require the consent or approval of any Governmental
Authority or any other Person. At or prior to the Closing Date, each of the
Loan Documents shall have been duly executed and delivered for the benefit of or
on behalf of Borrower or its Subsidiaries, as the case may be, and each shall
then constitute a legal, valid and binding obligation of Borrower or its
Subsidiaries, to the extent they are parties thereto, enforceable against them
in accordance with its terms.
3.4. Financial Statements.
(a) All of the following balance sheets and statements of income,
retained earnings and cash flows of Borrower, copies of which have been
furnished to Lenders prior to the date of this 1998 Credit Agreement, have been,
except as noted therein, prepared in conformity with GAAP consistently applied
throughout the periods involved and present fairly the consolidated financial
position of Borrower in each case at the dates thereof, and the results of
operations and cash flows for the periods then ended (as to the unaudited
interim financial statements, subject to normal year-end audit adjustments):
(i) the unaudited consolidated balance sheet of Borrower at
September 30, 1997, and the related consolidated statements of income,
retained earnings and cash flows for the three months ending on such
date; and
(ii) the audited consolidated balance sheet of Borrower as
at December 31, 1996, and the related consolidated statements of
income, retained earnings and cash flows for the year then ended, with
the opinion thereon of Arthur Andersen & Co., LLP.
(b) Borrower, as of September 30, 1997, had no obligations,
contingent liabilities or liabilities for Charges, long-term leases or unusual
forward or long-term commitments which are not reflected in the consolidated
financial statements of Borrower and its Subsidiaries and which would have a
Material Adverse Effect.
(c) There has been no material adverse change in the business,
assets, operations, prospects or financial or other condition of Borrower and
its Subsidiaries taken as a whole since September 30, 1997 (it being understood
that, subsequent to the Closing Date, this representation and warranty shall be
subject to the fact that Borrower shall have incurred the Obligations
hereunder). No dividends or other distributions have been declared, paid or
made upon any shares of capital Stock of Borrower or any of the Subsidiaries,
nor have any shares of capital Stock of Borrower or any of the Subsidiaries been
redeemed, retired, purchased or otherwise acquired for value by Borrower or
Subsidiaries since September 30, 1997.
3.5. Ownership of Property; Liens Borrower or its Subsidiaries
owns good and marketable fee simple title to all of the Real Estate owned by it
or such Subsidiaries and Borrower or such Subsidiaries have good, valid and
marketable leasehold interests in the Leases to which the Borrower or any
Subsidiary is a party, and good and marketable title to, or valid leasehold
interests in, all of its other properties and assets, and none of the properties
and assets of Borrower and its Subsidiaries, including, without limitation, the
Real Estate and Leases, is subject to any Liens, except (i) Permitted
Encumbrances and (ii) from and after the Closing Date, the Lien in favor of the
Agent and the Lenders pursuant to the Collateral Documents; and Borrower and its
Subsidiaries have duly effected all recordings, filings and other actions
necessary to establish, protect and perfect Borrower's and its Subsidiaries'
right, title and interest in and to all such property except where the failure
to have received such documents or effected such actions will not, in the
aggregate, have a Material Adverse Effect.
3.6. No Default. Except as set forth on Schedule 3.6, neither
Borrower nor any of its Subsidiaries is in default, nor to Borrower's knowledge,
is any third party in default, under or with respect to any contract, agreement,
lease or other instrument to which it is a party, except for any default which
(either individually or collectively with other defaults arising out of the same
event or events) would not have a Material Adverse Effect. No Default or Event
of Default has occurred and is continuing.
3.7. Burdensome Restrictions. No contract, lease, agreement or
other instrument to which Borrower or any of its Subsidiaries is a party or is
bound and no provision of applicable law or governmental regulation has a
Material Adverse Effect, or insofar as Borrower can reasonably foresee may have
a Material Adverse Effect.
3.8. Labor Matters. There are no strikes or other labor disputes
against Borrower or any of its Subsidiaries pending or, to Borrower's knowledge,
threatened which, if adversely determined, would have a Material Adverse
Effect. All payments due from Borrower or any of its Subsidiaries on account of
employee health and welfare insurance which would have a Material Adverse Effect
if not paid have been paid or accrued as a liability on the books of Borrower or
such Subsidiary. Neither Borrower nor any of its Subsidiaries has any
obligation under any collective bargaining agreement or any employment
agreement. There are no complaints or charges against Borrower or any of its
Subsidiaries pending or threatened to be filed with any federal, state, local or
foreign court, governmental agency or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by Borrower or any Subsidiary of any individual.
3.9. Other Ventures. Except for the Borrower's 34% interest in
Bachmann India, Ltd., neither Borrower nor any Subsidiary has any equity
interest in, or is engaged in, any partnership with any other Person.
3.10. Taxes. Except as set forth on Schedule 3.10, all
federal, state, local and foreign tax returns, reports and statements required
to be filed by Borrower and its Subsidiaries have been filed with the
appropriate Governmental Authority and all Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been
paid. Each of Borrower and its Subsidiaries has paid when due and payable
all Charges required to be paid by it. Proper and accurate amounts have been
withheld by Borrower and its Subsidiaries from their respective employees for
all periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state, local and
foreign law and such withholdings have been timely paid to the respective
governmental agencies. Neither Borrower nor any of its Subsidiaries are
currently being audited by the IRS or any other applicable Governmental
Authority. Neither Borrower nor any of its Subsidiaries has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any Charges. Neither Borrower nor any of its
Subsidiaries has filed a consent pursuant to IRC Section 341(f) or agreed to
have IRC Section 341(f)(2) apply to any dispositions of subsection (f) assets
(as such term is defined in IRC Section 341(f)(4)). None of the property
owned by Borrower or any of its Subsidiaries is property which such company
is required to treat as being owned by any other Person pursuant to the
provisions of IRC Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, and in effect immediately prior to the enactment of the Tax Reform Act
of 1986 or is "tax-exempt use property" within the meaning of IRC Section
168(h). Neither Borrower nor any of its Subsidiaries has agreed or has been
requested to make any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise. Neither Borrower nor any of its Subsidiaries
has any obligation under any written tax sharing agreement.
3.11. ERISA. Neither the Company nor any Subsidiary has any
Plan subject to regulation under ERISA except for its 401(k) plan.
3.12. No Litigation. No action, claim or proceeding is now
pending or, to the knowledge of Borrower, threatened against Borrower or any of
its Subsidiaries, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which, if determined adversely, could have a Material Adverse
Effect, nor to the knowledge of Borrower does a state of facts exist which is
reasonably likely to give rise to such proceedings. None of the matters set
forth therein questions the validity of any of the Loan Documents or any action
taken or to be taken pursuant thereto, or would have either individually or in
the aggregate a Material Adverse Effect.
3.13. Patents, Trademarks, Copyrights and Licenses. Borrower
and its Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct their business as heretofore conducted by them,
now conducted by them and proposed to be conducted by them. To the best of
their knowledge, Borrower and its Subsidiaries conduct their respective
businesses without infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others, except where such infringement or claim
of infringement would not have a Material Adverse Effect. To Borrower's
knowledge, there is no infringement or claim of infringement by others of any
material license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of Borrower or any of its
Subsidiaries.
3.14. Liens. Except for Permitted Encumbrances, the Liens
granted to the Agent for the benefit of the Lenders pursuant to the Collateral
Documents will at the Closing Date be fully perfected first priority Liens in
and to the Collateral described therein.
3.15. Full Disclosure. No information contained in this 1998
Credit Agreement, the other Loan Documents, the Financial Statements or any
written statement furnished by or on behalf of Borrower or its Subsidiaries
pursuant to the terms of this 1998 Credit Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which made.
4. CONDITIONS PRECEDENT
4.1. Conditions to Initial Tranche A Loan. Notwithstanding any
other provision of this Agreement and without affecting in any manner the rights
of the Agent or any Lender hereunder, Borrower shall have no rights under this
Agreement (but shall have all applicable obligations hereunder), and no lender
shall be obligated to make any Loan hereunder, unless and until Borrower shall
have delivered to the Agent, in form and substance satisfactory to the Agent and
each Lender and (unless otherwise indicated, each dated the Closing Date):
(a) The Tranche A Loan Note payable to the order of the Agent, duly
executed by Borrower.
(b) A favorable opinion of Roger M. Barzun, Esq., counsel to the
Borrower and its Subsidiaries (each a "Loan Party," and collectively, the "Loan
Parties"), in form and substance satisfactory to the Agent and its counsel;
(c) Resolutions of the board of directors of each Loan Party,
certified by the Secretary or Assistant Secretary of such Loan Party, as of the
Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (i) the consummation of each of the transactions contemplated by the
Loan Documents and (ii) specific officers to execute and deliver this Agreement
and the other Loan Documents.
(d) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, showing that each Loan Party is organized and in good
standing in the jurisdiction of its organization and is qualified as a foreign
corporation and in good standing in all other jurisdictions in which it is
qualified to transact business.
(e) The Security Agreement, duly executed and delivered by borrower;
the Stock Pledge Agreement, duly executed and delivered by Borrower and each
Subsidiary owning Stock of other Subsidiaries or Borrower; the Patent
Assignments duly executed by Borrower and its Subsidiaries; and the Guaranty,
duly executed and delivered by each Guarantor; together with:
(i) acknowledgment copies of proper Financing Statements (Form
UCC-1) or Amendment to/Assignment of Financing Statements (Form UCC-3), duly
filed under the Uniform Commercial Code of each jurisdiction as may be necessary
or, in the opinion of the Agent, desirable to perfect the security interests
created by the Security Agreement;
(ii) certified copies of requests for Information or Copies (Form
UCC-11), or equivalent reports, listing the Financing Statements and
Amendment/Assignment thereof referred to in paragraph (i) above and all other
effective financing statement which name Borrower or any of its Subsidiaries
(under this present name and any previous name) as debtor and which are filed in
the jurisdictions referred to in said paragraph (i), together with copies of
such other financing statements (none of which shall cover the Collateral
purported to be covered by the Security Agreement);
(iii) evidence of the completion of all recordings and filing
of the Security Agreement and Patent Assignments as may be necessary or, in the
opinion of the Agent, desirable to perfect the security interests and liens
created by the Security Agreement and Patent Assignments;
(iv) evidence that all other actions necessary or, in the opinion
of the Agent, desirable to perfect and protect the security interests created by
the Security Agreement and Patent Assignments have been taken.
(f) A certificate of the chief executive officer and chief financial
officer of Borrower, satisfactory in form and substance to the Agent, stating
that all of the representations and warranties of the Loan Parties contained
herein or in any of the Loan Documents are correct on and as of the Closing Date
as though made on and as of such date, and no event has occurred and is
continuing, or would result from a Tranche A Loan, which constitutes or would
constitute a Default or an Event of Default.
(g) Certificates of the Secretary or an Assistant Secretary of each
Loan Party, dated the Closing Date, as to the incumbency and signatures of the
officers of such Loan Party executing this Agreement, the Tranche A Note, any of
the Loan Documents and any other certificate or other document to be delivered
pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(h) Such additional information and materials as the Agent may
reasonably request, including, without limitation, copies of any debt agreement,
security agreements and other material contracts.
4.2. Conditions Precedent to Tranche B Loans. Notwithstanding
any other provision of this 1998 Credit Agreement and without affecting in any
manner the rights of the Agent or any Lender, unless and until:
(a) the Restructuring Conditions, as defined in the Restructuring
Agreement, shall all have been fulfilled (or with the consent of the Agent) duly
waived, and the Agent shall have so confirmed by delivering to the Borrower the
Agent's Certificate in the form attached to the form of Cross-Receipt attached
to the Restructuring Agreement.
(b) The Borrower shall have delivered to the Agent, duly executed by
Borrower's Tranche B Note, payable to the order of the Agent; and
(c) If requested by the Agent, a favorable opinion of Roger M.
Barzun, Esquire, counsel to the Loan Parties, in form and substance satisfactory
to the Agent and its counsel.
4.3. Conditions Precedent to All Tranche A and Tranche B Loans.
(a) No default or Event of Default shall have occurred and be
continuing.
(b) All of Borrower's representations and warranties set forth in
Section 3 of this 1998 Credit Agreement, or those of any Loan Party elsewhere in
the Loan Documents, shall be true and correct in all material respects on and as
of the proposed disbursement date.
Each request for a Tranche A or Tranche B Loan shall be deemed an express
representation that each of the aforesaid conditions is met.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1 Reports and Notices. Borrower covenants and agrees that it shall
deliver to the Agent, within thirty (30) days following the end of each month,
the financial statements and reports referred to as the "Monthly Reporting
Package," consistent with past practice. Borrower also agrees to provide Lender
with such other financial information concerning Borrower's results of
operations and financial condition as Lender may reasonably request from time to
time.
5.2 Communication with Accountants. Borrower authorizes the Agent
and the Lenders to communicate directly with its independent certified public
accountants and tax advisors and authorizes those accountants to disclose to the
Agent or any Lender any and all financial statements and other supporting
financial documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of Borrower and
any of its Subsidiaries.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless the Lenders shall otherwise
consent in writing, from and after the date hereof and until the Termination
Date:
6.1. Maintenance of Existence and Conduct of Business. Borrower
shall, and shall cause each of its Subsidiaries to: (a) do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its material trademarks and trade
names, and preserve all the remainder of its property, in use or useful in the
conduct of its business and keep the same in good repair, working order and
condition (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all needful and proper repairs, renewals and
replacements, betterments and improvements thereto consistent with applicable
industry practices, so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; and (d) transact business
only in such names used as of the date hereof, or such other names as Borrower
or any Subsidiary of Borrower shall specify to Lender in writing not less than
thirty (30) days prior to the first date such name is used by Borrower or any
Subsidiary of Borrower.
6.2. Payment of Obligations. (a) Borrower shall, and shall cause
each of its Subsidiaries to: (i) pay and discharge or cause to be paid and
discharged all its Indebtedness, including, without limitation, all the
Obligations, as and when due and payable, and (ii) pay and discharge or cause to
be paid and discharged promptly all (A) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed), and (B) lawful claims
for labor, materials, supplies and services or otherwise before any thereof
shall become in default.
(b) Borrower and its Subsidiaries may in good faith contest, by
proper legal actions or proceedings, the validity or amount of any Charges or
claims arising under Section 6.2(a)(ii), provided that at the time of
commencement of any such action or proceeding, and during the pendency thereof
(i) no Default or Event of Default shall have occurred; (ii) adequate Reserves
with respect thereto are maintained on the books of Borrower or such Subsidiary,
in accordance with GAAP; (iii) such contest operates to suspend collection of
the contested Charges or claims and is maintained and prosecuted continuously
with diligence; (iv) none of the Collateral would be subject to forfeiture or
loss or any Lien by reason of the institution or prosecution of such contest;
(v) no Lien shall exist for such Charges or claims during such action or
proceeding; (vi) Borrower or such Subsidiary shall promptly pay or discharge
such contested Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Lender evidence acceptable to Lender of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower or such Subsidiary; and (vii) Lender has not
advised Borrower in writing that Lender reasonably believes that nonpayment or
nondischarge thereof would have a Material Adverse Effect.
6.3. Lenders' Fees. Borrower shall pay to the Agent and the
Lenders, on demand, any and all fees, costs or expenses that the Agent or either
Lender shall pay to a bank or other similar institution arising out of or in
connection with the forwarding to Borrower or any other Person on behalf of
Borrower by any Lender of proceeds of the Tranche A or Tranche B Loans.
6.4. Books and Records. Borrower shall, and shall cause each of
its Subsidiaries to, keep adequate records and books of account with respect to
its business activities, in which proper entries, reflecting all of their
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financials referred to in Section 3.4(b) hereof.
6.5. Litigation. Borrower shall notify the Agent in writing,
promptly upon learning thereof, of any litigation commenced against Borrower
and/or any of the Subsidiaries, and of the institution against any of them of
any suit or administrative proceeding that may have a Material Adverse Effect.
6.6. Insurance. Borrower shall and shall cause each Subsidiary
of Borrower to maintain insurance covering, without limitation, fire, theft,
burglary, public liability, property damage, product liability, workers'
compensation, and insurance on all property and assets, all in amounts customary
for its industry and under policies issued by insurers and pursuant to policies
satisfactory to the Agent and in any event in compliance with any insurance
requirements under any Loan Documents and with a lender's loss payable clause
for the benefit of the Agent and the Lenders. Borrower shall, and shall cause
each of its Subsidiaries to, pay all insurance premiums payable by them.
6.7. Compliance with Law. Borrower shall and shall cause each of
its Subsidiaries to comply with all federal, state and local laws and
regulations applicable to it, including, without limitation, ERISA, those
regarding the collection, payment and deposit of employees' income, unemployment
and social security taxes and those relating to environmental matters where the
failure to comply may have a Material Adverse Effect.
6.8. Agreements. Borrower shall and shall cause each of its
Subsidiaries to perform, within all required time periods (after giving effect
to any applicable grace periods), all of its obligations and enforce all of its
rights under each agreement to which it is a party, including, without
limitation, any leases to which any such company is a party, where the failure
to so perform and enforce would have a Material Adverse Effect. Borrower shall
not and shall cause each of its Subsidiaries not to terminate or modify in any
manner adverse to any such company any provision of any agreement to which it is
a party which termination or modification could have a Material Adverse Effect.
6.9. SEC Filings; Certain Other Notices. Borrower shall furnish
to the Agent (i) promptly after the filing thereof with the Securities and
Exchange Commission, a copy of each report, notice or other filing, if any, by
Borrower with the Securities and Exchange Commission and (ii) a copy of each
written communication received by Borrower from or delivered by Borrower to the
Securities and Exchange Commission.
6.10. Additional Security. If requested by the Agent,
Borrower shall cause any Subsidiary designated by the Agent to enter into a
security agreement and/or one or more mortgages for the benefit of the Agent,
pursuant to which security agreement and mortgages such Subsidiary shall grant
the Agent a first priority security interest in substantially all of such
Subsidiary's real and personal property assets. In connection therewith, if the
Agent shall so request, such Subsidiary shall execute and deliver security
agreements, mortgages and such further documents and instruments and make such
filings as the Agent shall request to enable the Agent to perfect its security
interest and Liens in such Subsidiary's assets.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the Agent's prior written
consent, from and after the date hereof and until the Termination Date:
7.1. Mergers, Etc. Neither Borrower nor any Subsidiary of
Borrower shall directly or indirectly, by operation of law or otherwise, merge
with, consolidate with, acquire all or substantially all of the assets or
capital stock of, or otherwise combine with, any Person, or form any Subsidiary.
7.2. Investments; Loans and Advances. Except as otherwise
permitted by Section 7.3 or 7.4 hereof, Borrower shall not and shall not permit
any Subsidiary of Borrower to make any investment in, or make or accrue loans or
advances of money to any Person, through the direct or indirect holding of
securities or otherwise; provided, however, that Borrower shall be permitted
hereunder and may permit hereunder its Subsidiaries to make one or more
investments in, or make or accrue loans or advances of money to, Borrower or any
other Subsidiary and provided, further, that Borrower and its Subsidiaries may
make and own investments in (i) direct obligations of the United States of
America (including obligations issued or held in book-entry form on the books of
the Department of the Treasury of the United States of America) or obligations
the timely payment of the principal of, or interest on, which are fully
guaranteed by the United States of America; (ii) obligations, debentures, notes
or other evidence of indebtedness issued or guaranteed by any of the following:
Export-Import Bank of the United States, Federal Housing Administration or other
agency or instrumentality of the United States; (iii) repurchase agreements with
financial institutions or savings and loan associations having a combined
capital surplus of at least $500,000,000 fully secured by collateral security
described in clauses (i) or (ii) of this definition and continuously having a
market value of at least equal to the amount so invested; (iv) interest-bearing
demand or time deposits (including certificates of deposit) which are either (i)
insured by the Federal Deposit Insurance Corporation, or (ii) held in banks and
savings and loan associations, having general obligations rated at least "AA" or
equivalent by S&P or Moody's, or if not so rated, secured at all times, in the
manner and to the extent provided by law, by collateral security described in
clauses (i) or (ii) of this definition, of a market value of no less than the
amount of moneys so invested; (v) commercial paper rated (on the date of
acquisition thereof) at least A-1 or P-1 or equivalent by S&P or Moody's,
respectively (or an equivalent rating by another nationally recognized credit
rating agency of similar standing if neither of such corporations is then in the
business of rating commercial paper), maturing not more than 90 days from the
date of creation thereof; and (f) any corporate evidence of indebtedness rated
at least "A-" or equivalent by S&P or Moody's, maturing not more than 90 days
from the date of creation thereof. (the investments described in the preceding
clauses (i)-(v) being hereinafter referred to as "Cash Equivalents").
Notwithstanding the foregoing, Wahlco, Engineer Products, Ltd. has pledged cash
in the amount of $700,000 U.K. pounds with London & International Mercantile,
Ltd., which pledge shall not be deemed a breach of this Section 7.2; provided,
however, that no further pledges may be made without the consent of the Agent.
7.3. Indebtedness. (a) Except as otherwise expressly permitted
by this Section 7.3 or by any other section of this 1998 Credit Agreement,
Borrower shall not, nor shall it permit any of its Subsidiaries to, create,
incur, assume or permit to exist any Indebtedness, except (i) Indebtedness
secured by Liens permitted under Section 7.7 hereof, (ii) the Obligations, (iii)
all deferred taxes, (iv) all unfunded pension fund and other employee benefit
plan obligations and liabilities but only to the extent they are permitted to
remain unfunded under applicable law, (v) intercompany debt to any Guarantor or
to Borrower, and (vi) Indebtedness of Subsidiaries of Borrower created under the
Guaranty.
(a) Except as otherwise expressly permitted by Section 7.8
hereof, Borrower shall not and shall not permit any Subsidiary of Borrower to
sell or transfer, either with or without recourse, any assets, of any nature
whatsoever, in respect of which a Lien is granted or to be granted pursuant to
any Loan Document or engage in any sale-leaseback or similar transaction
involving any of such assets.
7.4. Employee Loans. Borrower shall not, and shall not permit
any Subsidiary of Borrower to, make or accrue any loans or other advances of
money to any employee of Borrower or any Subsidiary in excess at any one time of
$50,000 in the aggregate for all such loans, provided that any such loans are
made only in the ordinary course of Borrower's or such Subsidiary's business.
7.5. Maintenance of Business. Borrower shall not and shall not
permit any Subsidiary of Borrower to engage in any business other than the
business currently engaged in by Borrower or such Subsidiary on the Closing
Date.
7.6. Guaranteed Indebtedness. Borrower shall not and shall not
permit any Subsidiary of Borrower to incur any Guaranteed Indebtedness
(excluding the Guaranteed Indebtedness pursuant to the Guaranty) except (i) by
endorsement of instruments or items of payment for deposit to the general
account of Borrower or such Subsidiary, and (ii) for Guaranteed Indebtedness
incurred for the benefit of Borrower or any Subsidiary of Borrower if the
primary obligation is permitted by this 1998 Credit Agreement.
(a) Liens. Borrower shall not and shall not permit any
Subsidiary of Borrower to create or permit any Lien on any of its properties or
assets except: (a) presently existing or hereafter created Liens in favor of the
Agent or any Lender; and (b) Permitted Encumbrances.
7.7. Sales of Assets. Borrower shall not and shall not permit
any Subsidiary of Borrower to sell, transfer, convey or otherwise dispose of any
assets or properties; provided, however, that the foregoing shall not prohibit
(i) the sale of Inventory in the ordinary course of business, (ii) the sale of
surplus or obsolete equipment and fixtures, and (iii) transfers resulting from
any casualty or condemnation of assets or properties.
7.8. Cancellation of Indebtedness. Borrower shall not and shall
not permit any Subsidiary of Borrower to cancel any claim or debt owing to it,
except for reasonable consideration and in the ordinary course of business,
except that obligations of Wahlco Engineered Products Italiana SRC owed to
Wahlco Engineered Products Group Ltd. may be cancelled.
7.9. Events of Default. Borrower shall not and shall not permit
any Subsidiary of Borrower to take or omit to take any action, which act or
omission would constitute (i) a default or an event of default pursuant to, or
noncompliance with any of, the terms of any of the Loan Documents or the
Ancillary Agreements or (ii) a material default or an event of default pursuant
to, or noncompliance with any other contract, lease, mortgage, deed of trust or
instrument to which it is a party or by which it or any of its property is
bound, or any document creating a Lien, unless such default, event of default or
non-compliance would not have a Material Adverse Effect.
7.10. Hedging Transactions. Borrower shall not and shall not
permit any of its Subsidiaries to engage in any speculative interest rate
hedging swaps, caps or similar derivatives transaction other than currency
hedging in the ordinary course of business.
7.11. Restricted Payments. Borrower shall not and shall not
permit any Subsidiary of Borrower to make any Restricted Payments nor shall
Borrower permit any Subsidiary to make such payments with respect to Borrower's
Stock.
7.12. Compensation. Except with the approval of the Board of
Directors of the Borrower, Borrower shall not and shall not permit any
Subsidiary of Borrower to, increase the salary and bonus in any year of the ten
highest paid employees of Borrower and its Subsidiaries, if as a result of such
increase, any such employee's total cash Compensation would increase by more
than five percent (5%) of his total cash Compensation for the prior year.
7.13. ERISA. Neither Borrower nor any of its Subsidiaries
shall establish or become obligated to any new Plan.
8. TERM
8.1. Termination. Subject to the provisions of Section 2 hereof,
the financing arrangement contemplated hereby in respect of the Tranche A and
Tranche B Loans shall be in effect until the Commitment Termination Date.
8.2. Survival of Obligations Upon Termination of Financing
Arrangement. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this 1998 Credit Agreement shall in any way affect
or impair the powers, obligations, duties, rights and liabilities of Borrower or
the rights of the Agent or any Lender relating to any transaction or event
occurring prior to such termination. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations contained in the Loan Documents shall survive
such termination or cancellation and shall continue in full force and effect
until such time as all of the Obligations have been paid in full in accordance
with the terms of the agreements creating such Obligations, at which time the
same shall terminate.
8.3. Termination Prior To Closing Date. Borrower hereby
covenants and agrees with the Agent and each Lender that Borrower will: (a) use
its best efforts to satisfy, and to cause to be satisfied, fully and promptly
each of the conditions set forth in Sections 4.1, 4.2 and 4.3 hereof and to
consummate each of the transactions contemplated by this 1998 Credit Agreement;
and (b) refrain from taking, or permitting to be taken, any action, of any
nature whatsoever, which shall impede, preclude or otherwise interfere with the
satisfaction of any such condition,
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower shall fail to make any payment of principal of, or
interest on or any other amount owing in respect of, the Loans or any of the
other Obligations when due and payable or declared due and payable, except that
with respect to expenses payable under this 1998 Credit Agreement, or other
Obligations owing under any Loan Document other than this 1998 Credit Agreement,
such failure shall have remained unremedied for a period of ten (10) days after
Borrower has received notice of such failure from the Agent or any Lender.
(b) Borrower shall fail or neglect to perform, keep or observe
any of the provisions of Section 6 or 7 of this 1998 Credit Agreement.
(c) Borrower shall fail or neglect to perform, keep or observe
any other provision of this 1998 Credit Agreement or of any of the other Loan
Documents, or any other Loan Party shall fail or neglect to perform, keep or
observe any of the provisions of any other Loan Document and the same shall
remain unremedied for a period ending on the first to occur of ten (10) days
after Borrower shall receive written notice of any such failure from the Agent
or any Lender or thirty (30) days after Borrower shall become aware thereof.
(d) A default shall occur under any other agreement, document or
instrument to which any Loan Party is a party or by which any Loan Party or any
Loan Party's property is bound, and such default (i) involves the failure to
make any payment (whether of principal, interest or otherwise) due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) in
respect of any Indebtedness of any Loan Party in an aggregate amount exceeding
$25,000, or (ii) causes (or permits any holder of such Indebtedness or a trustee
to cause) such Indebtedness or a portion thereof in an aggregate amount
exceeding $25,000, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan
Document or in any written statement pursuant thereto or hereto, report,
financial statement or certificate made or delivered to the Agent or any Lender
by any Loan Party shall be untrue or incorrect in any material respect, as of
the date when made or deemed made (including those made or deemed made.
(f) Any of the assets of any Loan Party shall be attached,
seized, levied upon or subjected to a writ or distress warrant, or come within
the possession of any receiver, trustee, custodian or assignee for the benefit
of creditors of any Loan Party and shall remain unstayed or undismissed for
thirty (30) consecutive days; or any Person other than any Loan Party shall
apply for the appointment of a receiver, trustee or custodian for any of the
assets of any Loan Party and shall remain unstayed or undismissed for thirty
(30) consecutive days; or any Loan Party shall have concealed, removed or
permitted to be concealed or removed, any part of its property, with intent to
hinder, delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any
Loan Party in a court having competent jurisdiction seeking a decree or order in
respect of such Loan Party (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of such Loan
Party or of any substantial part of its or their properties, or (iii) ordering
the winding-up or liquidation of the affairs of such Loan Party and such case or
proceeding shall remain undismissed or unstayed for thirty (30) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief
under title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of Borrower or such Loan Party or of any substantial part of its
properties, (iii) fail generally to pay its debts as such debts become due, or
(iv) take any corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $25,000 in the
aggregate shall be rendered against Borrower or any of its Subsidiaries and the
same shall not be (i) fully covered by insurance in accordance with Section 6.6
hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
fifteen (15) days.
(j) Any other event shall have occurred which would have a
Material Adverse Effect and the Agent or any Lender shall have given Borrower at
least ten (10) days notice thereof.
(k) Any provision of any Security Agreement or Pledge Agreement
(collectively, the "Collateral Documents") Collateral Document or the Guaranty
shall for any reason cease to be valid or enforceable in accordance with its
terms, or any security interest created under any Collateral Document shall
cease to be a valid and perfected first priority security interest or Lien
(except as otherwise stated therein) in any of the Collateral purported to be
covered thereby.
9.2. Remedies. If any Event of Default shall have occurred and
be continuing, the Agent shall at the request, or may with the consent, of the
Required Lenders, without notice, (i) terminate this facility with respect to
further Loans, whereupon no Loan may be made hereunder, and/or (ii) declare all
Obligations to be forthwith due and payable, whereupon all Obligations shall
become and be due and payable, without presentment, demand, protest or further
notice of any kind, all of which are expressly waived by Borrower; provided,
however, that upon the occurrence of an Event of Default specified in Section
9.1(f), (g) or (h) hereof, the Obligations shall become due and payable without
declaration, notice or demand by Lender. Lender shall take such action with
respect to any Default or Event of Default as shall be directed by the Required
Lenders; provided that, unless and until Lender shall have received such
directions, Lender may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders taken as
a whole, including any action (or the failure to act) pursuant to the Loan
Documents.
9.3. Waivers by Borrower. Except as otherwise provided for in
this 1998 Credit Agreement and applicable law, Borrower waives (i) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by the Agent or any Lender on which Borrower may in
any way be liable and hereby ratifies and confirms whatever the Agent or such
Lender may do in this regard, (ii) all rights to notice and a hearing prior to
the Agent or such Lender's taking possession or control of, or to the Agent or
such Lender's replevy, attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to allowing Lender to
exercise any of its remedies, and (iii) the benefit of all valuation, appraisal
and exemption laws. Borrower acknowledges that it has been advised by counsel
of its choice with respect to this 1998 Credit Agreement, the other Loan
Documents and the transactions evidenced by this 1998 Credit Agreement and the
other Loan Documents.
10. MISCELLANEOUS
10.1. Complete Agreement; Modification of Agreement.. (a)
The Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and may not be modified, altered or amended
except by an agreement in writing signed by Borrower, the Agent and each Lender
in accordance with Section 10.1(d) hereof. Borrower may not sell, assign or
transfer any of the Loan Documents or any portion thereof, including, without
limitation, Borrower's rights, title, interests, remedies, powers and duties
hereunder or thereunder.
(a) In the event any Lender assigns or otherwise transfers all
or any part of any Note, Borrower shall, upon the request of such Lender, issue
new Notes to effectuate such assignment or transfer.
(b) Each Lender may sell, assign, transfer or negotiate to one
or more other lenders, commercial banks insurance companies, other financial
institutions or any other Person all or a portion of its rights and obligations
under any Note held by Lender and this 1998 Credit Agreement. From and after
the effective date of such an assignment, the assignees thereunder shall, in
addition to the rights and obligations hereunder held by it immediately prior to
such effective date, have the rights and obligations hereunder that have been
assigned to it pursuant to such assignment, relinquish its rights and be
released from its obligations under the Agreement (and, in the case of an
assignment and acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this 1998 Credit Agreement, such Lender
shall cease to be a party hereto).
(c) No amendment or waiver of any provision of this 1998 Credit
Agreement or any Notes or any other Loan Document, nor consent to any departure
by Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by each Lender affected thereby do any of the
following: (i) increase the amount of Lender's commitment to make Loans
hereunder or subject such Lender to any additional obligations, (ii) reduce the
principal of, or interest on, any Note or other amounts payable hereunder,
(iii) postpone any date fixed for any payment of principal of, or interest on,
any Note or other amounts payable hereunder, (iv) change the aggregate unpaid
principal amount of any Note, or the number of Lenders which shall be required
for the Lenders or any of them to take any action hereunder, (v) release or
discharge any Person liable for the performance of any obligations of any Loan
Party hereunder or under any of the Loan Documents, or (vi) amend this Section
10.1(c); and provided, further, however, that no amendment, waiver or consent
shall, unless in writing and signed by all Lenders holding Notes, increase the
amount of the commitment to make Loan. hereunder; and provided, further,
however, that no amendment, waiver or consent shall unless in writing and signed
by any such Lender in addition to the Required Lenders required above to take
such action, affect the rights or duties of any such Lender under this 1998
Credit Agreement, any Term Note or any Loan Document.
10.2. Fees and Expenses. Borrower shall pay all reasonable
out-of-pocket expenses of the Agent and the Lender in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its counsel and advisors retained in connection with the Loan Documents
and the transactions contemplated thereby and advice in connection therewith).
If, at any time or times, regardless of the existence of an Event of Default
(except with respect to paragraphs (iii) and (iv), which shall be subject to an
Event of Default having occurred and be continuing), the Agent or any Lender
shall employ counsel or other advisors for advice or other representation or
shall incur reasonable legal or other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights
hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by the Agent, a Lender, Borrower, any
Subsidiary of Borrower or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements to be
executed or delivered in connection herewith;
(iii) any attempt to enforce any rights of any Lender
against Borrower, any Subsidiary of Borrower or any other Person, that
may be obligated to any Lender by virtue of any of the Loan Documents;
(iv) any attempt to verify, protect, collect, sell,
liquidate or otherwise dispose of the Collateral;
then, and in any such event, the attorneys' and other parties' fees arising from
such services, including those of any appellate proceedings, and all expenses,
costs, charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 10.2 shall be payable, on demand, by Borrower to the
Agent or the relevant Lender and shall be additional Obligations secured under
this 1998 Credit Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, such expenses, costs, charges and fees may
include: paralegal fees, costs and expenses; accountants' and investment
bankers' fees, costs and expenses; court costs and expenses; photocopying and
duplicating expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram charges; secretarial
overtime charges; and expenses for travel, lodging and food paid or incurred
in connection with the performance of such legal services.
10.3. No Waiver by Lender. No failure of the Agent or any
Lender, at any time or times, to require strict performance by any Loan Party of
any provision of this 1998 Credit Agreement and any of the other Loan Documents
shall not waive, affect or diminish any right of the Agent or any Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by the Agent or any Lender of an Event of Default by any
Loan Party under the Loan Documents shall not suspend, waive or affect any other
Event of Default by any Loan Party under this 1998 Credit Agreement and any of
the other Loan Documents whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of any Loan Party
contained in this 1998 Credit Agreement or any of the other Loan Documents and
no Event of Default by Borrower under this 1998 Credit Agreement and no defaults
by any Loan Party under any of the other Loan Documents shall be deemed to have
been suspended or waived by the Agent or any Lender, unless such suspension or
waiver is by an instrument in writing signed by an officer of the Agent and
directed to such Loan Party specifying such suspension or waiver.
10.4. Agency Provisions. Wexford Management is appointed as
the lawful agent and attorney-in-fact by each Lender, as more fully set forth in
Section 6 of the Restructuring Agreement of even date herewith, which provisions
are incorporated herein as though fully set forth in this 1998 Credit Agreement.
10.5. Remedies. The rights and remedies of the Agent and
each Lender under this 1998 Credit Agreement shall be cumulative and
nonexclusive of any other rights and remedies which the Agent or any Lender may
have under any other agreement, including without limitation, the Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required.
10.6. WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THE LOAN DOCUMENTS.
10.7. Severability. Wherever possible, each provision of
this 1998 Credit Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this 1998
Credit Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this 1998 Credit Agreement.
10.8. Parties. This 1998 Credit Agreement and the other Loan
Documents shall be binding upon, and inure to the benefit of, the successors of
Borrower, the Agent and the Lender and the assigns, transferees and endorsees of
each Lender.
10.9. Conflict of Terms. Except as otherwise provided in
this 1998 Credit Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this 1998 Credit Agreement, if any
provision contained in this 1998 Credit Agreement is in conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this 1998 Credit Agreement shall govern and control.
10.10. Authorized Signature. Until Lender shall be notified
by Borrower to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an officer of Borrower listed in Schedule 10.10
hereto shall bind Borrower and be deemed to be the act of Borrower affixed
pursuant to and in accordance with resolutions duly adopted by Borrower's Board
of Directors.
10.11. Governing Law. Except as otherwise expressly provided
in any of the Loan Documents, in all respects, including all matters of
construction, validity and performance, this 1998 Credit Agreement and the
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of New York applicable to contracts
made and performed in such state, without regard to the principles thereof
regarding conflict of laws, and any applicable laws of the United States of
America. The Agent, each Lender and Borrower agree to submit to personal
jurisdiction and to waive any objection as to venue in the County of New York,
State of New York. Service of process on Borrower, the Agent and each Lender in
any action arising out of or relating to any of the Loan Documents shall be
effective if mailed to such party at the address listed in Section 10.12
hereof. Nothing herein shall preclude the Agent, any Lender or Borrower from
bringing suit or taking other legal action in any other jurisdiction.
10.12. Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any communication with respect to this 1998 Credit Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, or telecopied and confirmed by telecopy answerback
addressed as follows:
(a) If to the Lenders or to the Agent, at:
Wexford Management LLC, as Agent
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Mark L. Plaumann
Telephone: (203) 862-7000
Telecopier: (203) 862-7328
With a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Stephen B. Selbst
Telephone: (212) 704-0100
Telecopier: (212) 704-0196
(b) If to Borrower, at:
Wahlco Environmental Systems, Inc.
3600 West Segerstrom Avenue
Santa Ana, California 92704
Attention: C. Stephen Beal
Telephone: (714) 979-7300
Telecopier: (714) 979-0114
With a copy to:
Roger M. Barzun, Esq.
60 Hubbard Street
Concord, Massachusetts 01742
Telephone: (978) 287-4275
Telecopier: (978) 287-4276
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback or
three (3) Business Days after the same shall have been deposited in the United
States mail. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
10.13. Survival. The representations and warranties of
Borrower in this 1998 Credit Agreement shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto.
10.14. Section Titles. The Section titles and Table of
Contents contained in this 1998 Credit Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
10.15. Counterparts. This 1998 Credit Agreement may be
executed in any number of separate counterparts, each of which shall,
collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, this 1998 Credit Agreement has been duly executed
as of the date first written above.
WAHLCO ENVIRONMENTAL STYSTEMS, INC.
By: ______________________________________
Name:
Title:
WES ACQUISITION CORP.
By: _______________________________
Name:
Title:
WEXFORD CAPITAL PARTNERS II, L.P.
By: _______________________________
Wexford Capital II, L.P.
Its General Partner
By: _______________________________
Wexford Capital II, L.P.
Its General Partner
By: _______________________________
Name:
Title:
WEXFORD OVERSEAS PARTNERS I, L.P.
By: _______________________________
Wexford Capital Overseas II, L.P.
The General Partner
By: _______________________________
Wexford Capital Limited
Its General Partner
By: _______________________________
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By:
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996
INSTITUTIONAL, L.P.
By:
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996
LIMITED
By:
Name:
Title:
WEXFORD-EURIS SPECIAL SITUATIONS
1996, L.P.
By:
Name:
Title:
WEXFORD MANAGEMENT LLC, As Agent
By: _______________________________
Name:
Title:
SCHEDULE 3.6
DEFAULTS
1/30/98
DESCRIPTION
AMOUNT
London International Mercantile Bank (LIM) is in $459,812
default of deposits owed to WEP Ltd. These
deposits were originally restricted by LIM as
collateral for outstanding letters of credit. Due to
LIM's Financial problems/reorganization, they will
not allow WEP Ltd. to withdraw these funds.
( 280,544 @ 1.639 = $459,812)
__________________________________________________________________________
TOTAL
459,812
SCHEDULE 3.10
TAXES
1/30/98
None
Exhibit A-1
to 1988 Credit Agreement
TRANCHE A NOTE
$3,000,000 Santa Ana, California
__________ __, 1998
FOR VALUE RECEIVED, WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware
corporation (hereinafter referred to as "Borrower"), hereby unconditionally
PROMISES TO PAY to the order of WEXFORD MANAGEMENT LLC, a Connecticut limited
liability company, as agent (the "Agent"), at 411 West Putnam Avenue, Greenwich,
Connecticut 06830 or at such other place as the holder of this Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of THREE
MILLION DOLLARS ($3,000,000) or such lesser amount as may be outstanding
hereunder, together with interest on the unpaid principal amount of this Note
outstanding from time to time at the rate provided in the 1998 Credit Agreement
(as hereinafter defined).
This Note is issued pursuant to that certain Amended and Restated
Credit Agreement dated as of January 30, 1998 among Borrower, the Lenders named
therein and the Agent, as agent (the "1998 Credit Agreement"), and is entitled
to the benefit and security of the Loan Documents provided for therein, to which
reference is hereby made for a statement of all of the terms and conditions
under which the loan evidenced hereby is made. All capitalized terms, unless
otherwise defined herein, shall have the meanings ascribed to them in the 1998
Credit Agreement or in the Loan Documents.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the 1998 Credit Agreement
and, if not sooner paid in full, on December 31, 2000. Interest thereon shall
be paid until such principal amount is paid in full at such interest rates and
at such times as are specified in the Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
Upon and after the occurrence of an Event of Default, this Note may,
as provided in the Loan Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note has been executed, delivered and accepted at Santa Ana,
California and shall be interpreted, governed by, and construed in accordance
with, the laws of the State of New York.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
Exhibit A-2
to 1988 Credit Agreement
TRANCHE B NOTE
$2,500,000 Santa Ana, California
__________ __, 1998
FOR VALUE RECEIVED, WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware
corporation (hereinafter referred to as "Borrower"), hereby unconditionally
PROMISES TO PAY to the order of WEXFORD MANAGEMENT LLC, a Connecticut limited
liability company, as agent (the "Agent"), at 411 West Putnam Avenue, Greenwich,
Connecticut 06830 or at such other place as the holder of this Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) or such lesser amount as may be
outstanding hereunder, together with interest on the unpaid principal amount of
this Note outstanding from time to time at the rate provided in the 1998 Credit
Agreement (as hereinafter defined).
This Note is issued pursuant to that certain Amended and Restated
Credit Agreement dated as of January 30, 1998 among Borrower, the Lenders named
therein and the Agent, as agent (the "1998 Credit Agreement"), and is entitled
to the benefit and security of the Loan Documents provided for therein, to which
reference is hereby made for a statement of all of the terms and conditions
under which the loan evidenced hereby is made. All capitalized terms, unless
otherwise defined herein, shall have the meanings ascribed to them in the 1998
Credit Agreement or in the Loan Documents.
The principal amount of the indebtedness evidenced hereby shall be
payable in the amounts and on the dates specified in the 1998 Credit Agreement
and, if not sooner paid in full, on December 31, 2000. Interest thereon shall
be paid until such principal amount is paid in full at such interest rates and
at such times as are specified in the Agreement.
If any payment on this Note becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
Upon and after the occurrence of an Event of Default, this Note may,
as provided in the Loan Agreement, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
This Note has been executed, delivered and accepted at Santa Ana,
California and shall be interpreted, governed by, and construed in accordance
with, the laws of the State of New York.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
Exhibit B
to 1998 Credit Agreement
FIRST AMENDMENT TO GUARANTY
FIRST AMENDMENT TO GUARANTY, dated as of January 30, 1998 among the
Guarantors identified as such on the signature page hereof (individually a
"Guarantor" and collectively, the "Guarantors"), WES Acquisition Corp., a
Delaware corporation ("WESAC"); the 1998 Lenders (as hereinafter defined;
together with WESAC, collectively, the "Lenders"); and Wexford Management LLC, a
Connecticut limited liability company, as administrative and collateral agent
for the Lenders (the "Agent").
W I T N E S S E T H :
WHEREAS, WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware Corporation
("Borrower") and WESAC entered into that certain Term Loan Agreement dated as of
July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, Guarantors and Borrower are members of the same consolidated group
of companies and are engaged in related business; and
WHEREAS, to induce WESAC to make the Loans (as such term is defined in the
1995 Loan Agreement), Guarantors entered into that certain Guaranty dated as of
July 25, 1995 (the "Guaranty"); and
WHEREAS, to amend and supplement the 1995 Loan Agreement, and to provide
for additional credit facilities to Borrower, each of the Lenders and the Agent,
as agent, have entered into that certain Amended and Restated Loan Agreement
dated as of January 30, 1998 (the "1998 Credit Agreement"), pursuant to which
the Lenders have agreed to make loans to Borrower for the benefit of Borrower
and the Guarantors; and
WHEREAS, Lenders have determined to appoint the Agent as their agent for
admimnistrative and collateral purposes, including exercising all rights under
the Guaranty, as amended hereby;
WHEREAS, in connection with the execution and delivery of the 1998 Credit
Agreement and as a condition precedent thereto, the Lenders are requiring that
each Guarantor shall have executed and delivered this Guaranty;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders and the Agent to enter into the
1998 Credit Agreement, and to make the loans provided for therein, it is agreed
as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the
1998 Credit Agreement are used as therein defined, and as following shall have
(unless otherwise provided elsewhere in this Agreement or the Security
Agreement) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this First Amendment to the Security Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or hereafter
arising under the 1995 Loan Agreement or any Loan Document.
"1995 Lender" shall mean WESAC.
"1998 Lenders" shall mean all of the parties named as Lenders in the 1998
Credit Agreement.
2. Assignment to Agent; Guaranty of Obligations of Borrower. WESAC
hereby assigns to the Agent, for the benefit of all the Lenders, the
unconditional Guaranty of payment and performance and not collection, held by
WESAC as of the date hereof. Guarantors hereby consent to such assignment.
Each Guarantor acknowledges, confirms and agrees that this Agreement
unconditionally guarantees to the Lenders, and their successors, endorsees,
transferees and assigns, the prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance, in full, of the Obligations.
3. Effect of Amendment. Each Guarantor hereby confirms and agrees that,
except as specifically amended hereby, the Guaranty continues in full force and
effect.
4. Waiver. No delay on the part of the Agent to enforce this Agreement
or any other Loan Document or the waiver of consent by any Lender with respect
to any of the provisions thereof shall constitute a waiver thereof or impair the
Agent's rights to such Lender with respect to any of the provisions thereof
shall constitute a waiver thereof or impair the Agent's rights to seek
satisfaction from the Guarantors, jointly and severally, prior or subsequent to,
or simultaneously with, the enforcement of the Lenders' rights hereunder, to
exercise any right or remedy which either may have against any property, real or
personal, as a result of any lien it may have as security for all or any portion
of the Obligations.
5. Assignment. Each Lender may assign, endorse or transfer this
Agreement as provided in, and in accordance with, the 1998 Credit Agreement, and
the assignee of this Agreement shall be entitled to all the benefits hereof.
6. Further Assurances. Each Guarantor agrees, upon the written request
of the Agent, to execute and deliver to the Agent, any additional instruments or
any documents reasonably considered necessary by any Lender to cause this
Agreement to be, become or remain valid and effective in accordance with its
terms.
7. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to advice of counsel concerning all
matters pertaining to its duties hereunder.
(b) Each Guarantor jointly and severally agrees to promptly reimburse
the Agent for actual out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred in connection with the administrator and
enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it of them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) The Agreement shall be binding upon the Guarantors and their
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent, and its successors and assigns, and shall be governed by and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for on behalf of the Agent and
the Guarantors.
8. Severability. If for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
inability shall not impair the operation of or effect those portions of this
Agreement which are valid.
9. Notice. Whenever it is provided herein that any notice, demand,
request, consent, approval or other communication shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other a communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given as
provided in Section 10.11 of the 1998 Credit Agreement.
10. Section Titles. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one document.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to the Security Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:_________________________
Name:
Title:
BACHMANN COMPANIES, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
GROUP, LTD.
By:_________________________
Name:
Title:
WAHLCO, INC.
By:_________________________
Name:
Title:
FIELD SERVICE ASSOCIATES, INC.
By:_________________________
Name:
Title:
WAHLCO POWER PRODUCTS, INC.
By:_________________________
Name:
Title:
WES TECHNOLOGY, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS, INC.
By:_________________________
Name:
Title:
LAGUNA SERVICE CORPORATION
By:_________________________
Name:
Title:
WAHLCO GAS FLOW TECHNOLOGIES, INC.
By:_________________________
Name:
Title:
WAHLCO SERVICE CORPORATION
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
PTY., LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
CANADA, INC.
By:_________________________
Name:
Title:
FLOWRITE DAMPERS, LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS, LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED INTERNATIONAL,
LTD.
By:_________________________
Name:
Title:
PENTNEY ENGINEERING, LTD.
By:_________________________
Name:
Title:
TEDDINGTON BELLOWS (HOLDINGS), LTD.
By:_________________________
Name:
Title:
TRESTE PLAN HIRE, LTD.
By:_________________________
Name:
Title:
WAHLCO INTERNATIONAL, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
ITALIANA SRL.
By:_________________________
Name:
Title:
TEDDINGTON BELLOWS, LTD.
By:_________________________
Name:
Title:
BACHMANN H&T, GmbH
By:_________________________
Name:
Title:
EXERGETIC SYSTEMS, INC.
By:_________________________
Name:
Title:
CORONA PROPERTIES
By:_________________________
Name:
Title:
BACHMANN INDUSTRIES INDIA, LTD.
By:_________________________
Name:
Title:
Accepted and acknowledged by:
WEXFORD MANAGEMENT LLC
By:_________________________________
Name:
Title:
Exhibit C-1
to 1998 Credit Agreement
FIRST AMENDMENT TO PATENT ASSIGNMENT
FIRST AMENDMENT TO PATENT ASSIGNMENT, dated as of January 30, 1998
(the "Agreement") among WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware
corporation ("Borrower"); WES ACQUISITION CORP., a Delaware corporation
("WESAC"): the 1998 Lenders (as hereinafter defined); and WEXFORD MANAGEMENT
LLC, a Connecticut limited liability company, as administrative and collateral
agent for the Lenders (the "Agent").
W I T N E S S E T H
WHEREAS, Borrower is the sole and exclusive owner of the Letters of
Patent identified on Schedule I hereto, and of the patent applications in the
United States Patent and Trademark Office identified on such Schedule I (all of
the foregoing, collectively, the "Patents"), and of the inventions described and
claimed therein; and
WHEREAS, Borrower and WESAC entered into that certain Term Loan
Agreement dated as of July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, to secure Borrower's obligations under the 1995 Loan
Agreement, Borrower and WESAC entered into that certain Security Agreement dated
as of July 25, 1995 (the "Security Agreement") and Borrower granted a security
interest in the Collateral described therein to WESAC; and
WHEREAS, pursuant to the Security Agreement, Borrower executed a
Patent Assignment in favor of WESAC as of December 28, 1995 (the "Existing
Assignment"), whereby Borrower assigned all right, title and interest in and to
the Patents to WESAC; and
WHEREAS, to amend and supplement the 1995 Loan agreement, and to
provide for additional credit facilities to Borrower, each of the Lenders named
therein and the Agent, as agent, have entered into that certain Amended and
Restated Loan Agreement dated as of January 30, 1998 (the "1998 Credit
Agreement"), pursuant to which the Lenders have agreed to make loans to Borrower
and its Subsidiaries; and
WHEREAS, in connection with the execution and delivery of the 1998
Credit Agreement and as security for all the obligations of Borrower thereunder,
the Lenders and the Agent are requiring that Borrower shall have executed and
delivered this Agreement and granted and confirmed the security interests in the
Patents contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders and the Agent to enter into the
1998 Credit Agreement, and to make the loans provided for therein, it is agreed
as follows:
1. Definitions. Unless otherwise defined herein, terms defined in
the 1998 Credit Agreement are used as therein defined and shall have (unless
otherwise provided elsewhere in this Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Agreement" shall mean this First Amendment to the Patent Assignment,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or
hereafter arising under the 1995 Loan Agreement or any Loan Document;
"1998 Lenders" shall mean all the parties named as Lenders in the 1998
Credit Agreement.
2. Assignment. WESAC hereby assigns to the Agent, for the benefit
of all the Lenders, the Existing Assignment of the Patents held by WESAC as of
the date hereof. Borrower hereby consents to such assignment.
3. Security for Obligation. Borrower acknowledges, confirms and
agrees that this Agreement secures, and the assignment of the Patents is
security for, the prompt payment in full when due, whether at stated maturity,
by acceleration or otherwise, and performance of the Obligations, whether for
principal, premium, interest, fees, costs and expenses, and all obligations of
Borrower now or hereafter existing under this Agreement and under the First
Amendment to the Security Agreement (collectively, the "Secured Obligations")
including the Existing Obligations, and any and all other future advances, as
well as all interest, fees, charges expenses, attorneys' fees and any other sum
chargeable to borrower of any or all of its subsidiaries under any of the Loan
Documents. Concurrently with the execution and delivery of this Agreement, each
of the UCC-1 financing statement listed on Schedule I attached hereto shall be
amended to assign the security interests represented thereby to the Agent.
4. Effect of Amendment. Borrower hereby confirms and agrees that,
except as specifically amended hereby, the Existing Assignment continues in full
force and effect.
5. Waiver. No delay on the part of the Agent in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Borrower by the Agent with request to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's rights to take any action or to exercise
any power of sale, Lien, option, or any other rights as against Borrower in any
respect.
6. Assignment. Each Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligators as provided in,
and in accordance with, the 1998 Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
7. Miscellaneous
(a) The Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder;
(b) Borrower agrees to promptly reimburse the Agent for actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred in connection with the administrator and enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any action lawfully
taken or omitted to be taken by it of them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct.
(d) The Agreement shall be binding upon Borrower and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent, and its successors and assigns, and shall be governed by and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for on behalf of the Agent and
Borrower.
8. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such inability shall not impair the operation of or effect those portions of
this Agreement which are valid.
9. Notice. Whenever it is provided herein that any notice, demand,
request, consent, approval or other communication shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other a communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given as
provided in Section 10.11 of the 1998 Credit Agreement.
10. Section Titles. The section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one document.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to the Patent Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
WES ACQUISITION CORP.
By:
Name:
Title:
The foregoing First Amendment to the Patent Assignment is hereby
accepted by the Agent:
WEXFORD MANAGEMENT, LLC.
By:
Name:
Title:
SCHEDULE I
TITLE: Hot Side Electrostatic Precipitator
PATENT NO.: 5,300,270
FILE DATE: 08/20/92
SN: 933,489
ISSUE DATE: 04/05/94
EXPIRATION DATE: 04/05/11
ABSTRACT: A process for reducing the NOx in flue gas, comprising
the steps of: furnishing a flow of gas containing
particular matter and NOx; providing an electrostatic
precipitator having therein collecting surfaces coated
with a catalyst for the reduction of NOx in the flue gas
by reaction with a nitrogeneous compound, the
electrostatic being positioned in the flue gas flow at a
location such that the temperature of the flue gas is no
less than about 450 degrees F at the point of flue gas
from the electrostatic precipitator; and operating an
electrostatic precipitator to remove particulate from
the flue gas, the NOx from the flue gas reacting with
the nitrogeneous compound in the presence of the
catalyst to reduce the NOx content of the flue gas.
SCHEDULE I
TITLE: Temperature Stabilized Heat Exchanger
PATENT NO.: 5,323,842
FILE DATE: 06/05/92
SN: 894,438
ISSUE DATE: 06/28/94
EXPIRATION DATE: 06/28/11
ABSTRACT: A heat exchange module comprises a rotating-wheel type
regenerative heat exchanger unit having a plurality of
heat exchange elements mounted in baskets through the
volume of the heat exchanger wheel. The heat exchanger
wheel rotates about its axis so that the heat exchange
elements are heated by a hot gas flow over a portion of
the rotation, and transfer the heat to an air flow over
another portion of the rotation. At least some of the
heat exchange elements include phase change materials,
such as salts, that absorb heat while maintaining a
constant temperature. The phase change materials narrow
the range of temperatures reached by the heat exchange
elements located at various positions of the heat
exchanger wheel. The phase change materials prevent
excessively low temperatures that can result in
condensation of corrosive acids on the surfaces of the
heat exchange elements in particularly desirable
temperature ranges for the operation of catalysts coated
onto the heat exchange elements.
SCHEDULE I
TITLE: Catalytic Sulfur Trioxide FGC
PATENT NO.: 5,320,052
FILE DATE: 03/01/93
SN: 25,034
ISSUE DATE: 06/14/04
EXPIRATION DATE: 06/14/11
ABSTRACT: A sulfur trioxide conditioning system includes a
catalytic converter that converts a portion of the
sulfur trioxide. The catalytic converter includes a
catalyst support, which is disposed across at least a
portion of the cross section of a main duct from a
burner to a heat recovery apparatus, and a catalyst on
the catalyst support. The amount of the catalyzed
surface exposed to the flow of flue gas is selectively
varied to control the conversion of sulfur dioxide to
sulfur trioxide.
SCHEDULE I
TITLE: Method and Apparatus for Reducing NOx Emissions
PATENT NO.: 5,237,939
FILE DATE: 08/20/92
SN: 933,487
ISSUE DATE: 08/24/93
EXPIRATION DATE: 08/24/10
ABSTRACT: Apparatus for reducing NOx from a flue gas stream
produced from a burner, comprising:
means for reacting a flow of flue gas with a
nitrogeneous compound in the presence of a catalyst to
react and reduce NOx in the flue gas, the means for
reacting exhibiting a variation of temperature therein;
means for adding a spatially controllably variable flow
of a nitrogeneous compound to the flow of flue gas prior
to the entry of the flue gas into the means for
reacting; and means for adjusting the spatial
distribution of the flow of the nitrogeneous compound
responsive to the variation of temperature within the
means for reacting.
SCHEDULE I
TITLE: Control of NOx Reduction In Flue Gas Flows
PATENT NO.: 5,233,934
FILE DATE: 08/20/92
SN: 933,488
ISSUE DATE: 08/10/93
EXPIRATION DATE: 08/10/10
ABSTRACT: The NOx content in a flow of gas is reduced by passing
the flue gas through a first treatment zone and a second
treatment zone. A nitrogeneous treatment agent is
introduced into the first treatment zone for the
selective non-catalytic reduction of part of the NOx,
and the flue gas is thereafter passed through the second
treatment zone which includes a catalyst for further
selective catalytic reduction of NOx. Optionally, a
second nitrogeneous treatment agent is added to the flue
gas in the second treatment zone. The quantity of NOx
in the flue gas is detected intermediate the first and
second treatment zones and, optionally, after the flue
gas has left the second treatment zone. The quantity of
ammonia in the flue gas exiting from the second
treatment zone is also detected. The amounts of the
treatment agents exiting from the second treatment zone
added to the flue gas are controlled responsive to the
variations and absolute levels determined by these
measurements.
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, _________________, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that ________________, personally known to me to be
the _________ of Wahlco Environmental Systems, Inc., a corporation organized
under the laws of the State of Delaware, and personally known to me to be the
same person whose name is subscribed to the foregoing Patent Assignment,
appeared before me this day in person and acknowledged that (he)(she) signed and
delivered the said Assignment as (his)(her) free and voluntary act, and as the
free and voluntary act and deed of said corporation, for the uses and purposes
therein set forth.
GIVEN under my hand and seal this ______ day of February, 1998.
___________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
Exhibit C-2
to 1998 Credit Agreement
FIRST AMENDMENT TO PATENT ASSIGNMENT
FIRST AMENDMENT TO PATENT ASSIGNMENT, dated as of
January 30, 1998 (the Agreement") among WAHLCO INTERNATIONAL, INC., a California
corporation ("Assignor"); WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware
Corporation ("Borrower"); WES ACQUISITION CORP., a Delaware corporation
("WESAC"): the 1998 Lenders (as hereinafter defined); and WEXFORD MANAGEMENT
LLC, a Connecticut limited liability company, as administrative and collateral
agent for the Lenders (the "Agent").
W I T N E S S E T H
WHEREAS, Assignor is the sole and exclusive owner of
the Letters of Patent identified on Schedule I hereto, and of the patent
applications in the United States Patent and Trademark Office identified on such
Schedule I (all of the foregoing, collectively, the "Patents"), and of the
inventions described and claimed therein; and
WHEREAS, Assignor is a wholly-owned subsidiary of
Borrower, and Borrower and WESAC entered into that certain Term Loan Agreement
dated as of July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, to secure Borrower's obligations under the
1995 Loan Agreement, Assignor, Borrower and WESAC entered into that certain
Security Agreement dated as of July 25, 1995 (the "Security Agreement") and
Assignor and Borrower granted a security interest in the Collateral described
therein to WESAC; and
WHEREAS, pursuant to the Security Agreement, Assignor
executed a Patent Assignment in favor of WESAC as of December 28, 1995 (the
"Existing Assignment"), whereby Assignor assigned all right, title and interest
in and to the Patents to WESAC; and
WHEREAS, to amend and supplement the 1995 Loan
Agreement, and to provide for additional credit facilities to Borrower, each of
the Lenders named therein and the Agent, as agent, have entered into that
certain Amended and Restated Loan Agreement dated as of January 30, 1998 (the
"1998 Credit Agreement"), pursuant to which the Lenders have agreed to make
loans to Borrower and its Subsidiaries; and
WHEREAS, in connection with the execution and delivery
of the 1998 Credit Agreement and as security for all the obligations of Borrower
thereunder, the Lenders and the Agent are requiring that Assignor shall have
executed and delivered this Agreement and granted and confirmed the security
interests in the Patents contemplated hereby;
NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained and to induce the Lenders and the Agent to
enter into the 1998 Credit Agreement, and to make the loans provided for
therein, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, terms
defined in the 1998 Credit Agreement are used as therein defined and shall have
(unless otherwise provided elsewhere in this Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Agreement" shall mean this First Amendment to the Patent Assignment,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or
hereafter arising under the 1995 Loan Agreement or any Loan Document;
"1998 Lenders" shall mean all the parties named as Lenders in the 1998
Credit Agreement.
2. Assignment. WESAC hereby assigns to the Agent, for the benefit
of all the Lenders, the Existing Assignment of the Patents held by WESAC as of
the date hereof. Assignor hereby consents to such assignment.
3. Security for Obligation. Each of Assignor and Borrower
acknowledges, confirms and agrees that this Agreement secures, and the
assignment of the Patents is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Borrower now or hereafter existing under this Agreement
and under the First Amendment to the Security Agreement (collectively, the
"Secured Obligations") including the Existing Obligations, and any and all other
future advances, as well as all interest, fees, charges, expenses, attorneys'
fees and any other sum chargeable to borrower of any or all of its subsidiaries
under any of the Loan Documents. Concurrently with the execution and delivery
of this Agreement, each of the UCC-1 financing statement listed on Schedule I
attached hereto shall be amended to assign the security interests represented
thereby to the Agent.
4. Effect of Amendment. Assignor hereby confirms and agrees that,
except as specifically amended hereby, the Existing Assignment continues in full
force and effect.
5. Waiver. No delay on the part of the Agent in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Assignor by the Agent with request to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's rights to take any action or to exercise
any power of sale, Lien, option, or any other rights as against Assignor in any
respect.
6. Assignment. Each Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligators as provided in,
and in accordance with, the 1998 Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
7. Miscellaneous
(a) The Agent may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of counsel
concerning all matters pertaining to its duties hereunder;
(b) Assignor agrees to promptly reimburse the Agent for actual
out-of-pocket expenses, including, without limitation, reasonable counsel fees,
incurred in connection with the administrator and enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers,
directors, employees, agents or counsel shall be liable for any action lawfully
taken or omitted to be taken by it of them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct.
(d) The Agreement shall be binding upon Assignor and its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent, and its successors and assigns, and shall be governed by and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for on behalf of the Agent and
Assignor.
8. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such inability shall not impair the operation of or effect those portions of
this Agreement which are valid.
9. Notice. Whenever it is provided herein that any notice, demand,
request, consent, approval or other communication shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other a communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given as
provided in Section 10.11 of the 1998 Credit Agreement.
10. Section Titles. The section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one document.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to the Patent Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
WAHLCO, INC.
By:
Name:
Title:
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
WES ACQUISITION CORP.
By:
Name:
Title:
The foregoing First Amendment to the Patent Assignment is hereby
accepted by the Agent:
WEXFORD MANAGEMENT, LLC.
By:
Name:
Title:
SCHEDULE I
TITLE: Gas Conditioning Apparatus
PATENT NO.: 4,466,815
FILE DATE: 05/03/82
SN: 374,516
ISSUE DATE: 08/21/84
EXPIRATION DATE: 08/21/01
ABSTRACT: A gas conditioning apparatus for conditioning flue
gases and more particularly an improved means for
purging a gas conditioning system of latent or residual
sulfur trioxide which is normally produced by the gas
conditioning system for conditioning of flue gases.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,602,673
FILE DATE: 10/03/84
SN: 637,394
ISSUE DATE: 07/29/86
EXPIRATION DATE: 07/29/03
ABSTRACT: An apparatus for preheating air for combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gases utilized to effect said
preheating, said apparatus comprising: a regenerative
revolving air heater which includes heat exchange
elements having surfaces which are exposed to said hot
flue gases, and a coating which acts as a catalyst for
the reduction of NOx and is only on those heat exchange
surfaces which are contacted by flue gas having a
temperature greater than the condensation temperature
of reaction produces resulting from material contained
in said flue gas and from the added reducing agent.
SCHEDULE I
TITLE: Gas Conditioning Means for a Plurality of Boilers
PATENT NO.: 4,333,746
FILE DATE: 04/24/81
SN: 257,343
ISSUE DATE: 06/08/82
EXPIRATION DATE: 06/08/99
ABSTRACT: A gas conditioning means for a plurality of boilers
and more particularly improved means for providing a
conditioning mixture of sulfur trioxide (SO3), from a
single system, for injection into the flues gas streams
of a plurality of boilers for the conditioning thereof.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,739,826
FILE DATE: 07/07/86
SN: 882,245
ISSUE DATE: 04/26/88
EXPIRATION DATE: 04/26/05
ABSTRACT: An apparatus for preheating air for combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gas utilized to effect said
preheating to attain advantages which relate to
combustion and which result from higher combustion
chamber temperatures, such as accelerated ignition and
more complete combustion, comprising: a recuperative
air heater which includes heat exchange elements
having surfaces which are exposed to said hot flue
gases, and a coating which acts as a catalyst for the
reduction of NOx, said coating being provided only with
those heat exchange surfaces which are contacted by
flue gases having a temperature greater than the
condensation temperature of the reaction products
resulting from the material contained in said flue gas
and from added reducing agent in order to avoid
formation of deposits on catalyst contact surfaces such
as a result of flue gas, which is cooled off as it
flows through the heat exchanger, falling below the
condensation temperature.
SCHEDULE I
TITLE: Removal of Participate Matter From Combustion Gas
Streams
PATENT NO.: 4,987,839
FILE DATE: 05/14/90
SN: 523,312
ISSUE DATE: 01/29/91
EXPIRATION DATE: 01/29/08
ABSTRACT: Unburned particulate matter is removed from a
combustion gas stream by adding a conditioning agent to
modify the resistivity of the particulate matter and
passing the conditioning combustion gas stream through
an electrostatic precipitator whose precipitating
elements are energized with an intermittent applied
voltage. The addition of conditioning agent and the
precipitating voltage signal are mutually optimized. A
controller receives measurement signals from sensors
that monitor the total flow rate of the particulate
matter in the gas stream before the electrostatic
precipitate treatment, and the concentration of
particulate matter in the gas stream after the
treatment. Performance of the system may be optimized
according to selected combinations of variables.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,903,755
FILE DATE: 04/25/88
SN: 185,861
ISSUE DATE: 02/27/90
EXPIRATION DATE: 07/29/03
ABSTRACT: An apparatus for preheating air combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gases utilized to effect said
preheating, said apparatus comprising: a revolving
regenerative air heater that includes heat exchange
elements having surfaces that are exposed to said hot
flue gases, with said surfaces having a coating that
acts as a catalyst for the reduction of NOx, whereby
said regenerative air heater is a revolving drum that
is divided in a radial direction into individual
chambers that contain said heat exchange elements,
which are in the form of a heat storage mass comprised
of a plurality of movable individual elements that are
respectively provided with said catalyst coating.
SCHEDULE I
TITLE: Conditioning of Gas Streams Containing Particulate
PATENT NO.: 4,966,610
FILE DATE: 06/05/89
SN: 361,272
ISSUE DATE: 10/30/90
EXPIRATION DATE: 10/30/07
ABSTRACT: A method for precipitating particulate matter from a
flowing gas stream, comprising the steps of:
furnishing a flowing gas stream containing particulate
matter entrained therein; pretreating the particulate
matter of the gas stream, by supplying to the gas
stream a conditioning agent selected from the group
consisting of sulfur trioxide, a gaseous compound
containing ammonia, and water vapor, and substantially
simultaneously, establishing an electrostatic potential
between the conditioning agent and the particulate
matter whereupon the conditioning agent deposits upon
the particulate matter; and electrostatically
precipitating the particulate matter from the
conditioned gas stream.
SCHEDULE I
TITLE: Reduction of Acidic Emissions From Combustion of
Sulfur, Etc
PATENT NO.: 5,024,171
FILE DATE: 03/19/90
SN: 496,872
ISSUE DATE: 06/18/91
EXPIRATION DATE: 06/18/08
ABSTRACT: The sulfer trioxide in the combustion stream of a power
plant is reactered with injected ammonia to produce a
solid ammonia sulfate that is captured, and not
released to the atmosphere. A feedforward signal
indicative of the total mass flow of sulfur trioxide is
determined as the product of the measured boiler and
measured prior to the addition of ammonia. The ammonia
mass flow injection rate is preferably at a normal
stoichiometric ratio of from about 1.0 to 1.1 relative
to the sulfur dioxide mass flow rate (that is, from
about 2.0 to 2.2 times the molar mass flow rate of the
sulfur trioxide), avoiding the production of ammonia
bisulfate. The ammonia content of the combustion gas
stream is added. Based upon this feedback measurement,
the amount of ammonia added is adjusted to be just
sufficient to react with all of the sulfur trioxide,
but not in such excess as to be environmentally
detrimental.
SCHEDULE I
TITLE: Control of Addition of Conditioning Agents to Flue Gas
PATENT NO.: 5,029,535
FILE DATE: 05/14/90
SN: 523,311
ISSUE DATE: 07/09/91
EXPIRATION DATE: 07/09/08
ABSTRACT: Additions of conditioning agents to a particulate
containing flue gas stream are controlled by a
controller operating from feedforward and feedback
signals received from sensors in the combustion and gas
cleanup system, and, optionally, from the power
consumption level of the electrostatic precipitator.
The flow rates of the conitator poditioning agents,
such as sulfur trioxide and ammonia, are thereby
balanced to achieve an optimal removal of particulate
matter and also sulfur and sulfur compounds from the
gas stream before it is exhausted to the atmosphere. A
typical feedforward signal is the boiler loading, and
typical feedback signals include residual sulfur
trioxide and ammonia levels and stack gas opacity.
SCHEDULE I
TITLE: Control System for Flue Gas Conditioning
PATENT NO.: 5,122,162
FILE DATE: 03/19/90
SN: 496,873
ISSUE DATE: 06/16/92
EXPIRATION DATE: 06/16/09
ABSTRACT: The volumetric flow rate for the addition of a flue gas
conditioning agent, such as sulfur trioxide, is
established by maintaining the derivative of the
electrostatic precipitator power with respect to flow
rate within a preselected operating range. The
derivative of the precipitator power with respect to
time and the derivative of the flow rate with respect
to time are measured, and then the derivatives are
divided to determine the derivative of precipitator
power with respect to flow rate. This calculated value
is compared with a preselected operating range. If the
calculated value is greater than the preselected
operating range, the flow rate is reduced, until a
steady state calculated derivative value within the
operating range is reached.
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
I, _________________, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that ________________, personally known to me to be
the _________ of Wahlco International, Inc., a corporation organized under the
laws of the State of California, and personally known to me to be the same
person whose name is subscribed to the foregoing Patent Assignment, appeared
before me this day in person and acknowledged that (he)(she) signed and
delivered the said Assignment as (his)(her) free and voluntary act, and as the
free and voluntary act and deed of said corporation, for the uses and purposes
therein set forth.
GIVEN under my hand and seal this ______ day of December, 1995.
___________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
Exhibit C-3
to 1998 Credit Agreement
FIRST AMENDMENT TO PATENT ASSIGNMENT
FIRST AMENDMENT TO PATENT ASSIGNMENT, dated as of January 30, 1998
(the Agreement") among WAHLCO INTERNATIONAL, INC., a California corporation
("Assignor"); WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware Corporation
("Borrower"); WES ACQUISITION CORP., a Delaware corporation ("WESAC"): the 1998
Lenders (as hereinafter defined); and WEXFORD MANAGEMENT LLC, a Connecticut
limited liability company, as administrative and collateral agent for the
Lenders (the "Agent").
W I T N E S S E T H
WHEREAS, Assignor is the sole and exclusive owner of the Letters of
Patent identified on Schedule I hereto, and of the patent applications in the
United States Patent and Trademark Office identified on such Schedule I (all of
the foregoing, collectively, the "Patents"), and of the inventions described and
claimed therein; and
WHEREAS, Assignor is a wholly-owned subsidiary of Borrower, and
Borrower and WESAC entered into that certain Term Loan Agreement dated as of
July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, to secure Borrower's obligations under the 1995 Loan
Agreement, Assignor, Borrower and WESAC entered into that certain Security
Agreement dated as of July 25, 1995 (the "Security Agreement") and Assignor and
Borrower granted a security interest in the Collateral described therein to
WESAC; and
WHEREAS, pursuant to the Security Agreement, Assignor executed a
Patent Assignment in favor of WESAC as of December 28, 1995 (the "Existing
Assignment"), whereby Assignor assigned all right, title and interest in and to
the Patents to WESAC; and
WHEREAS, to amend and supplement the 1995 Loan Agreement, and to
provide for additional credit facilities to Borrower, each of the Lenders named
therein and the Agent, as agent, have entered into that certain Amended and
Restated Loan Agreement dated as of January 30, 1998 (the "1998 Credit
Agreement"), pursuant to which the Lenders have agreed to make loans to Borrower
and its Subsidiaries; and
WHEREAS, in connection with the execution and delivery of the 1998
Credit Agreement and as security for all the obligations of Borrower thereunder,
the Lenders and the Agent are requiring that Assignor shall have executed and
delivered this Agreement and granted and confirmed the security interests in the
Patents contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders and the Agent to enter into the
1998 Credit Agreement, and to make the loans provided for therein, it is agreed
as follows:
1. Definitions. Unless otherwise defined herein, terms defined in
the 1998 Credit Agreement are used as therein defined and shall have (unless
otherwise provided elsewhere in this Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Agreement" shall mean this First Amendment to the Patent Assignment,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or
hereafter arising under the 1995 Loan Agreement or any Loan Document;
"1998 Lenders" shall mean all the parties named as Lenders in the 1998
Credit Agreement.
2. Assignment. WESAC hereby assigns to the Agent, for the benefit
of all the Lenders, the Existing Assignment of the Patents held by WESAC as of
the date hereof. Assignor hereby consents to such assignment.
3. Security for Obligation. Each of Assignor and Borrower
acknowledges, confirms and agrees that this Agreement secures, and the
assignment of the Patents is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees, costs and expenses,
and all obligations of Borrower now or hereafter existing under this Agreement
and under the First Amendment to the Security Agreement (collectively, the
"Secured Obligations") including the Existing Obligations, and any and all other
future advances, as well as all interest, fees, charges, expenses, attorneys'
fees and any other sum chargeable to borrower of any or all of its subsidiaries
under any of the Loan Documents. Concurrently with the execution and delivery
of this Agreement, each of the UCC-1 financing statement listed on Schedule I
attached hereto shall be amended to assign the security interests represented
thereby to the Agent.
4. Effect of Amendment. Assignor hereby confirms and agrees that,
except as specifically amended hereby, the Existing Assignment continues in full
force and effect.
5. Waiver. No delay on the part of the Agent in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Assignor by the Agent with request to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's rights to take any action or to exercise
any power of sale, Lien, option, or any other rights as against Assignor in any
respect.
6. Assignment. Each Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligators as provided in,
and in accordance with, the 1998 Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
7. Miscellaneous
(a) The Agent may execute any of its duties hereunder by or through agents
or employees and shall be entitled to advice of counsel concerning all matters
pertaining to its duties hereunder;
(b) Assignor agrees to promptly reimburse the Agent for actual out-of-
pocket expenses, including, without limitation, reasonable counsel fees,
incurred in connection with the administrator and enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it of them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) The Agreement shall be binding upon Assignor and its successors and
assigns, and shall inure to the benefit of, and be enforceable by, the Agent,
and its successors and assigns, and shall be governed by and construed and
enforced in accordance with, the internal laws in effect in the State of New
York without giving effect to principles of conflict of laws, and none of the
terms or provisions of this Agreement may be waived, altered, modified or
amended except in writing duly signed for on behalf of the Agent and Assignor.
8. Severability. If for any reason any provision or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such inability shall not impair the operation of or effect those portions of
this Agreement which are valid.
9. Notice. Whenever it is provided herein that any notice, demand,
request, consent, approval or other communication shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other a communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given as
provided in Section 10.11 of the 1998 Credit Agreement.
10. Section Titles. The section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one document.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to the Patent Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
WAHLCO INTERNATIONAL, INC.
By:
Name:
Title:
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:
Name:
Title:
WES ACQUISITION CORP.
By:
Name:
Title:
The foregoing First Amendment to the Patent Assignment is hereby
accepted by the Agent:
WEXFORD MANAGEMENT, LLC.
By:
Name:
Title:
SCHEDULE I
TITLE: Gas Conditioning Apparatus
PATENT NO.: 4,466,815
FILE DATE: 05/03/82
SN: 374,516
ISSUE DATE: 08/21/84
EXPIRATION DATE: 08/21/01
ABSTRACT: A gas conditioning apparatus for conditioning flue
gases and more particularly an improved means for
purging a gas conditioning system of latent or residual
sulfur trioxide which is normally produced by the gas
conditioning system for conditioning of flue gases.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,602,673
FILE DATE: 10/03/84
SN: 637,394
ISSUE DATE: 07/29/86
EXPIRATION DATE: 07/29/03
ABSTRACT: An apparatus for preheating air for combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gases utilized to effect said
preheating, said apparatus comprising: a regenerative
revolving air heater which includes heat exchange
elements having surfaces which are exposed to said hot
flue gases, and a coating which acts as a catalyst for
the reduction of NOx and is only on those heat exchange
surfaces which are contacted by flue gas having a
temperature greater than the condensation temperature
of reaction produces resulting from material contained
in said flue gas and from the added reducing agent.
SCHEDULE I
TITLE: Gas Conditioning Means for a Plurality of Boilers
PATENT NO.: 4,333,746
FILE DATE: 04/24/81
SN: 257,343
ISSUE DATE: 06/08/82
EXPIRATION DATE: 06/08/99
ABSTRACT: A gas conditioning means for a plurality of boilers
and more particularly improved means for providing a
conditioning mixture of sulfur trioxide (SO3), from a
single system, for injection into the flues gas streams
of a plurality of boilers for the conditioning thereof.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,739,826
FILE DATE: 07/07/86
SN: 882,245
ISSUE DATE: 04/26/88
EXPIRATION DATE: 04/26/05
ABSTRACT: An apparatus for preheating air for combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gas utilized to effect said
preheating to attain advantages which relate to
combustion and which result from higher combustion
chamber temperatures, such as accelerated ignition and
more complete combustion, comprising: a recuperative
air heater which includes heat exchange elements
having surfaces which are exposed to said hot flue
gases, and a coating which acts as a catalyst for the
reduction of NOx, said coating being provided only with
those heat exchange surfaces which are contacted by
flue gases having a temperature greater than the
condensation temperature of the reaction products
resulting from the material contained in said flue gas
and from added reducing agent in order to avoid
formation of deposits on catalyst contact surfaces such
as a result of flue gas, which is cooled off as it
flows through the heat exchanger, falling below the
condensation temperature.
SCHEDULE I
TITLE: Removal of Participate Matter From Combustion Gas
Streams
PATENT NO.: 4,987,839
FILE DATE: 05/14/90
SN: 523,312
ISSUE DATE: 01/29/91
EXPIRATION DATE: 01/29/08
ABSTRACT: Unburned particulate matter is removed from a
combustion gas stream by adding a conditioning agent to
modify the resistivity of the particulate matter and
passing the conditioning combustion gas stream through
an electrostatic precipitator whose precipitating
elements are energized with an intermittent applied
voltage. The addition of conditioning agent and the
precipitating voltage signal are mutually optimized. A
controller receives measurement signals from sensors
that monitor the total flow rate of the particulate
matter in the gas stream before the electrostatic
precipitate treatment, and the concentration of
particulate matter in the gas stream after the
treatment. Performance of the system may be optimized
according to selected combinations of variables.
SCHEDULE I
TITLE: Apparatus for Preheating Combustion Air, etc.
PATENT NO.: 4,903,755
FILE DATE: 04/25/88
SN: 185,861
ISSUE DATE: 02/27/90
EXPIRATION DATE: 07/29/03
ABSTRACT: An apparatus for preheating air combustion for a
combustion process while simultaneously reducing the
NOx content of hot flue gases utilized to effect said
preheating, said apparatus comprising: a revolving
regenerative air heater that includes heat exchange
elements having surfaces that are exposed to said hot
flue gases, with said surfaces having a coating that
acts as a catalyst for the reduction of NOx, whereby
said regenerative air heater is a revolving drum that
is divided in a radial direction into individual
chambers that contain said heat exchange elements,
which are in the form of a heat storage mass comprised
of a plurality of movable individual elements that are
respectively provided with said catalyst coating.
SCHEDULE I
TITLE: Conditioning of Gas Streams Containing Particulate
PATENT NO.: 4,966,610
FILE DATE: 06/05/89
SN: 361,272
ISSUE DATE: 10/30/90
EXPIRATION DATE: 10/30/07
ABSTRACT: A method for precipitating particulate matter from a
flowing gas stream, comprising the steps of: furnishing
a flowing gas stream containing particulate matter
entrained therein; pretreating the particulate matter
of the gas stream, by supplying to the gas stream a
conditioning agent selected from the group consisting
of sulfur trioxide, a gaseous compound containing
ammonia, and water vapor, and substantially
simultaneously, establishing an electrostatic potential
between the conditioning agent and the particulate
matter whereupon the conditioning agent deposits upon
the particulate matter; and electrostatically
precipitating the particulate matter from the
conditioned gas stream.
SCHEDULE I
TITLE: Reduction of Acidic Emissions From Combustion of
Sulfur, Etc
PATENT NO.: 5,024,171
FILE DATE: 03/19/90
SN: 496,872
ISSUE DATE: 06/18/91
EXPIRATION DATE: 06/18/08
ABSTRACT: The sulfer trioxide in the combustion stream of a power
plant is reactered with injected ammonia to produce a
solid ammonia sulfate that is captured, and not
released to the atmosphere. A feedforward signal
indicative of the total mass flow of sulfur trioxide is
determined as the product of the measured boiler and
measured prior to the addition of ammonia. The ammonia
mass flow injection rate is preferably at a normal
stoichiometric ratio of from about 1.0 to 1.1 relative
to the sulfur dioxide mass flow rate (that is, from
about 2.0 to 2.2 times the molar mass flow rate of the
sulfur trioxide), avoiding the production of ammonia
bisulfate. The ammonia content of the combustion gas
stream is added. Based upon this feedback measurement,
the amount of ammonia added is adjusted to be just
sufficient to react with all of the sulfur trioxide,
but not in such excess as to be environmentally
detrimental.
SCHEDULE I
TITLE: Control of Addition of Conditioning Agents to Flue Gas
PATENT NO.: 5,029,535
FILE DATE: 05/14/90
SN: 523,311
ISSUE DATE: 07/09/91
EXPIRATION DATE: 07/09/08
ABSTRACT: Additions of conditioning agents to a particulate
containing flue gas stream are controlled by a
controller operating from feedforward and feedback
signals received from sensors in the combustion and gas
cleanup system, and, optionally, from the power
consumption level of the electrostatic precipitator.
The flow rates of the conitator poditioning agents,
such as sulfur trioxide and ammonia, are thereby
balanced to achieve an optimal removal of particulate
matter and also sulfur and sulfur compounds from the
gas stream before it is exhausted to the atmosphere. A
typical feedforward signal is the boiler loading, and
typical feedback signals include residual sulfur
trioxide and ammonia levels and stack gas opacity.
SCHEDULE I
TITLE: Control System for Flue Gas Conditioning
PATENT NO.: 5,122,162
FILE DATE: 03/19/90
SN: 496,873
ISSUE DATE: 06/16/92
EXPIRATION DATE: 06/16/09
ABSTRACT: The volumetric flow rate for the addition of a flue gas
conditioning agent, such as sulfur trioxide, is
established by maintaining the derivative of the
electrostatic precipitator power with respect to flow
rate within a preselected operating range. The
derivative of the precipitator power with respect to
time and the derivative of the flow rate with respect
to time are measured, and then the derivatives are
divided to determine the derivative of precipitator
power with respect to flow rate. This calculated value
is compared with a preselected operating range. If the
calculated value is greater than the preselected
operating range, the flow rate is reduced, until a
steady state calculated derivative value within the
operating range is reached.
STATE OF CALIFORNIA )
) ss.:
COUNTY OF NEW YORK )
I, _________________, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that ________________, personally known to me to be
the _________ of Wahlco, Inc., a corporation organized under the laws of the
State of California, and personally known to me to be the same person whose name
is subscribed to the foregoing Patent Assignment, appeared before me this day in
person and acknowledged that (he)(she) signed and delivered the said Assignment
as (his)(her) free and voluntary act, and as the free and voluntary act and deed
of said corporation, for the uses and purposes therein set forth.
GIVEN under my hand and seal this ______ day of December, 1995
___________________
Notary Public
[NOTARIAL SEAL]
My Commission Expires:
Exhibit D
to 1998 Credit Agreement
FIRST AMENDMENT TO SECURITY AGREEMENT
FIRST AMENDMENT TO SECURITY AGREEMENT, dated as of January 30, 1998, among
WAHLCO ENVIRONMENTAL SYSTEMS, INC., a Delaware corporation ("Borrower"), each
subsidiary of Borrower listed on the signature pages hereof (Borrower and each
such subsidiary being individually a "Grantor" and collectively, the
"Grantors"); WES Acquisition Corp., a Delaware corporation ("WESAC"); the 1998
Lenders (as hereinafter defined); and Wexford Management LLC, a Connecticut
limited liability company, as administrative and collateral agent for the
Lenders (the "Agent").
W I T N E S S E T H :
WHEREAS, Borrower and WESAC entered into that certain Term Loan Agreement
dated as of July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, to secure Borrower's obligations under the 1995 Loan Agreement,
Borrower, each Grantor and WESAC entered into that certain Security Agreement
dated as of July 25, 1995 (the "Security Agreement") and Borrower and each
Grantor granted a security interest in the Collateral described therein to
WESAC; and
WHEREAS, to amend and supplement the 1995 Loan Agreement, and to provide
for additional credit facilities to Borrower, Borrower, each of the Lenders
named therein and the Agent, as agent, have entered into that certain Amended
and Restated Loan Agreement dated as of January 30, 1998 (the "1998 Credit
Agreement"), pursuant to which Lenders have agreed to make loans to Borrower and
its Subsidiaries; and
WHEREAS, Lenders have determined to appoint the Agent as their agent for
administrative and collateral purposes, including holding the Collateral and
exercising all rights under the Security Agreement, as amended hereby; and
WHEREAS, in connection with the execution and delivery of the 1998 Credit
Agreement and as security for all the obligations of Borrower thereunder,
Lenders and the Agent are requiring that Grantors shall have executed and
delivered this Agreement and granted and confirmed the security interests
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders and the Agent to enter into the
1998 Credit Agreement, and to make the loans provided for therein, it is agreed
as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the
1998 Credit Agreement are used as therein defined, and as following shall have
(unless otherwise provided elsewhere in this Agreement or the Security
Agreement) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this First Amendment to the Security Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or hereafter
arising under the 1995 Loan Agreement or any Loan Document;
"1998 Lenders" shall mean all the parties named as Lenders in the 1998
Credit Agreement.
2. Delivery of Collateral. WESAC hereby assigns to the Agent, for the
benefit of all the Lenders, all Liens and Security Interests in the Collateral
held by WESAC as of the date hereof. Grantors hereby consent to such
assignment.
3. Security for Obligation. Each Grantor acknowledges, confirms and
agrees that this Agreement serves, and the collateral is security for, the
prompt payment in full when due, whether at stated maturity, by acceleration or
otherwise, and performance of the Obligations, whether for principal, premium,
interest, fees, costs and expenses, and all obligations of Grantors now or
hereafter existing under this Agreement and under the First Amendment to the
Guaranty (collectively, the "Secured Obligations") including the Existing
Obligations, and any and all other future advances, as well as all interest,
fees, charges expenses, attorneys' fees and any other sum chargeable to borrower
of any or all of its subsidiaries under any of the Loan Documents. Concurrently
with the execution and delivery of this Agreement, each of the UCC-1 financing
statement listed on Schedule I attached hereto shall be amended to assign the
security interests represented thereby to the Agent.
4. Effect of Amendment. Each Grantor hereby confirms and agrees that,
except as specifically amended hereby, the Security Agreement continues in full
force and effect.
5. Waiver. No delay on the part of the Agent in exercising any power of
sale, Lien, option or other right hereunder, and no notice or demand which may
be given to or made upon Grantors by the Agent with request to any power of
sale, Lien, option or other right hereunder, shall constitute a waiver thereof,
or limit or impair the Agent's rights to take any action or to exercise any
power of sale, Lien, option, or any other rights as against Grantors in any
respect.
6. Assignment. Each Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligators as provided in,
and in accordance with, the 1998 Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
7. Miscellaneous
(a) The Agent may execute any of its duties hereunder by or through
agents or employees and shall be entitled to advice of counsel concerning all
matters pertaining to its duties hereunder;
(b) Each Grantor jointly and severally agrees to promptly reimburse
the Agent for actual out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred in connection with the administrator and
enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it of them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) The Agreement shall be binding upon the Grantors and their
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Agent, and its successors and assigns, and shall be governed by and
construed and enforced in accordance with, the internal laws in effect in the
State of New York without giving effect to principles of conflict of laws, and
none of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for on behalf of the Agent and
the Grantors.
8. Severability. If for any reason any provision or provisions hereof
are determined to be invalid and contrary to any existing or future law, such
inability shall not impair the operation of or effect those portions of this
Agreement which are valid.
9. Notice. Whenever it is provided herein that any notice, demand,
request, consent, approval or other communication shall or may be given to or
served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other a communication with respect to
this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given as
provided in Section 10.11 of the 1998 Credit Agreement.
10. Section Titles. the section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one document.
IN WITNESS WHEREOF, each of the parties hereto has caused this First
Amendment to the Security Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:_________________________
Name:
Title:
SUBSIDIARIES:
BACHMANN COMPANIES, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
GROUP, LTD.
By:_________________________
Name:
Title:
WAHLCO, INC.
By:_________________________
Name:
Title:
FIELD SERVICE ASSOCIATES, INC.
By:_________________________
Name:
Title:
WAHLCO POWER PRODUCTS, INC.
By:_________________________
Name:
Title:
WES TECHNOLOGY, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS, INC.
By:_________________________
Name:
Title:
LAGUNA SERVICE CORPORATION
By:_________________________
Name:
Title:
WAHLCO GAS FLOW TECHNOLOGIES, INC.
By:_________________________
Name:
Title:
WAHLCO SERVICE CORPORATION
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
PTY., LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
CANADA, INC.
By:_________________________
Name:
Title:
FLOWRITE DAMPERS, LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS, LTD.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED INTERNATIONAL,
LTD.
By:_________________________
Name:
Title:
PENTNEY ENGINEERING, LTD.
By:_________________________
Name:
Title:
TEDDINGTON BELLOWS (HOLDINGS), LTD.
By:_________________________
Name:
Title:
TRESTE PLAN HIRE, LTD.
By:_________________________
Name:
Title:
WAHLCO INTERNATIONAL, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS
ITALIANA SRL.
By:_________________________
Name:
Title:
TEDDINGTON BELLOWS, LTD.
By:_________________________
Name:
Title:
BACHMANN H&T, GmbH
By:_________________________
Name:
Title:
EXERGETIC SYSTEMS, INC.
By:_________________________
Name:
Title:
CORONA PROPERTIES
By:_________________________
Name:
Title:
BACHMANN INDUSTRIES INDIA, LTD.
By:_________________________
Name:
Title:
WAHLCO ENVIRONMENTAL SERVICES, INC.
By:_________________________
Name:
Title:
WES ACQUISITION CORP.
By:_________________________
Name:
Title:
WEXFORD CAPITAL PARTNERS II, L.P.
By:_________________________
Wexford Capital II, L.P.
Its General Partner
By:_________________________
Wexford Capital II, L.P.
Its General Partner
By:_________________________
Name:
Title:
WEXFORD OVERSEAS PARTNERS I, L.P.
By:_________________________
Wexford Capital Overseas II, L.P.
The General Partner
By:_________________________
Wexford Capital Limited
Its General Partner
By:_________________________
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996, L.P.
By:_________________________
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996
INSTITUTIONAL, L.P.
By:_________________________
Name:
Title:
WEXFORD SPECIAL SITUATIONS 1996
LIMITED
By:_________________________
Name:
Title:
WEXFORD-EURIS SPECIAL SITUATIONS
1996, L.P.
By:_________________________
Name:
Title:
WEXFORD MANAGEMENT LLC, As Agent
By:_________________________
Name:
Title:
Schedule I
FILINGS
1. Bachmann Companies, Inc. UCC-1 financing statement number 114530 filed with
the Maine Secretary of State on September 18, 1995
2. Wahlco Engineered Products, Inc. UCC-1 financing statement number 114531
filed with the Maine Secretary of State on September 18, 1995
3. Wahlco, Inc. UCC-1 financing statement number 9526460275 filed with the
California Secretary of State on September 18, 1995
4. WES Technology, Inc. UCC-1 financing statement number 9526460337 filed with
the California Secretary of State on September 18, 1995
5. Wahlco Environmental Systems, Inc. UCC-1 financing statement number
952460286 filed with the California Secretary of State on September 18,
1995
Exhibit E
to 1998 Credit Agreement
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT
FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT, dated as of January 30,
1998, among WES ACQUISITION CORP., a Delaware corporation, WAHLCO ENVIRONMENTAL
SYSTEMS, INC., a Delaware corporation (the "Borrower"), and BACHMANN COMPANIES,
INC., a Delaware corpora-tion, WAHLCO, INC., a California corporation, WAHLCO
ENGINEERED PRODUCTS GROUP LIMITED, a United Kingdom corporation, and TEDDINGTON
BELLOWS (HOLDINGS), LTD., a United Kingdom corporation, each a subsidiary of
Borrower (individually as a "Pledgor" and collectively as "Pledgors"); in favor
of (a) the 1995 Lender (as hereinafter defined), (b) the 1998 Lenders (as
hereinafter defined, and together with the 1995 Lender, the "Lenders"), and (c)
Wexford Management LLC, a Connecticut limited liability company, as
administrative and collateral agent for the Lenders (the "Agent").
W I T N E S S E T H
WHEREAS, the Borrower and WESAC entered into that certain Term Loan
Agreement dated as of July 28, 1995 (the "1995 Loan Agreement"); and
WHEREAS, to secure Borrower's obligations under the 1995 Loan
Agreement, the Borrower and the Pledgors entered into that certain Stock Pledge
Agreement dated as of July 28, 1995 (the "Stock Pledge Agreement") and pledged
the Pledged Collateral described therein to WESAC; and
WHEREAS, to amend and supplement the 1995 Loan Agreement, and to
provide for additional credit facilities to the Borrower, the Borrower, each of
the Lenders named therein and the Agent, as agent, have entered into that
certain Amended and Restated Loan Agreement dated as of January 30, 1998 (the
"1998 Credit Agreement"), pursuant to which the Lenders have agreed to make
loans to the Borrower and its subsidiaries; and
WHEREAS, the Lenders have determined to appoint the Agent as their
agent for administrative and collateral purposes, including holding the Pledged
Collateral and exercising all rights under the Stock Pledge Agreement; and
WHEREAS, in connection with the execution and delivery of the 1998
Credit Agreement and as security for all of the obligations of Borrower
thereunder, the Lenders and the Agent are requiring that Pledgors shall have
executed and delivered this Agreement and granted and confirmed the security
interest contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lenders and the Agent to enter into the
1998 Credit Agreement, and to make the loans provided for therein, it is agreed
as follows:
1. Definitions. Unless otherwise defined herein, terms defined in
the 1998 Credit Agreement are used herein as there-in defined, and the following
shall have (unless other-wise provided elsewhere in this Agreement or the Stock
Pledge Agreement) the following respective meanings (such meanings being equally
applicable to both the singular and plural form of the terms defined):
"Agreement" shall mean this First Amendment Stock Pledge Agree-ment,
including all amendments, modifications and supple-ments and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Existing Obligations" shall mean any Obligations now existing or
hereafter arising under the 1995 Loan Agreement or any Loan Document.
"1995 Lender" shall mean WES Acquisition Corp., a Delaware
corporation.
"1998 Lenders" shall mean the parties named as Lenders in the 1998
Credit Agreement.
2. Delivery of Pledged Collateral. WESAC hereby delivers to the
Agent the Pledged Collateral, the receipt of which is hereby acknowledged.
3. Security for Obligations. Each Pledgor acknowledges, confirms
and agrees that this Agreement secures, and the Pledged Collateral is security
for, the prompt payment in full when due, whether at stated maturity, by
acceleration or otherwise, and performance of the Obliga-tions, whether for
principal, premium, interest, fees, costs and expenses, and all obligations of
Pledgors now or here-after existing under this Agreement and under the Amended
Guaranty (collectively, the "Secured Obligations") including the Existing
Obligations, and any and all other, future advances, as well as all interest,
fees, charges, expenses, attorneys' fees and any other sum chargeable to
Borrower or any or all of its Subsidiaries under any of the Loan Documents.
4. Effect of Amendment. Each Pledor hereby confirms and agrees
that, except as specifically amended hereby, the Stock Pledge Agreement
continues in full force and effect.
5. Waiver. No delay on the part of the Agent in exer-cis-ing any
power of sale, Lien, option or other right here-under, and no notice or demand
which may be given to or made upon Pledgors by the Agent with respect to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair the Agent's, right to take any action or to exercise
any power of sale, Lien, option, or any other right hereunder, without notice or
demand, or prejudice any of their rights as against Pledgors in any respect.
6. Assignment. Each Lender may assign, endorse or transfer any
instrument evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the 1998 Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
7. Miscellaneous.
(a) The Agent may execute any of its duties hereunder by or through agents
or employees and shall be entitled to advice of counsel concerning all matters
pertaining to its duties hereunder.
(b) Each Pledgor jointly and severally agrees to promptly reimburse the
Agent for actual out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred in connection with the administration and
enforcement of this Agreement.
(c) Neither the Agent nor any of its respective officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon Pledgors and their successors and
assigns, and shall inure to the benefit of, and be enforceable by, the Agent,
and its successors and assigns, and shall be governed by, and construed and
enforced in accordance with, the internal laws in effect in the State of New
York without giving effect to principles of conflict of laws, and none of the
terms or provisions of this Agreement may be waived, altered, modi-fied or
amended except in writing duly signed for and on behalf of the Agent and the
Pledgors.
8. Severability. If for any reason any provi-sion or provisions
hereof are determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those portions of
this Agreement which are valid.
9. Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communica-tion shall or may be
given to or served upon any of the parties by any other party, or whenever any
of the parties desires to give or serve upon any other a communica-tion with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communi-cation shall be in writing and either shall be
given as provided in Section __ of the 1998 Credit Agreement.
10. Section Titles. The section titles contained in this Agreement
are and shall be without substantive mean-ing or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
11. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Stock Pledge Agreement to be duly executed as of the date first written above.
WES ACQUISITION CORP.
By:_________________________
WAHLCO ENVIRONMENTAL SYSTEMS, INC.
By:_________________________
Name:
Title:
BACHMANN COMPANIES, INC.
By:_________________________
Name:
Title:
WAHLCO, INC.
By:_________________________
Name:
Title:
WAHLCO ENGINEERED PRODUCTS GROUP
LIMITED
By:_________________________
Name:
Title:
TEDDINGTON BELLOWS (HOLDINGS), LTD.
By:_________________________
Name:
Title:
Accepted and Acknowledged by:
WEXFORD MANAGEMENT LLC, as Agent
By:_________________________________
Name:
Title:
