FIFTH AMENDMENT TO CREDIT AND
SECURITY AGREEMENT
THIS FIFTH AMENDMENT (the
“Amendment”), dated March 13 , 2009, is entered
into by and between PURE EARTH, INC., a Delaware corporation
(“Pure Earth”) and all of its wholly owned
subsidiaries, including, but not limited to PURE EARTH MATERIALS,
INC., a Pennsylvania corporation, PURE EARTH TRANSPORTATION &
DISPOSAL, INC., a Delaware corporation, JUDA CONSTRUCTION, LTD., a
New York corporation, ECHO LAKE BROWNFIELD, LLC, a Connecticut
limited liability company, PEI DISPOSAL GROUP, INC., a Delaware
corporation, and PURE EARTH MATERIALS (NJ), INC., a Delaware
corporation, (collectively, the “Borrower”), BIO
METHODS, LLC, a Delaware limited liability company, PURE EARTH
ENVIRONMENTAL, INC., a Connecticut corporation, HFH ACQUISITION
CORP., a Delaware corporation, CASIE ECOLOGY OIL SALVAGE, INC., a
New Jersey corporation, REZULTZ, INCORPORATED, a New Jersey
corporation, MIDATLANTIC RECYCLING TECHNOLOGIES, INC., a Delaware
corporation, GEO METHODS, LLC., a Delaware limited liability
company, PURE EARTH ENERGY RESOURCES, INC., a Delaware corporation,
and NEW NYCON, INC., a Delaware corporation, and WELLS FARGO BANK,
NATIONAL ASSOCIATION (the “Lender”), acting through its
Wells Fargo Business Credit operating division.
The Borrower and the Lender are parties to a
Credit and Security Agreement dated October 24, 2006 (as
amended from time to time, the “Credit Agreement”).
Capitalized terms used in this Amendment have the meanings given to
them in the Credit Agreement unless otherwise specified.
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants and agreements herein contained, it is
agreed as follows:
1. The definition of “Adjusted Net
Income” shall be added to Section 1.1 of the Credit
Agreement as follows:
“Adjusted
Net Income” means Net Income (a) plus the amount of any
income taxes accrued and unpaid and deducted in the calculation of
Net Income, (b) plus any loss included in the calculation of
Net Income arising from (i) Specified Accounts, (ii) the book
loss associated with the sale or other divestiture of Equipment
that is idle, obsolete, or otherwise not necessary for the current
operations of Borrowers’ business, in an aggregate amount per
calendar year not to exceed $1,000,000; (iii) GAAP-required
adjustments to earnings arising from stock options and warrants,
restricted stock awards and other similar items, (iv) goodwill and
intangible asset impairments under GAAP, and (iv) non-cash
losses
attributable to
any outstanding interest rate swap obligations; (c) less any
gain included in the calculation of Net Income arising from
GAAP-required adjustments to earnings arising from stock options
and warrants, restricted stock awards and other similar items,
(d) less the amount of any income tax benefit included in the
calculation of Net Income, and (e) less any non-cash gains
attributable to any outstanding interest rate swap
obligations.
2. The definition of “Current
Maturities of Long Term Debt” shall be added to
Section 1.1 of the Credit Agreement as follows:
“Current
Maturities of Long Term Debt” means, during a period
beginning and ending on designated dates, the amount of
Borrower’s long-term debt and capitalized leases (excluding
that portion of any capitalized lease obligations allocable to
interest expense) which become due during that period.
3. The definition of “Debt Service
Coverage Ratio” shall be added to Section 1.1 of the
Credit Agreement as follows:
“Debt
Service Coverage Ratio” means (a) the sum of
(i) Funds from Operations plus (ii) Interest
Expense minus (iii) Unfinanced Capital Expenditures,
divided by (b) the sum of (i) Current Maturities
of Long Term Debt plus (ii) Interest Expense,
minus (iii) amounts paid on account of interest or
principal from the Susquehanna Reserve.
4. The definition of “Eligible
Accounts” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“Eligible
Accounts” means all unpaid Accounts of the Borrower arising
from the sale or lease of goods or the performance of services, net
of any credits, but excluding any such Accounts having any of the
following characteristics:
(i) That
portion of Accounts unpaid 90 days or more after the invoice
date;
(ii) That
portion of Accounts related to goods or services with respect to
which the Borrower has received notice of a claim or dispute, which
are subject to a claim of set-off or a contra account (to the
extent of such claim of set-off or contra account), or which
reflect a reasonable reserve for warranty claims or
returns;
(iii) That
portion of Accounts not yet earned by the final delivery of goods
or rendition of services, as applicable, by the Borrower to the
customer, including
progress
billings, and that portion of Accounts for which an invoice has not
been sent to the applicable account debtor;
(iv) Accounts constituting
(i) proceeds of copyrightable material unless such
copyrightable material shall have been registered with the United
States Copyright Office, or (ii) proceeds of patentable
inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office;
(v) Accounts owed by any unit of
government, whether foreign or domestic (provided, however, that
there shall be included in Eligible Accounts that portion of
Accounts owed by such units of government for which the Borrower
has provided evidence satisfactory to the Lender that (A) the
Lender has a first priority perfected security interest and
(B) such Accounts may be enforced by the Lender directly
against such unit of government under all applicable
laws);
(vi) Accounts denominated in any currency
other than United States dollars;
(vii) Accounts owed by an account debtor
located outside the United States which are not (A) backed by
a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender’s possession or
control, and with respect to which a control agreement concerning
the letter-of-credit rights is in effect, and acceptable to the
Lender in all respects, in its sole discretion, or (B) covered
by a foreign receivables insurance policy acceptable to the Lender
in its sole discretion;
(viii) Accounts owed by an account debtor
that is insolvent, the subject of bankruptcy proceedings or has
gone out of business;
(ix) Accounts owed by an Owner, Subsidiary,
Affiliate, Officer or employee of the Borrower;
(x) Accounts not subject to a duly
perfected security interest in the Lender’s favor or which
are subject to any Lien in favor of any Person other than the
Lender;
(xi) That
portion of Accounts that has been restructured, extended, amended
or modified;
(xii) That
portion of Accounts that constitutes advertising, finance charges,
service charges or sales or excise taxes;
(xiii) Accounts owed by an account debtor,
regardless of whether otherwise eligible, to the extent that the
aggregate balance of such Accounts exceeds fifteen
percent (15%)
of the aggregate amount of all Accounts (with ineligibility under
this subsection limited to such excess);
(xiv) Accounts owed to the Borrower by
Civetta Cousins, to the extent that the aggregate balance of such
Accounts exceeds $1,250,000 (with ineligibility under this
subsection limited to such excess);
(xv) Accounts owed to the Borrower by The
Laquila Group;
(xvi) Accounts owed by an account debtor,
regardless of whether otherwise eligible, if twenty-five percent
(25%) or more of the total amount of Accounts due from such debtor
is ineligible under clauses (i), (ii), or (x) above;
and
(xvii) Accounts, or portions thereof,
otherwise deemed ineligible by the Lender in its sole reasonable
discretion.”
5. The definition of “Fidus
Transaction” shall be added to Section 1.1 of the Credit
Agreement as follows:
“Fidus
Transaction” means that certain sale and issuance of
Series B Preferred Stock by Borrower to Fidus Mezzanine
Capital L.P. (“Fidus”) and other transactions
contemplated by that certain Investment Agreement among Pure Earth
and Fidus dated as of March 4, 2008.
6. The definition of “Floating
Rate” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the
following:
“Floating
Rate” means an annual interest rate equal to the sum of the
Prime Rate plus two and three quarters percent (2.75%), which
interest rate shall change when and as the Prime Rate
changes.
7. The definition of “Funds from
Operations” shall be added to Section 1.1 of the Credit
Agreement as follows:
“Funds
from Operations” means for a given period, the sum, without
duplication, of (a) Adjusted Net Income, (b) depreciation
and amortization, (c) any increase (or decrease) in deferred
income taxes, (d) any increase (or decrease) in lifo reserves,
and (e) other non-cash items, each as determined for such
period in accordance with GAAP.
8. The definition of “Interest
Expense” shall be added to Section 1.1 of the Credit
Agreement as follows:
“Interest
Expense” means for a fiscal year-to-date period,
Borrower’s total gross interest expense during such period
(excluding interest income), and shall in any event include
(a) interest expensed (whether or not paid) on all Debt, but
specifically excluding dividends (treated as interest under GAAP)
paid-in-kind in connection with Series B Preferred Stock
issued in the Fidus Transaction, (b) the amortization of debt
discounts (excluding debt discounts in connection with the Fidus
Transaction), (c) the amortization of all fees payable in
connection with the incurrence of Debt to the extent included in
interest expense (excluding transaction fees paid in connection
with the Fidus Transaction, the Susquehanna Bank Financing and any
financing with the Lender), (d) the portion of any capitalized
lease obligation allocable to interest expense, and (e) cash
dividends actually paid on the Series A Preferred
Stock.
9. The definition of “Interest
Period” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the
following:
“Interest
Period” means the period that commences on (and includes) the
Business Day on which either a LIBOR Advance is made or continued
or on which a Floating Rate Advance is converted to a LIBOR
Advance, and ending on (but excluding) the Business Day numerically
corresponding to such date that is three months thereafter, as
designated by the Borrower, but in no event maturing after the
Maturity Date, during which period the outstanding principal
balance of the LIBOR Advance shall bear interest at the LIBOR
Advance Rate; provided , however , that:
(a) No Interest Period may be selected for
an Advance for a principal amount less than Five Hundred Thousand
Dollars ($500,000) with an initial Advance of not less than One
Million Dollars ($1,000,000), and no more than two
(2) different Interest Periods may be outstanding at any one
time;
(b) If an Interest Period would otherwise
end on a day which is not a Business Day, then the Interest Period
shall end on the next Business Day thereafter, unless that Business
Day is the first Business Day of a month, in which case the
Interest Period shall end on the last Business Day of the preceding
month);
(c) No Interest Period applicable to a
Revolving Advance may end later than the Maturity Date;
and
(d) In no event shall the Borrower select
Interest Periods with respect to Advances which, in the aggregate,
would require payment of a contracted funds breakage fee under this
Agreement in order to make required principal payments.
10. The definition of “LIBOR Advance
Rate” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the
following:
“LIBOR
Advance Rate” means an annual interest rate equal to the sum
of LIBOR plus three hundred (300) basis points.
11. The definition of “New Equity
Account” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“New
Equity Account” means the deposit account into which the
Borrower has deposited or may deposit the New Equity, specifically,
Wells Fargo Bank, N.A. account number 13061585. No other account
may contain New Equity.
12. The definition of “Prime
Rate” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the
following:
“Prime
Rate” means at any time the gr
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