EXHIBIT 10.4.1
Amendment, dated July 1, 1997, to Subordinated Note, by and among TRC Companies,
Inc., R & M Corporation, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇.
July 1, 1997
R&M Corporation
c/o ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Re: TRC Companies, Inc.
5.75% Subordinated Note
Due March 21, 1997
Dear Dick and Miro:
This letter constitutes the Agreement between TRC Companies, Inc. ("TRC"), R&M
Corporation ("R&M") and you with respect to the restructuring of the
above-subject Note (the "Subordinated Note"). In consideration of the promises
contained herein and other good and valuable consideration, the parties agree as
follows:
1. TRC will issue to R&M an Amended Subordinated Note in the form
attached hereto as Exhibit A (the "Amended Note"). In return for such
Amended Note, R&M will return the Subordinated Note to TRC marked
"canceled" and waive all rights thereunder, and such Subordinated Note
will be of no further force and effect except for rights as provided
under paragraph 4 of this letter agreement.
2. TRC will issue to R&M a Common Stock Purchase Warrant to purchase
50,000 shares of TRC Common Stock at a purchase price of $4.50 per
share in the form attached as Exhibit B.
3. TRC agrees to deliver the shares of TRC Common Stock to be delivered
as the Contingent Payment as provided under Section 2.4 of the Asset
Purchase Agreement dated March 21, 1994 by and among TRC,
Environmental Solutions, Inc., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇
(the "Asset Purchase Agreement") six months after the final principal
payment is made as provided under paragraph 2.1 of the Amended Note,
but in no event later than December 21, 1999. Delivery of the
Contingent Payment prior to this date may only be made with the prior
approval of R&M Corporation.
4. The 2% late payment fee as provided for under Section 2.1 (b) of the
Subordinated Note in the amount of $140,000 shall be abated and
forgiven at such time as the final principal payment is timely made as
provided under paragraph 2.1 of the Amended Note.
5. TRC agrees to pay all reasonable expenses including reasonable
attorney and accounting fees incurred by R&M and Messrs. ▇▇▇▇▇▇▇ and
Knezevic in connection with this transaction within 30 days of
presentation of invoices for such expenses.
6. This Agreement and the documents issued pursuant hereto shall be
governed by the laws of the State of Connecticut without giving effect
to the principles of conflicts of law thereof. This Agreement
including the attachments hereto and all documents incorporated or
referred to herein or therein embodies the entire agreement among the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, oral or written
with respect thereto and shall inure to the benefit of and shall be
binding upon the parties hereto and their respective legal
representatives, successors and assigns.
Please indicate your acceptance of the foregoing by signing in the space below
and returning a duplicate original of this Agreement.
Sincerely,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇
MHD/pah
Attachments
ACCEPTED AND AGREED:
R& M CORPORATION
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR SECURITIES LAWS OF OTHER JURISDICTIONS AND
MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, SUCH DISPOSITION IS EXEMPT FROM SUCH REGISTRATION
REQUIREMENTS. THIS NOTE IS SUBORDINATED TO THE PRIOR PAYMENT OF THE SENIOR
INDEBTEDNESS IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR
AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO.
TRC COMPANIES, INC.
AMENDED SUBORDINATED NOTE
DUE JULY 1, 1999
$7,000,000 July 1,1997
FOR VALUE RECEIVED, TRC Companies, Inc., a Delaware corporation ("Maker"),
promises to pay to R&M Corporation, a California corporation of which the
stockholders as of the date of this Note are ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇ ("Payee"), without any right of setoff or counterclaim at the place and
in the manner specified below, or at such other place as Payee may designate
from time to time in writing, the principal sum of SEVEN MILLION AND 00/100
DOLLARS ($7,000,000), subject to reduction as provided herein, together with
interest on the unpaid principal balance hereof payable at the rate per annum
set forth below.
SECTION 1. Definitions.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated March
21, 1994 by and between Payee (then known as Environmental Solutions, Inc.),
Maker, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇, as amended from time to time.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of Connecticut.
"Default on Senior Indebtedness" means the occurrence of any default or
event of default under Senior Indebtedness.
"Events of Default" is defined in Section 5 of this Note.
"Intercreditor Agreement" means the Intercreditor Agreement dated March 21,
1994, between Payee, the First National Bank of Boston and Maker, a copy of
which is attached as Exhibit A hereto.
"Interest Payment Date" is defined in Section 2.2 (b) of this Note.
"Note" means this Amended Subordinated Note, as the same may be amended
from time to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal, premium, if any, and interest to Payee
hereunder).
"Person" means any person or entity including without limitation, a
corporation, partnership, trust or joint venture).
"Rate" means the greater of the interest rate paid on the Senior
Indebtedness or seven and three quarters percent (7.75%).
"Revolving Credit Agreement" means the Amended and Restated Revolving
Credit and Term Loan Agreement dated as of March 15, 1995, among Maker and its
subsidiaries and the First National Bank of Boston, as the same may be amended
from time to time.
"Senior Indebtedness" means the principal of, premium, if any, interest on,
and all other obligatins incurred under the Revolving Credit Agreement, any
successor facility or any renewal, extension, modification, refunding or
refinancing of such agreement or any successor facility.
"Stockholder" or "Stockholders" means each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇, individually or collectively, as the case may be.
Unless otherwise defined herein, terms used in the Asset Purchase Agreement
shall have the same meanings when used in this Note.
SECTION 2. Terms.
SECTION 2.1. Repayment of Principal.
(a) The principal balance of this Note shall be payable by Maker in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debt, in two (2) consecutive
annual installments of THREE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($3,500,000), and THREE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS
($3,500,000) plus accrued interest as provided under Section 2.2 (b) below,
respectively, such installments to be paid on July 1, 1998 and July 1, 1999,
respectively.
(b) Any payment of principal under this Note which is paid more than thirty
(30) days after the date such payment is due and payable hereunder shall be
increased by a penalty equal to two percent (2%) of such principal payment.
(c) Upon any payment of principal of this Note pursuant to this Section
2.1, Payee shall make a notation of such payment on the Schedule of Payments
attached as Exhibit B hereto and deliver a copy of such schedule to Maker.
SECTION 2.2. Interest; Payments.
(a) Interest shall accrue on the unpaid principal amount of this Note at a
rate per annum equal to the Rate.
(b) Accrued interest on the outstanding principal amount of this Note at
the rate of five and three quarters percent (5.75%) per annum shall be paid
quarterly in arrears on October 1, 1997, and on the first day of each January,
April, July and October thereafter (each an "Interest Payment Date"), until the
Obligations are paid in full. Interest hereunder shall be computed on the basis
of a year of 365 days for the actual number of days elapsed. If any payment of
principal, premium, if any, or interest hereunder shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment. Both
principal and interest hereunder are payable to Payee by wire transfer to such
account as Payee may, from time to time, designate to Maker in writing. Accrued
Interest equivalent to the difference between the Rate and 5.75%, which shall
accrue beginning as of March 21, 1997, shall be added on each Interest Payment
Date to the outstanding principal and shall accrue interest as principal and
shall be paid as part of the final principal payment under Section 2.1 (a)
above.
(c) Notwithstanding subsections (a) or (b) above, should Maker fail to pay
any principal payment or the current portion of any interest installment on this
Note when such installment is due and payable hereunder, Maker shall pay
interest on the unpaid principal amount of this Note at a rate per annum equal
to nine percent (9%) from but not including the date when such installment was
originally due and payable hereunder to and including the date on which such
interest installment is paid.
(d) Notwithstanding Section 2.1 or subsection (b) above, Maker may prepay
the outstanding principal amount of and accrued and unpaid interest on this Note
at any time either in whole or in part, without penalty with the prior written
consent of the Payee which may be withheld by Payee for any reason. Maker shall
deliver written notice of such prepayment to Payee at least thirty (30) days
prior to prepayment. Each notice of prepayment delivered pursuant to this
subsection (d) shall set forth the amount of such prepayment and the proposed
date of such prepayment. Any prepayment of principal shall be applied against
the installments of principal of this Note in order of maturity. Upon
prepayment in whole, Payee shall surrender this Note to Maker for cancellation.
Upon any prepayment in part of principal, Payee shall make a notation of such
prepayment on the Schedule of Payments attached as Exhibit B hereto and deliver
a copy of such schedule to Maker.
SECTION 3. Special Conditions.
SECTION 3.1. Subordination. The payment of principal and interest on this
Note is subordinated to prior payment of the Senior Indebtedness in the manner
and to the extent set forth in the Intercreditor Agreement.
SECTION 3.2. Limitation on Senior Indebtedness. The amount of the Senior
Indebtedness may not exceed $8 million without the prior approval of Payee.
SECTION 3.3. Notice of Default. In the event Maker receives notice of a
Default on Senior Indebtedness, Maker shall within five (5) business days
provide written notice to Payee.
SECTION 4. Restrictions on Liens. Maker will not create or incur or
suffer to be created or incurred or to exist any lien, encumbrance, mortgage,
pledge, charge, restriction or other security interest of any kind
(collectively, "Liens") upon any of its property or assets of any character
(other than upon any margin stock, as defined in Regulation U of the Board of
Governors of the Federal Reserve System, owned by Maker), whether now owned or
hereafter acquired, or upon the income or profits therefrom; or transfer any of
such property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of indebtedness or performance of any other
obligation in priority to payment of its general creditors; or acquire, or agree
or have an option to acquire, any property or assets upon conditional sale or
other title retention or purchase money security agreement, device or
arrangement; or suffer to exist for a period of more than thirty (30) days after
the same shall have been incurred any indebtedness or claim or demand against it
which if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; or sell, assign,
pledge or otherwise transfer any accounts, contract rights, general intangibles
or chattel paper, with or without recourse, except for the following
(collectively, "Permitted Liens"):
(a) Liens granted to secure obligations of Maker and its subsidiaries under
Senior Indebtedness;
(b) To the extent permitted by the terms of the Senior Indebtedness, Liens
securing the indebtedness incurred in connection with the acquisition of
property or assets useful or intended to be used in carrying on the business of
Maker or any of its subsidiaries, provided that such Liens shall encumber only
the property or assets so acquired and do not exceed the fair market value
thereof;
(c) Liens to secure taxes, assessments and other government charges or
claims for labor, material or supplies in respect of obligations not overdue;
(d) Deposits or pledges made in connection with, or to secure payment of,
workmen's compensation, unemployment insurance, old age pensions or other social
security obligations;
(e) Liens in respect of judgments or awards, the indebtedness with respect
to which is permitted by the terms of the Senior Indebtedness;
(f) Liens of carriers, warehousemen, mechanics and materialmen, and other
like Liens, in existence less than 120 days from the date of creation thereof in
respect of obligations not overdue; and
(g) Encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's Liens under leases
to which Maker or any of its subsidiaries is a party, and other minor Liens none
of which in the reasonable opinion of Maker interferes materially with the use
of the property affected in the ordinary conduct of the business of Maker and
its subsidiaries, which defects do not individually or in the aggregate have a
material adverse effect on the business of Maker on a consolidated basis;
unless, in the case of any Lien which is not a Permitted Lien, any payments made
or to be made under this Note shall be secured equally and ratably with (or
prior to) any other obligations secured by such Lien.
SECTION 5. Events of Default; Acceleration.
If any of the following events ("Events of Default") shall occur:
(a) if Maker shall fail to make any payment of principal of, premium, if
any, or interest on this Note within thirty (30) days after written notice has
been given to Maker by Payee of Maker's failure to pay such principal, premium,
if any, or interest when the same shall become due and payable, whether at the
stated date of maturity or at any other date fixed for payment;
(b) if Maker shall (i) fail to pay at maturity, or within any applicable
period of grace, any obligation for borrowed money (excluding, however, (x) any
obligation for borrowed money secured solely by real property of Maker and its
subsidiaries and (y) any agreement relating to any pledge of, or restriction on
the pledge or disposition of, margin stock, as defined in Regulation U of the
Board of Governors of the Federal Reserve System, owned by Maker or any of its
subsidiaries), or (ii) fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing borrowed money if, in the case of either clause (i) or (ii), such
failure results in any obligation of Maker for borrowed money becoming due prior
to its stated maturity; or
(c) if Maker makes an assignment for the benefit of creditors, or admits in
writing its inability to pay or generally fails to pay its debts as they mature
or become due (excluding, however, any agreement relating to any pledge of, or
restriction on the pledge or disposition of, margin stock, as defined in
Regulation U of the Board of Governors of the Federal Reserve System, owned by
Maker), or petitions or applies for the appointment of a trustee or other
custodian, liquidator or receiver of Maker or of any substantial part of the
assets of Maker under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or takes any action to authorize or in
furtherance of any of the foregoing, or if any such petition or application is
filed or any such case or other proceeding is commenced against Maker and Maker
indicates its approval thereof, consent thereto or acquiescence therein;
(d) a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating Maker bankrupt or insolvent, or approving
a petition in any such case or other proceeding, or a decree or order for relief
is entered in respect of Maker in an involuntary case under Federal bankruptcy
laws as now or hereafter constituted, and such decree or order remains in effect
for more than sixty (60) days, whether or not consecutive;
(e) if Maker shall sell, lease, exchange or otherwise dispose of all or
substantially all of its assets, other than in the ordinary course of business;
(f) if Maker shall become a party to any merger, consolidation or plan of
liquidation, unless Maker will be the surviving or continuing corporation
following such transaction; or
(g) if ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ no longer holds the office of Chairman of the
Board, Chief Executive Officer and President of Maker as a result of action by
Maker's Board of Directors;
then, subject to Section 3 hereof, Payee may by notice in writing to Maker
declare all amounts owing with respect to this Note to be, and they shall
thereupon forthwith mature and become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by Maker; provided, that in the event of any Event of
Default specified in subsection (c) or (d) hereof, all such amounts shall become
immediately due and payable automatically and without any requirement of notice
from Payee.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. The remedies provided herein are
cumulative and are not exclusive of any other remedies available to Payee at law
or in equity. No waiver by Payee of any Event of Default shall operate as a
waiver of any other Event of Default or the same Event of Default on a future
occasion. No delay on the part of Payee in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Payee of
any right or remedy shall preclude other or future exercise thereof or the
exercise of any other right or remedy.
If any Event of Default occurs, subject to Section 3 hereof, Maker shall
pay on demand all reasonable out-of-pocket expenses incurred or sustained by
Payee in connection with the enforcement or protection of the rights of Payee
under this Note, including costs of collection and the fees and disbursements of
counsel.
SECTION 6. Miscellaneous.
(a) Demand, presentment, protest and notice of nonpayment and protest and
all rights to interpose any defense, setoff or counterclaim of any nature or
description, including but not limited to any claims for indemnification under
the Asset Purchase Agreement, are hereby waived by Maker.
(b) This Note may be assigned by Payee.
(c) The obligations of Maker under this Note may not be assigned or
delegated without the written consent of Payee.
(d) Whenever in this Note there is a reference made to either Payee or
Maker, such reference shall be deemed to include a reference to the successors
and permitted assigns of such party and, except as set forth in subsection (b)
above, the provisions of this Note shall be binding upon and inure to the
benefit of said successors and permitted assigns.
(e) Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, telegraphed, telexed, sent by
facsimile transmission or sent by
certified, registered or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered, personally, telegraphed, telexed or sent by
facsimile transmission or, if mailed, two days after the date of deposit in the
United States mails as follows:
To Maker:
TRC Companies, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
To Payee:
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
and
▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party shall furnish to the other by notice given
in accordance with this Section.
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF CONNECTICUT, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF. THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CONNECTICUT AND OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
CONNECTICUT (THE "CONNECTICUT COURTS") FOR ANY LITIGATION ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND
AGREE NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS),
WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE
CONNECTICUT COURTS AND AGREE NOT TO PLEAD OR CLAIM IN ANY CONNECTICUT COURT
THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(g) The section and subsection titles contained herein are for convenience
only and shall not control or affect the meaning or construction of any
provision hereof.
(h) The invalidity or unenforceability of any provision of this Note in any
jurisdiction shall not affect the validity or enforceability of the remainder of
this Note in that jurisdiction or the validity or enforceability of this Note,
including that provision, in any other jurisdiction. If any restriction or
provision of this Note is held unreasonable, unlawful or unenforceable in any
respect, such restriction or provision shall be interpreted, revised or applied
in a manner that renders it lawful and enforceable to the fullest extent
possible under law.
(i) Nothing in this Note is intended or shall be construed to give any
Person other than the parties hereto any legal or equitable right, remedy or
claim under or in respect of this Note or any provision contained herein.
(j) This Note constitutes the entire agreement among the parties with
respect to the transactions contemplated hereby and thereby, and supersedes all
prior agreements and understandings, written or oral, with respect thereto.
(k) Upon receipt by Maker of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Note, Maker will make and deliver
a new Note of like tenor (payable, in the case of transfer, in the name of the
new holder) in lieu of this Note against receipt of Payee's personal undertaking
to indemnify Maker against and hold it harmless from all reasonable costs
arising as a result of its making and delivery of the new Note.
This Note has been executed and delivered at Windsor, Connecticut,
effective as of the date first above written.
TRC COMPANIES, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President
EXHIBIT B
SCHEDULE OF PAYMENTS
Amount of Payment Pursuant to Remaining
Principal Section 2.1 or Prepayment Pursuant to Principal
Date Balance Section 2.2 Balance
---- --------- ------------------------------------- ---------
July 1, 1997 $7,000,000 N/A $7,000,000