UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23892
ENVIROMETRICS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 57-0941152
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4055 FABER PLACE DRIVE, SUITE 201
CHARLESTON, SOUTH CAROLINA 29405
(Address of principal executive office)
Registrant's telephone number, including are code (803) 740-7700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
As of May 13, 1996 the Registrant had outstanding 2,500,203 shares of common
Stock. Transitional small business disclosure format (check one):
Yes No X
-- ---
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page #
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1996
and December 31, 1995 1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 and 1995 2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Conditions 5-8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports 9
Signature 10
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1995 1996
(Audited) (Unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,069 $ 53,143
Cash, restricted 26,347 125,644
Trade receivables, less allowance for doubtful accounts
1996 $73,241; 1995 $86,000 1,083,360 1,191,910
Other receivables, including amounts due from stockholders
1996 $57,435; 1995 $57,435 97,291 81,480
Inventories 603,066 563,981
Prepaid expenses 91,301 111,437
------------ ------------
TOTAL CURRENT ASSETS 1,907,434 2,127,595
------------ ------------
OTHER ASSETS AND INTANGIBLES
Deposits 17,167 15,972
Organization and loan costs, net of accumulated
amortization 1996 $24,056; 1995 $18,304 12,720 6,739
Goodwill and acquisition costs, net of accumulated
amortization 1996 $43,813; 1995 $35,598 614,938 623,153
License and distribution agreements, net of accumulated
amortization 1996 $4,915; 1995 $2,000 48,501 28,000
Other 74,021 59,816
------------ ------------
767,347 733,680
------------ ------------
PROPERTY AND EQUIPMENT
Land 239,120 239,120
Buildings 841,790 841,790
Furniture and equipment 1,450,341 1,443,197
Vehicles 195,986 200,050
------------ ------------
2,727,237 2,724,157
Less accumulated depreciation and amortization 1,136,305 1,088,397
------------ ------------
1,590,932 1,635,760
------------ ------------
$ 4,265,713 $ 4,497,035
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 195,585 $ 246,480
Current maturities of long-term debt 1,252,942 914,847
Current maturities of long-term debt, stockholders 24,844 24,844
Accounts payable 1,173,814 965,155
Accrued expenses 291,142 454,957
------------ ------------
TOTAL CURRENT LIABILITIES 2,938,327 2,606,283
------------ ------------
LONG-TERM DEBT, less current maturities 248,230 597,363
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized 10,000,000 shares;
issued 2,500,203 shares 2,500 2,500
Additional paid-in-capital 5,121,692 5,117,942
Retained deficit (4,045,036) (3,827,053)
------------ ------------
1,079,156 1,293,389
------------ ------------
$ 4,265,713 $ 4,497,035
============ ============
See Notes to Condensed Consolidated Financial Statements.
1
</TABLE>
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FIRST QUARTER ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
March 31, March 31,
1996 1995
---------------- ---------------
<S> <C> <C>
NET SALES AND SERVICE REVENUE
Services $ 801,829 $ 937,929
Products 722,477 588,348
---------------- ---------------
1,524,306 1,526,277
---------------- ---------------
COST OF GOODS SOLD AND DIRECT SERVICE COSTS
Services 583,223 722,184
Products 512,239 347,934
---------------- ---------------
1,095,462 1,070,118
---------------- ---------------
GROSS PROFIT 428,844 456,159
---------------- ---------------
OTHER OPERATING REVENUE 113 21,926
---------------- ---------------
OPERATING EXPENSES
Sales and marketing 94,263 163,304
General and administrative 361,374 327,229
Research and development 61,832 70,343
Shipping and receiving 18,091 18,223
Quality control 3,742 9,039
Depreciation and amortization 64,790 63,547
---------------- ---------------
604,092 651,685
---------------- ---------------
OPERATING LOSS (175,135) (173,600)
---------------- ---------------
FINANCIAL INCOME (EXPENSE)
Interest income 1,414 5,168
Interest expense (39,108) (43,060)
Amortization of loan costs (5,154) (5,946)
---------------- ---------------
(42,848) (43,838)
---------------- ---------------
NET LOSS $ (217,983) $ (217,438)
================ ===============
Net loss per common share $ (0.087) $ (0.098)
================ ===============
Dividends per common share $ - $ -
================ ===============
Weighted average number of common
shares outstanding 2,500,203 2,225,203
================ ===============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2
<PAGE>
ENVIROMETRICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW
(UNAUDITED)
FIRST QUARTER ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $(217,983) $(217,438)
--------- ---------
Adjustments to reconcile net (loss)
to net cash used in operating activities:
Depreciation 47,908 54,735
Amortization 16,882 14,758
Provision (recoveries) for doubtful accounts (12,759) (5,287)
Non-cash expense paid by issuance of warrants 3,750 -
(Gain) loss on disposal of equipment - -
Change in assets and liabilities:
Decrease in cash, restricted 99,297 611,953
(Increase) decrease in accounts receivable 105,498 (312,297)
(Increase) in inventory (39,085) (127,526)
(Increase) decrease in prepaid expenses 20,136 (10,017)
Increase in accounts payable
and accrued expenses 44,844 205,055
--------- ---------
Net cash provided by operating activities 68,488 213,936
--------- ---------
Cash Flows from Investing Activities:
Purchase of property and equipment (3,080) (40,774)
(Increase) in deposits, organization and
loan costs and acquisition costs (36,344) (7,249)
(Increase) in other assets (14,205) (6,039)
--------- ---------
Net cash used in investing activities (53,629) (54,062)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from borrowings on short-term notes 200,000 589,825
Principal payments on short-term notes (150,000) (635,495)
Proceeds from long-term borrowing 0 14,952
Principal payments on long-term borrowing (111,933) (49,723)
--------- ---------
Net cash used in financing activities (61,933) (80,441)
--------- ---------
Net (decrease) increase in cash and cash equivalents (47,074) 79,433
Cash and cash equivalents, beginning 53,143 3,295
--------- ---------
Cash and cash equivalents, ending $ 6,069 $ 82,728
========= =========
Supplemental Disclosure of Cash Flows Information
Cash payments for interest $ 32,647 $ 40,711
========= =========
See Notes to Condensed Consolidated Financial Statements
</TABLE>
3
<PAGE>
Envirometrics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(1) The unaudited condensed financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations. The accompanying condensed consolidated
financial statements of the Company, and notes thereto, for the year ended
December 31, 1995.
The results of operations for the interim periods shown in this report are
not necessarily indicative of results to be expected for the fiscal year. In
the opinion of management, the information contained herein reflects all
adjustments necessary to present fairly the consolidated financial position,
results of operations and changes in cash flow for the interim periods. All
such adjustments are of a normal recurring nature.
(2) Net loss per common share is computed using the weighted average number of
common shares outstanding, after giving effect for the 1 for 2 reverse split
effective with the initial public offering.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and with the Company's audited
financial statements, and notes thereto, for the fiscal year ended December 31,
1995.
RESULTS OF OPERATIONS
Sales and revenues for the first quarter of 1996 of $1,524,306 were
approximately the same as the first quarter sales and revenue of 1995 which were
$1,526,277. While the Products Division increased its sales by $134,129 to
$722,477, the Service Division lost revenues of $136,100 and reported $801,829
for the first quarter of 1996 as compared to $937,929 for the first quarter of
1995. The Consultative Services group reported $105,350 less revenues; the
Laboratory reported $76,723 less revenues, and the Environmental Consulting and
Engineering and Civil Engineering and Surveying Division experienced an increase
in revenues of $45,973 compared to the same quarter in 1995, all of which was
attributable to the Air Quality group within the Division.
Cost of goods sold and direct service costs increased by $25,344 to
$1,095,462 for the first quarter of 1996 as compared to $1,070,118 reported for
the first quarter of 1995. The Products group increased its cost of good sold by
$164,305 to $512,239 for 1996 as compared to $347,934 for the first quarter of
1995. The Services Division reduced its direct service costs by $138,961 and
reported $583,223 for the first quarter of 1996 as compared to $722,184 for the
first quarter of 1995.
The gross margin for the quarter ended March 31, 1996 decreased by
$27,315 to $428,844 as compared to $456,159 for the quarter ended March 31,
1995. The Products Division experienced a $30,176 reduction in its gross margin
and the Services Division recorded a slight increase of $2,861 in its gross
margin for the first quarter of 1996 as compared to the first quarter of 1995.
The Products Division has experienced significant declines in the gross margins
on its air sampling cassettes products due to an agreement with a major
customer. Percentage comparisons of gross margins reported by the company are as
follows:
Period Total Products Services
------ ----- -------- --------
1st Quarter 1996 28.1% 29.1% 27.3%
1st Quarter 1995 29.9% 40.9% 23.0%
Other operating revenue decreased by $21,813 to $113 for the first
quarter ended March 31, 1996 as compared to $21,926 for the quarter ended March
31, 1995. This decrease is attributable to a change in the way the Company
recorded service charges for 1995. For 1996 the Company records service charges
as revenue when collected rather than when applied to customer accounts.
5
<PAGE>
Operating expenses were $47,593 lower and amounted to $604,092 for the
quarter ended March 31, 1996, as compared to $651,685 reported for the quarter
ended March 31, 1995. Sales and marketing expenses decreased by $69,041. The
reduction in sales personnel and related cost savings at the Products Division,
which resulted from the agreement with Zellweger Analytics, Inc. for the
distribution of the ACT product line amounted to $54,447. General and
administrative costs increased by $34,145 to $361,374 for the quarter ended
March 31, 1996, as compared to $327,229 reported for the quarter ended March 31,
1995. Research and development costs decreased by $8,511 to $61,832 for the
quarter ended March 31, 1996 from $70,343. This decrease is due to a reduction
in personnel and restructuring of costs. A reduction of $5,297 in costs related
to quality control was also the result of a reduction in personnel in the first
quarter of 1996 as compared to 1995. Shipping and receiving costs remained at
approximately the same levels and depreciation and amortization costs increased
slightly by $1,243 to $64,790 for the first quarter of 1996 as compared to
$63,547 for the quarter ended March 31, 1995.
The Company incurred an operating loss of $175,135 for the first quarter
of 1996 which approximated the operating loss of $173,600 for the first quarter
of 1995.
Interest income decreased by $3,754 or 72.6% to $1,414 for 1996 as
compared to $5,168 for the first quarter ended March 31, 1995. This decrease is
attributable to the use of the restricted cash remaining from the initial public
offering in the first quarter of 1995 to reduce debt.
Interest expense was $39,108 for the first quarter of 1996 as compared
to $43,060 for the first quarter of 1995. The decrease of $3,952 is related to
lower interest rates for the first quarter of 1996.
Amortization of loan costs for the quarter ended March 31, 1996 was
$5,154 which approximated the quarter ended March 31, 1995 which was $5,946.
The Company incurred a net operating loss of $217,983 for the first
quarter of 1996 which approximated the net operating loss reported for the first
quarter of 1995 which was $217,438.
FINANCIAL CONDITION
The Company's financial condition continued to deteriorate during the
first quarter of 1996 due principally to continued operating losses. During the
fourth quarter of 1995, Management developed and implemented a plan to reduce
direct service costs and certain operating expenses during the first quarter of
1996. The full cost savings is not expected to be realized until the second
quarter of 1996 as some personnel remained with the Company for February and
March 1996.
6
<PAGE>
The Consultative Services Division experienced a significant reduction
in sales revenues and the trade receivables from that group are down to $197,193
at March 31, 1996 from $351,948 at March 31, 1995 and $258,187 at December 31,
1995. The Engineering Services Division experienced an improvement in the aging
and collection of its trade receivables for the first quarter of 1996.
As of March 31, 1996 the Company had a net working capital deficiency of
$1,030,893, including restricted cash of $26,347 which collateralized borrowings
under a loan agreement with a financial institution. Included in the net working
capital deficiency amount is the balance of $603,487 reflected as a current
liability related to two mortgages on the Company's operating facilities which
was due April 12, 1996, but was extended for a maximum of three additional
three-month terms. Refinancing the mortgages to long-term debt will
significantly improve the Company's current working capital position.
Effective January 1, 1996 the Company, through its Products Division
subsidiary, entered into a two year Master Distribution Agreement with Zellweger
Analytics, Inc. Zellweger has become the exclusive national and international
distributor of the Company's proprietary passive air monitoring technology,
known as the ACT Monitoring Card System(TM). Zellweger will be responsible for
all sales and marketing activity of the system. The Company has already
experienced a decrease in sales and marketing costs as a result of the
agreement.
Under the Master Distribution Agreement quarterly payments totaling
$675,000 are to be made at the beginning of each calendar quarter for 1996 based
on forecasted sales. A total of $236,250 has been received for the first and
second quarters of 1996. Quarterly payments for forecasted sales for 1997 are
expected to be determined during the fourth quarter of 1996.
In January 1996 the Company modified two of its loan agreements which
were due and extended the due dates to January 15, 1997. In addition, on
February 26, 1996 The United States Company loaned $150,000 to the Company for
an initial 30 day period. Subsequent to its due date the note was amended and
extended to October 30, 1996. Richard H. Guilford, Chairman of the Board of
Directors of the Company, Maurizio F. Giabbai, Ph.D., a Director of the Company,
and Elsie L. Rose, CPA, Treasurer of the Company, are Principals in The United
States Company.
On May 13, 1996 the Company entered into a two year financing
arrangement with Reservoir Capital Corporation. Under the terms of the
agreement, The Company will offer to sell to Reservoir Capital Corporation the
eligible trade accounts receivable of two of its subsidiaries at an approved
advance rate. On that date Reservoir Capital Corporation advanced approximately
$233,000 on behalf of the Company. The Company immediately reduced one of its
bank notes by approximately $50,000. The Company intends to utilize the
remaining funds to reduce its trade accounts payable.
7
<PAGE>
As of this date the Company has not been successful in refinancing its
two mortgage loans with NationsBank. The mortgages were due April 12, 1996.
NationsBank has agreed to refinance the mortgages for up to three additional
three-month terms, at a cost of $10,000 in commitment fees for each three-month
period the mortgages are renewed. The Company is actively searching for a lender
to replace NationsBank. In addition, the Company has signed a letter of intent
to lease the space currently occupied by its Products Division to a national
company for a five year term, with two renewal options.
In March, 1996, The Company initiated a program, through its Laboratory,
to support the American Industrial Hygiene Association (AIHA) Foundation ("The
Foundation"). The Foundation is an education fund that will endow a national
scholarship for graduate students in industrial hygiene. The fundraising goal of
the Foundation is $1.5 million .
The Laboratory conducted a 12,000 piece mail solicitation to AIHA
members during the month of April 1996. The expected response from this mailing,
a follow-up campaign and exhibition efforts at the AIHA conference in May 1996
is estimated to be 1-2% of total membership which approximates a 50% increase in
the current number of laboratory clients.
In addition, the Company has initiated or is in the process of
implementing several programs and actions which it believes will result in
improved efficiency and reporting, and additional profitable operations. These
include:
- Specific targeted marketing programs designed to generate quick
revenue realization have been implemented. These programs are
intended to support those areas of the business where process
capacity is available without incremental cost increases to match
revenue increases.
- A new marketing program for the industrial hygiene industry which is
designed to network Certified Industrial Hygiene firms together to
provide them with greater buying power and resulting price discounts
for purchase of services from the Company. The program also
anticipates greater insurance purchasing power and cross-client
referral systems.
Management believes that with the implementation of the programs listed
above, the restructure of its debt during the first quarter of 1996, the
addition of the credit facility in the second quarter of 1996, and the Master
Distribution Agreement effective January 1, 1996 all are significant positive
steps in meeting the Company's immediate liquidity needs and stabilizing the
revenues of the Company. In addition the cost reductions implemented in the
first quarter of 1996 should show improved trends for the second quarter of
1996.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
None
Item 6.Exhibits and Reports on Form 8-K
Exhibit
10.1 Copy of Modification of Note and Guaranty Reaffirmation
Agreement with The United States Company
10.2 Copy of Master Factoring Agreement with Reservoir Capital
B. Reports on Form 8-K
None
9
<PAGE>
SIGNATURES
Pursuant to the registration requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned duly authorized.
ENVIROMETRICS, INC.
(Registrant)
Date: May 15, 1996 By: s/Richard D. Bennett
-----------------------
Richard D. Bennett, CIH, MSPH
Chief Executive Officer, President
Signing on behalf of the registrant
and as principal financial officer
10
MODIFICATION OF NOTE AND GUARANTY REAFFIRMATION AGREEMENT
THIS MODIFICATION OF NOTE AND GUARANTY REAFFIRMATION AGREEMENT (this
"Modification Agreement") is made as of the 3rd day of May, 1996, by and between
ENVIROMETRICS, INC., a Delaware corporation, AZIMUTH, INCORPORATED, a South
Carolina corporation, TRICO ENVIROMETRICS, INC., a South Carolina corporation,
ENVIROMETRICS PRODUCTS COMPANY, a South Carolina corporation (all of the
foregoing, jointly and severally, individually and collectively, the
"Borrower"), RICHARD D. BENNETT and ANDREW C. GILLETTE, III, (the "Guarantors");
THE UNITED STATES COMPANY, a Virginia corporation (the "Lender").
RECITALS:
1. The Borrower is the maker of a certain Corporate Promissory Note
dated February 26, 1996 in the principal amount of One Hundred Fifty Thousand
Dollars ($150,000.00) payable to the order of the Lender (the "Note").
2. The Guarantors have each executed a guaranty contained in the Note
(the "Guaranty"), guaranteeing the payment of the Borrowers' obligations to the
Lender under the Note.
3. The Note is secured by certain collateral pursuant to a Security
Agreement between the Borrower and the Lender (the "Security Agreement"), a
Third Mortgage between Envirometrics, Inc. and the Lender relating to certain
real property of Envirometrics, Inc. and another certain Third Mortgage between
Envirometrics, Inc. and the Lender relating to certain other real property of
Envirometrics, Inc. (the "Mortgages"), all of the foregoing documents dated
February 26, 1996.
4. The Note matured on March 29, 1996 without repayment.
5. The Borrower and the Lender desire to amend the terms of the Note to
extend its maturity and modify the terms of payment of principal and accrued
interest, and the Guarantors desire to reaffirm their respective obligations
under the Guaranty, all as hereafter set forth.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants, conditions and obligations contained herein, and other good and
valuable consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the Borrower, the Lender, and the Guarantors hereby covenant and
agree as follows:
1. The maturity of the Note is hereby extended to October 30, 1996.
Interest shall continue to accrue at the rate of interest provided under the
<PAGE>
Note. The Borrower shall pay the indebtedness evidenced by the Note and this
Agreement as follows: (i) in monthly installments of all accrued and unpaid
interest on the principal balance remaining unpaid, beginning on May 30, 1996,
and continuing thereafter through October 30, 1996, and (ii) in monthly
installments of unpaid principal in amounts not less than $25,000.00 or more
than $50,000.00, beginning May 30, 1996 and continuing through October 30, 1996.
If not sooner paid, all unpaid principal and all accrued but unpaid interest
shall be due and payable on October 30, 1996.
2. To secure the obligations of the Borrower under the Note and this
Modification Agreement and to induce lender to enter into this Modification
Agreement, concurrently herewith Envirometrics, Inc. and Lender shall enter into
a Pledge Agreement of even date herewith (the "Pledge") whereby Envirometrics
pledges all of the issued and outstanding shares of capital stock of
Envirometrics Products Company to Lender.
3. The Guarantors hereby consent to (i) the modifications effected
under this Modification Agreement, (ii) the Pledge, and (iii) the factoring
financing arrangement between the Borrower and Reservoir Capital Corporation
("Reservoir") evidenced, among other things, by that certain Master Factoring
Agreement dated May 3, 1996 between the Borrower and Reservoir; and, after
giving effect thereto, hereby reaffirm their respective obligations under the
Guaranty.
4. The Borrower represents and warrants that it has not claims,
defenses or offsets to the payment and performance of its duties, obligations
and undertakings under the Note, the Security Agreement, the Mortgages, the
Pledge or any of the other documents or instruments described or contemplated in
the Note, the Security Agreement or the Mortgages (collectively, the "Loan
Documents") and hereby ratifies, reaffirms and reconfirms each such duty,
obligation and undertaking in all respects. The Borrower further represents and
warrants to the Lender that, since the date of the Note, there has occurred no
material adverse change, financial or otherwise, in its affairs, and that the
representations and warranties contained in the Note, Security Agreement and
Mortgages and the other Loan Documents are true and correct as of the date of
this Modification Agreement.
5. The Guarantors represent and warrant that they have no claims,
defenses or offsets to the payment and performance of their duties, obligations
and undertakings under the Guaranty and hereby ratify, reaffirm and reconfirm
each such duty, obligation and undertaking in all respects. The Guarantors
further represent and warrant to the Lender that, since the date of the
Guaranty, there has occurred no material adverse charge, financial or otherwise,
in their affairs.
<PAGE>
6. Except as modified by this Modification Agreement, the terms and
provisions of the Note are hereby ratified and confirmed by the parties and
shall remain in full force and effect. No novation is intended.
7. This Modification Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, personal and legal
representatives, executors, successors and assigns. This Modification Agreement
shall be governed by the laws of Virginia.
IN WITNESS WHEREOF, the parties have caused this Modification Agreement
to be executed as of the date first above written.
THE UNITED STATES COMPANY, a Virginia
corporation
By: /s/ Richard H. Guilford
------------------------------
Name: Richard H. Guilford
Title: Chairman
/s/ Richard D. Bennett
-----------------------------------
Richard D. Bennett, Guarantor
/s/ Andrew C. Gillette
-----------------------------------
Andrew C. Gillette, II, Guarantor
ENVIROMETRICS, INC., a Delaware
corporation
By: /s/ Richard D. Bennett
-----------------------------------
Name: Richard D. Bennett, CIH, MSPH
Title: President and CEO
AZIMUTH, INCORPORATED, a South Carolina
corporation
By: /s/ Richard D. Bennett
______________________________
Name: Richard D. Bennett, CIH,
Title: President
<PAGE>
TRICO ENVIROMETRICS, INC., a South
Carolina corporation
By: /s/ Richard D. Bennett
______________________________
Name: Richard D. Bennett, CIH
Title: President
ENVIROMETRICS PRODUCTS COMPANY, a
South Carolina corporation
By: /s/ Richard D. Bennett
______________________________
Name: Richard D. Bennett, CIH
Title: Chairman
MASTER FACTORING AGREEMENT
THIS MASTER FACTORING AGREEMENT ("this Agreement") is made this 3rd day
of May, 1996 by and between the Assignor, Envirometrics, Inc., Azimuth
Incorporated ("AI"), Envirometrics Products Company ("EPC"), and Trico
Envirometrics, Inc. ("TEI") (referred to throughout this Agreement as "you",
"your" and "yours") and the Assignee, RESERVOIR CAPITAL CORPORATION (referred to
throughout this Agreement as "we", "us", "our" and "ours").
1. Sale and Assignment of Accounts Receivable.
1.1. Purchase and Sale of Accounts. From time to time during
the term of this Agreement, you will offer to sell to us selected of your
Accounts (hereinafter defined), and we will consider purchasing, in our sole
discretion, such Accounts which are acceptable to us. At any one time, the
aggregate outstanding purchase price for all Accounts which we will purchase or
consider purchasing shall be not greater than $800,000.00. As used herein, the
term "Accounts" means, collectively, accounts, contract rights and other forms
of obligation arising in the ordinary course of business from the sale of goods
or rendition of services. Any purchase of Accounts will be evidenced by the
execution of an Agreement for Assignment and Transfer of Accounts which we
purchase is hereinafter called an "Assigned Account." Each purchase shall be
subject to the terms of this Agreement.
1.2. Assignment Price. We will pay to you for each Assigned
Account a price (an "Assignment Price") equal to Eighty percent (80%) for EPC,
Seventy-Five percent (75%) for TEI, and Eighty percent (80%) for AI of the
outstanding amount of such Account. We will not purchase AI's accounts until the
existing security interest on accounts receivable is either released or fully
subordinated.
1.3. Sale and Assignment of Accounts. You agree to sell,
assign and transfer to us all of your right, title and interest to the Assigned
Accounts, together with (a) any notes or drafts related thereto, (b) the
contracts under which such Accounts arose, (C) your books and records relating
thereto, (d) the goods (if any) giving rise to such Accounts, (e) your rights as
an unpaid vendor or lienor, (f) all rights of stoppage in transit, replevin,
repossession, and reclamation, (g) all security therefor and guarantees thereof,
and (h) all rights to insurance proceeds resulting therefrom (all of the
foregoing being included in the term "Assigned Accounts").
1.4. Account Documentation. Upon acceptance by us of any
Assignment Agreement, you will deliver to us: (a) copies of all documents
evidencing the Accounts listed thereon and (b) such other documentation as we
require, in form satisfactory to us in all respects. You will maintain all
shipping documents, delivery receipts and invoices relating to Assigned
Accounts, available for inspection and copying by us, and you will deliver them
to us promptly upon our request. Each sale of Accounts will be reflected as a
sale on your books and financial statements.
<PAGE>
1.5. Processing Fee. In consideration of our purchase of
Accounts from you and our rendition of processing and monitoring services, you
agree to pay to us a fee (the "Processing Fee") as set out in the rate sheet
attached hereto as Exhibit B. The Processing Fee shall be due and payable at the
time each Account is collected or, if not collected in a timely manner, upon
repurchase. It is contemplated that the minimum volume of accounts to be
assigned to us will be $400,000 per month (face value amount) based upon a
rolling three month average of Accounts assigned, as calculated commencing on
the first day of the first calendar month after the date of the first assignment
of Accounts. If you fail to provide the contemplated volume of acceptable
Accounts for us to consider purchasing, you will pay us a processing fee based
upon the difference between the processing fee charged for the actual Accounts
assigned and a processing fee computed as if the minimum volume had been
assigned.
1.6. Servicing Fee. In further consideration of our
purchase of Accounts from you and our rendition of processing and monitoring
services, you agree to pay to us a servicing fee (the "Servicing Fee") of three
quarters of a percent (.75%) of the face amount of Accounts purchased by us
payable at the time of purchase.
1.7. Payments on Accounts. You shall, and we may, notify all
persons obligated to make payments with respect to Accounts (collectively,
"Account Debtors") to make all payments on or with respect to Accounts directly
into a special banking account over which we have exclusive dominion, control,
and power of access and withdrawal (the "Collection Account"). In connection
therewith, you agree to reference our payment instructions on all invoices
submitted to Account Debtors. In addition, if any Account Debtor is an agency,
department, or instrumentality of the United States Government, you shall
execute such forms of notice and assignment, and shall conform to all applicable
procedures, as may be required pursuant to the Federal Assignment of Claims Act
of 1940, as amended, in order to perfect our rights in the Accounts of such
Account Debtor. You hereby authorize us to collect and receive all payments from
all Account Debtors, and to facilitate our collection and receipt, you hereby
irrevocably appoint and constitute us, or any of our agents or employees, as
your lawful Attorney-in-Fact to exercise at any time any of the following
powers: (i) to receive, endorse, and deposit in our name all payments from
Account Debtors; (ii) to transmit to any party notice that you have granted to
us a security interest in the Accounts or that an Assigned Account has been sold
to us; (iii) to institute any proceedings deemed by us necessary to effect
collection of Accounts; and (iv) to sign your name on any financing statements,
or any amendment or continuation statement relating thereto with respect to any
Account. Any act of ours as your lawful Attorney-in-Fact shall not render us
liable for any acts of omission or commission, nor for any error of judgment or
mistake of fact or law. If you receive any payment on any Account, you shall
promptly remit such payment in the form received (with any necessary
<PAGE>
endorsement) directly to us. Until so remitted, you will hold such payment in
trust for us separate and apart from all of your other funds.
1.8. Remittance of Holdback and Payments on Accounts Not
Assigned. Upon our receipt of any payment under an Assigned Account, so long as
you are not in default hereunder, we shall remit to you the difference, if any,
between the payment received by us and the Assignment Price of that Assigned
Account, less all unpaid Processing Fees (which amount is herein called the
"Holdback"). If an Assigned Account is part of a group of Accounts for which we
paid an aggregate Assignment Price, the Holdback shall not be paid until an
amount equal to the aggregate Assignment Price plus Processing Fees has been
paid to us by the Account Debtors obligated on the group of Accounts. Upon our
receipt of any payment under an Account (other than an Assigned Account), so
long as you are not in default hereunder, we shall remit such payment to you
promptly or, at your request, apply such payment as you may direct. Remittances
required by this Paragraph 1.8 will be paid to you weekly on Friday or if not a
business day, the next succeeding business day.
2. Representations, Warranties and Promises. To induce us to purchase
Accounts from time to time, you make the following representations, warranties,
and promises, each of which survives the execution and delivery of this
Agreement and is deemed to be incorporated by reference in each Assignment
Agreement:
2.1. Power and Authority. You have all requisite power and
authority to execute, deliver and perform this Agreement and each Assignment
Agreement, and such performance does not contravene your articles of
incorporation, by-laws, or partnership agreement, as applicable, or any other
agreement by which you are bound.
2.2. Representations and Warranties with Respect to Accounts.
With respect to each Account: (a) your principal place of business and your
books and records relating to the Accounts are located at the address set forth
at the end of this Agreement; (b) you are the sole owner of each Account, free
and clear of all liens and encumbrances, and you will not assign, sell,
transfer, pledge, grant a security interest in or encumber or otherwise dispose
of or abandon any part or all of the Accounts; (C) you have made proper entries
in your books disclosing the sale of Accounts to us; (d) each of your Account
Debtors has legal capacity to contract and is indebted to you in the amount
indicated in your books and records; (e) each Account is valid, legally
enforceable, and represents a bona fide undisputed indebtedness; (f) no Account
is subject to any valid defense, offset, counterclaim, allowance, or is
contingent; (g) each Account Debtor is solvent, and each Account will be paid in
full on or before its maturity date; (h) no agreement for any deduction or
allowance of any kind exists or will be made by you; (i) all information
appearing in your books and records relating to each Account is true and correct
in all respects; and (j) all signatures and endorsements appearing on the
invoices and documents relating to the Accounts are genuine, and all signatures
and endorsers have full capacity and authority and were fully authorized to
contract for the purchase of the goods and/or services giving rise to the
Accounts.
<PAGE>
2.3. Books and Records; Inspections. You will maintain books
and records in accordance with generally accepted accounting principles
consistently applied. We shall have full access to, and the right to audit and
make copies from, your books and records relating to the Collateral or this
Agreement. You will furnish to us such financial statements and other
information regarding your business affairs as we may request.
2.4. Subsidiaries. You have no subsidiaries other than those
disclosed in writing to us, and you will not create any additional subsidiaries
without our prior written consent, which consent may be withheld in our absolute
discretion or conditioned upon any such subsidiary entering into a factoring
agreement similar to this Agreement with us.
2.5. Advances and Loans. You will not, without our prior
written consent, invest in, or make loans or advances to, any of your
stockholders.
2.6. Financial Statements. Within thirty (30) days following
the end of each month you will provide to us a Balance Sheet as of the end of
such month and an Income Statement for the current fiscal year to date in a form
acceptable to us, prepared in accordance with Generally Accepted Accounting
Principles.
2.7. Title to and Condition of Collateral Other than Accounts.
You are the sole owner of the Collateral (other than the Accounts, which are
covered by Paragraph 2.2 above) and have the right to grant to us a lien on and
security interest in such Collateral; and the Collateral is, or will be when
acquired by you, free and clear of all liens, security interests, taxes and
other encumbrances of any nature except for those created by this Agreement or
permitted by us in writing. As to inventory which is included in the Collateral,
such inventory is not stored with a bailee, warehouseman or similar party
without our prior written consent, such inventory is not under consignment to or
from any person, and such inventory is currently salable or usable in the normal
course of your business.
2.8. Insurance on Collateral Other than Accounts. During the
term of this Agreement, you shall maintain with financially sound, well rated
and reputable insurance companies comprehensive fire and extended coverage
insurance on your inventory against such risks, with such loss deductible
amounts and in such amounts not less than those which may be satisfactory to us
but in all events conforming to prudent business practices and in such minimum
amounts that you will not be deemed a co-insurer under applicable insurance
laws, regulations, policies and practices. Each policy of such insurance
covering your inventory shall contain a provision or endorsement satisfactory to
us naming us as loss payee and providing that (a) such policy may not be
canceled or altered and we may not be removed as loss payee without at least
thirty (30) days prior written notice to us, and (b) no act or default of you or
any other person shall affect our right to recover under such policy. You will
pay, when due, all premiums on such insurance and will furnish to us, upon
request, evidence of payment of such premiums and other information as to the
insurance carried by you. You hereby irrevocably (x) assign and grant to us a
security interest in any and all proceeds of each such insurance policy covering
<PAGE>
your inventory, (y) direct each insurance company to pay all such proceeds
directly to us, and (z) constitute and appoint us (and all officers, employees
or agents designated by us) as your true and lawful attorney-in-fact (coupled
with an interest) with authority and power on your behalf to make, adjust,
settle or compromise all claims under each such insurance policy and to endorse
any check, draft or instrument for such proceeds. Any proceeds of such insurance
received by us (less the amount of any reasonable costs of settlement of such
losses) shall be held and applied, at our option, to the Obligations (whether
matured or unmatured) in such manner and at such times as we may determine in
our sole discretion or to the replacement of the damaged or destroyed inventory
upon terms and conditions reasonably satisfactory in all material respects to
us.
2.9. Compliance with Laws, Etc. You are in compliance in
all material respects with all applicable federal, state and local laws,
statutes, orders, rules, regulations and judgments.
2.10. No Material Adverse Change. There has been no material
adverse change in your management, financial condition or business prospects or
in the personal financial condition of any guarantor of your Obligations under
this Agreement from that represented in any application, financial statement or
other information provided to us prior to the date of this Agreement.
3. Account Disputes; Breaches of Representations, Warranties and
Promises; Repurchase of Accounts.
3.1. Dispute Resolution Authority. You will notify us promptly
of and, if requested by us, will settle all disputes concerning any Assigned
Account, at your sole cost and expense. However, you shall not, without our
prior written consent, settle, compromise or adjust any Assigned Account or
grant any additional discounts, allowances or credits thereon. If we demand
repurchase or exchange of an Assigned Account which is subject to dispute under
Section 3.2 and you fail to repurchase or exchange such Assigned Account, we
may, but are not required to, attempt to settle, compromise, or litigate the
dispute upon such terms as we in our sole discretion deem advisable, for your
account and risk and at your sole expense.
3.2. Repurchase of Assigned Account. If any Assigned Account
is not paid within 90 days of its invoice date, or if there exists any breach of
your representations, warranties and promises under this Agreement with respect
to any Assigned Account, or if there is a dispute concerning any Assigned
Account, you agree, upon demand by us at our sole option, either (i) to
repurchase from us such Assigned Account (or the unpaid portion thereof) for the
amount of the applicable Assignment Price (or the unpaid portion thereof),
together with all unpaid Processing Fees, or (ii) to accept a reassignment from
us of such Assigned Account in exchange for an assignment of an Assigned Account
of equal or greater value.
<PAGE>
4. Security Interest in Collateral.
4.1. Grant of Security Interest; Collateral Defined. To secure
payment and performance of all of your obligations under this Agreement,
including, without limitation, repurchase and reassignment obligations,
processing fees, costs, and expenses (collectively, the "Obligations"), you
pledge, assign and grant to us a continuing lien and security interest in the
following property, both now owned and existing and hereafter created, acquired
and arising, regardless of where located (collectively, the "Collateral"):
(1) all of your Accounts (whether or not
accepted by us or specifically assigned to us and whether arising before or
after termination of this Agreement);
(2) all of your present and future instruments,
documents, chattel paper and general intangibles (as those terms are defined in
the Uniform Commercial Code);
(3) all reserves, balances, deposits, credits,
moneys, securities, and other property at any time owing or belonging to you
which are now or hereafter in the possession of, or in transit to, us, whether
for safekeeping, pledge or otherwise (including, without limitation, all
Holdbacks at any time owing by us to you, whether then or thereafter payable,
under or in connection with this Agreement);
(4) all of your claims against us at any time
existing;
(5) all books and records and other property
relating to the Assigned Accounts, the Collateral and your Obligations; and
(6) all cash and non-cash proceeds and products of
any of the foregoing, including any claim against third parties in any way
related to the foregoing.
We are irrevocably authorized at any time to charge your
account (and any credit balance on our books in your favor) for the amount of
any or all of your Obligations.
4.2. Perfection of Security Interest. You shall execute and
deliver to us such documents and instruments, including, without limitation,
Uniform Commercial Code ("UCC") financing statements, as we may request from
time to time in order to evidence and perfect our security interest in the
Collateral.
5. No Agency. Nothing in this Agreement shall be construed to
constitute us as your agent or to obligate us to assume any of your obligations
with respect to any Account. We will not have any liability for any error or
omission or delay occurring in the settlement, collection or payment of any
Account. Notwithstanding the foregoing, if you fail to perform any obligation
you are required to perform in order to maintain the obligation of an Account
Debtor to make payments on an Assigned Account, we may perform, or retain others
<PAGE>
to perform, such obligations, at your sole expense, and such expense shall
constitute part of your Obligations.
6. Collection Costs. You shall reimburse us on demand for all costs
incurred by us in efforts to enforce payment of Assigned Accounts. All fees,
costs and expenses (including attorneys' fees), of any kind and nature, which we
may incur in (a) filing notices, (b) making lien or title examinations, (C)
protecting, maintaining, preserving or enforcing Assigned Accounts, or (d)
defending or prosecuting, any actions or proceedings related to this Agreement
shall be added to and deemed part of your Obligations. In addition, in the
absence of a Default under Paragraph 7 below, you shall be responsible for the
fees, costs and expenses for all field examinations (not to exceed $400 per day
plus out of pocket expenses) in addition to the initial field audit performed
prior to the date of this Agreement.
7. Default. All of your Obligations shall, at our option, be and become
immediately due and payable without notice or demand upon the occurrence of any
one or more of the following events (each a "Default"): (i) default in the
payment, when due and payable, of any of your Obligations; (ii) if any of your
representations or warranties are false or misleading in any material respect;
(iii) if you fail to perform any promise contained in this Agreement or any
Assignment Agreement; (iv) the discontinuance or suspension of your present
business operation without our consent such consent to not be unreasonably
withheld, or if you become insolvent or unable to meet your debts as they
mature, or any proceeding is commenced against you for relief under any
provision of any Federal or State bankruptcy, insolvency or other similar law,
the issuance or filing of any injunction, attachment, judgment or lien against
you or any of your property, or the appointment of a receiver, custodian or
trustee of any kind for you or any of your property; and (v) if a default occurs
under any Guaranty Agreement executed in conjunction with this Agreement and is
not cured within any applicable grace period.
8. Remedies.
8.1. Our Rights. Upon the occurrence of any Default, without
further notice to you, we shall have the right to (i) cease purchasing Accounts;
(ii) terminate this Agreement and enforce the liquidated damages provisions of
Paragraph 9.4; (iii) enforce against you immediate payment of all of your
Obligations; (iv) collect all amounts due and owing on all Accounts; (v) require
you to assemble the Collateral and make it available to us at a place designated
by us; (vi) enter upon your premises to take possession of the Collateral; and
(vii) appropriate, set off and apply the Collateral to the payment of your
Obligations in such order and manner as we in our sole discretion shall
determine, or settle, compromise or release, in whole or in part, any amounts
owing on the Collateral, or prosecute any proceeding with respect to the
Collateral, or extend the time of payment of any or all of the Collateral, or
issue credits regarding the Collateral, or sell, assign and deliver the
Collateral (or any party thereof), at public or private sale and apply the net
cash proceeds resulting from the exercise of any of the foregoing rights or
remedies to the payment of your Obligations in such order as we in our sole
<PAGE>
discretion may elect, and you shall remain liable to us for any deficiency.
8.2. Confession of Judgment. Upon the occurrence of a Default,
you hereby authorize and empower any attorney designated by us or any clerk of
any court of record to appear for you in any court of record and confess
judgment against you without prior hearing, in favor of us for and in the amount
of your Obligations then outstanding, costs of suit and attorneys' fees in an
amount equal to 10% of the Obligations then outstanding. Such authority and
power may be exercised on one or more occasions, from time to time, in the same
or different jurisdictions, as often as Assignee shall deem necessary or
desirable, for all of which this Agreement shall be a sufficient warrant.
8.3. Application of Collections; Deficiency. All collections
we receive from realizing upn the Collateral, less expenses of collection
(including, without limitation, attorneys' fees and court costs) incurred by us,
shall be applied to your Obligations. If for any reason collections received by
us exceed your Obligations, we will account to you for the surplus. However, if
the collections we receive are insufficient to pay all of your Obligations, you
shall be liable to us for the deficiency.
8.4. Remedies Cumulative. Each right, power, and remedy
provided for herein or otherwise existing shall be cumulative and concurrent and
shall be in addition to every other right, power, and remedy existing hereunder,
by law or otherwise.
8.5. Chargeback Not a Reassignment. The chargeback of an
Assigned Account to you shall not constitute a reassignment of such Account to
you, and title thereto and to the goods, if any, represented thereby shall
remain in us unless such chargeback is accompanied by a simultaneous sale and
assignment of another Account as provided in Paragraph 3.2 of this Agreement, or
until all of your Obligations are paid in full.
9. Term of Agreement and Termination.
9.1. Initial Term; Renewal. The term of this Agreement shall
be 24 months. Unless terminated in accordance with this Paragraph 9, the
provisions of this Agreement shall automatically renew for successive one year
periods without any notice or action on the part of either party hereto. During
the term of this Agreement, you shall deal exclusively with us in the factoring,
financing and sale of Accounts.
9.2. Facility Fee. You will pay to us an Annual Facility
Fee of one percent (1.0%) of the $800,000.00 maximum factoring arrangement
payable at closing and on the anniversary date of the agreement.
9.3. Termination in Absence of Default. This Agreement may be
terminated at any time (a) by us giving you written notice stating a termination
date not less than ten (10) days after the date such notice is mailed or
dispatched, or (b) if you obtain bank, equity or subordinated debt financing,
you may terminate after twelve months (12) without payment of termination fees
by giving us written notice stating a termination date not less than sixty (60)
<PAGE>
days prior to the first anniversary date of closing. However, if we do not
receive written termination, you shall pay to us a termination fee in an amount
equal to $7,500.00 for each month or portion of a month remaining in the initial
or renewal term.
9.4. Effect of Termination. Notwithstanding any termination,
all of our rights and interests, all of your Obligations, and all of the terms,
conditions, and provisions hereof shall continue in full force and effect until
all transactions entered into prior to the effective date of termination have
been fully concluded and all of your Obligations have been paid in full. After
termination of this Agreement, you shall pay to us on demand the amount of your
Obligations then outstanding and any of your Obligations arising thereafter.
9.5. Termination After Default; Liquidated Damages. If a
Default occurs hereunder, we shall have the right at our sole option to
terminate this Agreement at any time thereafter without notice to you. If we
exercise such option, in addition to all other rights and remedies we may have,
and in addition to all of your other Obligations, you agree to pay us upon
demand as liquidated damages for our lost fee earnings, a sum equal to $7,500.00
for each month or portion of a month remaining in the initial or renewal term of
this Agreement.
10. Notices. Notices shall be deemed given when sent or dispatched
by certified or registered mail, by private overnight express mail, or by
telegram, postage or charges prepaid, to the parties at their respective
addresses set forth below.
11. Binding Effect; Complete Agreement. This Agreement will
bind you and your personal representatives, successors and assigns, and will
inure to the benefit of us and our successors and assigns, and is the complete
agreement between the parties.
12. Waiver. No delay or failure by us in exercising any of our
rights or remedies shall operate as a waiver of such or of any other right or
remedy, and no waiver shall be valid unless in writing signed by us and then
only to the extent therein set forth.
13. Governing Law, Etc. This Agreement shall be governed by and
interpreted according to the laws of the State of Maryland. You consent to the
nonexclusive jurisdiction of the courts of the State of Maryland with respect to
any controversy relating to this Agreement or to any transaction in connection
herewith, and waive personal service of the summons and complaint or other
process to be issued therein and agree that service of such summons and
complaint or process may be made by registered or certified mail addressed to
you at your address appearing herein. Your failure to appear or answer within
thirty (30) days after the mailing of such summons, complaint or process shall
constitute a default entitling us to enter a judgment or order as demanded or
prayed for therein.
14. Waiver of Jury Trial. You and we each agree that any suit, action
or proceeding, whether claim or counterclaim, brought or instituted by either
party hereto or any successor or assign of any party on or with respect to this
Agreement or which in any way relates, directly or indirectly, to this Agreement
or any event, transaction or occurrence arising out of or in any way connected
with this Agreement, or the dealings of the parties with respect thereto, shall
be tried only by a court and not by a jury. EACH PARTY HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.
<PAGE>
15. Legal Counsel. You have had the opportunity to obtain legal
counsel, and you agree that you fully understand the terms, provisions and legal
consequences of this Agreement.
IN WITNESS WHEREOF, this Agreement is executed and delivered under the
seal as of the date first above written.
ASSIGNOR: ASSIGNEE:
Envirometrics, Inc., AI, EPC, and TEI RESERVOIR CAPITAL CORPORATION
By: /s/ Richard D. Bennett By: /s/
________________________ (SEAL) ____________________ (SEAL)
Title: President Title
_______________________ ____________________
Address: 4055 Faber Place Drive, Ste. 201 Address: 6 Reservoir Circle, Ste. 105
Charleston, SC 29405 Baltimore, Maryland 21208
Address of Chief Executive Office,
if different: __________________
- ----------------------------
State of South Carolina
) TO WIT:
County of Charleston
I HEREBY CERTIFTY, that on this 3rd day of May, 1996, before me, a
Notary Public of said State, personally appeared Richard D. Bennett, known to me
(or satisfactorily proven) to be the person whose name is subscribed to the
foregoing Agreement and acknowledged that he executed the same for the purposes
therein contained.
WITNESS my hand and Notarial Seal.
/s/
------------------------
Notary Public
My Commission Expires: February 18, 2004
<PAGE>
SCHEDULE A
Schedule # _____________________
Date __________________________
This is to certify that the account debtors named below are indebted to borrower
in the sums set out opposite their respective names for goods sold, shipped and
delivered (or, in case borrower's principal business is rendering of service,
for services rendered) an open account.
SCHEDULE OF ASSIGNED ACCOUNTS
The Account(s) identified below and the invoices, contracts and/or other
evidence thereof attached hereto (is) (are) being sold, assigned and transferred
by the Assignor to RESERVOIR CAPITAL CORPORATION pursuant to all of the terms
and conditions of the foregoing Assignment Agreement.
ACCOUNT
DEBTOR Customer # Invoice # Contract # Invoice Date Ship # Invoice
(Customer) Date Received Amount
See Attached
TOTALS
` (a) Total Amount of Invoices on this schedule $__________
(b) Advance Rate _________%
Total Advance Requested (line a x line b) $_____________
<PAGE>
EXHIBIT A
AGREEMENT FOR
ASSIGNMENT AND TRANSFER OF ACCOUNTS RECEIVABLE
ASSIGNOR ASSIGNEE
Envirometrics Inc., AI, EPC, and TEI Reservoir Capital Corporation
4055 Faber Place Drive, Suite 201 6 Reservoir Circle, Suite
105 Charleston, SC 29405 Baltimore, MD 21208
(referred to herein as "you", "your", and (referred to herein as "we",
"yours") "us", "our", and "ours").
Subject to the terms and conditions of that certain Master Factoring
Agreement executed between you and us (the "Factoring Agreement") (capitalized
terms used herein and not defined having the meaning set forth in the Factoring
Agreement), we agree as follows:
1. Assignment of Accounts. In consideration of our payment to you of
the Assignment Price shown in Schedule A, receipt of which is hereby
acknowledged, you hereby sell, assign and transfer to us all of your right,
title and interest to the Accounts arising from the invoices identified in
Schedule A.
2. Aged Account. If an Assigned Account is not paid by the Account
Debtor in full within 90 days of its invoice date, or if the Account Debtor
refuses to make any payment due under any Assigned Account, then upon our
demand, you agree (a) to repurchase such Account for a price equal to the
Assignment Price plus any unpaid Processing Fees, less any payments on such
Account which we may have received, or (b) at our sale option, to replace such
Account with another account of equal or greater value.
3. Default. You shall be in default upon the occurrence of: (i)
default in the payment of any amount due us hereunder. Upon any such occurrence,
we may exercise any remedies set forth in the Factoring Agreement, it being
understood and agreed that a Default under this Agreement shall be deemed a
Default under the Factoring Agreement.
4. Effective Date. The effective date of this Agreement shall be
the date set forth below aas the effective date of our acceptance.
IN WITNESS WHEREOF, the parties have executed this Agreement under
their respective seals.
ASSIGNOR: ASSIGNEE:
Envirometrics, Inc., AI, EPC and TEI Reservoir Capital Corporation
By: /s/ Richard D. Bennett By:
___________________________(SEAL) ______________________(SEAL)
Title: President
--------------------- ------------------
Dated: 5/3/96 Effective Date:
____________________ ___________
<PAGE>
EXHIBIT B
RATE SHEET
The Processing Fee payable by Envirometrics, Inc., Azimuth
Incorporated, Envirometrics Products Company, and Trico Envirometrics, Inc.
("Assignor") under the Master Factoring Agreement between Assignor and Reservoir
Capital Corporation ("Assignee") shall be calculated at a per annum rate equal
to the "Prime Rate" (as hereinafter defined) plus four and three-quarter percent
(4.75%) from the date on which the Assignment Price for each Assigned Account is
paid to Assignor to and including the date which is three (3) business days
after the date on which payment under such Assigned Account is received by
Assignee, such rate to be applied to the Assignment Price for each Assigned
Account and calculated on the basis of actual days elapsed and a month of 30
days. The term "Prime Rate" shall mean the prime rte of interest as published by
NationsBank on the last business day of the preceding calendar month, and any
change in the Prime Rate shall be effective on the first business day of the
month following the month in which such change was first published.
<PAGE>
INDEMNIFICATION AGREEMENT AND FIDELITY GUARANTY
THIS INDEMNIFICATION AGREEMENT AND FIDELITY GUARANTY (this "Agreement")
is made as of this 3rd day of May, 1996, to RESERVOIR CAPITAL CORPORATION, a
Maryland corporation (the "Assignee"), by A. C. Gillette, a (the "Guarantor"),
witnesseth:
Recitals
A. Pursuant to a Master Factoring Agreement (which, as the same may
from time to time be amended, restated, supplemented, or otherwise modified, is
hereinafter called the "Master Factoring Agreement") date herewith by and
between Envirometrics, Inc., Azimuth Incorporated, Envirometrics Products
Company and Trico Envirometrics, Inc., (the "Assignor") and the Assignee, the
Assignor and the Assignee have entered into a factoring arrangement (the
"Factoring Arrangement") pursuant to which the Assignor has offered to sell
certain of its accounts receivable to the Assignee from time to time, and the
Assignee has agreed to consider the purchase thereof. As used in this Agreement,
the term "Factoring Documents" means collectively any instrument or agreement
previously, simultaneously, or hereafter executed and delivered by the Assignor,
the Guarantor, or any other person as evidence of, security for, guaranty of, or
in connection with, the Factoring Arrangement, as any of such instruments of
agreements may from time to time be amended, restated, supplemented, extended,
or otherwise modified, including, without limitation, the Master Factoring
Agreement.
B. The Guarantor has requested the Assignee to enter into the Master
Factoring Agreement, and the Assignee has required, as a condition to entering
into the Master Factoring Agreement, the execution of this Agreement by the
Guarantor.
NOW, THEREFORE, in order to induce the Assignee to enter into the
Master Factoring Agreement with the Assignor, the Guarantor covenants and agrees
with the Assignee as follows:
1. Guaranty and Indemnification. The Guarantor hereby unconditionally
and irrevocably guarantees to the Assignee the fidelity of the Assignor, and
hereby agrees to indemnify and save harmless the Assignee and its agents,
servants, employees and successors and assigns from and against any all
liabilities, claims, debts, obligations, losses and proceedings and any costs
attributable to them (including reasonable attorney's fees), of any nature or
kind whatsoever, that may result from (a) any fraud or misrepresentation by the
Assignor or the Guarantor in connection with the Factoring Arrangement, or (b)
any breach of any representation or warranty by the Assignor or the Guarantor
under any of the Factoring Documents. The Guarantor shall pay the amount of any
such liabilities, claims, debts, obligations, losses and proceedings (together
with all costs attributable to them) immediately upon demand.
2. Nature of Obligations. The obligations and liabilities of the
Guarantor under this Agreement are primary obligations of the Guarantor, are
continuing, absolute, and unconditional, shall not be subject to any
counterclaim, recoupment, set-off, reduction, or defense based upon any claim
that the Guarantor may have against the Assignor or the Assignee, are
independent of any other guaranty or guaranties at any time in effect, and may
be enforced regardless of the existence of such other guaranty or guaranties.
This Agreement shall continue to be effective, or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any of amounts due to
the Assignee under the Master Factoring Agreement is rescinded or must otherwise
be restored or returned by the Assignee upon the insolvency, bankruptcy,
receivership, dissolution, liquidation or reorganization of the Assignor or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Assignor or the
Guarantor or any substantial part of the property of the Assignor or the
Guarantor, or otherwise, all as though such payment had not been made and
irrespective of whether such payment is returned to the party who originally
made it or to some other party. The obligations and liabilities of the Guarantor
under this Agreement shall not be affected, impaired, lessened, modified,
waived, and/or released by the invalidity or unenforceability of any or all of
the Factoring Documents.
3. Consents. The Guarantor hereby consents that at any time and from
time to time, the Assignee may, without in any manner affecting, impairing,
lessening, modifying, waiving, and/or releasing any or all of the obligations
and liabilities of the Guarantor under this Agreement, do any one or more of the
following, all without notice to, or further consent of, the Guarantor, or with
or without consideration: (a) renew, extend, or otherwise modify the Factoring
Arrangement; (b) extend and/or change the time and/or terms for performance of
any other obligations, covenants, or agreements under the Factoring Documents of
the Assignor or any other party to the Factoring Documents; (c) fail, omit, lack
diligence, or delay to enforce, assert, or exercise any right, power, privilege,
or remedy conferred upon the Assignee under the provisions of any of the
Factoring Documents or under applicable laws; (d) grant consents or indulgences
or take action or omit to take action under, or in respect of, any or all of the
Factoring Documents; and (e) apply any payment received by the Assignee of, or
<PAGE>
on account of, any of the Factoring Arrangement in whatever order and manner the
Assignee elects.
4. Waiver by Guarantor. The Guarantor unconditionally waives,
to the extent permitted by applicable laws: (a) notice of the execution and
delivery of the Factoring Documents; or (b) notice of the Assignee's acceptance
of and reliance on this Agreement or the execution of the Master Factoring
Agreement or the other Factoring Documents.
5. Enforcement Expenses. The Guarantor shall indemnify and hold
harmless the Assignee against any loss, liability, or expense, including
attorneys' fees and disbursements and any other fees and disbursements, that may
result from any failure of the Guarantor to pay any amount due under paragraph 1
hereof immediately upon demand.
6. Delay and Waiver by Assignee. No delay in the exercise of, or
failure to exercise, any right, remedy, or power accruing upon any default or
failure of the Guarantor in the performance of any obligation under this
Agreement shall impair any such right, remedy, or power or shall be construed to
be a waiver thereof, but any such right, remedy, or power may be exercised from
time to time and as often as may be deemed by the Assignee expedient. In order
to entitle the Assignee to exercise any right, remedy, or power reserved to it
in this Agreement, it shall not be necessary to give any notice to the
Guarantor. No waiver, amendment, release, or modification of this Agreement
shall be established by conduct, custom, or course of dealing.
7. Notices and Communications. All notices and other communications
hereunder shall be in writing and shall be effective when sent by certified
mail, return receipt requested: (a) if to the Guarantor, at 1085 Stonehenge
Road, Hanahan, SC 29406, or at such other address as the Guarantor shall have
furnished in writing to the Assignee; or (b) if to the Assignee, addressed to it
at 6 Reservoir Circle, Suite 105, Baltimore, Maryland 21208, or at such other
address as the Assignee shall have furnished in writing to the Guarantor.
8. Successors and Assigns. All covenants and agreements of the
Guarantor set forth in this Agreement shall bind the Guarantor and its heirs,
personal representatives, successors, and assigns and shall inure to the benefit
of, and be enforceable by, the Assignee and its successors and assigns,
including, without limitation, any holder of any or all of the Factoring
Documents.
9. Waiver of Trial of Jury. The Guarantor hereby waives trial by
jury in any action or proceeding to which the Guarantor and the Assignee may be
parties, arising out of or in any way pertaining to this Agreement or any of the
other Factoring Documents.
10. Miscellaneous. Neither this Agreement nor any term hereof may be
terminated, amended, supplemented, waived, released, or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver, release, or
modification is sought. Whenever used herein, the singular number shall include
the plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders. Whenever used herein, the word "person"
or "persons" shall mean and include a corporation, an association, a
partnership, an organization, a business, an individual, a government or
political subdivision or agency thereof, or an estate or trust. This Agreement
shall in all respects be deemed to be made in, and governed by, construed and
enforced in accordance with the laws of, the State of Maryland. The Assignee
shall have the right to grant participations in the Factoring Arrangement to
others at any time and from time to time, and the Assignee may divulge to any
such participant or potential participant all information, reports, financial
statements, and documents obtained in connection with this Agreement, any of the
Factoring Documents, or otherwise. If any term of this Agreement or any
obligation thereunder shall be held to be invalid, illegal, or unenforceable,
the remainder of this Agreement and any other application of such term shall not
be affected thereby. The paragraph and section headings of this Agreement have
been inserted for convenience only and shall not modify, define, limit, or
expand the express provisions hereof. This Agreement may be executed in
duplicate originals or in several counterparts, each of which shall be deemed an
original but all of which together shall constitute one instrument, and it shall
not be necessary in making proof hereof to produce or account for more than one
such duplicate original or counterpart.
IN WITNESS WHEREOF, the Guarantor has caused this Agreement to be
signed, sealed, and delivered as of the day and year first written above.
WITNESS: A.C. Gillette
_______________________ _______________________(SEAL)
<PAGE>
INDEMNIFICATION AGREEMENT AND FIDELITY GUARANTY
THIS INDEMNIFICATION AGREEMENT AND FIDELITY GUARANTY (this "Agreement")
is made as of this 3rd day of May, 1996, to RESERVOIR CAPITAL CORPORATION, a
Maryland corporation (the "Assignee"), by Richard D. Bennett, a (the
"Guarantor"), witnesseth:
Recitals
A. Pursuant to a Master Factoring Agreement (which, as the same may
from time to time be amended, restated, supplemented, or otherwise modified, is
hereinafter called the "Master Factoring Agreement") date herewith by and
between Envirometrics, Inc., Azimuth Incorporated, Envirometrics Products
Company and Trico Envirometrics, Inc., (the "Assignor") and the Assignee, the
Assignor and the Assignee have entered into a factoring arrangement (the
"Factoring Arrangement") pursuant to which the Assignor has offered to sell
certain of its accounts receivable to the Assignee from time to time, and the
Assignee has agreed to consider the purchase thereof. As used in this Agreement,
the term "Factoring Documents" means collectively any instrument or agreement
previously, simultaneously, or hereafter executed and delivered by the Assignor,
the Guarantor, or any other person as evidence of, security for, guaranty of, or
in connection with, the Factoring Arrangement, as any of such instruments of
agreements may from time to time be amended, restated, supplemented, extended,
or otherwise modified, including, without limitation, the Master Factoring
Agreement.
B. The Guarantor has requested the Assignee to enter into the Master
Factoring Agreement, and the Assignee has required, as a condition to entering
into the Master Factoring Agreement, the execution of this Agreement by the
Guarantor.
NOW, THEREFORE, in order to induce the Assignee to enter into the
Master Factoring Agreement with the Assignor, the Guarantor covenants and agrees
with the Assignee as follows:
1. Guaranty and Indemnification. The Guarantor hereby unconditionally
and irrevocably guarantees to the Assignee the fidelity of the Assignor, and
hereby agrees to indemnify and save harmless the Assignee and its agents,
servants, employees and successors and assigns from and against any and all
liabilities, claims, debts, obligations, losses and proceedings and any costs
attributable to them (including reasonable attorney's fees), of any nature or
kind whatsoever, that may result from (a) any fraud or misrepresentation by the
Assignor or the Guarantor in connection with the Factoring Arrangement, or (b)
any breach of any representation or warranty by the Assignor or the Guarantor
under any of the Factoring Documents. The Guarantor shall pay the amount of any
such liabilities, claims, debts, obligations, losses and proceedings (together
with all costs attributable to them) immediately upon demand.
2. Nature of Obligations. The obligations and liabilities of the
Guarantor under this Agreement are primary obligations of the Guarantor, are
continuing, absolute, and unconditional, shall not be subject to any
counterclaim, recoupment, set-off, reduction, or defense based upon any claim
that the Guarantor may have against the Assignor or the Assignee, are
independent of any other guaranty or guaranties at any time in effect, and may
be enforced regardless of the existence of such other guaranty or guaranties.
This Agreement shall continue to be effective, or be reinstated, as the case may
be, if at any time any payment, or any part thereof, of any of amounts due to
the Assignee under the Master Factoring Agreement is rescinded or must otherwise
be restored or returned by the Assignee upon the insolvency, bankruptcy,
receivership, dissolution, liquidation or reorganization of the Assignor or the
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Assignor or the
Guarantor or any substantial part of the property of the Assignor or the
Guarantor, or otherwise, all as though such payment had not been made and
irrespective of whether such payment is returned to the party who originally
made it or to some other party. The obligations and liabilities of the Guarantor
under this Agreement shall not be affected, impaired, lessened, modified,
waived, and/or released by the invalidity or unenforceability of any or all of
the Factoring Documents.
3. Consents. The Guarantor hereby consents that at any time and from
time to time, the Assignee may, without in any manner affecting, impairing,
lessening, modifying, waiving, and/or releasing any or all of the obligations
and liabilities of the Guarantor under this Agreement, do any one or more of the
following, all without notice to, or further consent of, the Guarantor, or with
or without consideration: (a) renew, extend, or otherwise modify the Factoring
Arrangement; (b) extend and/or change the time and/or terms for performance of
any other obligations, covenants, or agreements under the Factoring Documents of
the Assignor or any other party to the Factoring Documents; (c) fail, omit, lack
diligence, or delay to enforce, assert, or exercise any right, power, privilege,
or remedy conferred upon the Assignee under the provisions of any of the
Factoring Documents or under applicable laws; (d) grant consents or indulgences
or take action or omit to take action under, or in respect of, any or all of the
Factoring Documents; and (e) apply any payment received by the Assignee of, or
<PAGE>
on account of, any of the Factoring Arrangement in whatever order and manner the
Assignee elects.
4. Waiver by Guarantor. The Guarantor unconditionally waives,
to the extent permitted by applicable laws: (a) notice of the execution and
delivery of the Factoring Documents; or (b) notice of the Assignee's acceptance
of and reliance on this Agreement or the execution of the Master Factoring
Agreement or the other Factoring Documents.
5. Enforcement Expenses. The Guarantor shall indemnity and hold
harmless the Assignee against any loss, liability, or expense, including
attorneys' fees and disbursements and any other fees and disbursements, that may
result from any failure of the Guarantor to pay any amount due under paragraph 1
hereof immediately upon demand.
6. Delay and Waiver by Assignee. No delay in the exercise of, or
failure to exercise, any right, remedy, or power accruing upon any default or
failure of the Guarantor in the performance of any obligation under this
Agreement shall impair any such right, remedy, or power or shall be construed to
be a waiver thereof, but any such right, remedy, or power may be exercised from
time to time and as often as may be deemed by the Assignee expedient. In order
to entitle the Assignee to exercise any right, remedy, or power reserved to it
in this Agreement, it shall not be necessary to give any notice to the
Guarantor. No waiver, amendment, release, or modification of this Agreement
shall be established by conduct, custom, or course of dealing.
7. Notices and Communications. All notices and other communications
hereunder shall be in writing and shall be effective when sent by certified
mail, return receipt requested: (a) if to the Guarantor, at 2059 Emerald
Terrace, Mt. Pleasant, SC 29464, or at such other address as the Guarantor shall
have furnished in writing to the Assignee; or (b) if to the Assignee, addressed
to it at 6 Reservoir Circle, Suite 105, Baltimore, Maryland 21208, or at such
other address as the Assignee shall have furnished in writing to the Guarantor.
8. Successors and Assigns. All covenants and agreements of the
Guarantor set forth in this Agreement shall bind the Guarantor and its heirs,
personal representatives, successors, and assigns and shall inure to the benefit
of, and be enforceable by, the Assignee and its successors and assigns,
including, without limitation, any holder of any or all of the Factoring
Documents.
9. Waiver of Trial by Jury. The Guarantor hereby waives trial by
jury in any action or proceeding to which the Guarantor and the Assignee may be
parties, arising out of or in any way pertaining to this Agreement or any of the
other Factoring Documents.
10. Miscellaneous. Neither this Agreement nor any term hereof may be
terminated, amended, supplemented, waived, released, or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver, release, or
modification is sought. Whenever used herein, the singular number shall include
the plural, the plural the singular, and the use of the masculine, feminine, or
neuter gender shall include all genders. Whenever used herein, the word "person"
or "persons" shall mean include a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
or agency thereof, or an estate or trust. This Agreement shall in all respects
be deemed to be made in, and governed by, construed and enforced in accordance
with the laws of, the State of Maryland. The Assignee shall have the right to
grant participations in the Factoring Arrangement to others at any time and from
time to time, and the Assignee may divulge to any such participant or potential
participant all information, reports, financial statements, and documents
obtained in connection with this Agreement, any of the Factoring Documents, or
otherwise. If any term of this Agreement or any obligation thereunder shall be
held to be invalid, illegal, or unenforceable, the remainder of this Agreement
and any other application of such term shall not be affected thereby. The
paragraph and section headings of this Agreement have been inserted for
convenience only and shall not modify, define, limit, or expand the express
provisions hereof. This Agreement may be executed in duplicate originals or in
several counterparts, each of which shall be deemed an original but all of which
together shall constitute one instrument, and it shall not be necessary in
making proof hereof to produce or account for more than one such duplicate
original or counterpart.
IN WITNESS WHEREOF, the Guarantor has caused this Agreement to be
signed, sealed, and delivered as of the day and year first written above.
WITNESS Richard D. Bennett
_______________________ _______________________(SEAL)
<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (herein, the "Agreement") is made by and
between RESERVOIR CAPITAL CORPORATION (herein, "Reservoir"), a Maryland
corporation and The United States Company, Inc. (herein, the "Lender"), and
Envirometrics, Inc. (herein "Debtor"), a Delaware Corporation.
R E C I T A L S
A. Reservoir has extended a credit facility to the Debtor and is
receiving from the Debtor a lien and security interest in the accounts
receivable and other property of the Debtor.
B. The Debtor has outstanding certain indebtedness and other
obligations to the Lender pursuant to a Security Agreement dated as of 5/3/96
pursuant to which Lender has a prior security interest in the accounts
receivable and other property of the Debtor and has made the appropriate UCC
filings to place such security interest of record in the appropriate
jurisdictions.
C. The Debtor has requested that Reservoir provide funding to the
Debtor in the form of accounts receivable factoring pursuant to, among other
things, Reservoir's form of Master Factoring Agreement (the "Reservoir Master
Factoring Agreement") and form of Assignment and Transfer Agreement (the
"Reservoir Assignment Agreement") (the Reservoir Master Factoring Agreement and
the Reservoir Assignment Agreement, as the same may from time to time be
amended, restated, supplemented or otherwise modified being hereinafter called
collectively the "Reservoir Security Agreements").
D. In consideration of the terms of the credit facility between
Reservoir and the Debtor pursuant to which Reservoir will make additional funds
available to the Debtor, and Reservoir have agreed that the Lender shall
subordinate its prior security interest in all accounts receivable and other
property of the Debtor as more fully described in the attached UCC-1 financing
statements (the "Collateral") to the lien position of Reservoir in such
Collateral.
W I T N E S S E T H
NOW, THEREFORE, in consideration of the premise and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged , the parties hereby agree as follows:
1. Subordination
1.1 The Lender does hereby subordinate its first-lien security
interest in the Collateral in favor of the lien, operation and effect of the
Reservoir Security Agreements with respect to all indebtedness and other
obligations of the Debtor to Reservoir under the credit facility between the
Debtor and Reservoir, as the same may be amended from time to time.
1.2 The Debtor consents to the filing of this Agreement by
Reservoir in the UCC records of any jurisdiction in which Reservoir determines
it should file such agreement to protect its first-lien security interest in the
Collateral, and does hereby covenant and agree to take such further actions and
execute such further instruments as Reservoir shall reasonably request in making
any such UCC filings.
1.3 The Lender agrees that it will not pursue any remedies
under its agreement(s) with the Debtor without the prior written consent of
Reservoir.
1.4 Without the prior written consent of Reservoir, Debtor
will not make and Lender will not accept payments of principal or interest on
Lender's debt. Reservoir, Debtor and Lender agree that weekly payments of
principal plus interest are permitted on Friday of each week from Debtor's
available rebates and non-factored cash up to but not exceeding $50,000
principal per month plus interest to Lender provided Debtor is not in default
under the Reservoir Master Factoring Agreement. Debtor will provide a monthly
certificate to Reservoir showing the outstanding balance (principal and
interest) on the Debtor's obligation to the Lender.
2. Rights of Debtor. The provisions of this Agreements shall not in any
way expand, alter or modify the rights of the Debtor under the documents
evidencing their obligations to the Lender and Reservoir, respectively,
including, without limitation, the right to cure any default with respect
thereto. This Agreement is for the sole and exclusive benefit of the parties
hereto and shall govern their relationship inter se as creditors of the Debtor.
<PAGE>
3. Modification. The agreement(s) between the Lender and the Debtor
shall not be modified, altered or amended without the written consent of
Reservoir.
4. Limitations. The rights, remedies, privileges and duties expressed
herein or in any of or all of the documents evidencing the Debtor's obligations
to the Lender and Reservoir shall be subject to and may be limited by
bankruptcy, insolvency or similar laws and the rules, orders, decrees and
similar directives of any court of competent authority possessing and exercising
jurisdiction with respect to the Debtor, its property, or any guarantor of the
Debtor's obligations to ** and Reservoir, and nothing contained in this
Agreement constitutes any assurance by either party to the other that the
rights, remedies, privileges and duties will, in all events, be available,
enforceable or exercisable in full. Notwithstanding the foregoing, the
institution of legal proceedings by or against the Debtor, its property, or any
guarantor of the Debtor's obligations to the Debtor and Reservoir shall not
limit, restrict, discharge, satisfy or in any manner alter or affect the rights,
remedies, privileges and duties of the parties expressed herein as between
themselves.
5. Relationship of Parties. Reservoir and the Lender shall not be
fiduciaries with respect to each other and shall not be the agent of the other.
Notwithstanding the foregoing, however, until all of the obligations of the
Debtor to Reservoir as set forth in the Reservoir Security Documents have been
indefeasibly paid in full, if any of the Collateral or proceeds of the
Collateral shall be received by the Lender at any time for any reason, such
Collateral or proceeds shall be held in trust for the benefit of, and promptly
remitted to, Reservoir.
6. Notices. Any notices required or permitted by this Agreement shall
in writing and shall be deemed delivered if hand delivered, sent by facsimile
transmission, sent by Federal Express, or sent by certified mail, return-receipt
requested, postage prepaid, to the address as follows, unless such address is
changed by written notice hereunder, and shall be deemed given on the earlier of
the date of hand delivery, the date of facsimile transmission, one (1) business
day after the date of delivery to Federal Express, or two (2) business days
after the date of mailing, as the case may be.
(a) If to Reservoir:
Reservoir Capital Corporation
6 Reservoir Circle, Suite 105
Baltimore, Maryland 21208
FAX: (410) 653-1871
(b) If to the Lender:
The United States Company
1051 Technology Park Drive
Glen Allen, VA 23060
FAX: (804) 553-1908
(c) If to the Debtor:
Envirometrics, Inc.
4055 Faber Place Drive, Suite 201
Charleston, SC 29405
FAX: (804) 740-7707
7. Authority of Parties. Any notification, consultation or
communication required or permitted under this Agreement shall be directed to
the parties at the addresses set forth above in Section 6, and to the specific
individuals named therein, and their respective successors who may be designated
and appointed hereafter from time to time, all of whom are duly authorized to
act for and on behalf of the corporate parties hereto.
8. Assignability. The rights and obligations under the Agreement
may not be assigned unless any such assignment is subject to the terms and
conditions of this Agreement.
9. Miscellaneous. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and shall be binding upon and shall
inure to the benefit of the parties and their heirs, successors and assigns; no
person who is not a party to this Agreement shall have any rights or benefits
hereunder; this Agreement may be amended, modified or altered only in writing
signed by the party to be bound thereby and making specific reference to the
amendment, modification or alteration of this Agreement; time is of the essence
in the performance and satisfaction of the terms and conditions of this
Agreement; and the laws of the State of Maryland, exclusive of its conflicts of
laws rules, shall govern the rights and obligations of the parties to this
Agreement and the interpretation, construction and enforceability thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have affixed their hands and
seals as of the 3rd day of May 1996 with the intention that signatures conveyed
by facsimile transmission shall serve as original signatures and a facsimile
transmission including the signature of both parties shall serve as an original
document until such time as the parties have delivered original documents.
RESERVOIR CAPITAL CORPORATION
- ----------------------- -----------------------
THE UNITED STATES COMPANY
/s/ /s/
- ----------------------- -----------------------
ENVIROMETRICS, INC.
/s/ /s/
- ----------------------------- --------------------------------
