EXHIBIT 10.37
EXTENSION AND MODIFICATION AGREEMENTS
THIS EXTENSION AND MODIFICATION AGREEMENT ("Agreement") is made as of March 19,
1999 between UNION BANK OF CALIFORNIA, N.A., formerly known as The Bank of
California, N.A. ("Bank") and EMCON, a California corporation.
RECITALS
This Agreement is made and entered into in reliance on the accuracy of the
following recitals which are acknowledged by Borrower and Bank to be true and
accurate:
A. Borrower is liable to Bank as follows (collectively, "Liabilities"): a line
of credit ("Line of Credit") and a term loan ("Term Loan") originally granted
pursuant to the terms of that certain Credit Agreement dated as of February 29,
1996 (as amended, supplemented, extended, restated, or renewed from time to
time, the "Credit Agreement") by and between Bank and Borrower and evidenced by
that certain (i) Promissory Note Base Rate dated January 27, 1999 in the maximum
principal amount of $10,000,000.00 ("Line of Credit Note"); and (ii) Term Loan
Note dated February 29, 1996 in the original principal amount of $10,000,000.00
("Term Note" together with the Line of Credit Note, each a "Note" and
collectively, the "Notes"). As of March 17, 1999, the outstanding principal
balance under the (1) Line of Credit Note was $1,190,893.71, together with
accrued and unpaid interest in the amount of $9,138.86; and (2) Term Note was
$3,428,570.00, together with accrued and unpaid interest in the amount of
$10,497.94; and (3) together with all accruing interest, fees, costs and
expenses provided in the Loan Documents. The purpose of the Line of Credit was
to support working capital needs. The purpose of the Term Loan was to support
Borrower's acquisition of Organic Waste Technologies ("OWT") and, in connection
with this acquisition, Borrower obtained financing for the operating
requirements of OWT from Charter One Bank ("Charter One"). As of March 17, 1999,
$150,000.000 in the aggregate is unpaid under unexpired letters of credit issued
by Bank for the account of Borrower.
B. To secure Borrower's obligations to Bank, Borrower executed and delivered to
Bank that certain (i) Security Agreement; and (ii) Pledge Agreement, each dated
as of February 29, 1996, each executed by Borrower in favor of Bank (each a
"Security Agreement" and collectively, the "Security Agreements") pursuant to
which Borrower granted to Bank a security interest in personal property and
fixtures described therein ("Collateral") which security interest was perfected
by that certain UCC-1 Financing Statement filed February 29, 1999, as File No.
9606660051, in the Office of the Secretary of State of the State of California
("UCC-1"). Pursuant to the Security Agreements and UCC-1 Bank has a valid,
perfected lien of first priority upon the Collateral.
C. The following documents evidence Borrower's obligations to and relationship
with Bank: the Agreement, the Line of Credit Note, the Term Note, the Credit
Agreement, the Security Agreements, the Additional Security Agreement (defined
below), the SLC Agreement (defined below) and the UCC-1. The documents described
above, together with any other documents executed by or among the parties in
connection with the Liabilities, and any and all amendments and modifications
thereto, are referred to collectively in this Agreement as "Loan Documents".
There are not written or oral agreements concerning or affecting the Liabilities
between Borrower on the one hand and Bank on the other, other than the Loan
Documents. Unless otherwise defined herein, all capitalized terms shall have the
meanings assigned to them in the Loan Documents.
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D. Borrower, Bank and Charter One have been working to combine Borrower's and
OWT's existing financing arrangements into a combined credit relationship that
would be agented by Bank ("Joint Lending Project"). Borrower has recently
advised Bank and charter One that Borrower may be sold and has requested that
Bank and Charter One defer work on the combined credit relationship. The Line of
Credit Note will mature on March 19, 1999, on which date all sums of principal
and accrued unpaid interest will be due and payable in full. Borrower has
advised Bank that because of the potential sale of Borrower, Borrower will not
satisfy it obligations to Bank on the Termination Date ("Potential Default"). In
addition, Borrower has advised Bank that financing requirements for its working
capital requirements equal approximately $5,000,000.00 for the remaining term
(as extended by this Agreement) of the Line of Credit Note. Borrower has further
requested that Bank extend the Termination Date and provide additional credit in
the form of a cash secured standby letter of credit. Borrower is also agreeable
to a reduction in the maximum amount available under the Line of Credit Note and
to the cancellation of OWT's line of credit from Charter One.
E. At Borrower's request, Bank is willing to modify the Loan Documents as set
forth herein, provided that the conditions set forth herein are satisfied within
the time periods required under this Agreement, and provided further that all
security interests and liens under the Loan Documents shall continue to exist
and remain in full force and effect. Bank is entering into this Agreement for
the sole purpose of allowing Borrower an additional opportunity to negotiate the
possible sale of Borrower.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Bank and Borrower hereby agree as follows:
1. Incorporation of Recitals. Each of the above recitals is incorporated herein
and deemed to be the agreement of the Bank and Borrower and is relied upon by
each party to this Agreement in agreeing to the terms of this Agreement.
2. Confirmation of Collateral. Borrower hereby grants and confirms that all
obligations of Borrower to Bank are secured by a perfected, first priority
security interest in Collateral.
3. Conditions Precedent. Borrower understands that this Agreement shall not be
effective and Bank shall have no obligation to amend the terms of the Loan
Documents as provided herein unless and until each of the following conditions
precedent has been satisfied not later than March 19, 1999, or waived by Bank
(in Bank's sole discretion):
(a) Borrower shall have executed and delivered to Bank this Agreement
together with (i) a promissory note, in form and substance satisfactory
to Bank in the maximum principal amount of FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00), dated as of the date of this Agreement
("Replacement Line of Credit Note"), which Replacement Line of Credit
Note shall supersede and replace the Line of Credit Note in its
entirety, and which Replacement Line of Credit Note shall evidence all
amounts outstanding under the Line of Credit Note, and such outstanding
amounts to be repaid as provided in the Replacement Line of Credit
Note; and (ii) a security agreement, in form and substance satisfactory
to Bank ("Additional Security Agreement"), granting Bank a security
interest in that certain certificate of deposit no. 7009033775 in the
principal amount of $136,500.00, issued and held by Bank, and all
renewals of and substitutions for such certificate ("Additional
Collateral").
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(b) Borrower shall have reimbursed Bank for Bank's costs and expenses
through the date of this Agreement, including, without limitation,
reasonable attorney's fees and expenses (including the fees of Bank's
inside counsel), incurred in connection with both the Joint Lending
Project and the negotiation and drafting of this Agreement and the
transactions contemplated hereby in the amount of $6,610.00.
(c) On or before such time as Bank may require, Borrower shall have
taken any and all actions and executed and delivered to Bank any and
all documents necessary or appropriate in Bank's sole discretion to
effectuate this Agreement.
(d) Borrower shall have paid to Bank a non-refundable documentation fee
in the amount of $10,000.00
4. Documentation Fee. In consideration of the extension and modifications
granted by Bank to Borrower pursuant to this Agreement, Borrower agrees to pay
to Bank a non-refundable fee of $10,000.00 which amount shall be paid as maybe
provided in Section 3 above.
5. Waiver of Potential Default. Subject to all of the terms and conditions of
this Agreement, including, without limitation, the requirements of Section 3
hereof, Bank hereby agrees to waive its default rights in connection with the
Potential Default, provided, however, that this waiver is not a waiver of any
subsequent breach of the same provision of the Credit Agreement or any Note or
other Loan Documents, nor is it a waiver of any current or future breach of any
other provision of the Credit Agreement or any Note or other Loan Documents.
Bank is not obligated to provide this or any other waiver of its default rights.
Further, the Bank reserves all of the rights, powers and remedies available to
it under the Credit Agreement, each Note and any other Loan Documents if any
subsequent breach of the same provisions or any other provision of the Credit
Agreement, any Note or any other Loan Document should occur.
6. Modification of Loan Documents. To induce Bank to enter into this Agreement,
Borrower agrees that the Loan Documents are hereby supplemented and modified as
follows, which modifications shall supersede and prevail over any conflicting
provisions of the Loan Documents:
(a) The date "March 19, 1999" in the paragraph entitled "Termination
Date" in Article One of the Credit Agreement is hereby amended to "April 30,
1999".
(b) Section 2.1.1 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"2.1.1 Line of Credit. Subject to the terms and conditions of
this Agreement from time to time prior to Termination Date,
upon request by Borrower, Bank will provide extensions of
credit ("Line of Credit") to Borrower in the form of Advances.
Letters of Credit that, in the aggregate, shall not exceed at
any time FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) (the
"Credit Limit"), in the following manner."
(c) Section 2.1.1(a) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"(a) Advances. Provide up to the Credit Limit in aggregate
outstanding principal amounts ("Advance Sublimit") in Advances
to Borrower. Each Advance shall be payable no later than the
Termination Date. Borrower may borrow, repay and reborrow
under the
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Advance Sublimit, as Borrower may elect, in minimum amounts of
$10,000.000 or integral multiples thereof. Advances shall be
used by Borrower for the purpose of working capital for its
own operations".
(d) A new Section 2.1.3 is hereby added to the Credit Agreement and
shall read as follows:
"2.1.3 Standby Letter of Credit/Cash Secured. Provide up to
$136,500.00 in aggregate outstanding unpaid face amount for
the purpose of issuing an irrevocable, standby letter of
credit, in form and substance satisfactory to Bank, for the
account of Borrower in United States Dollars ("SLC"). The SLC
shall expire on September 30, 1999. Borrower shall execute,
deliver and perform in accordance with Bank's standard form
Standby Letter of Credit Application & Agreement, all terms of
which are incorporated herein by this reference ("SLC
Agreement"). To secure Borrower's obligations to Bank
evidenced by the SLC Agreement, Borrower execute and deliver
to Bank that certain security agreement dated as of March 19,
1999 (Additional Security Agreement")" providing to Bank a
first priority security interest in that certain certificate
of deposit no. 7009033775 in the principal amount of
$136,500.00, issued and held by Bank, and all renewals of an
substitutions for such certificate".
7. Representations and Warranties. To induce Bank to enter into this Agreement,
Borrower hereby represents and warrants to Bank as follows:
(a) All representations and warranties contained in this Agreement and
in any and all of the other Loan Documents are true and correct as of
the date of this Agreement, and all such representations and warranties
shall survive the execution of this Agreement.
(b) The execution, delivery and performance by Borrower of this
Agreement and all documents contemplated hereunder are within
Borrower's powers, have been duly authorized, and are not in conflict
with Borrower's articles of incorporation or by-laws, or the terms of
any charter or other organizational document of Borrower; and all such
documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms. In addition, such
execution, delivery and performance by Borrower will not violate any
law, rule or order of any court or governmental agency or body to which
Borrower is subject; and cannot (except as expressly provided or
contemplated herein) result in the creation or imposition of any lien,
security interest or encumbrance on any now owned or hereafter acquired
property of Borrower.
(c) With the exception of the Potential Default, no event has occurred
or failed to occur that is, or, with notice or lapse of time or both
would constitute a default, an event of default, or a breach or failure
of any condition under any Loan Document.
(d) Each Note represents an unconditional, absolute, valid and
enforceable obligation against Borrower. Borrower has no claims or
defenses against Bank or any other person or entity which would or
might affect; (a) the enforceability of any provisions of the Loan
Documents; or (b) the collectability of sums advanced by Bank in
connection with the Liabilities. Borrower understands and acknowledges
that the Bank is entering into this Agreement in reliance upon, and in
partial consideration for, this acknowledgment and representation, and
agrees that such reliance is reasonable and appropriate.
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8. Borrower's Covenants. Unless Bank otherwise consents in writing during the
extension period provided herein, Borrower will do the following:
(a) Comply with all requirements of all Loan Documents to the extent
not inconsistent with this Agreement.
(b) On or before April 5, 1999, provide Bank with written evidence of
the cancellation of OWT's credit facility with Charter One.
(c) Not enter into any agreements with any of its other creditors that
might impair it ability to perform under this Agreement.
(d) Ensure that Bank is fully informed at all times of all matters
relating to the operation of Borrower's business, including any new
reformed or revived subsidiaries or affiliates, any planned changes in
key personnel or manner of operating its business.
(e) Ensure that Bank is fully informed at all times of all matters
relating to the possible sale of Borrower.
(f) Take any and all actions of any kind or nature whatsoever, either
directly or indirectly, that are necessary to prevent Bank from
suffering a loss with respect to the Liabilities or being deprived of
the Collateral or the Additional Collateral, or of any rights or
remedies of Bank with respect to the Liabilities, the Loan Documents or
this Agreement in the event of a default by Borrower under this
Agreement or any other Loan Documents (or the ability to exercise such
any rights or remedies).
(g) Reimburse Bank for Bank's costs and expenses as set forth in
Section 3(b) of this Agreement for such costs and expenses for which
Bank did not have invoices or statements as of the date of this
Agreement.
9. Additional Events of Default. In addition to the events of default set forth
in the Loan Documents, the occurrence of any of the following events of default
other than the Potential Default shall be an event of default and, at Bank's
option, may make all obligations of Borrower immediately due and payable, all
without demand, presentment or notice, all of which requirements Borrower hereby
waives:
(a) Failure to perform any of the obligations set forth in this
Agreement or in any other Loan documents (as the same may be modified
by this Agreement).
(b) Any representation or warranty of Borrower herein or in any other
Loan Document shall be false, misleading or incorrect.
(c) If there is any substantial impairment of the prospect of
Borrower's satisfaction of its obligations to Bank or substantial
impairment of the value of the Collateral or the Additional Collateral,
or any substantial impairment of the priority of Bank's security
interest in or lien on any Collateral or Additional Collateral.
10. Remedies. Upon the occurrence of an Event of Default and at all times
thereafter, Bank, without the necessity of obtaining any prior approval of any
court, shall be entitled to terminate all advances or other extensions of credit
under the Loan Documents and Bank shall also be entitled to exercise all rights
and remedies available to Bank as a creditor generally, including, without
limitation, all remedies
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available to Bank under the Loan Documents, as well as rights and remedies
available to Bank at law or in equity. All such rights and remedies shall be
cumulative. No failure or delay on the part of Bank in exercising any power,
right or remedy under any of the Loan Documents shall operate as a waiver
thereof, and no single or partial exercise of any such power, right or remedy
shall preclude any further exercise thereof or the exercise of any other power,
right or remedy.
11. Dispute Resolution. This Agreement hereby incorporates any alternative
dispute resolution agreement previously, concurrently or hereafter executed
between Borrower and Bank.
12. Waiver of Statute of Limitations. Borrower shall not please the statute of
limitations to any action brought by Bank with respect to the Liabilities, the
Notes, Credit Agreement, any other Loan Document, the Collateral, and hereby
waives the statute of limitations in respect of any and all sums due from it
under the Notes.
13. Miscellaneous
(a) All the parties hereto agree to and will cooperate fully with each
other in the performance of this Agreement and the Loan Documents
including, without limitation, executing any additional documents and
instruments reasonable or necessary to the full performance of this
Agreement. Without limiting the generality of the foregoing, Borrower
agrees to execute such other and further documents and instruments as
Bank may request to implement the provisions of this Agreement and to
perfect and protect the liens and security interests created by this
Agreement or any other Loan Document.
(b) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto, their respective successors
and assigns. No other person or entity shall be entitled to claim any
right or benefit hereunder, including, without limitation, the status
of a third party beneficiary hereunder, except the Released Parties.
(c) Bank and Borrower agree that except as expressly provided herein,
the Loan Documents shall remain in full force and effect in accordance
with their respective terms, and this Agreement shall not be construed
to:
(i) Impair the validity, perfection or priority of any lien or
security interest securing Borrower's obligations to Bank;
(ii) Waive or impair any rights, powers or remedies of Bank
under the Loan Documents;
(iii) Constitute an agreement by Bank or require Bank to grant
forbearance periods or extend the term of the Credit
Agreement, the Line of Credit Note, or the time for payment of
any of Borrower's obligations to Bank except as expressly
provided herein, none of which Bank agrees or has agreed to
do, and all of which matters are in Bank's sole and absolute
discretion; or
(iv) make any other loans or other extension of credit to or
for the benefit of Borrower.
In the event of any inconsistency between the terms of this Agreement
and any other Loan Document, this Agreement shall govern. Borrower
acknowledges that it has consulted with counsel and with such other
experts and advisors as it has deemed necessary in connection with
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the negotiation, execution and delivery of this Agreement, or has had
an opportunity to so consult and has knowingly chosen not to do so.
This Agreement shall be construed without regard to any presumption or
rule requiring that it be construed against the party causing this
Agreement or any part hereof to be drafted. The headings used in this
Agreement are for convenience only and shall be disregarded in
interpreting the substantive provisions of this Agreement.
(d) This Agreement and the other Loan Documents shall not be deemed or
construed to create a partnership, tenancy in common, joint tenancy,
joint venture, co-ownership or any other relationship aside from a
continuing debtor-creditor relationship between Borrower on the one
hand and Bank on the other.
(e) In case any provision in this Agreement shall be invalid, illegal
or unenforceable, such provision shall be severable from the remainder
of this agreement and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
(f) If Bank receives any payment or rents, issues, profits or proceeds
of any Collateral which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be paid to a
trustee, debtor-in-possession, receiver or any other party under any
bankruptcy law, common law, equitable cause or otherwise, then, to such
extent, the obligations or part thereof intended to be satisfied by
such payments or proceeds shall be reserved and continue as if such
payments or proceeds had not been received by Bank.
(g) This Agreement may not be amended, waived or modified in any manner
without the prior written consent of the party against whom the
amendment, waiver or modification is sought to be enforced.
(h) Borrower shall reimburse Bank for all costs and expenses,
including, without limitation, reasonable attorneys' fees and
disbursements (and fees and disbursements of Bank's in-house counsel)
expended or incurred by Bank in an arbitration, mediation, judicial
reference, legal action or otherwise in connection with; (a) the
negotiation, preparation, amendment, interpretation and enforcement of
the Loan Documents, including, without limitation, during any workout,
attempted workout, and/or in connection with the rendering of legal
advice as to Bank's rights, remedies and obligations under the Loan
Documents; (b) collecting any sum which becomes due Bank under any Loan
Document; (c) any proceeding for declaratory relief, any counterclaim
to any proceeding, or any appeal; or (d) the protection, preservation
or enforcement of any rights of Bank. For the purposes of this section,
attorneys' fees shall include, without limitation, fees incurred in
connection with the following: (1) contempt proceedings; (2) discover;
(3) any motion proceeding or other activity of any kind in connection
with a bankruptcy proceeding or case arising out of or relating to any
petition under Title 11 of the United Sates Code, as the same shall be
in effect from time to time, or any similar law; (4) garnishment, levy,
and debtor and third party examinations; and (5) postjudgment motions
and proceedings of any kind, including, without limitation, any
activity taken to collect or enforce any judgment. All of such costs
and expenses shall bear interest from the time of demand at the rate
then in effect under the Line of Credit Note.
(i) Except as otherwise provided herein, this Agreement and all other
Loan Documents and the rights and obligations of the parties hereto
shall be governed by the laws of the State of California without regard
to principles concerning choice of law. In any action arising out of or
connected with this Agreement, Borrower hereby expressly consents to
the personal jurisdiction of any state or federal court located in the
State of California and also consents to service of process by any
means authorized by federal or governing state law.
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(j) This Agreement may be executed in any number of counterparts which,
when taken together, shall constitute but one agreement.
(k) All representations, warranties, covenants, agreements, waivers and
releases of Borrower contained herein shall survive the payment in full
of Borrower's obligations to Bank.
(l) Any notices or other communications provided for or allowed
hereunder shall be effective only when given by one of the following
methods and addressed to the respective party at its address given with
the signatures at the end of this Agreement and shall be considered to
have been validly given: (a) upon delivery, if delivered personally;
(b) upon receipt, if mailed, first class postage prepaid, with the
United States Postal Service; (c) on the next business day, if sent by
overnight courier service of recognized standing; and (d) upon
telephoned confirmation of receipt, if telecopied. The addresses to
which notices or demands are to be given may be changed from time to
time by notice delivered as provided above.
(m) In the event of any inconsistency between the terms of this
Agreement and any other ▇▇▇▇▇▇▇▇, statements or the like form Bank to
Borrower in connection with the Liabilities, the terms of this
Agreement shall prevail over the terms of any other such ▇▇▇▇▇▇▇▇,
statements or the like.
(n) This Agreement and other Loan Documents are intended by the parties
as the final expression of their agreement and therefore incorporate
all negotiations of the parties hereto and are the entire agreement of
the parties hereto. Borrower acknowledges that it is relying on no
written or oral agreement, representation, warranty, or understanding
of any kind made by Bank or any employee or agent of Bank except for
the agreements of Bank set forth herein or in the other Loan Documents.
Except as expressly set forth in this Agreement, the other Loan
Documents remain unchanged and in full force and effect. Where any
provisions of the Credit Agreement amended by this Agreement appear in
a promissory note tied to the Credit Agreement, the same provisions in
said promissory note shall be deemed likewise amended.
IN WITNESS WHEREOF, Bank and Borrower have executed this Agreement as of the
date set forth in the preamble.
EMCON, a UNION BANK OF CALIFORNIA, N.A.
California corporation
By: \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By:
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Title: CEO and President Title:
By: \s\ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: CFO and VP Legal
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