Exhibit 5
______________________________________________________________________________
SENIOR SUBORDINATED LOAN AGREEMENT
Dated as of January 27, 2000
Among
SYNAGRO TECHNOLOGIES, INC.,
as Borrower,
CERTAIN SUBSIDIARY GUARANTORS,
as Guarantors,
and
GTCR CAPITAL PARTNERS, L.P.,
as Lender
________________________________________________________________________________
TABLE OF CONTENTS
Page(s)
SECTION 1. DEFINITIONS....................................... 2
1.1 Certain Defined Terms................................... 2
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1.2 Accounting Terms........................................ 2
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SECTION 2. MAKING AND BORROWING OF LOANS..................... 2
2.1 Making and Borrowing of Loans........................... 2
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2.2 Making of Loans; Notice................................. 2
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2.3 Use of Proceeds......................................... 3
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2.4 The Closing............................................. 3
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SECTION 3. TERMS OF THE LOANS................................ 3
3.1 The Note................................................ 3
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3.2 Interest on the Loans................................... 4
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3.3 Payment of Loans........................................ 4
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3.4 Voluntary Prepayments................................... 4
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3.5 Mandatory Prepayments................................... 4
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3.6 Application of Prepayments.............................. 5
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3.7 Manner and Time of Payment.............................. 5
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..... 6
4.1 Organization, Corporate Power and Licenses.............. 6
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4.2 Capital Stock and Related Matters....................... 6
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4.3 Subsidiaries; Investments............................... 7
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4.4 Authorization; No Breach................................ 8
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4.5 Financial Statements.................................... 8
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4.6 Absence of Undisclosed Liabilities...................... 9
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4.7 No Material Adverse Change.............................. 9
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4.8 Absence of Certain Developments......................... 9
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4.9 Assets.................................................. 11
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4.10 Real Property........................................... 11
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4.11 Tax Matters............................................. 12
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4.12 Contracts and Commitments............................... 13
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4.13 Intellectual Property Rights............................ 14
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4.14 Litigation, etc......................................... 15
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4.15 Brokerage............................................... 16
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4.16 Governmental Consent, etc............................... 16
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4.17 Insurance............................................... 16
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4.18 Employees............................................... 16
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4.19 Employee Benefit Plans.................................. 17
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4.20 Compliance with Laws.................................... 18
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4.21 Environmental and Safety Matters........................ 18
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4.22 Affiliated Transactions................................. 19
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4.23 Real Property Holding Corporation Status................ 19
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4.24 Customers and Suppliers................................. 20
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4.25 Reports with the Securities and Exchange Commission..... 20
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4.26 Investment Company...................................... 20
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4.27 Section 203 of the DGCL; Takeover Statute............... 20
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4.28 Public Utility Holding Company Act...................... 20
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4.29 Regulation U............................................ 21
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4.30 Solvency, etc........................................... 21
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4.31 Stockholder Consent..................................... 21
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4.32 Disclosure.............................................. 21
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SECTION 5. CONDITIONS TO LENDER'S OBLIGATION TO MAKE LOANS... 22
5.1 Conditions to Lender's Obligation to Make the Initial
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Loan.......................................................... 22
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5.2 Conditions to Lender's Obligations to Make Subsequent
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Loans After the Closing Date.................................. 25
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SECTION 6. COVENANTS......................................... 26
6.1 Performance of Documents; etc........................... 26
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6.2 Securities Laws......................................... 26
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6.3 Reports, Certificates and Other Information............. 27
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6.4 Books, Records and Inspections.......................... 29
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6.5 Insurance............................................... 29
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6.6 Compliance with Laws, Material Contracts; Payment of
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Taxes and Liabilities........................................ 30
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6.7 Maintenance of Existence, etc........................... 30
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6.8 Financial Covenants..................................... 30
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6.9 Limitations on Debt..................................... 31
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6.10 Liens................................................... 32
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6.11 [Reserved].............................................. 33
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6.12 Restricted Payments..................................... 33
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6.13 Mergers, Consolidations, Sales.......................... 33
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6.14 Further Assurances...................................... 34
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6.15 Transactions with Affiliates............................ 34
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6.16 Employee Benefit Plans.................................. 34
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6.17 Environmental Laws...................................... 34
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6.18 Unconditional Purchase Obligations...................... 35
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6.19 Inconsistent Agreements................................. 35
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6.20 Business Activities..................................... 35
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6.21 Advances and Other Investments.......................... 35
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6.22 Other Subordinated Debt................................. 36
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6.23 Foreign Subsidiaries.................................... 36
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6.24 Business Plan and Financial Projections................. 36
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6.25 Amendments to Certain Documents......................... 36
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6.26 Listing................................................. 36
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6.27 Current Public Information.............................. 37
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6.28 Section 203 of the DGCL................................. 37
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6.29 Fiscal Year............................................. 37
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6.30 Board................................................... 37
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6.31 Filing of Information Statement......................... 37
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6.32 Amendment to Certificate of Incorporation............... 37
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SECTION 7. EVENTS OF DEFAULT................................. 37
7.1 Events of Default....................................... 37
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7.2 Payment Default......................................... 37
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7.3 Other Debt.............................................. 38
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7.4 Other Material Obligations.............................. 38
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7.5 Non-Compliance with Provisions of This Agreement........ 38
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7.6 Breach of Representations or Warranties................. 38
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7.7 Involuntary Bankruptcy, Appointment of Receiver, etc.... 38
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7.8 Voluntary Bankruptcy, Appointment of Receiver, etc...... 39
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7.9 Judgments............................................... 39
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7.10 Dissolution............................................. 39
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7.11 Solvency................................................ 39
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7.12 Injunction.............................................. 39
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7.13 ERISA; Pension Plans.................................... 39
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7.14 Invalidity of Subordinated Loan Documents............... 40
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7.15 Change in Control....................................... 40
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7.16 Consequences of Default................................. 40
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SECTION 8. SUBORDINATION..................................... 41
SECTION 9. THE GUARANTEES.................................... 41
9.1 The Guarantees.......................................... 41
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9.2 Guaranteed Obligations Unconditional.................... 41
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9.3 Reinstatement........................................... 42
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9.4 Subrogation............................................. 42
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9.5 Contribution............................................ 42
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9.6 Remedies................................................ 43
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9.7 Continuing Guarantee.................................... 44
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9.8 Subordination of Guaranteed Obligations................. 44
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SECTION 10. TRANSFERS OF NOTE; LEGENDS........................ 44
10.1 Assignments of Note..................................... 44
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10.2 Investment Representations; Restrictive Legend.......... 45
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10.3 Termination of Restrictions............................. 45
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10.4 Note Legend relating to Subordination................... 45
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10.5 Note Legend relating to Original Issue Discount......... 46
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SECTION 11. MISCELLANEOUS..................................... 46
11.1 Expenses............................................... 46
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11.2 Indemnity.............................................. 46
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11.3 Amendments and Waivers................................. 48
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11.4 Independence of Covenants.............................. 48
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11.5 Notices................................................ 48
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11.6 Survival of Warranties and Certain Agreements.......... 49
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11.7 Failure or Indulgence Not Waiver; Remedies Cumulative.. 49
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11.8 Severability........................................... 50
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11.9 Heading................................................ 50
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11.10 Applicable Law......................................... 50
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11.11 Successors and Assigns; Subsequent Holders............. 50
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11.12 Consent to Jurisdiction and Service of Process......... 50
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11.13 Waiver of Jury Trial................................... 51
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11.14 No Personal Obligations................................ 51
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11.15 Counterparts; Effectiveness............................ 51
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11.16 Entirety............................................... 52
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SENIOR SUBORDINATED LOAN AGREEMENT
This SENIOR SUBORDINATED LOAN AGREEMENT (this "Agreement") is made as of
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January 27, 2000, by and among Synagro Technologies, Inc., a Delaware
corporation (the "Company"), as borrower, the Guarantors (as defined hereafter)
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which appear on the signature pages hereto or otherwise execute a counterpart
hereto, as guarantors, and GTCR Capital Partners, L.P., a Delaware limited
partnership, as lender (the "Lender").
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RECITALS
WHEREAS, the Company has entered into a Purchase and Sale Agreement, dated
as of October 20, 1999 (the "Acquisition Agreement"), with ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
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individually, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, as trustee of the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1998 Grat,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, individually, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, as executrix of the
estate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, as
co-trustees of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Revocable Trust under agreement dated
November 2, 1998, which collectively own, directly or indirectly, all of the
outstanding capital stock, limited partnership interests and limited liability
companies interests listed on Schedule 1 thereto (the "Acquisition");
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WHEREAS, the Company has entered into a Purchase Agreement (the "Preferred
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Stock Purchase Agreement"), dated as of the date hereof, with GTCR Fund VII,
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L.P., a Delaware limited partnership, for the purpose of financing a part of the
Acquisition and to provide future financing to the Company;
WHEREAS, the Company has entered into an Amended and Restated Credit
Agreement (the "Credit Agreement"), dated as of the date hereof, by and among
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the Company, various financial institutions (together with their respective
successors and assigns, the "Senior Lenders") and Bank of America, N.A.,
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individually and as administrative agent for the Senior Lenders (the "Agent"),
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and related documents pursuant to which the Senior Lenders have extended term
and revolving loans to the Company and its Subsidiaries on a senior secured
basis;
WHEREAS, the Lender intends to make available or arrange for Loans to the
Company in the aggregate amount of up to $125,000,000 (including the amount of
the Loan made on the Closing Date), and such Loans will be available to the
Company from time to time on and after the Closing Date on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, on the Closing Date the Lender shall make a Loan to the Company in
the amount of $20,000,000;
WHEREAS, the Guarantors are wholly-owned Subsidiaries of the Company and
desire that the Lender enter into this Agreement for their and its benefit;
WHEREAS, on the Closing Date in connection with the Initial Loan (as
defined hereafter) and from time to time thereafter in connection with the
borrowing of subsequent loans hereunder, the Company shall issue to the Lender
warrants (the "Warrants") to purchase shares of the Company's Convertible
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Preferred Stock (the "Warrant Shares"), pursuant to a Warrant Agreement,
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dated as of the date hereof, by and between the Company and the Lender (the
"Warrant Agreement"); and
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WHEREAS, the Lender, as holder of the Warrants, will enter into a
Registration Agreement (the "Registration Agreement"), dated as of the date
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hereof, by and among the Company , the Lender, GTCR Fund VII, L.P., and others.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used in this Agreement shall
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have the meanings set forth in Exhibit A hereto.
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1.2 Accounting Terms. All accounting terms not specifically defined
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herein shall be construed, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered pursuant hereto
shall be prepared, in accordance with GAAP. No Accounting Changes shall affect
the financial covenants, standards or terms contained in this Agreement;
provided, that, the Company shall include a description in each Borrowers'
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Certificate and other financial reports required to be delivered hereunder which
explains the differences between the financial statements delivered (which
reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes).
SECTION 2. MAKING AND BORROWING OF LOANS
2.1 Making and Borrowing of Loans. Subject to the terms and conditions of
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this Agreement and on the basis of the representations and warranties set forth
herein, the Lender may make loans (each a "Loan," and collectively, the "Loans")
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to the Company as set forth in Section 2.2, and the Company may borrow, prepay
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and repay such Loans hereunder in accordance with the terms of this Agreement,
at any time and from time to time on any Business Day prior to the termination
of this Agreement. The obligation of the Company to repay any Loan made by the
Lender and borrowed by the Company shall be evidenced by the Company's execution
and delivery to the Lender of the Note described in Section 3.1 below.
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2.2 Making of Loans; Notice.
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2.2.1. Minimum Amount. Each Loan borrowed by the Company hereunder
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shall be in a minimum aggregate principal amount of $100,000 or an integral
multiple thereof.
2.2.2. Initial Loan. The initial Loan shall be made on the date hereof
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in the amount of $20,000,000 (the "Initial Loan").
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2.2.3. Future Loans; Approved Uses. Subject to the terms and
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conditions hereof, the Lender may make or arrange for up to $125,000,000 in
Loans (including the Initial Loan) to the Company as subordinated debt financing
necessary to finance a portion of the purchase price of the Acquisition on the
Closing Date and to finance in part one or more future acquisitions and such
other uses as Lender approves in writing (the "Future Acquisitions"), in each
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case as approved by the Board and the Lender (in each case, an "Approved Use").
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In order to implement the foregoing, the Lender may make Loans to the Company
from time to time after the Closing, upon the written request of the Board (with
at least ten Business Days' prior notice), solely for purposes of an Approved
Use and subject to the fulfillment of all applicable conditions set forth in
this Agreement. The Lender shall pay or deliver the proceeds of any Loan in
immediately available funds to or upon the order of the Company at a commercial
bank designated by the Company in a notice of borrowing delivered to the
Lender.
2.3 Use of Proceeds. The proceeds of any Loans made hereunder and of the
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Warrants pursuant to the Warrant Agreement shall be used solely for the Approved
Use approved by the Lender in connection therewith. No portion of the proceeds
of any Loans made hereunder or the Warrants pursuant to the Warrant Agreement
shall be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock" within the
meaning of any regulation, interpretation or ruling of the FRB, all as from time
to time in effect, refunding of any indebtedness incurred for such purpose, or
making any investment prohibited by foreign trade regulations. Without limiting
the foregoing, the Company agrees that in no event shall any proceeds of any
Loans made hereunder or from the sale of the Warrants pursuant to the Warrant
Agreement be used in any manner which might cause the Loans, the Warrants or the
application of such proceeds to violate any of Regulations U or X of the FRB or
any other regulation of the FRB, or to violate the Exchange Act, in each case as
in effect as of the Closing and as of such use of proceeds.
2.4 The Closing. Subject to the satisfaction of the conditions thereto
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set forth in this Agreement, the closing of the Initial Loan made by the Lender
and borrowed by the Company hereunder (the "Closing") shall take place at 10:00
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a.m. Chicago time as of the date of this Agreement, at the offices of ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other date,
time and/or location(s) or by such other means, including transmission of
signature pages by telecopy as may be agreed upon by the parties hereto (the
"Closing Date").
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SECTION 3. TERMS OF THE LOANS
3.1 The Note. The obligation of the Company to repay the aggregate unpaid
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principal amount of the Initial Loan and subsequent Loans made hereunder shall
be evidenced by a promissory note in the form attached hereto as Exhibit B (the
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"Note"), dated the date hereof, payable as specified in this Section 3, made to
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the order of the Lender in an aggregate principal amount of $125,000,000, and
bearing interest and maturing as provided in this Agreement. The Lender shall,
and is hereby authorized by the Company to, endorse on the schedules annexed to
the Note an appropriate notation evidencing the date and amount of each Loan
made by the Lender as well as the date and amount of each payment of principal
and interest by the Company with respect thereto and which notations shall be
presumed correct until the contrary is established; provided that the failure to
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make or any
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error in making any such notation shall not limit or expand or otherwise affect
the obligations of the Company hereunder or under the Note.
3.2 Interest on the Loans.
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3.2.1. The Loans shall bear interest at a rate equal to 12 % per annum
on the unpaid principal amount thereof from and including the Closing Date until
the principal amount shall be paid in full, such interest to be payable in cash
in the manner specified in Section 3.7. Notwithstanding the foregoing, upon the
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occurrence of an Event of Default hereunder and for so long as an Event of
Default is continuing, the interest rate, to the extent permitted by law, on the
unpaid principal amount of the Loans shall increase to 14%.
3.2.2. Interest shall be payable with respect to the Loans, in
arrears, on the last day of each Interest Period, upon any prepayment of the
Loans (to the extent of accrued interest on the principal amount of the Loans so
prepaid) and at maturity of the Loans. The "Interest Period" means (i)
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initially, the period commencing on the Closing Date (with respect to the
Initial Loan) or on the date any subsequent Loan is made (with respect to
subsequent Loans) and ending on the next succeeding Interest Payment Date and
(ii) thereafter, each quarterly period ending on March 31, June 30, September
30, or December 31, as applicable (each such date for an interest payment, an
"Interest Payment Date" ); provided, that, no Interest Period shall extend
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beyond the Maturity Date.
3.2.3. Interest on the Loans shall be computed on the basis of a 360-
day year of twelve 30-day months. In computing such interest, the date or dates
of the making of the Loans shall be included and the date of payment shall be
excluded.
3.3 Payment of Loans. The unpaid principal amount of the Loans plus all
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accrued and unpaid interest thereon and all other amounts owed thereunder with
respect thereto shall be paid in full in cash on the Maturity Date.
3.4 Voluntary Prepayments. Subject to the terms and conditions of the
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Credit Documents, the Loans may be prepaid, at the Company's option, at any time
and from time to time, in whole or in part, without premium, fee or penalty, (a)
upon not less than five (5) Business Days and not more than thirty (30) Business
Days prior written notice to the Lender (which notice shall be irrevocable) and
(b) in an aggregate minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of that amount.
3.5 Mandatory Prepayments.
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3.5.1. Asset Sales. Subject to the terms and conditions of the Credit
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Documents (which do require application of proceeds), concurrently with the
receipt by the Company or any Subsidiary of any Applicable Asset Sale Proceeds,
the Company shall make a prepayment of the Loans in an amount equal to 100% of
such Applicable Asset Sale Proceeds (rounded down, if necessary, to an integral
multiple of $100,000); provided that no such prepayment shall be required unless
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the aggregate amount of Applicable Asset Sale Proceeds so received together with
all Applicable Asset Sale Proceeds previously received and not previously
applied to prepay the Loans pursuant to this clause 3.5.1 exceeds $100,000.
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3.5.2. Debt Issuances. Subject to terms and conditions of the Credit
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Documents, concurrently with the receipt by the Company or any Subsidiary of any
Net Cash Proceeds from the issuance of any Debt (other than Debt permitted by
Section 6.9(a) or (c) and the Loans hereunder), the Company shall make a
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prepayment of the Loans in an amount equal to 100% of such Net Cash Proceeds.
3.5.3. Equity Issuances. Subject to the terms and conditions of the
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Credit Documents, concurrently with the receipt by the Company of any Net Cash
Proceeds (other than pursuant to sales of Series D Preferred Stock pursuant to
the Preferred Stock Purchase Agreement) from the issuance of any equity
securities of the Company, the Company shall make a prepayment of the Loans in
an amount equal to 100% of such Net Cash Proceeds; provided that no such
prepayment shall be required with respect to the granting of stock options to
officers, directors and employees of the Company and its Subsidiaries or the
exercise thereof for an aggregate of $2,000,000.
3.5.4. Notice. The Company shall notify the Lender of any event which
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could reasonably be expected to give rise to any prepayment to be made pursuant
to Sections 3.5.1 through 3.5.3 as soon as practicable prior to such prepayment
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date.
3.5.5. Calculation of Net Proceeds Amounts. Concurrently with any
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prepayment of the Loans pursuant to Sections 3.5.1 through 3.5.3, the Company
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shall deliver to the Lender a Borrowers' Certificate demonstrating the
calculation of the amount of the proceeds that gave rise to such prepayment.
3.6 Application of Prepayments. All prepayments (whether voluntary or
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mandatory) shall include, notwithstanding Section 3.2.2 above, the payment in
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cash of accrued and unpaid interest on the principal amount of the Loans so
prepaid and shall be applied first to payment of principal before application to
accrued interest thereon.
3.7 Manner and Time of Payment.
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3.7.1. All payments by the Company under the Note of principal and
interest and fees hereunder shall be made without defense, set-off or
counterclaim, in same day funds and delivered to each holder of the Note not
later than 12:00 noon (Chicago time) on the date such payment is due by wire
transfer of immediately available funds to the following account or such other
place as the Lender may from time to time designate:
ABA No. 07100505
Account Number: 5800151556
Account Name: GTCR Capital Partners, ▇.▇.
▇▇▇▇▇▇▇ National Bank
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Reference: Synagro Technologies, Inc.
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provided, that, funds received by any such holder after 12:00 noon (Chicago
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time) shall be deemed to have been paid by the Company on the next succeeding
Business Day.
3.7.2. Whenever any payment to be made hereunder or under the Note
shall be stated to be due on a day which is not a Business Day, the payment
shall be made on the next succeeding Business Day and such additional period
shall be included in the computation of the payment of interest hereunder or
under the Note.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Lender to enter into this Agreement and to make
Loans to the Company hereunder, the Company and each of the Guarantors
represent, warrant and agree for the benefit of the Lender that:
4.1 Organization, Corporate Power and Licenses. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify (except in
those instances in which the failure to be so qualified or to be validly
existing and in good standing has not and would not reasonably be expected to
have a Material Adverse Effect). The Company possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own and operate its properties, to carry on its businesses as now
conducted and presently proposed to be conducted and to carry out the transac
tions contemplated by this Agreement. The copies of the Company's and each
Subsidiary's charter documents and bylaws which have been furnished to the
Lender's special counsel reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete.
4.2 Capital Stock and Related Matters.
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4.2.1 As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of:
(a) 10,000,000 shares of preferred stock, (i) of which 500,000 shares
shall be designated as Series A Preferred, none of which shall be issued
and outstanding, (ii) of which 1,458,335 shares shall be designated as
Series B Preferred, none of which shall be issued and outstanding, (iii) of
which 30,000 shares shall be designated as Series C Convertible Preferred
Stock, of which 17,358.824 shares shall be issued and outstanding, (iv) of
which 32,000 shares shall be designated as Series D Convertible Preferred
Stock, of which (a) 5,498.319 shares shall be issued and outstanding and
(b) 17,358.824 shares shall be reserved for future issuance upon conversion
of the Series C Convertible Preferred Stock, (v) of which 15,000 shares
shall be reserved for future issuance under the Warrant Agreement and (vi)
of which 105,000 shares shall be reserved for future issuance pursuant to
the Preferred Stock Purchase Agreement; and
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(b) 100,000,000 shares of Common Stock, of which 17,710,189 shares
shall be issued and outstanding, 9,142,858 shares shall be reserved for
issuance upon conversion of the Company's Series D Convertible Preferred
Stock and 4,689,599 shares shall be reserved for issuance upon exercise of
outstanding options and warrants to purchase Common Stock as set forth on
the attached "Capitalization Schedule."
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(c) As of the Closing, neither the Company nor any Subsidiary shall
have outstanding any stock or securities convertible or exchangeable for
any shares of its capital stock or containing any profit participation
features, nor shall it have outstanding any rights or options to subscribe
for or to purchase its capital stock or any stock or securities convertible
into or exchangeable for its capital stock or any stock appreciation rights
or phantom stock plans, except for the Convertible Preferred Stock, the
Warrants and except as set forth on the attached "Capitalization Schedule."
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The Capitalization Schedule accurately sets forth the following information
with respect to all outstanding options and rights to acquire the Company's
capital stock: the holder, the type of security, the number of shares
covered, the exercise price and the expiration date. As of the Closing,
neither the Company nor any Subsidiary shall be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to
acquire its capital stock, except as set forth on the Capitalization
Schedule and except pursuant to the Certificates of Designation. As of the
Closing, all of the outstanding shares of the Company's capital stock shall
be validly issued, fully paid and nonassessable.
4.2.2 There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Warrant Shares, the Warrants, or the Purchased
Preferred or the issuance of the Common Stock issuable upon conversion of the
Warrant Shares or the Purchase Preferred or upon exercise of the Warrants. The
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital stock, and the
offer, sale and issuance of the Warrants and the Purchased Preferred do not
require registration under the Securities Act or any applicable state securities
laws. To the best of the Company's knowledge, there are no agreements between
the Company's stockholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs, except as set forth on the Capitalization Schedule.
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4.3 Subsidiaries; Investments. The attached "Subsidiary Schedule"
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correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the out standing capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which its ownership of property or the
conduct of business requires it to qualify (except in those instances in which
the failure to be so qualified or to be validly existing and in good standing
has not and would not reasonably be expected to have a Material Adverse Effect).
All of the outstanding shares of capital stock of each Subsidiary are validly
issued, full paid and nonassessable, and all such shares are owned by the
Company or
-7-
another Subsidiary free and clear of any Lien, except for Liens under
the Credit Documents, and not subject to any option or right to purchase any
such shares. Except as set forth on the Subsidiary Schedule, neither the Company
nor any Subsidiary owns or holds the right to acquire any shares of stock or any
other security or interest in any other Person.
4.4 Authorization; No Breach. The execution, delivery and performance of
------------------------
this Agreement, the Warrants, the Warrant Agreement, the Preferred Stock
Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement and all other agreements contemplated hereby to which
the Company is a party, the filing of the Certificates of Designation, the
amendment of the Company's Certificate of Incorporation by the Certificate
Amendment and the amendment of the Company's bylaws have been duly authorized by
the Company. This Agreement, the Warrants, the Warrant Agreement, the Preferred
Stock Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement, the Certificates of Designation, the Company's
Certificate of Incorporation (as amended by the Certificate Amendment) and all
other agreements contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms (except as limited by bankruptcy, insolvency or other
laws affecting the enforcement of creditors' rights). Except as set forth on the
attached "Restrictions Schedule," the execution and delivery by the Company
---------------------
of this Agreement, the Registration Agreement, the Intercreditor Agreement, the
Acquisition Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering, sale and issuance of the Purchased Preferred,
the issuance of the Common Stock upon conversion of the Convertible Preferred
Stock, the issuance of Warrants pursuant to the Warrant Agreement, the issuance
of the Warrant Shares upon exercise of Warrants, the filing of the Certificates
of Designation, the filing of the Certificate Amendment and the amendment of the
Company's bylaws and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, the Certificates of Designation or the charter or bylaws
of the Company or any Subsidiary, or any law, statute, rule or regulation to
which the Company or any Subsidiary is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the Restrictions Schedule, none of the Subsidiaries are
subject to any restrictions upon making loans or advances or paying dividends
to, transferring property to, or repaying any Debt owed to, the Company or
another Subsidiary.
4.5 Financial Statements. Attached hereto as the "Financial Statements
-------------------- --------------------
Schedule" are the following financial statements:
--------
4.5.1 the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997 and 1998, and the related statements of
income and cash flows (or the equivalent) for the respective twelve-month
periods ended December 31, 1996, 1997 and 1998; and
-8-
4.5 the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of November 30, 1999 (the "Latest Balance Sheet"), and the
--------------------
related statements of income and cash flows (or the equivalent) for the eleven-
month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with GAAP, consistently applied, subject in the case of the unaudited
financial statements to the absence of footnote disclosure and changes resulting
from normal year-end adjustments for recurring accruals (none of which would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
The pro forma consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 1999, which gives effect to the Transactions and the
Acquisition, is also attached hereto in the Financial Statement Schedule and is
----------------------------
complete and correct in all material respects and presents fairly in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of such date as if the transactions contemplated by this
Agreement had occurred immediately prior to such date, and such balance sheet
contains all pro forma adjustments necessary in order to fairly reflect such
assumption.
4.6 Absence of Undisclosed Liabilities. Except as set forth on the
----------------------------------
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
--------------------
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business consistent with past practice (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit), (iii) other liabilities and obligations expressly disclosed in the
other Schedules to this Agreement and (iv) obligations under contracts not
required to be disclosed on the Contracts Schedule.
4.7 No Material Adverse Change. Except as set forth on the attached
--------------------------
"Adverse Change Schedule" or, without duplication, as a result of the Special
-----------------------
Charges, since November 30, 1999, there has been no material adverse change in
the financial condition, operating results, assets, operations, business
prospects, employee relations or customer or supplier relations of the Company
and its Subsidiaries taken as a whole.
4.8 Absence of Certain Developments.
-------------------------------
4.8.1 Except as expressly contemplated by this Agreement or as set
forth on the attached "Developments Schedule," since the date of the Latest
---------------------
Balance Sheet, neither the Company nor any Subsidiary has
-9-
(a) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount or incurred or become subject to any
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary
course of business;
(c) discharged or satisfied any Lien or paid any obligation or
liability, other than current liabilities paid in the ordinary course of
business;
(d) declared or made any payment or distribution of cash or other
property to its stockholders with respect to its capital stock or other
equity securities or purchased or redeemed any shares of its capital stock
or other equity securities (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities);
(e) mortgaged or pledged any of its properties or assets or subjected
them to any Lien, except for Permitted Encumbrances;
(f) sold, assigned or transferred any of its tangible assets, except
in the ordinary course of business, or canceled any debts or claims;
(g) sold, assigned or transferred any patents or patent applications,
trademarks, service marks, trade names, corporate names, copyrights or
copyright registrations, trade secrets or other intangible assets, or
disclosed any proprietary confidential information to any Person;
(h) suffered any extraordinary losses or waived any rights of value,
whether or not in the ordinary course of business or consistent with past
practice;
(i) made capital expenditures or commitments therefor that aggregate
in excess of $250,000;
(j) made any loans or advances to, guarantees for the benefit of, or
any Investments in, any Persons in excess of $50,000 in the aggregate;
(k) made any charitable contributions or pledges in excess of $10,000
in the aggregate;
(l) suffered any damage, destruction or casualty loss exceeding in the
aggregate $100,000, whether or not covered by insurance;
(m) made any Investment in or taken steps to incorporate any
Subsidiary except for the incorporation of Wholly-Owned Subsidiaries in
connection with Future Acquisitions approved by the Board and the Lenders;
or
-10-
(n) entered into any other transaction other than in the ordinary
course of business or entered into any other material transaction, whether
or not in the ordinary course of business consistent with past practice.
4.8.2. No officer, director, employee or agent of the Company or any
of its Subsidiaries has been or is authorized to make or receive, and the
Company does not know of any such person making or receiving, any bribe,
kickback or other illegal payment.
4.9 Assets. Except as set forth on the attached "Assets Schedule," the
------ ---------------
Company and each Subsidiary have good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet and except for
Liens disclosed on the Latest Balance Sheet (including any notes thereto) and
Permitted Encumbrances. Except as described on the Assets Schedule, the
Company's and each Subsidiary's buildings, equipment and other tangible assets
are in good operating condition in all material respects and are fit for use in
the ordinary course of business. The Company and each Subsidiary own, or have a
valid leasehold interest in, all assets necessary for the conduct of their
respective businesses as presently conducted and as presently proposed to be
conducted.
4.1 Real Property.
-------------
4.10.1. Owned Properties. The "Owned Real Property Schedule" attached
---------------- ----------------------------
hereto sets forth a list of all owned real property (the "Owned Real Property")
-------------------
used by the Company or any of it Subsidiaries in the operation of the Company's
or any of it Subsidiaries' business. With respect to each such parcel of Owned
Real Property and except for Liens in favor of the Senior Lenders: (i) such
parcel is free and clear of all covenants, conditions, restrictions, easements,
liens or other encumbrances, except Permitted Encumbrances; (ii) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupance of any portion of such
parcel; and (iii) there are no outstanding actions or rights of first refusal to
purchase such parcel, or any portion thereof or interest therein.
4.10.2. Leased Properties. The "Leased Property Schedule" attached
----------------- ------------------------
hereto sets forth a list of all of the leases and subleases ("Leases") and each
------
leased and subleased parcel of real property in which the Company or any of it
Subsidiaries have a leasehold and subleasehold interest (the "Leased Real
-----------
Property"). The Company has delivered to the Lender true, correct, complete and
--------
accurate copies of each of the Leases described in the Leased Property Schedule.
With respect to each Lease listed on the Leased Property Schedule: (i) the
Lease is legal, valid, binding, enforceable and in full force and effect; (ii)
the Lease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing; (iii) neither the
Company nor any of its Subsidiaries nor, to the best of the Company's knowledge,
any other party to the Lease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute such a breach or default
or permit termination, modification or acceleration under the Lease; (iv) to the
best of the Company's knowledge, no party to the Lease has repudiated any
provision thereof; (v) to the best of the Company's knowledge, there are no
disputes, oral agreements, or forbearance
-11-
programs in effect as to the Lease; (vi) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents delivered to the Lender; and (vii) neither the Company nor any of it
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease.
4.10.3. Real Property Disclosure. Except as disclosed in the Owned
------------------------
Real Property Schedule and the Leased Property Schedule, there is no Real
Property leased or owned by the Company or any of it Subsidiaries used in the
Company's or any of it Subsidiaries' business.
4.11 Tax Matters.
-----------
4.11.1. Except as set forth on the attached "Taxes Schedule": the
--------------
Company, each Subsidiary and each Affiliated Group have filed all Tax Returns
which they are required to file under applicable laws and regulations; all such
Tax Returns are complete and correct in all material respects and have been
prepared in compliance with all applicable laws and regulations in all material
respects; the Company, each Subsidiary and each Affiliated Group in all material
respects have paid all Taxes due and owing by them (whether or not such Taxes
are required to be shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
party; neither the Company, any Subsidiary nor any Affiliated Group has waived
any statute of limitations with respect to any Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency; the accrual for Taxes
on the Latest Balance Sheet would be adequate to pay all Tax liabilities of the
Company and its Subsidiaries if their current tax year were treated as ending on
the date of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); since
the date of the Latest Balance Sheet, the Company and its Subsidiaries have not
incurred any liability for Taxes other than in the ordinary course of business;
the assessment of any additional Taxes for periods for which Tax Returns have
been filed by the Company, each Subsidiary and each Affiliated Group shall not
exceed the recorded liability therefor on the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing differences between
book and Tax income); the federal income Tax Returns of the Company and its
Subsidiaries have been audited and closed for all tax years through 1998; to the
best of the Company's knowledge, no foreign, federal, state or local tax audits
or administrative or judicial proceedings are pending or being conducted with
respect to the Company, any Subsidiary or any Affiliated Group; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; no written notice indicating an intent to open an audit
or other review has been received by the Company from any foreign, federal,
state or local taxing authority; and there are no material unresolved questions
or claims concerning the Company's, any Subsidiary's or any Affiliated Group Tax
liability.
4.11.2 Neither the Company nor any of its Subsidiaries has made an
election under (S)341(f) of the Internal Revenue Code of 1986, as amended.
Neither the Company nor any Subsidiary is liable for the Taxes of another Person
that is not a Subsidiary in a material amount under (a) Treas. Reg. (S) 1.1502-6
(or comparable provisions of state, local or foreign law), (b) as a transferee
or successor, (c) by contract or indemnity or (d) otherwise. Neither the
Company nor any Subsidiary is a party to any tax sharing agreement. The
Company, each Subsidiary and each Affiliated Group have disclosed on their
federal income Tax Returns any position taken for which
-12-
substantial authority (within the meaning of IRC (S)6662(d)(2)(B)(i)) did not
exist at the time the return was filed. Neither the Company nor any Subsidiary
has made any payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would not be
deductible under IRC (S)280G.
4.12 Contracts and Commitments.
-------------------------
4.12.1. Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule" or the attached "Employee Benefits
------------------ -----------------
Schedule," neither the Company nor any Subsidiary is a party to or bound by any
--------
written or oral:
(a) pension, profit sharing, stock option, employee stock purchase or
other plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit plan or arrangement, or any
collective bargaining agreement or any other contract with any labor union,
or severance agreements, programs, policies or arrangements;
(b) contract for the employment of any officer, individual employee or
other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $75,000 or contract relating to loans to
officers, directors or Affiliates;
(c) contract under which the Company or Subsidiary has advanced or
loaned any other Person amounts in the aggregate exceeding $100,000;
(d) agreement or indenture relating to borrowed money or other Debt or
the mortgaging, pledging or otherwise placing a Lien on any material asset
or material group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation in excess of $100,000 (other than by
the Company of a Wholly-Owned Subsidiary's debts or a guarantee by a
Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any Subsidiary is
lessee of or holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property under which
the aggregate annual rental payments do not exceed $100,000;
(g) lease or agreement under which the Company or any Subsidiary is
lessor of or permits any third party to hold or operate any property, real
or personal, owned or controlled by the Company or any Subsidiary;
(h) assignment, license, indemnification or agreement with respect to
any intangible property (including, without limitation, any Intellectual
Property);
(i) warranty agreement with respect to its services rendered or its
products sold or leased;
-13-
(j) agreement under which it has granted any Person any registration
rights (including, without limitation, demand and piggyback registration
rights);
(k) sales, distribution or franchise agreement;
(l) contract, agreement or other arrangement with any officer,
director, stockholder, employee or Affiliate, or any Affiliate of any
officer, director, stockholder or employee;
(m) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world;
(n) contract or group of related contracts with the same party or
group of affiliated parties the performance of which involves consideration
in excess of $200,000; or agreement with a term of more than six months
which is not terminable by the Company or any Subsidiary upon less than 30
days notice without penalty.
4.12.2. All of the contracts, agreements and instruments set forth on
the Contracts Schedule are valid, binding and enforceable in accordance with
their respective terms in all material respects. The Company and each
Subsidiary have performed all material obligations required to be performed by
them and are not in default under or in breach of nor in receipt of any claim of
default or breach under any material contract, agreement or instrument to which
the Company or any Subsidiary is subject; no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance by the Company or any Subsidiary under any
material contract, agreement or instrument to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; and
neither the Company nor any Subsidiary has knowledge of any breach or
anticipated breach by the other parties to any material contract, agreement,
instrument or commitment to which it is a party.
4.12.3. The Lender's special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
4.13 Intellectual Property Rights.
----------------------------
4.13.1 The attached "Intellectual Property Schedule" contains a
------------------------------
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company or any Subsidiary, (b) pending
patent applications and applications for registrations of other Intellectual
Property Rights filed by the Company or any Subsidiary, (c) unregistered trade
names and corporate names owned or used by the Company or any Subsidiary and (d)
unregistered trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary, in each case which are
material to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries taken as a whole. The
Intellectual Property Schedule also contains a complete and accurate list of all
licenses
-14-
and other rights granted by the Company or any Subsidiary to any third party
with respect to any Intellectual Property Rights and all licenses and other
rights granted by any third party to the Company or any Subsidiary with respect
to any Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. Except as set forth on the Intellectual Property
Schedule, the Company or one of its Subsidiaries owns all right, title and
interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens. The loss or expiration of
any Intellectual Property Right or related group of Intellectual Property Rights
owned or used by the Company or any Subsidiary has not had and would not
reasonably be expected to have a Material Adverse Effect, and no such loss or
expiration is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
reasonably necessary and desirable actions to maintain and protect the
Intellectual Property Rights which they own. To the best of the Company's
knowledge, the owners of any Intellectual Property Rights licensed to the
Company or any Subsidiary have taken all reasonably necessary and desirable
actions to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
4.13.2. (a) The Company and its Subsidiaries own all right, title and
interest in and to all of the Intellectual Property Rights listed on such
schedule, free and clear of all Liens, (b) there have been no claims made
against the Company or any Subsidiary asserting the invalidity, misuse or
unenforceability of any of such Intellectual Property Rights, and, to the best
of the Company's knowledge, there are no grounds for the same, (c) neither the
Company nor any Subsidiary has received any notices of, and is not aware of any
facts which indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any Subsidiary license any rights from a third party), (d) the conduct of the
Company's and each Subsidiary's business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct as
presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (e) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed to
the Company or any Subsidiary have not been infringed, misappropriated or
conflicted by other Persons. The transactions contemplated by this Agreement
shall have no material adverse effect on the Company's or any Subsidiary's
right, title and interest in and to the Intellectual Property Rights listed on
the Intellectual Property Schedule.
4.14 Litigation, etc. Except as set forth on the attached "Litigation
--------------- ----------
Schedule," there are no actions, suits, proceedings, orders, investigations or
--------
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company and its Subsidiaries with respect to their
businesses or proposed business activities), or pending or threatened by the
Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the best
of the Company's knowledge, any governmental
-15-
investigations or inquiries (including, without limitation, inquiries as to the
qualification to hold or receive any license or permit); and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. Neither the
Company nor any Subsidiary is subject to any judgment, order or decree of any
court or other governmental agency, and neither the Company nor any Subsidiary
has received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
4.15 Brokerage. Other than the fees payable by the Company to ▇▇▇▇▇▇▇
---------
▇▇▇▇▇▇ ▇▇▇▇▇ Inc. as described in the Financial Advisory Agreement dated
November 16, 1999, as amended by the Amendment dated January 24, 2000, there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Company or any Subsidiary. The
Company shall pay, and hold the Lender harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and out-of-
pocket expenses) arising in connection with any such claim.
4.16 Governmental Consent, etc. No permit, consent, approval or
-------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as set forth on the attached "Consents Schedule" and except as
-----------------
expressly contemplated herein or in the exhibits hereto.
4.17 Insurance. The attached "Insurance Schedule" contains a description
--------- ------------------
of each insurance policy maintained by the Company and its Subsidiaries with
respect to its properties, assets and businesses, and each such policy is in
full force and effect as of the Closing. Neither the Company nor any Subsidiary
is in default with respect to its obligations under any insurance policy
maintained by it, and neither the Company nor any Subsidiary has been denied
insurance coverage. Except as set forth on the Insurance Schedule, the Company
and its Subsidiaries do not have any self-insurance or co-insurance programs,
and the reserves set forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to any such self-insurance or co-insurance
programs.
4.18 Employees. The Company is not aware that any of the persons set forth
---------
in the "Schedule of Key Employees" hereto has any plans to terminate employment
-------------------------
with the Company or any Subsidiary. The Company and each Subsidiary have
complied in all material respects with all laws relating to the employment of
labor (including, without limitation, provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and the Company is not aware that it or any
Subsidiary has any material labor relations problems (including, without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances). Neither the Company, its Subsidiaries
nor, to the best of the Company's knowledge, any of their employees is subject
to any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company and its Subsidiaries, except for
agreements between the Company and its present and former employees.
-16-
4.19 Employee Benefit Plans.
----------------------
4.19.1. The attached Employee Benefits Schedule sets forth an accurate
--------------------------
and complete list of each employee benefit plan (as such term is defined in
Section 3(3) of ERISA), and any other bonus, deferred compensation, incentive
compensation, stock, severance or other plan or arrangement, other than a non-
material fringe benefit plan (each of the foregoing, a "Benefit Plan"),
------------
currently maintained or contributed to by the Company and its Subsidiaries or
with respect to which the Company and its Subsidiaries have or may have any
material liability.
4.19.2. None of the Benefit Plans is subject to Title IV of ERISA or
the minimum funding requirements of Section 412 of the Code or Section 302 of
ERISA. No underfunded defined benefit plan has been, during the five years
preceding the Closing Date, transferred out of the Company's Controlled Group.
4.19.3. None of the Benefits Plans is a multiemployer plan (as defined
in Section 3(37) of ERISA).
4.19.4. None of the Benefit Plans provides for medical or life
insurance benefits to current or future retired or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service (other than as required under Section 4980B of the Code or applicable
state law).
4.19.5. None of the Benefit Plans obligates the Company or any
Subsidiary to pay any severance or similar benefit solely as a result of a
change in control or ownership within the meaning of Section 280G of the Code.
4.19.6. All required contributions to date by the Company or any
Subsidiary under the terms of any Benefit Plan or applicable law have been made
within the time prescribed by any such plan or applicable law or properly
accrued on the appropriate balance sheet. All contributions, premiums and
expenses payable to or in respect of any Benefit Plan or the operation or
administration thereof relating to any period on or prior to the date hereof
have been paid or properly accrued on the appropriate balance sheet. No
material liability has been assessed or is expected to be incurred by the
Company or any Subsidiary or any trade or business, whether or not incorporated,
which is or would have been at any date of determination occurring within the
preceding six years treated as a single employer under Section 414 of the Code
together with the Company or the Subsidiaries (each such person, a "Related
-------
Person") (either directly or indirectly, including as a result of an
------
indemnification obligation or any joint and several liability obligations) under
or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans, and
no event, transaction or condition has occurred or exists that could result in
any material liability to the Buyer, the Company, any Subsidiary or any Related
Person or any employee benefit plan of the Company, any Subsidiary or any
Related Person. No actions, suits, investigations or claims with respect to any
Benefit Plan (other than routine claims for benefits) are pending or, to the
knowledge of the Company, threatened which could reasonably be expected to
result in liability to the Company or any Subsidiary.
-17-
4.19.7. Each of the Benefit Plans has been administered in accordance
with its terms in all material respects and is in compliance in all material
respects with applicable laws and regulations including, without limitation,
ERISA and the Code.
4.19.8. Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code and the trust forming a
part thereof has received a favorable determination letter from the IRS to be so
qualified and to the extent that each such trust is exempt from taxation under
section 501(a) of the Code, and, to the knowledge of the Company, nothing has
occurred since the date of such determination that could adversely affect such
qualification or tax-exempt status.
4.19.9. With respect to each Benefit Plan, the Company previously has
furnished to the Lender a true and correct copy of, where applicable, (a) the
most recent annual report (Form 5500) filed with the IRS, (b) the plan document
if written, or a description of such plan if not written, (c) each trust
agreement, group annuity contract or other funding arrangement, if any, relating
to such Benefit Plan, (d) the most recent actuarial report or valuation relating
to such Benefit Plan (in the event such Benefit Plan is subject to Title IV of
ERISA, is a non-U.S. pension plan, or provides any post-employment health,
medical or life insurance benefits), (e) the most recent summary plan
description and (f) the most recent determination letter issued by the IRS.
4.20 Compliance with Laws. Neither the Company nor any Subsidiary has
--------------------
violated any law or any governmental regulation or requirement which violation
has had or would reasonably be expected to have a Material Adverse Effect and
neither the Company nor any Subsidiary has received notice of any such
violation.
4.21 Environmental and Safety Matters.
--------------------------------
4.21.1. Except as set forth on the attached "Environmental Schedule":
----------------------
(a) The Company and its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements, and
neither the Company nor its Subsidiaries have received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and
Safety Requirements which relate to the Company or its Subsidiaries or any
of their properties or facilities that has not been complied with.
(b) Without limiting the generality of the foregoing, the Company and
its Subsidiaries have obtained and complied with, and are currently in
compliance with, all material permits, licenses and other authorizations
that may be required pursuant to any Environmental and Safety Requirements
for the occupancy of their properties or facilities or the operation of
their businesses. A list of all such permits, licenses and other
authorizations is set forth on the attached Environmental Schedule.
-18-
(c) Neither this Agreement nor the consummation of the transactions
con templated by this Agreement shall impose any obligations on the Company
and its Subsidiaries or otherwise for site investigation or cleanup, or
notification to or consent of any government agencies or third parties
under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(d) To the best of the Company's knowledge, none of the following
exists at any property or facility owned, occupied or operated by the
Company or any of its Subsidiaries if the existence of same would violate
Environmental Laws:
(i) underground storage tanks or surface impoundments;
(ii) asbestos-containing materials in any form or
condition; or
(iii) materials or equipment containing polychlorinated
biphenyls.
(e) Neither the Company nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company or
its Subsidiaries pursuant to Environmental and Safety Requirements
(including, without limitation, any liability for response costs, natural
resource damages or attorneys fees pursuant to CERCLA).
(f) Neither the Company nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person
relating to any Environmental and Safety Requirements.
(g) No Environmental Lien has attached to any property owned, leased
or operated by the Company or any of its Subsidiaries.
4.22 Affiliated Transactions. Except as set forth on the attached
-----------------------
"Affiliated Transactions Schedule," no officer, director , employee, or
--------------------------------
Affiliate of the Company or any Subsidiary or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company or any Subsidiary or has
any material interest in any material property used by the Company or any
Subsidiary.
4.23 Real Property Holding Corporation Status. Since its date of
----------------------------------------
incorporation, the Company has not been, and as of the date of the Closing shall
not be, a "United States real property holding corporation", as defined in
Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the Treasury
Regulations issued thereunder. The Company has no current plans or intentions
which would cause the Company to become a "United States real property holding
company," and the Company has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Treasury Regulations.
-19-
4.24 Customers and Suppliers.
-----------------------
4.24.1 The attached "Customer Schedule" lists the 10 largest
-----------------
customers of the Company (on a consolidated basis) for each of the two most
recent Fiscal Years and sets forth opposite the name of each such customer the
percentage of consolidated net sales attributable to such customer. The
Customer Schedule also lists any additional current customers which the Company
anticipates shall be among the 10 largest customers for the current Fiscal Year.
4.24.2 Since the date of the Latest Balance Sheet, no material
supplier of the Company or any Subsidiary has indicated that it shall stop, or
materially decrease the rate of, supplying materials, products or services to
the Company or any Subsidiary, and no customer listed on the Customer Schedule
has indicated that it shall stop, or materially decrease the rate of, buying
materials, products or services from the Company or any Subsidiary.
4.25 Reports with the Securities and Exchange Commission. The Company has
---------------------------------------------------
furnished the Lender with complete and accurate copies of its annual report on
Form 10-K for its three most recent Fiscal Years, all other reports or documents
required to be filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the filing of the most recent annual report on Form 10-K and
its most recent annual report to its stockholders. Such reports and filings do
not contain any material false statements or any misstatement of any material
fact and do not omit to state any fact necessary to make the statements set
forth therein not misleading. The Company has made all filings with the
Securities and Exchange Commission which it is required to make, and the Company
has not received any request from the Securities and Exchange Commission to file
any amendment or supplement to any of the reports described in this paragraph.
4.26 Investment Company. The Company is not an "investment company" as
------------------
defined under the Investment Company Act of 1940.
4.27 Section 203 of the DGCL; Takeover Statute. The Board has taken all
-----------------------------------------
actions necessary or advisable so that the restrictions contained in Section 203
of the Delaware General Corporate Law (the "DGCL") applicable to a "business
----
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Documents or the
consummation of the transactions contemplated hereby or thereby, including the
issuance of the Convertible Preferred Stock, the Warrants and all future
issuances of Convertible Preferred Stock. The execution, delivery and
performance of this Agreement or any of the other Documents and the consummation
of the transactions contemplated hereby or thereby will not cause to be
applicable to the Company any "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws.
4.28 Public Utility Holding Company Act. Neither the Company nor any
----------------------------------
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
-20-
4.29 Regulation U. The Company is not engaged principally, or as one of
------------
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
4.30 Solvency, etc. On the Closing Date and the date of each subsequent
--------------
Loan hereunder (or, in the case of any Person which becomes a Guarantor after
the Closing Date, on the date such Person becomes a Guarantor), and immediately
prior to and after giving effect to each borrowing hereunder and under the
Credit Agreement and the use of the proceeds thereof (and after giving effect to
any right of contribution and subrogation), (a) each of the Company's and each
Guarantor's assets will exceed its liabilities and (b) each of the Company and
each Guarantor will be solvent, will be able to pay its debts as they mature,
will own property with fair saleable value greater than the amount required to
pay its debts and will have capital sufficient to carry on its business as then
constituted.
4.31 Stockholder Consent. The Stockholders Consent was executed by the
-------------------
stockholders of the Company set forth on the attached "Shareholders Consent
--------------------
Schedule", each of whom owns the number of shares of Common Stock indicated next
--------
to such person's name on the Shareholders Consent Schedule (the "Consenting
----------
Stockholders"). The Consenting Stockholders collectively own a majority of the
------------
outstanding Common Stock. The disclosure provided to the Consenting
Stockholders in connection with the solicitation of the Stockholders Consent did
not contain a material misstatement of fact or an omission of a material fact
necessary to make the statements made, in light of the circumstances in which
they were made, not misleading.
4.32 Disclosure. All information heretofore or contemporaneously herewith
----------
furnished in writing by the Company or any Subsidiary to the Lender for purposes
of or in connection with this Agreement and the transactions contemplated hereby
is, and all written information hereafter furnished by or on behalf of the
Company or any Subsidiary to the Lender pursuant hereto or in connection
herewith will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and none of such information is or
will be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Lender that (a) any projections and forecasts provided
by the Company are based on good faith estimates and assumptions believed by the
Company to be reasonable as of the date of the applicable projections or
assumptions and that actual results during the period or periods covered by any
such projections and forecasts will likely differ from projected or forecasted
results and (b) any information provided by the Company or any Subsidiary with
respect to any Person or assets acquired or to be acquired by the Company or any
Subsidiary shall, for all periods prior to the date of such acquisition, be
limited to the knowledge of the Company or the acquiring Subsidiary after
reasonable inquiry). There is no fact known to the Company which the Company has
not disclosed to the Lender in writing and of which any of its officers,
directors or executive employees is aware (other than general economic and
industry conditions) and which has had or would reasonably be expected to have a
Material Adverse Effect.
On the Closing Date and the date of each subsequent Loan hereunder, or at any
other time at which the Company or its Subsidiaries is required to make
representations and warranties hereunder, each representation and warranty shall
be made after giving effect to each borrowing hereunder and under the Credit
Agreement and the application of the proceeds therefrom including the
acquisition of RESTEC or any Future Acquisitions as if said acquisition had at
that time been made. Without
-21-
limiting the foregoing, to the extent representations and warranties are being
made in connection with a Loan the proceeds of which will be used to consummate
the Acquisition or a Future Acquisition, the Company's "Subsidiaries" in such
representations and warranties shall include the entities and businesses being
acquired pursuant to such Acquisition or Future Acquisition.
The Company shall have the right to supplement and amend the Schedules to this
Agreement with respect to events occurring after the date of this Agreement,
which such new event, when scheduled, shall not constitute a breach hereof;
provided that any such amendment or supplement shall be approved by the Lender
--------
and shall be in a form satisfactory to the Lender; and further provided that no
------- --------
such amendment or supplement shall cure a Default or Event of Default hereunder.
SECTION 5. CONDITIONS TO LENDER'S OBLIGATION TO MAKE LOANS
5.1 Conditions to Lender's Obligation to Make the Initial Loan. The
----------------------------------------------------------
obligation of the Lender to make the Initial Loan on the Closing Date is subject
to the satisfaction of the following conditions, each as of the Closing Date:
5.1.1. Representations and Warranties; No Default.
------------------------------------------
(a) All representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all
material respects (other than representations and warranties qualified by a
materiality standard including, without limitation, a Material Adverse
Effect qualifier, which shall be true and correct in all respects).
(b) No Default or Event of Default shall exist as of the Closing
Date or would result from the consummation of the borrowings made by the
Company on the Closing Date.
5.1.2. Documents Satisfactory; Transactions Consummated. Each of the
------------------------------------------------
Documents shall have been duly executed and delivered by the respective parties
thereto and shall be in full force and effect. All of the terms, conditions and
provisions of each of such documents shall be satisfactory to the Lender in all
respects in form and substance, and no term, condition or provision thereof
shall have been supplemented, amended, modified or waived without the Lender's
consent.
5.1.3. Opinion of Counsel to the Company. The Lender shall have
---------------------------------
received an opinion from ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP special counsel for the
Company, which shall be addressed to the Lender, dated the Closing Date and in
form and substance reasonably satisfactory to the Lender.
5.1.4. Opinion of Company General Counsel. The Lender shall have
----------------------------------
received an opinion from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, general counsel for the Company,
which shall be addressed to the Lender, dated the Closing Date and in form and
substance reasonably satisfactory to the Lender.
5.1.5. Restec Acquisition Opinions. The Lender shall have received an
---------------------------
opinion (or permission to rely on an opinion) from each of the special counsels
to the sellers in the Acquisition,
-22-
which shall be addressed to the Lender, relating to the transactions
consummating the Acquisition, dated the Closing Date and in form and substance
reasonably satisfactory to the Lender.
5.1.6. Delivery of Documents. The Lender shall have received the
---------------------
following items, each of which shall be in form and substance reasonably
satisfactory to the Lender:
(a) Executed copies of this Agreement, the Note issued in the name
of the Lender, the Warrant Agreement and the Warrants issued in the name of
the Lender.
(b) Resolutions of the Board and each board of directors of each
Subsidiary of the Company approving the transactions contemplated by the
Documents, and approving and authorizing the execution, delivery and
performance of each Document to which it is a party and approving and
authorizing the borrowing of the Loans, the execution, delivery and payment
of the Note of the obligations thereunder, in each case certified as of the
Closing Date by the secretary or an assistant secretary of the Company as
being in full force and effect without modification or amendment.
Certified copies of the resolutions duly adopted by the Board exempting the
Lender from Section 203 of the DGCL and authorizing the filing of the
Certificate Amendment as contemplated herein.
(c) A copy of the certificate of incorporation of the Company
certified by the secretary of State of Delaware, together with a good
standing certificate from the secretary of state of Delaware as to the
Company, to be dated a recent date prior to the Closing Date.
(d) A certificate of the Company, signed on its behalf by a duly
authorized officer, dated the Closing Date (the statements made in which
certificate shall be true on and as of such date) certifying as to (A) a
true and correct copy of the charter of such Person and any amendments
thereto, (B) a true and correct copy of the by-laws of such Person as in
effect on the Closing Date, and (C) the completeness and accuracy of the
representations and warranties contained in Documents as of the Closing
Date, including the absence of any event occurring and continuing, or
resulting from the Transactions, that constitutes a Default or an Event of
Default.
(e) A certificate of the secretary of the Company certifying the
names and true signatures of the officers of the Company, as applicable,
executing the Documents.
(f) True and correct copies of all of the Documents.
(g) Copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the
Transactions.
(h) A certificate of the chief financial officer of the Company as
to (a) consolidated financial statements for the Acquisition and its
Subsidiaries for the periods required under Rule 3-05 of Regulation S-X of
the SEC, including balance sheets, income statements and cash flow
statements audited by independent public accountants of recognized national
standing and prepared in conformity with GAAP, (b) a pro forma balance
sheet of the Company and its Subsidiaries as of the Closing Date after
giving effect
-23-
to the Acquisition and the transactions contemplated hereby and reflecting
estimated purchase accounting adjustments, prepared by the chief financial
officer of the Company, and (c) the business plan and financial projections
of the Company and its Subsidiaries for Fiscal Years 2000 through 2004.
(i) A Borrower's Certificate in a form reasonably satisfactory to
the Lender, dated the Closing Date, stating that the conditions specified
in Sections 5.1.1 and 5.1.2 and Sections 5.1.9 through 5.1.16 (inclusive)
------------------------ -----------------------------
have been satisfied.
5.1.7. Corporate/Capital Structure. The Lender shall be satisfied
---------------------------
with the ownership, corporate and legal structure and capitalization of the
Company and its Subsidiaries, including, without limitation, the terms and
conditions of their respective charters and by-laws, the terms of the Company's
and such Subsidiaries' capital stock, options, warrants or other securities and
any agreements related thereto.
5.1.8. Lender's Equity. The Lender shall have received the Warrants
---------------
to be issued to it pursuant to the Warrant Agreement.
5.1.9. No Material Adverse Change. Nothing shall have occurred (and
--------------------------
the Lender shall not be aware of any facts or conditions not previously known)
which the Lender shall determine has or reasonably could be expected to have, a
Material Adverse Effect.
5.1.10. Litigation. There shall exist no action, suit, investigation,
----------
litigation or proceeding affecting the Company or any of its Subsidiaries or any
of their respective properties pending or, to the knowledge of the Company,
threatened before any court, governmental agency or arbitrator that (i) could
reasonably be expected to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of the Documents or the
consummation of the transactions contemplated hereby and thereby. No order,
judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the Lender from making the Loans.
5.1.11. Certain Fees. On the Closing Date, the Company shall pay all
------------
expenses of the Lender (including, without limitation, legal fees and expenses)
incurred in connection with the negotiation and execution of this Agreement and
the other Documents.
5.1.12 No Violation of Regulations U or X. The making of the Loans
----------------------------------
shall not violate Regulations U or X of the FRB.
5.1.13. Monitoring Agreement. The Company shall have entered into the
--------------------
Monitoring Agreement, the Monitoring Agreement shall be in full force and
effect, and any fees due thereunder shall have been paid in full.
5.1.14. Authorization; Listing. The Company's shares issuable upon
----------------------
conversion of the Convertible Preferred shall have been duly authorized and
reserved for issuance and such shares shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
-24-
5.1.15. Rights Plan. The Company shall have amended its Rights
-----------
Agreement to provide that the provisions of such agreement will not be triggered
by the execution, delivery or performance of this Agreement or any of the other
Documents or the consummation of the transactions contemplated hereby or
thereby.
5.1.16. Stockholder Consent. A majority of the Company's stockholders
-------------------
shall have executed an action on written consent (the "Stockholders Consent")
--------------------
(and such consent shall continue to be in full force and effect) approving (i)
the amendment to the Company's Certificate of Incorporation in the form set
forth on Exhibit E hereto (the "Certificate Amendment") and (ii) the issuance of
--------- ---------------------
the Convertible Preferred Stock (including the issuance of Warrant Shares) and
the Common Stock issuable upon conversion of the Convertible Preferred Stock and
the Company shall have delivered such executed consents to the Lender.
5.2 Conditions to Lender's Obligations to Make Subsequent Loans After the
---------------------------------------------------------------------
Closing Date. The obligation of the Lender to make subsequent Loans to the
------------
Company hereunder after the Closing Date is subject to the satisfaction of the
following conditions, each as of the date of each such subsequent Loan:
5.2.1. Representations and Warranties. All representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (other than representations and warranties qualified by
a materiality standard including, without limitation, a Material Adverse Effect
qualifier, which shall be true and correct in all respects) as of the making of
such subsequent Loan, before and after giving effect to such Loan and to the
application of the proceeds therefrom, with the same effect as though such
representations and warranties had been made on and as of such date, except that
(a) references to financial statements and the Latest Balance Sheet in such
representations and warranties shall be deemed to refer for this purpose to the
financial statements required to be provided to the Lender pursuant to Section
-------
6.3 hereof and the latest consolidated balance sheet of the Company required to
---
be provided to the Lender pursuant to Section 6.3 hereof, respectively, and (b)
-----------
references to the date of this Agreement, the Closing Date and the like shall
be deemed to refer to the date of the making of such subsequent Loan.
5.2.2. No Default. No Default or Event of Default shall exist as of
----------
the date of such subsequent Loan or would result from the consummation of the
borrowings made by the Company on the date of such subsequent Loan.
5.2.3. Approved Use. The Lender shall have received evidence
------------
satisfactory to it that the proceeds of such subsequent Loan will be used for
the Approved Use. The Lender shall have approved any Future Acquisition being
financed therewith and the Lender shall have received such documents and
deliveries in connection therewith as requested by the Lender.
5.2.4. Acquisitions. No default or material breach of performance
------------
shall have occurred under the agreements related to the Future Acquisition, if
any, for which the Loan is being made, and all of the buyers' material
conditions to closing thereunder shall have been satisfied and not waived
(except with the Lender's consent).
-25-
5.2.5. Opinion of Counsel to the Company. The Lender shall have
---------------------------------
received an opinion from the special counsel for the Company, which shall be
addressed to the Lender, dated the date of the making of such subsequent Loan
and in form and substance reasonably satisfactory to the Lender.
5.2.6. Opinion of Company General Counsel. The Lender shall have
----------------------------------
received an opinion from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, general counsel for the Company, or
his successor, if any, which shall be addressed to the Lender, dated the Closing
Date and in form and substance reasonably satisfactory to the Lender.
5.2.7. Acquisition Opinions. To the extent the Company or any of its
--------------------
Subsidiaries receives (or is otherwise entitled to rely on) an opinion of
counsel in connection with any Future Acquisition, such opinion shall also be
addressed to the Lender or the Lender shall otherwise be entitled to rely
thereon.
5.2.8. Amendment to Certificate of Incorporation. The Company's
-----------------------------------------
Certificate of Incorporation shall have been amended to include the provisions
set forth in the Certificate Amendments, shall be in full force and effect under
the laws of the State of Delaware as of the making of such subsequent Loan and
shall not have been further amended or modified other than as permitted
hereunder or pursuant to the Preferred Stock Purchase Agreement.
5.2.9. Preferred Stock Financing. The Purchaser (as defined in the
-------------------------
Preferred Stock Purchase Agreement) shall have (or will concurrently with the
funding of the subsequent Loan) purchased from the Company for cash Convertible
Preferred Stock pursuant to the Preferred Stock Purchase Agreement in an amount
equal to the aggregate outstanding principal balance of the Loans including the
Loan then being requested by the Company.
At the time of making an additional borrowing under a subsequent Loan hereunder,
the Company shall deliver a Borrower's Certificate to the Lender stating that
the conditions specified in Sections 5.2.1 through 5.2.4 (inclusive) and Section
---------------------------- -------
5.2.8 and 5.2.9 have been fully satisfied as of such time.
---------------
SECTION 6. COVENANTS
The Company covenants and agrees that so long as the Note or any Loan
Obligations remain outstanding:
6.1 Performance of Documents; etc. The Company will comply with all of
-----------------------------
the covenants, agreements and conditions contained in the Subordinated Loan
Documents and the Other Documents (other than the Credit Documents) to which it
is party.
6.2 Securities Laws.
---------------
6.2.1. Integration. The Company will take all action that is
-----------
appropriate or necessary to assure that its offerings of other securities will
not be integrated for purposes of the Securities Act
-26-
with the offerings of the Note by the Company to the Lender in any manner that
would require the registration of such offering of the Note under the Securities
Act.
6.2.2. Available Information. While the Note is a "restricted
---------------------
security" within the meaning of Rule 144(a)(3) under the Securities Act, the
Company will, during any period in which it is not subject to Section 13 or
----------
15(d) of the Exchange Act, make available to the Lender in connection with any
-----
sale thereof and, subject to the provisions of Section 15(d), any prospective
-------------
purchaser of the Note, in each case as soon as is reasonably practicable upon
written request of such holder, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act (or any successor
thereto).
6.3 Reports, Certificates and Other Information. Furnish to the Lender:
-------------------------------------------
6.3.1. Audit Report. Promptly when available and in any event within
------------
90 days after the close of each Fiscal Year: (a) a copy of the annual audit
report of the Company and its Subsidiaries for such Fiscal Year, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Year and consolidated statements of earnings and cash
flow of the Company and its Subsidiaries for such Fiscal Year certified without
qualification by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP or other independent auditors of recognized
standing selected by the Company and reasonably acceptable to the Lender,
together with a written statement from such accountants to the effect that in
making the examination necessary for the signing of such annual audit report by
such accountants, they have not become aware of any Event of Default or Default
that has occurred and is continuing or, if they have become aware of any such
event, describing it in reasonable detail and (b) consolidating balance sheets
of the Company and its Subsidiaries as of the end of such Fiscal Year and
consolidating statements of earnings for the Company and its Subsidiaries for
such Fiscal Year, certified by the chief financial officer of the Company.
6.3.2. Quarterly Reports. Promptly when available and in any event
-----------------
within 45 days after the end of each Fiscal Quarter (except the last Fiscal
Quarter) of each Fiscal Year, consolidated and consolidating balance sheets of
the Company and its Subsidiaries as of the end of such Fiscal Quarter, together
with consolidated and consolidating statements of earnings and consolidated
statements of cash flow for such Fiscal Quarter and for the period beginning
with the first day of such Fiscal Year and ending on the last day of such Fiscal
Quarter, certified by the chief financial officer of the Company.
6.3.3. Monthly Reports. Promptly when available and in any event
---------------
within 30 days after the end of each of the first two months of each Fiscal
Quarter, consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such month, together with consolidated and
consolidating statements of earnings for such month and for the period beginning
with the first day of the applicable Fiscal Year and ending on the last day of
such month, certified by the chief financial officer of the Company.
6.3.4. Compliance Certificates. Contemporaneously with the furnishing
-----------------------
of a copy of each annual audit report pursuant to Section 6.3.1 and of each set
-------------
of quarterly statements pursuant to Section 6.6.2, (a) a duly completed
-------------
compliance certificate in the form of Exhibit C, with appropriate insertions,
---------
dated the date of such annual report or such quarterly statements and signed
-27-
by the chief financial officer of the Company, containing a computation of each
of the financial ratios and restrictions set forth in Section 6.8 and to the
-----------
effect that such officer has not become aware of any Event of Default or Default
that has occurred and is continuing or, if there is any such event, describing
it and the steps, if any, being taken to cure it; and (b) an updated
organizational chart listing all Subsidiaries and the locations of their
businesses.
6.3.5. Reports to SEC and to Shareholders. Promptly upon the filing
----------------------------------
or sending thereof, copies of all regular, periodic or special reports of the
Company or any Subsidiary filed with the SEC (excluding exhibits thereto,
provided that the Company shall promptly deliver any such exhibit to the Lender
upon request therefor); copies of all registration statements of the Company or
any Subsidiary filed with the SEC (other than on Form S-8); and copies of all
proxy statements or other communications made to shareholders generally
concerning material developments in the business of the Company or any of its
Subsidiaries.
6.3.6. Notice of Default, Litigation and ERISA Matters. Promptly upon
-----------------------------------------------
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or a Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Lender which has
been instituted or, to the knowledge of the Company, is threatened against
the Company or any of its Subsidiaries or to which any of the properties of
any thereof is subject which, if adversely determined, might reasonably be
expected to have a Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, or the failure of
any member of the Controlled Group to make a required contribution to any
Pension Plan (if such failure is sufficient to give rise to a lien under
Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Company furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such
plan is or may be terminated, or that any such plan is or may become
insolvent;
(d) any cancellation (without replacement) or material change in
any insurance maintained by the Company or any Subsidiary thereof;
-28-
(e) any event (including any violation of any Environmental Law or
the assertion of any Environmental Claim) which has had or would reasonably
be expected to have a Material Adverse Effect;
(f) any event or circumstance which requires the Company to give
notice to the Senior Lenders under the Credit Documents; or
(g) any notice of default received by it under any Credit
Document.
6.3.7. Subsidiaries. Promptly upon any change in the list of its
------------
Subsidiaries from that set forth on the attached "Subsidiaries Schedule" (or in
---------------------
the most recent notice pursuant to this Section), notification of such change.
6.3.8. Management Reports. Promptly upon the request of the Lender,
------------------
copies of all detailed financial and management reports submitted to the Company
by independent auditors in connection with each annual or interim audit made by
such auditors of the books of the Company.
6.3.9. Projections. As soon as practicable and in any event within 60
-----------
days after the commencement of each Fiscal Year, financial projections for the
Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Lender prior
to the Closing Date.
6.3.10. Other Information. From time to time such other information
-----------------
concerning the Company and its Subsidiaries as the Lender may reasonably
request.
6.4 Books, Records and Inspections. Keep, and cause each Subsidiary to
------------------------------
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, the Lender or any
representative thereof upon reasonable prior notice to inspect the properties
and operations of the Company and of such Subsidiary; and permit, and cause each
Subsidiary to permit, at any reasonable time during normal business hours and
with reasonable notice (or at any time without notice if an Event of Default
exists), the Lender or any representative thereof to visit any or all of its
offices, to discuss its financial matters with its officers and its independent
auditors (and the Company hereby authorizes such independent auditors to discuss
such financial matters with the Lender or any representative thereof whether or
not any representative of the Company or any Subsidiary is present), and to
examine (and, at the expense of the Company or the applicable Subsidiary,
photocopy extracts from) any of its books or other corporate records.
6.5 Insurance. Maintain, and cause each Subsidiary to maintain, with
---------
responsible insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of the
Lender, furnish to the Lender a certificate setting forth in reasonable detail
the nature and extent of all insurance maintained by the Company and its
Subsidiaries.
-29-
6.6 Compliance with Laws, Material Contracts; Payment of Taxes and
--------------------------------------------------------------
Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material
-----------
respects with all material applicable laws (including Environmental Laws),
rules, regulations, decrees, orders, judgments, licenses, material contracts and
permits; and (b) pay, and cause each Subsidiary to pay, prior to delinquency,
all Federal taxes and all other material taxes and other governmental charges
against it or any of its property, as well as claims of any kind which, if
unpaid, might become a Lien on any of its property; provided that the foregoing
--------
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
6.7 Maintenance of Existence, etc. Maintain and preserve, and (subject to
-----------------------------
Section 6.13) cause each Subsidiary to maintain and preserve, (a) its existence
------------
and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing does
not have a Material Adverse Effect).
6.8 Financial Covenants.
-------------------
6.8.1. Fixed Charge Coverage Ratio. So long as the Lender and its
---------------------------
Affiliates hold at least 50% of the outstanding interests in the Note, not
permit the Fixed Charge Coverage Ratio at any time to be less than the
applicable ratio set forth below:
Computation Fixed Charge
Period Ending: Coverage Ratio
-------------- --------------
Closing Date through 12/31/00 0.85 to 1.0
1/01/01 through 12/31/01 0.95 to 1.0
1/01/02 through 12/31/02 1.00 to 1.0
1/01/03 and thereafter 1.05 to 1.0.
6.8.2. Minimum Interest Coverage. Not permit the Interest Coverage
-------------------------
Ratio as of the last day of any Computation Period to be less than the
applicable ratio set forth below:
Computation Interest
Period Ending: Coverage Ratio
-------------- --------------
Closing Date through 12/31/00 1.49 to 1.0
1/01/01 through 12/31/01 1.70 to 1.0
1/01/02 and thereafter 1.91 to 1.0
6.8.3. Funded Debt to Adjusted EBITDA Ratio. Not permit the Funded
------------------------------------
Debt to Adjusted EBITDA Ratio as of the last day of any Computation Period to
exceed the applicable ratio set forth below:
-30-
Computation Funded Debt to
Period Ending: Adjusted EBITDA Ratio
------------- ---------------------
Closing Date through 12/31/00 5.18 to 1.0
1/01/01 through 12/31/01 4.89 to 1.0
1/01/02 through 12/31/02 4.60 to 1.0
1/01/03 through 12/31/03 4.31 to 1.0
1/01/04 and thereafter 4.03 to 1.0.
6.8.4. Senior Funded Debt to Adjusted EBITDA Ratio. Not permit the
-------------------------------------------
Senior Funded Debt to Adjusted EBITDA Ratio as of the last day of any
Computation Period to exceed the applicable ratio set forth below:
Senior Funded
Computation Debt to
Period Ending: Adjusted EBITDA Ratio
------------- ---------------------
Closing Date through 12/31/00 4.03 to 1.0
1/01/01 through 12/31/01 3.77 to 1.0
1/01/02 through 12/31/02 3.45 to 1.0
1/01/03 through 12/31/03 3.16 to 1.0
1/01/04 and thereafter 2.88 to 1.0.
6.8.5. Debt to Capitalization Ratio. Not permit the ratio of (a)
----------------------------
Funded Debt to (b) the sum of Funded Debt plus Net Worth at any time to exceed
the applicable percentage set forth below during any period set forth below:
Debt to
Capitalization
Period: Percentage
------ --------------
Closing Date through 12/31/00 75%
1/01/01 through 12/31/01 70%
1/01/02 and thereafter 65%
6.8.6. Capital Expenditures. The Company will not permit the aggregate
--------------------
amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate Future Acquisitions approved by the Lender which constitute Capital
Expenditures) made by the Company and its Subsidiaries during any period of 12
consecutive months to exceed the product of (i) 1.50 (or, for any date of
determination during the period from the date of the acquisition of EPIC through
December 31, 2000, 1.75) multiplied by (ii) the depreciation of the Company and
its Subsidiaries during the preceding period of 12 consecutive months
(calculated on a pro forma basis giving effect to acquisitions and sales and
--- -----
other dispositions made subsequent to such preceding 12 months).
6.9 Limitations on Debt. Not, and not permit any Subsidiary to, create,
-------------------
incur, assume or suffer to exist any Debt, except:
-31-
(a) Debt under the Credit Agreement or Permitted Refinancing Debt with
respect thereto in an aggregate principal amount at any one time
outstanding (including loans, the nominal amount of outstanding letters of
credit and all unused commitments) not to exceed (as determined from time
to time, the "Maximum Senior Indebtedness") (i) $10,000,000 of revolving
---------------------------
Senior Indebtedness, (ii) $100,000,000 of term Senior Indebtedness, (iii)
$15,000,000 of additional Senior Indebtedness (whether revolving or term),
and (iv) up to $10,000,000 of additional Senior Indebtedness (whether
revolving or term) incurred to fund the Rhode Island Project in each case
with respect to this Section 6.9 less the aggregate principal amount of any
-----------
permanent reductions of commitments for revolving Senior Indebtedness or
repayments of term Senior Indebtedness under the instruments governing such
Senior Indebtedness (including, without limitation, payments actually
applied to the Senior Indebtedness pursuant to Section 3.5 hereof) and
-----------
guaranties in respect of Debt described in the foregoing clauses (i), (ii)
and (iii);
(b) unsecured seller Debt which represents all or part of the purchase
price payable in connection with a Future Acquisition approved by the
Lender and the existing Debt listed on the attached "Unsecured Seller Debt
---------------------
Schedule"; provided that the aggregate principal amount of all such Debt
-------- --------
(other than (i) the Debt designated with an asterisk on the Unsecured
-------------
Seller Debt Schedule, and (ii) an unsecured seller note payable in
--------------------
connection with the acquisition of EPIC not in excess of $6,000,000, the
payment of which is contingent upon the performance of EPIC) shall not at
any time exceed $7,500,000;
(c) Debt arising under Capital Leases, Debt secured by Liens permitted
by subsection 6.10(c) or (d) and other Debt outstanding on the date hereof
------------------ ---
and listed on the attached "Capital Lease Debt Schedule", and refinancings
---------------------------
of any such Debt so long as the terms applicable to such refinanced Debt
are no less favorable to the Company or the applicable Subsidiary than the
terms in effect immediately prior to such refinancing, provided that the
--------
aggregate amount of all such Debt at any time outstanding shall not exceed
$15,000,000;
(d) Debt of Subsidiaries owed to the Company;
(e) Hedging Obligations of the Company for the hedging of interest
payments on the Senior Indebtedness to the extent required by the Credit
Agreement;
(f) unsecured Debt of the Company to Subsidiaries;
(g) the RESTEC Bonds; provided that the RESTEC Bonds must be repaid or
--------
defeased not later than 360 days after the Closing Date; and
(h) the Loans made hereunder.
6.10 Liens. Not, and not permit any Subsidiary to, create or permit to
-----
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
-32-
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and, in each case, for which it maintains
adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i)
Liens of carriers, warehousemen, mechanics and materialmen and other
similar Liens imposed by law and (ii) Liens incurred in connection with
worker's compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
bonds, bids, performance bonds and similar obligations) for sums not
overdue or being contested in good faith by appropriate proceedings and not
involving any deposits or advances or borrowed money or the deferred
purchase price of property or services, and, in each case, for which it
maintains adequate reserves;
(c) Liens identified in the attached "Liens Schedule";
--------------
(d) subject to the limitation set forth in Section 6.9(c), (i) Liens
--------------
existing on property at the time of the acquisition thereof by the Company
or any Subsidiary (and not created in contemplation of such acquisition)
and (ii) Liens that constitute purchase money security interests on any
property securing debt incurred for the purpose of financing all or any
part of the cost of acquiring such property, provided that any such Lien
--------
attaches to such property within 60 days of the acquisition thereof and
such Lien attaches solely to the property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $1,000,000 arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the Company
or any Subsidiary; and
(g) Liens in favor of the Senior Lenders arising under the Credit
Documents.
6.11 [Reserved].
----------
6.12 Restricted Payments. Not, and not permit any Subsidiary to, (a)
-------------------
declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders, or (d) set aside funds for any of the foregoing;
provided that any Subsidiary may declare and pay dividends to the Company or to
--------
any other Wholly-Owned Subsidiary.
6.13 Mergers, Consolidations, Sales. Not, and not permit any Subsidiary
------------------------------
to, be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell,
-33-
transfer, convey or lease all or any substantial part of its assets, or sell or
assign with or without recourse any receivables, except for (a) any such merger
or consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into the Company or into, with or to any other Wholly-
Owned Subsidiary; (b) any such purchase or other acquisition by the Company or
any Wholly-Owned Subsidiary of the assets or stock of any Wholly-Owned
Subsidiary; and (c) any such purchase or other acquisition by the Company or any
wholly-owned Subsidiary of the assets or stock of any other Person where (1)
such assets (in the case of an asset purchase) are for use, or such Person (in
the case of a stock purchase) is, or after the acquisition will be, engaged in
the business activities permitted by Section 6.20; (2) immediately before or
------------
after giving effect to such purchase or acquisition, no Event of Default or
Default shall have occurred and be continuing; (3) the aggregate consideration
to be paid by the Company and its Subsidiaries (including any Debt assumed or
issued in connection therewith, the amount thereof to be calculated in
accordance with GAAP) in connection with such purchase or other acquisition
after the date hereof (or any series of related acquisitions) is less than
$3,000,000 for any single transaction or series of related transactions and less
than $10,000,000 in the aggregate for all such transactions; (4) the Company is
in pro forma compliance with all the financial ratios and restrictions set forth
--- -----
in Section 6.8; and (5) the proceeds of any of the Loans hereunder are not used
-----------
to finance such transactions. Notwithstanding the foregoing, the Company shall
not, and shall not permit any Subsidiary to, consummate any such merger,
consolidation or purchase described above within the 120 days immediately
following the Closing Date without the prior written consent of the Lender other
than Future Acquisitions approved by the Lender.
6.14 Further Assurances. Take, and cause each Subsidiary to take, such
------------------
actions as are necessary, or as the Lender may reasonably request, from time to
time to ensure that the obligations of the Company and the Guarantors hereunder
and under the other Subordinated Loan Documents are enforceable in accordance
with their terms and are guaranteed by all of the Subsidiaries of the Company
(including, promptly upon the acquisition or creation thereof, the execution by
any Subsidiary acquired or created after the date hereof of a counterpart to
this Agreement); provided that no Foreign Subsidiary shall have an obligation to
--------
execute a counterpart hereto; and provided further that, so long as the RESTEC
-------- -------
Bonds issued by such Subsidiary are outstanding, neither of Netco-Waterbury,
Limited Partnership nor New Haven Residuals, Limited Partnership shall have an
obligation to execute a counterpart hereto.
6.15 Transactions with Affiliates. Not, and not permit any Subsidiary to,
----------------------------
enter into, or cause, suffer or permit to exist any transaction, arrangement or
contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
6.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
----------------------
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
6.17 Environmental Laws. Conduct, and cause each Subsidiary to conduct,
------------------
its operations and keep and maintain its property in material compliance with
all Environmental Laws (other than Immaterial Laws).
-34-
6.18 Unconditional Purchase Obligations. Not, and not permit any
----------------------------------
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services; provided that the
foregoing shall not prohibit the Company or any Subsidiary from entering into
options for the purchase of particular assets or businesses.
6.19 Inconsistent Agreements. Not, and not permit any Subsidiary to, enter
-----------------------
into any agreement containing any provision which would be violated or breached
by any borrowing by the Company hereunder or by the performance by the Company
or any Subsidiary of any of its obligations hereunder or under any other
Subordinated Loan Document.
6.20 Business Activities. Not, and not permit any Subsidiary to, engage in
-------------------
any line of business other than the management, processing, collection, handling
and disposal of non-hazardous bio-solid waste, animal manures, and green or
other organic waste or similar non-hazardous waste-related business activities.
6.21 Advances and Other Investments. Not, and not permit any Subsidiary
------------------------------
to, make, incur, assume or suffer to exist any Investment in any other Person,
except (without duplication) the following:
(a) equity Investments existing on the Closing Date in Wholly-Owned
Subsidiaries identified on the Subsidiaries Schedule;
---------------------
(b) equity Investments in Subsidiaries acquired after the Closing Date
in transactions approved by the Lender including approved Future
Acquisitions (unless not required to be approved pursuant to Section 6.13);
-------------
(c) in the ordinary course of business, contributions by the Company
to the capital of any of its Subsidiaries, or by any such Subsidiary to the
capital of any of its Subsidiaries;
(d) in the ordinary course of business, Investments by the Company in
any Subsidiary or by any of the Subsidiaries in the Company, by way of
intercompany loans, advances or guaranties, all to the extent permitted by
Section 6.9;
-----------
(e) Suretyship Liabilities permitted by Section 6.9;
-----------
(f) loans to officers and employees not exceeding (i) $115,000 in the
aggregate to any single individual or (ii) $287,500 in the aggregate for
all such individuals;
(g) good faith deposits and escrow accounts in connection with
prospective acquisitions of stock or assets for Future Acquisitions
approved by the Lender;
(h) Cash Equivalent Investments; and
-35-
(i) bank deposits in the ordinary course of business; provided that
--------
the aggregate amount of all such deposits (excluding (x) amounts in payroll
accounts or for accounts payable, in each case to the extent that checks
have been issued to third parties, and (y) amounts maintained (in the
ordinary course of business consistent with past practice) in accounts of
any Person which is acquired by the Company or a Subsidiary in accordance
with the terms hereof during the 45 days following the date of such
acquisition) which are maintained with any bank other than a Senior Lender
shall not at any time exceed (x) in the case of such deposits with any
single bank, $115,000 for three consecutive Business Days and (y) in the
case of all such deposits, $1,115,000 for three consecutive Business Days;
provided that no Investment otherwise permitted by clause (b), (c), (d), (e),
-------- ---------- --- --- ---
(f) or (g) shall be permitted to be made if, immediately before or after giving
--- ---
effect thereto, any Event of Default or Default shall have occurred and be
continuing.
6.22 Other Subordinated Debt. The Company shall not and shall not permit
-----------------------
any of its Subsidiaries to, directly or indirectly, incur, create, or suffer to
exist any Debt that by its express terms is subordinate or junior in right of
payment (to any extent) to any Debt of the Company or a Guarantor unless, by its
terms or by the terms of the instrument creating or evidencing it, such Debt (A)
has a maturity and Weighted Average Life to Maturity longer than the Loans and
(B) is subordinate or junior in right of payment to the Loans (or, in the case
of a Guarantor, to the Guaranty).
6.23 Foreign Subsidiaries. Not at any time permit more than 10% of its
--------------------
consolidated assets to be owned by, or more than 10% of its consolidated
revenues for any Fiscal Quarter to be earned by, Foreign Subsidiaries.
6.24 Business Plan and Financial Projections. Not later than ten Business
---------------------------------------
Days after the Closing Date, deliver to the Lender a business plan and financial
projections of the Company and its Subsidiaries for Fiscal Years 2000 through
2006.
6.25 Amendments to Certain Documents. The Company shall not make or agree
-------------------------------
to any amendment to or modification of, or waive any of its rights under, any of
the terms of the Credit Agreement or any other agreement or instrument governing
any document relating to Debt which would (a) have the effect of (i) breaching
the covenant set forth in Section 6.9(a) hereof, (ii) increasing the principal
--------------
amount payable thereon or redemptions thereof, or (iii) providing for earlier
payment in respect of principal or redemptions or otherwise or (b) otherwise
adversely affect the interest of the Lender.
6.26 Listing. The Company shall use its reasonable best efforts to continue
-------
to have the Common Stock listed on the NASDAQ SmallCap Market ("Nasdaq") or a
------
national securities exchange for so long as any of the Convertible Preferred
Stock or any shares into which the Convertible Preferred Stock is convertible
are outstanding. Prior to the Closing, the Company shall prepare and submit to
Nasdaq a listing application covering the shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock and shall obtain approval for the
listing of such shares, subject to official notice of issuance.
-36-
6.27 Current Public Information. The Company shall file all reports
--------------------------
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder and shall take such further
action as any holder or holders of the Convertible Preferred Stock may
reasonably request, all to the extent required to enable such holders to sell
the Convertible Preferred Stock pursuant to Rule 144 adopted by the SEC under
the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the SEC. Upon request, the
Company shall deliver to any holder of the Convertible Preferred Stock a written
statement as to whether it has complied with such requirements.
6.28 Section 203 of the DGCL. The Board shall not adopt any resolution
-----------------------
containing any provisions relating to the exemption from Section 203 of the DGCL
granted to the Lender which would adversely affect or otherwise impair the
rights of the Lender thereunder.
6.29 Fiscal Year. The Company will not change its Fiscal Year from that
-----------
currently in effect.
6.30 Board. The maximum number of directors on the Board shall be fixed at
-----
no more than six; provided that the maximum number of directors on the Board may
be increased as a result of the exercise of any special rights to elect
directors upon events of default or events of noncompliance granted to the
holders of the Convertible Preferred Stock and the Lender or the holders of the
Note hereunder.
6.31 Filing of Information Statement. Within twenty (20) days after the
-------------------------------
Closing, the Company shall file with the SEC an information statement pursuant
to Section 14(c) and Regulation 14C of the Exchange Act regarding the
Stockholders Consent. The Company shall comply with all of its obligations
pursuant to Section 14(c) and Regulation 14C of the Exchange Act in connection
with the Stockholders Consent.
6.32 Amendment to Certificate of Incorporation. Twenty-one calender days
-----------------------------------------
after the date that the Company sends or gives its shareholders the information
statement required pursuant to Section 14(c) and Regulation 14C of the Exchange
Act relating to the Stockholders Consent, the Company shall file the Certificate
Amendment. The Company and the Board shall at all times comply with and give
effect to the provisions of the Certificate Amendment.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. If one or more of the following events set forth
-----------------
in Sections 7.2 through 7.15 hereof shall occur and be continuing it shall
-------------------------
constitute an event of default hereunder (the "Events of Default").
-----------------
7.2 Payment Default. The Company shall fail to pay (i) any principal of
---------------
the Note when the same becomes due and payable, whether upon maturity,
prepayment, acceleration or otherwise, (ii) any interest on the Note, for a
period of five (5) days after the same shall become due and payable
-37-
or (iii) any other amount due hereunder within five (5) days after the same
shall become due and payable; or
7.3 Other Debt. (i) The Company shall fail to pay in excess of $2,000,000
----------
in the aggregate of Senior Indebtedness (including interest and fees) when due
(whether upon maturity, prepayment, acceleration or otherwise); (ii) the
maturity of the Senior Indebtedness shall have been accelerated (whether by
having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); (iii) the Company shall fail to pay in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt (including interest and fees) of the Company or any Subsidiary when
due (whether upon maturity, prepayment, acceleration or otherwise); or (iv) in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt of the Company or any Subsidiary shall have been accelerated (whether
by having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); provided that the default by RESTEC under
any "non-transfer" provision in connection with the RESTEC Bonds shall not
constitute an Event of Default hereunder; or
7.4 Other Material Obligations. Default in the payment when due, or in
--------------------------
the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
7.5 Non-Compliance with Provisions of This Agreement. (a) Failure by the
------------------------------------------------
Company or its Subsidiaries to comply with or to perform any covenant set forth
in Sections 6.7 through 6.15 or Sections 6.25, 6.28, 6.29, 6.30, 6.31 or 6.32;
------------ -----------------------------------------------------
or (b) failure by the Company or its Subsidiaries to comply with or to perform
any other provision of this Agreement (and not constituting an Event of Default
under any of the other provisions of this Section 7) and continuance of such
---------
failure for 30 days after notice thereof to the Company from the Lender; or
7.6 Breach of Representations or Warranties. Any representation or
---------------------------------------
warranty made by the Company in this Agreement or in any statement or
certificate at any time given by them in writing pursuant hereto or in
connection herewith or therewith is false or misleading (i) in any respect, in
the case of representations or warranties qualified by a materiality standard
including, without limitation, a "material adverse effect" qualifier, or (ii) in
any respect which is material to the business, assets, property, operations,
results, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, in the case of all other representations or
warranties, in each case on the date made or furnished; or
7.7 Involuntary Bankruptcy, Appointment of Receiver, etc. (a) A court
----------------------------------------------------
having jurisdiction shall enter a decree or order for relief in respect of the
Company or any Subsidiary in an involuntary case under the Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not dismissed, stayed or discharged within 60
days after
-38-
filing; or any other similar relief is not granted and remains unstayed or
undismissed under any applicable federal or state law; or (b) an involuntary
case is commenced against the Company or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Company or any of its Subsidiaries
or over all or a substantial part of any of their respective properties shall
have been entered; or an interim receiver, trustee or other custodian of the
Company or any of its Subsidiaries for all or a substantial part of their
respective properties is involuntarily appointed, such events under this clause
(b) continue for 60 days unless dismissed, bonded, stayed, vacated or
discharged; or
7.8 Voluntary Bankruptcy, Appointment of Receiver, etc. (a) The Company
--------------------------------------------------
or any of its Subsidiaries shall have an order for relief entered with respect
to it or commence a voluntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or (b) the Company or any of its Subsidiaries makes any assignment for
the benefit of creditors; or (c) the board of directors of the Company or any of
its Subsidiaries (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing; or
7.9 Judgments. Final judgments which exceed an aggregate of $1,000,000
---------
shall be rendered against the Company or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments; or
7.10 Dissolution. Any order, judgment or decree is entered against the
-----------
Company or any of its Subsidiaries decreeing the dissolution or split up of the
Company or such Subsidiary and such order remains undischarged or unstayed for a
period in excess of thirty (30) days; or
7.11 Solvency. The Company or any of its Subsidiaries ceases to be solvent
--------
or admits in writing its present or prospective inability to pay its debts as
they become due; or
7.12 Injunction. The Company or any of its Subsidiaries is enjoined,
----------
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business for more than thirty (30) days; or
7.13 ERISA; Pension Plans. (i) Institution of any steps by the Company or
--------------------
any other Person to terminate a Pension Plan if as a result of such termination
the Company could be required to make a contribution to such Pension Plan, or
could incur a liability or obligation to such Pension Plan, in excess of
$1,000,000; (ii) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA; or (iii) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Pension
Plan and the withdrawal liability (without unaccrued interest) to Multiemployer
Pension Plans as a result of such withdrawal (including any outstanding
-39-
withdrawal liability that the Company and the Controlled Group have incurred on
the date of such withdrawal) exceeds $1,000,000; or
7.14 Invalidity of Subordinated Loan Documents. Any of the Subordinated
-----------------------------------------
Loan Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and effect or is
declared to be null and void, or the Company or its Subsidiaries denies that it
has any further liability under any Subordinated Loan Documents to which it is
party, or gives notice to such effect; or
7.15 Change in Control. (a) Any Person or group of Persons (within the
-----------------
meaning of Section 13 or 14 of the Exchange Act, but excluding (i) the executive
managers of the Company as of the Closing Date and (ii) GTCR Capital Partners,
L.P., GTCR Fund VII, L.P. ("GTCR Fund VII") and their respective Affiliates)
-------------
shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of the outstanding voting stock of the Company equal to
the greater of (x) 25% of the then outstanding shares of voting stock of the
Company and (y) the proportion of the then outstanding shares of voting stock of
the Company held by GTCR Fund VII and its Affiliates; or (b) during any 12-month
period, individuals who at the beginning of such period constituted the Board
(together with any directors designated by the holders of the Convertible
Preferred Stock or the Lender and new directors whose election by the Board or
whose nomination for election by the Company's shareholders was approved by a
vote of at least majority of the directors who either were directors at
beginning of such period or whose election or nomination was previously so
approved) cease for any reason to constitute a majority of the Board; (each of
clauses (a) and (b) constituting a "Change of Control");
------------------- -----------------
7.16 Consequences of Default. Upon the occurrence and continuation of any
-----------------------
Event of Default (but subject to the terms of the Intercreditor Agreement):
7.16.1. With respect to any Event of Default (i) by the Guarantors or
(ii) by the Company other than pursuant to Section 7.7 or 7.8 hereof, the Lender
------------------
may, and shall upon the request of the Majority Holders, upon 30 days prior
written notice to the Lender, and upon written notice to the Company, declare
the Note to be due and payable, whereupon the principal amount of the Note,
together with accrued interest thereon, shall automatically become immediately
due and payable, without any other notice of any kind, and without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Company.
7.16.2. The Lender may exercise the rights granted to holders of the
Notes in Article Ninth, Part B of the Company's Certificate of Incorporation (as
---------------------
in effect following amendment by the Certificate Amendment) to elect an
additional director to the Company's Board.
7.16.3. With respect to any Event of Default by the Company pursuant
to Section 7.7 or 7.8 hereof, the principal amount of the Note, together with
------------------
accrued interest thereon, shall automatically become immediately due and
payable, without any other notice of any kind, and without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company.
-40-
7.16.4. If any Event of Default exists, each holder of the Note
shall also have any other rights which such holder is entitled to under any
contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.
SECTION 8. SUBORDINATION
The Lender shall enter into a Subordination and Intercreditor Agreement
("Intercreditor Agreement") with the Agent substantially in the form of the
-----------------------
attached Exhibit D.
---------
SECTION 9. THE GUARANTEES
9.1 The Guarantees. In order to induce the Lender to enter into this
--------------
Agreement and to make the Loans hereunder and in recognition of the direct
benefits to be received by each Guarantor from the Loans hereunder, each
Guarantor hereby agrees with the Lender as follows (the "Guaranty"):
--------
9.1.1. Each Guarantor hereby unconditionally guarantees, as primary
obligor and not merely as a surety, jointly and severally with each other
Guarantor, to the Lender and its successors and assigns the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
principal of, and interest on the Loans and all other Loan Obligations of the
Company. Each Guarantor further agrees that if the Company shall fail to pay
any of its Loan Obligations in full when due (whether at stated maturity, by
acceleration or otherwise), such Guarantor will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Loan Obligations, the same will be promptly
paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal. The
obligations of the Guarantors hereunder are referred to herein as the
"Guaranteed Obligations."
----------------------
9.2 Guaranteed Obligations Unconditional. The Guaranteed Obligations are
------------------------------------
absolute and unconditional irrespective of the value, genuineness, validity,
regularity or enforceability of this Agreement, the Note, any Document, or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Loan Obligations, and to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 9.2 that the obligations of each Guarantor
-----------
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder, which shall remain absolute and
unconditional as provided above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of
the Loan Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement, the Note or any Document or any other agreement or
instrument referred to herein or therein shall be done or omitted; or
-41-
(iii) the maturity of any of the Loan Obligations shall be
accelerated, or any such Loan Obligations shall be modified,
supplemented or amended in any respect, or any right under this
Agreement, the Note, any Document or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee
of any such Loan Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with.
9.2.1. Each Guarantor hereby expressly waives diligence, presentment,
demand of payment, protest and all notices whatsoever, and any requirement that
the Lender exhaust any right, power or remedy or proceed against the Company
under this Agreement, the Note, any Document or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Loan Obligations.
9.3 Reinstatement. The obligations of each Guarantor under this Section 9
------------- ---------
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Company in respect of the Loan Obligations is
rescinded or must be otherwise restored by any holder of any such Loan
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees, on a joint and several
basis, that it will indemnify the Lender and any of its successors or assigns on
demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Lender or such successors or assigns in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
9.4 Subrogation. Each Guarantor hereby waives all rights of subrogation
-----------
or contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Bankruptcy Code) or
otherwise by reason of any payment or performance by it pursuant to the
provisions of this Section 9.
---------
9.5 Contribution.
------------
9.5.1. At any time a payment in respect of the Loan Obligations is
made under this Guaranty, the right of contribution, if any, of each Guarantor
against any other Guarantor required to make any payment to such Guarantor
pursuant to this Section 9 (a "Contributor") shall be determined as provided in
--------- -----------
the immediately following sentence, with the right of contribution of each
Guarantor to be revised and restated as of each date on which a payment (a
"Relevant Payment") is made on the Loan Obligations under this Guaranty. At any
----------------
time that a Relevant Payment is made by a Guarantor that results in the
aggregate payments made by such Guarantor in respect of the Loan Obligations
including the Relevant Payment exceeding such Guarantor's Contribution
Percentage (as hereinafter defined) of the aggregate payments made by all
Guarantors in respect of the Loan Obligations (such excess, the "Aggregate
---------
Excess Amount"), each such Guarantor shall have a right of contribution against
-------------
each Contributor who has made payments in respect of the Loan Obligations in an
aggregate amount less than such Contributor's Contribution Percentage of the
aggregate payments made by all Guarantors in respect of the Loan Obligations
(the aggregate amount of such deficit, the "Aggregate Deficit Amount") in an
------------------------
amount equal to (x) a fraction the numerator of which is the Aggregate Excess
Amount of such Guarantor and the denominator of which is the Aggregate Excess
Amount of all
-42-
Guarantors multiplied by (y) the Aggregate Deficit Amount of such
Contributor. A Guarantor's right of contribution, if any, pursuant to the
preceding sentences shall arise at the time of each computation, subject to
adjustment at the time of any subsequent computation; provided, however, that no
-------- -------
Guarantor may take any action to enforce such right until the Loan Obligations
have been irrevocably paid in full in cash and the Note and the Loan Agreement
have been terminated; it being expressly recognized and agreed by all parties
hereto that any Guarantor's right of contribution arising pursuant to this
Section 9 against any Contributor shall be expressly junior and subordinate to
---------
such Contributor's obligations and liabilities in respect of the Loan
Obligations and any other obligations owing under this Guaranty. As used in
this Guaranty, (i) each Contributor's "Contribution Percentage" shall mean the
-----------------------
percentage obtained by dividing (x) the Adjusted Guarantor Net Worth of such
Contributor by (y) the aggregate Adjusted Guarantor Net Worth of all Guarantors
of the respective Loan Obligations; (ii) the "Adjusted Guarantor Net Worth" of
----------------------------
each Guarantor shall mean the greater of (x) the Guarantor Net Worth of such
Guarantor or (y) zero; and (iii) the "Guarantor Net Worth" of each Guarantor
-------------------
shall mean the amount by which the fair salable value of such Guarantor's assets
(other than its equity interests in another Guarantor and its rights under this
Section 9) on the later of the date it first became a Guarantor hereunder and
---------
the last date on which the maximum aggregate amount of Loan Obligations which it
guarantees pursuant to this Guaranty is increased over that amount which it
guaranteed pursuant to this Guaranty on the date it first became a Guarantor
hereunder exceeds its existing debts and other liabilities (including contingent
liabilities, but without giving effect to any Loan Obligations arising under
this Guaranty and any liabilities of such Guarantor in respect of intercompany
indebtedness to the Company or any of its Subsidiaries or any Affiliate of any
such Person), in each case after giving effect to all transactions occurring on
such date.
9.5.2. Each Guarantor recognizes and acknowledges that the rights to
contribution arising hereunder shall constitute an asset in favor of the party
entitled to such contribution. In this connection, each Guarantor has the right
to, and hereby does expressly, waive its contribution right against any other
Guarantor to the extent that after giving effect to such waiver such Guarantor
would remain solvent, in the determination of the Lender.
9.5.3. In any action or proceeding involving any state corporate law,
or any state or federal bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any Guarantor
under Section 9 hereof would otherwise, taking into account the provisions of
---------
Section 9.5.1 above be held or determined to be void, invalid or unenforceable,
-------------
or subordinated to the claims of any other creditors, on account of the amount
of its liability under said Section 9, then, notwithstanding any other provision
---------
hereof to the contrary, the amount of such liability shall, without any further
action by such Guarantor, the Company, the Lender or any other Person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
9.6 Remedies. Each Guarantor agrees that, as between such Guarantor and
--------
the Lender, the Loan Obligations and the Note may be declared to be forthwith
due and payable as provided in Section 7 of this Agreement (and shall be deemed
---------
to have become automatically due and payable in the circumstances provided in
such Section 7) for purposes of Section 9.1 notwithstanding any stay, injunction
--------- -----------
or other prohibition preventing such declaration (or such Loan Obligation being
deemed to have become automatically due and payable ), in which case such Loan
Obligations (whether or
-43-
not due and payable by the Company) shall forthwith become due and payable by
such Guarantor for purposes of Section 9.1.
-----------
9.7 Continuing Guarantee. The guarantee in this Section 9 is a continuing
-------------------- ---------
guarantee, and shall apply to all of the Loan Obligations whenever arising.
Notwithstanding anything to the contrary in this Agreement, upon (i) the release
by the Lenders under this Agreement and the Note of all guarantees of a
Guarantor, or (ii) the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Guarantor (or all or substantially all of its
assets) to an entity which is not a Subsidiary of the Company and which sale or
disposition is otherwise in compliance with the terms of this Agreement, such
Guarantor shall be deemed released from all obligations under this Section 9
---------
without any further action required on the part of the Lender.
9.8 Subordination of Guaranteed Obligations. Notwithstanding anything to
---------------------------------------
the contrary in this Agreement, the Company, each Guarantor and the Lender, in
making the Loans hereunder, agrees and covenants that the Guaranteed Obligations
shall be subordinated and junior in right of payment to the prior payment in
full of the Senior Indebtedness, in the same manner, and to the same extent, as
the Loan Obligations are subordinated and junior in right of payment to the
Senior Indebtedness pursuant to the Intercreditor Agreement, if any.
SECTION 10. TRANSFERS OF NOTE; LEGENDS
10.1 Assignments of Note.
-------------------
10.1.1. Subject to the terms and conditions of the Credit Documents,
the Lender shall have the right at any time, to sell, assign, transfer or
negotiate all or any part of the Loans and the Note to one or more Persons, and
may grant participations in all or any part of the Note or the Loans evidenced
thereby to one or more Persons, provided in either case that such Person is an
Eligible Assignee. In the case of any sale, assignment, transfer or negotiation
of all or part of the Loans and the Note authorized under this Section 10.1 (but
------------
not in the case of a participation), the assignee, transferee or recipient shall
have, to the extent of such sale, assignment, transfer or negotiation, the same
rights, benefits and obligations as it would if it were a Lender with respect to
such Note or the Loans evidenced thereby.
10.1.2. The Company shall keep at its principal office a register in
which the Company shall provide for the registration of the Note and for the
transfer of the same. Upon surrender for registration of transfer of the Note
at the principal office of the Company, the Company shall, at its expense,
promptly execute and deliver one or more new Note of like tenor and of a like
aggregate principal amount, registered in the name(s) of such transferee(s) and,
in the case of a transfer in part, a new Note in the appropriate partial amount
registered in the name(s) of such transferor(s).
10.1.3. In connection with any sales, assignments or transfers of the
Note, the transferor shall give notice to the Company and the Lender of the
identity of such parties and obtain agreements from the transferees that all
nonpublic information given to such parties pursuant to this Agreement will be
held in strict confidence pursuant to a confidentiality agreement reasonably
satisfactory to the Company.
-44-
10.2 Investment Representations; Restrictive Legend.
----------------------------------------------
10.2.1. Investment Representations. The Lender individually (but not
--------------------------
on behalf of any other subsequent holder of the Note) represents and warrants
that as of the Closing Date:
(a) Restrictions on Transfer. The Lender has been advised that
------------------------
the Note has not been registered under the Securities Act or any state
securities laws and, therefore, cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. The Lender is
aware that the Company is under no obligation to effect any such
registration with respect to the Note or to file for or comply with any
exemption from registration. The Lender is receiving the Note from the
Company hereunder for its own account and not with a view to, or for resale
in connection with, the distribution thereof in violation of the Securities
Act; provided, however, that except as provided in the Intercreditor
-------- -------
Agreement, if any, the disposition of the Lender's property shall at all
times be and remain in its control.
(b) Accredited Investor, etc. The Lender has such knowledge and
------------------------
experience in financial and business matters so as to be capable of
evaluating the merits and risks of such investment, is able to incur a
complete loss of such investment and to bear the economic risk of such
investment for an indefinite period of time. The Lender is an "accredited
investor" as that term is defined in Regulation D under the Securities Act.
10.2.2. Restrictive Legend. The Note shall bear a legend in
------------------
substantially the following form:
"THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION UNDER THE ACT IS
NOT REQUIRED."
10.3 Termination of Restrictions. The restrictions imposed by Section 10.4
--------------------------- ------------
hereof upon the transferability of the Note shall cease and terminate as to the
Note (i) when, in the opinion of counsel reasonably acceptable to the Company,
such restrictions are no longer required in order to assure compliance with the
Securities Act or (ii) when such Note shall have been registered under the
Securities Act or transferred pursuant to Rule 144 thereunder. Whenever such
restrictions shall cease and terminate as to the Note or such Note shall be
transferable under paragraph (k) of Rule 144, the holder thereof shall be
entitled to receive from the Company, without expense, new certificates not
bearing the legend set forth in Section 11.3 hereof.
------------
10.4 Note Legend relating to Subordination. The Note shall bear a legend
-------------------------------------
in substantially the following form:
-45-
"THIS NOTE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
PURSUANT TO A SUBORDINATION AND INTERCREDITOR AGREEMENT (THE "INTERCREDITOR
AGREEMENT") TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANY
PURSUANT TO A SENIOR CREDIT AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT,
BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT; AND A COPY OF THE INTERCREDITOR AGREEMENT SHALL BE
AVAILABLE UPON REQUEST TO THE COMPANY BY THE HOLDER HEREOF WITHOUT CHARGE."
10.5 Note Legend relating to Original Issue Discount. The Note shall bear
-----------------------------------------------
a legend in substantially the following form:
"THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN REQUEST TO THE
CHIEF EXECUTIVE OFFICER OF SYNAGRO TECHNOLOGIES, INC. IN HOUSTON, TEXAS,
INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT,
ISSUE DATE AND YIELD TO MATURITY WILL BE MADE AVAILABLE."
SECTION 11. MISCELLANEOUS
11.1 Expenses. If and only if the transactions contemplated hereby shall
--------
be consummated, the Company agrees to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and related
documents and all costs of furnishing all opinions by counsel for the Company
(including, without limitation, any opinions requested by the Lender as to any
legal matters arising hereunder), and of the Company's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, (ii) the reasonable fees, expenses and disbursements
of counsel to the Lender in connection with the negotiation, preparation, and
execution of the Documents and with the review of other documents related to the
Transactions and any Future Acquisitions, and any amendments and waivers hereto
or thereto and (iii) after the occurrence of an Event of Default, all costs and
expenses (including reasonable attorneys' fees) incurred by the Lender in
enforcing any obligations of or in collecting any payments due hereunder or
under the Note by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a workout, or any insolvency or bankruptcy
proceedings.
11.2 Indemnity.
---------
11.2.1. General. In addition to the payment of expenses pursuant to
-------
Section 11.1, whether or not the transactions contemplated hereby shall be
------------
consummated, the Company (as "Indemnitor") agrees to indemnify, pay and hold the
----------
Lender, and the officers, directors, employees, agents, and Affiliates of the
Lender (collectively called the "Indemnitees") harmless from and against any and
-----------
all other liabilities, costs, expenses liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of one counsel for such Indemnitees in connection
-46-
with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against that Indemnitee, in
any manner relating to or arising out of this Agreement, the Loans or the other
documents related to the Transactions, the Lender's agreement to make the Loans
or the use or intended use of the proceeds of any of the proceeds thereof to the
Company (the "Indemnified Liabilities"); provided, that, the Indemnitor shall
----------------------- -------- ----
not have any obligation to an Indemnitee hereunder with respect to an
Indemnified Liability to the extent that such Indemnified Liability arises from
the gross negligence or willful misconduct of that Indemnitee. THIS INDEMNITY
INDEMNIFIES THE INDEMNITEES AGAINST THEIR OWN NEGLIGENCE. Each Indemnitee shall
give the Indemnitor prompt written notice of any claim that might give rise to
Indemnified Liabilities setting forth a description of those elements of such
claim of which such Indemnitee has knowledge; provided, that, any failure to
-------- ----
give such notice shall not affect the obligations of the Indemnitor unless (and
then solely to the extent) such Indemnitor is prejudiced. The Indemnitor shall
have the right at any time during which such claim is pending to select counsel
to defend and control the defense thereof and settle any claims for which they
are responsible for indemnification hereunder (provided, that, the Indemnitor
-------- ----
will not settle any such claim without (i) the appropriate Indemnitee's prior
written consent which consent shall not be unreasonably withheld or (ii)
obtaining an unconditional release of the appropriate Indemnitee from all claims
arising out of or in any way relating to the circumstances involving such claim)
so long as in any such event the Indemnitor shall have stated in a writing
delivered to the Indemnitee that, as between the Indemnitor and the Indemnitee,
the Indemnitor is responsible to the Indemnitee with respect to such claim to
the extent and subject to the limitations set forth herein; provided, that, the
-------- ----
Indemnitor shall not be entitled to control the defense of any claim in the
event that in the reasonable opinion of counsel for the Indemnitee there are one
or more material defenses available to the Indemnitee which are not available to
the Indemnitor; provided, further, that with respect to any claim as to which
-------- -------
the Indemnitee is controlling the defense, the Indemnitor will not be liable to
any Indemnitee for any settlement of any claim pursuant to this Section 11.2
------------
that is effected without its prior written consent. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them. No
Indemnitee (in its capacity as the Lender or holder of the Warrants or Warrant
Shares) shall be liable for any indirect or consequential damages in connection
with its activities relating to this Agreement, the Note or other documents
relating to the Transactions.
11.2.2. Environmental Liabilities. Without limiting the generality of
-------------------------
the indemnity set out in Section 11.2.1 above, the Company shall defend,
--------------
protect, indemnify and hold harmless the Lender and all other Indemnitees from
and against any and all actions, causes of action, suits, losses, liabilities,
damages, injuries, penalties, fees, costs, expenses and claims of any and every
kind whatsoever paid, incurred or suffered by, or asserted against, the Lender
or any other Indemnitee for, with respect to, or as a direct or indirect result
of, the past, present or future environmental condition of any property owned,
operated or used by the Company, any Subsidiary, their predecessors or
successors or of any offsite treatment, storage or disposal location associated
therewith, including, without limitation, the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, release, or threatened
release into, onto or from, any such property or location of any toxic, chemical
or hazardous substance, material or waste (including, without limitation, any
losses,
-47-
liabilities, damages, injuries, penalties, fees, costs, expenses or claims
asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law,
or any other federal, state, local or foreign statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or imposing liability
or standards on conduct concerning, any toxic, chemical or hazardous substance,
material or waste), regardless of whether caused by, or within the control of,
the Company or any Subsidiary.
11.3 Amendments and Waivers. No amendment, modification, termination,
----------------------
waiver or consent of any provision of this Agreement, shall in any event be
effective without the written consent of the Majority Holders and the Company;
provided, that, no amendment, modification, termination, waiver or consent of
-------- ----
any provision of this Agreement, shall, unless in writing and signed by all the
holders of Notes, do any of the following: (a) increase or subject the Lender
to any additional obligations, (b) reduce the principal of, or interest on the
Loans or any fees, premiums or other amounts payable hereunder, (c) postpone any
date fixed for any payment of principal of, or premium or interest on, the Loan
or any fees or other amounts payable hereunder (other than as a result of
waiving a prepayment required under Section 3.2 or a Default or Event of Default
-----------
giving rise to a right of acceleration, which shall each be by written consent
of the Majority Holders), or (d) amend this Section 11.3. Any waiver or consent
------------
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on the Company in any case shall
entitle the Company to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.3 shall be binding upon each Lender
------------
at the time outstanding and each future holder thereof.
11.4 Independence of Covenants. All covenants hereunder shall be given
-------------------------
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
11.5 Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and delivered personally, mailed by certified or registered mail, return
receipt requested and postage prepaid, sent via a nationally recognized
overnight courier, or via facsimile. Such notices, demands and other
communications will be sent to the address indicated below:
If to the Company:
-----------------
Synagro Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
-48-
With a copy to:
--------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
3400 Chase Tower
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender:
----------------
GTCR Capital Partners, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
--------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party;
provided, that, the failure to deliver copies of notices as indicated above
-------- ----
shall not affect the validity of any notice. Any such communication shall be
deemed to have been received (i) when delivered, if personally delivered or sent
by nationally recognized overnight courier or sent via facsimile or (ii) on the
third Business Day following the date on which the piece of mail containing such
communication is posted if sent by certified or registered mail.
11.6 Survival of Warranties and Certain Agreements.
---------------------------------------------
11.6.1. All agreements, representations and warranties made herein
shall survive the execution and delivery of this Agreement and the execution and
delivery of the Note, and shall continue until the repayment of the Note and the
Loan Obligations in full; provided, that, if all or any part of such payment is
-------- ----
set aside, the representations and warranties contained herein shall continue as
if no such payment had been made.
11.6.2. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of the Company set forth in Sections 11.1 and
-------------
11.2 shall survive the payment of the Note and the termination of this
----
Agreement.
11.7 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
-----------------------------------------------------
delay on the part of the Lender in the exercise of any power, right or privilege
hereunder or under the Note shall
-49-
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under this
Agreement or the Note are cumulative to and not exclusive of, any rights or
remedies otherwise available.
11.8 Severability. If and to the extent that any provision in this
------------
Agreement or the Note shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions of the Agreement or obligations of the Company under such provisions,
or of such provision or obligation in any other jurisdiction, or of such
provision to the extent not invalid, illegal or unenforceable shall not in any
way be affected or impaired thereby.
11.9 Heading. Section and subsection headings in this Agreement are
-------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.10 Applicable Law. This Agreement shall be governed by, and shall be
--------------
construed and enforced in accordance with, the laws of the State of Illinois
without regard to the principles of conflicts of laws.
11.11 Successors and Assigns; Subsequent Holders of Note. This Agreement
--------------------------------------------------
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and the successors
and assigns of the Lender. The terms and provisions of this Agreement and all
certificates delivered pursuant hereto shall inure to the benefit of any
assignee or transferee of the Note, to the extent the assignment is permitted
hereunder, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon the Lender shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. The Company's rights or any interest therein or hereunder may not be
assigned without the written consent of the Majority Holders.
11.12 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
----------------------------------------------
PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT TO THIS AGREEMENT OR THE
NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN
THE STATE OF ILLINOIS LOCATED IN THE CITY OF CHICAGO, ILLINOIS AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT, HOWEVER, TO RIGHTS OF APPEAL.
THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF COPIES OF ANY SUMMONS
AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY DELIVERING A COPY
OF SUCH PROCESS TO SUCH PARTY, AT ITS ADDRESS SPECIFIED IN SECTION 11.5, OR BY
------------
ANY OTHER METHOD PERMITTED BY APPLICABLE LAW. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE
-50-
LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION.
11.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO
--------------------
THE FULL EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER DOCUMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE LENDER FOR ANY LOST
PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL
FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER THE OTHER DOCUMENTS, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; THE COMPANY HEREBY WAIVES,
RELEASES AND AGREES NOT TO ▇▇▇ UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. THE
COMPANY AGREES THAT THIS SECTION 11.13 IS A SPECIFIC AND MATERIAL ASPECT OF THIS
-------------
AGREEMENT AND ACKNOWLEDGES THAT THE LENDER WOULD NOT EXTEND TO THE COMPANY ANY
MONIES HEREUNDER IF THIS SECTION 11.13 WERE NOT PART OF THIS AGREEMENT.
-------------
11.14 No Personal Obligations. Notwithstanding anything to the contrary
-----------------------
contained herein or in any other Document, it is expressly understood and the
Lender expressly agrees that nothing contained herein, in any other Document or
in any other document contemplated hereby or thereby (whether from a covenant,
representation, warranty or other provision herein) shall create, or be
construed as creating, any personal liability of any shareholder, director,
officer, employee, agent, partner or Affiliate of the Company or its
Subsidiaries, in its capacity as such or otherwise, with respect to (a) any
payment obligation of the Company or its Subsidiaries, (b) any obligation of the
Company or its Subsidiaries to perform any covenant, undertaking,
indemnification or agreement, either express or implied, contained herein or in
any other Document, (c) any other claim or liability to the Lender under or
arising under this Agreement or any other Document, in any other document
contemplated hereby or thereby or (d) any credit extended or loan made;
provided, that, nothing herein shall be deemed to be a waiver of claims arising
-------- ----
from fraud.
11.15 Counterparts; Effectiveness. This Agreement and any amendments,
---------------------------
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and written or telephonic notification of such execution and
authorization of delivery thereof has been received by the Company and the
Lender.
-51-
11.16 Entirety. This Agreement and the Documents embody the entire
--------
agreement among the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
* * * * *
-52-
IN WITNESS WHEREOF, the parties hereto have caused this Senior Subordinated
Loan Agreement to be executed by the respective duly authorized officers of the
undersigned and by the undersigned as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Title: Chairman/CEO
------------------
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C.
Its: General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Principal
Counterpart signature page to Senior Subordinated Loan Agreement dated as of
January 27, 2000 among Synagro Technologies, Inc., GTCR Capital Partners, L.P.
and certain Guarantors:
SYNAGRO WEST, INC.
SYNAGRO OF CALIFORNIA, INC.
SYNAGRO COMPOSTING COMPANY OF
CALIFORNIA, INC.
SYNAGRO MIDWEST, INC.
SYNAGRO OF MICHIGAN, INC.
SYNAGRO OF WISCONSIN, INC.
SYNAGRO SOUTHWEST, INC.
SYNAGRO OF TEXAS - VITAL-CYCLE, INC.
SYNAGRO OF TEXAS - CDR, INC.
SYNAGRO SOUTHEAST, INC.
SYNAGRO OF NORTH CAROLINA - AMSCO, INC.
SYNAGRO OF FLORIDA - ANTI-POLLUTION,
INC.
SYNAGRO OF NORTH CAROLINA - EWR, INC.
SYNAGRO OF FLORIDA - A&J, INC.
SYNAGRO NORTHEAST, INC.
SYNAGRO MID-ATLANTIC, INC.
ORGANI-GRO, INC.
ST INTERCO, INC.
COMPOSTING CORPORATION OF AMERICA
MICHIGAN ORGANIC RESOURCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: _______________________
NEW HAVEN RESIDUALS SYSTEMS, INC.
RESIDUAL TECHNOLOGIES SYSTEMS, INC.
FAIRHAVEN RESIDUAL SYSTEMS, INC.
NEW ENGLAND TREATMENT COMPANY, INC.
NETCO-CONNECTICUT, INC.
NETCO-WATERBURY SYSTEMS, INC.
NETCO-RESIDUALS MANAGEMENT SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: _______________________
NETCO-RESIDUALS MANAGEMENT, LIMITED
PARTNERSHIP
By: Netco-Residuals Management Systems, Inc.,
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title:______________________
RESIDUAL TECHNOLOGIES, LIMITED
PARTNERSHIP
By: Residual Technologies Systems, Inc.,
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title:______________________
FAIRHAVEN RESIDUALS, LIMITED PARTNERSHIP
By: Fairhaven Residual Systems, Inc.,
its General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title:______________________
PROVIDENCE SOILS, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
its Member
By:_________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Title:______________________
List of Exhibits
----------------
Exhibit A Definitions
Exhibit B Form of Note
Exhibit C Compliance Certificate
Exhibit D Form of Intercreditor Agreement
Exhibit E Form of Amendment to Restated Certificate of Incorporation
List of Disclosure Schedules
----------------------------
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Owned Real Property Schedule
Leased Property Schedule
Taxes Schedule
Contracts Schedule
Employee Benefits Schedule
Intellectual Property Schedule
Litigation Schedule
Consents Schedule
Shareholders Consent Schedule
Insurance Schedule
Schedule of Key Employees
Employee Benefit Schedule
Environmental Schedule
Affiliated Transactions Schedule
Customer Schedule
Unsecured Seller Debt Schedule
Capital Lease Debt Schedule
Liens Schedule
EXHIBIT A
---------
DEFINITIONS
-----------
"Accounting Changes" shall mean changes in GAAP or interpretations of GAAP
------------------
occurring after the Closing Date.
"Acquisition" has the meaning set forth in the recitals to the Agreement.
-----------
"Acquisition Agreement" has the meaning set forth in the recitals to the
---------------------
Agreement.
"Act" has the meaning set forth in Section 10.2.2 to the Agreement.
--- --------------
"Adjusted Capital Expenditures" means Capital Expenditures other than
-----------------------------
Capital Expenditures made from the proceeds of asset sales.
"Adjusted EBITDA" means, for any period, EBITDA for such period; provided
--------------- --------
that in calculating Adjusted EBITDA, (a) the consolidated net income of any
Person acquired by the Company or any Subsidiary during such period (plus, to
the extent deducted in determining such consolidated net income, interest
expense, income tax expense, depreciation and amortization of such Person) shall
be included on a pro forma basis for such period (assuming the consummation of
--- -----
each such acquisition and the incurrence or assumption of any Debt in connection
therewith occurred on the first day of such period, but adjusted to add back
non-recurring expenses and other items disclosed in the report of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP dated on or about January 27, 2000 (such as owner compensation) or
otherwise disclosed in connection with Future Acquisitions approved by the
Lender, in each case to the extent disclosed to and reasonably approved by the
Majority Holders) based upon (i) to the extent available, (x) the audited
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the fiscal year of such Person preceding the
acquisition of such Person and the related audited consolidated statements of
income, stockholders' equity and cash flows for such fiscal year and (y) any
subsequent unaudited financial statements for such Person for the period prior
to the acquisition of such Person so long as such statements were prepared on a
basis consistent with the audited financial statements referred to above or (ii)
to the extent the items listed in clause (i) are not available, such historical
----------
financial statements and other information as is disclosed to, and reasonably
approved by, the Majority Holders; (b) the consolidated net income of any Person
(or division or similar business unit) disposed of by the Company or any
Subsidiary during such period (plus, to the extent deducted in determining such
consolidated net income, interest expense, income tax expense, depreciation and
amortization of such Person (or division or business unit)) shall be excluded on
a pro forma basis for such period (assuming the consummation of such disposition
--- -----
occurred on the first day of such period) and (c) the Special Charges (net of
any Recoveries received or taken), if applicable, shall be added to EBITDA.
"Adjusted Guarantor Net Worth" has the meaning set forth in Section 9.5.1
---------------------------- -------------
of this Agreement.
-i-
"Affiliate," as applied to any Person, means any other Person directly or
---------
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly,
indirectly or beneficially, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise. The Lender nor any parent of the Lender
nor any Subsidiary of the Lender shall not be treated as an Affiliate of the
Company nor shall be deemed to be a holder of 5% or more of any class of equity
securities of the Company.
"Affiliated Group" means any affiliated group as defined in IRC (S)1504
----------------
that has filed a consolidated return for federal income tax purposes (or any
similar group under state, local or foreign law) for a period during which the
Company or any of its Subsidiaries was a member.
"Agent" has the meaning set forth in the recitals to the Agreement.
-----
"Agreement" means this Senior Subordinated Loan Agreement, as from time to
---------
time in effect, of which this Exhibit is a part.
"Applicable Asset Sale Proceeds" means the Net Cash Proceeds from any Asset
------------------------------
Sale, excluding (i) Net Cash Proceeds from any Asset Sale of transportation,
---------
processing and spreading equipment so long as such Net Cash Proceeds are used to
purchase similar transportation, processing or spreading equipment within six
months after such Asset Sale and (ii) the first $250,000 of Net Cash Proceeds
received from all other Asset Sales in any Fiscal Year.
"Approved Use" has the meaning set forth in Section 2.2.3 to the Agreement.
------------ -------------
"Asset Sale" means the sale, lease, assignment or other transfer for value
----------
by the Company or any Subsidiary to any Person (other than the Company or any
Subsidiary) of any asset or right of the Company or such Subsidiary (including
any sale or other transfer of stock of any Subsidiary, whether by merger,
consolidation or otherwise).
"Bankruptcy Code" means Title 11 of the United States Code, as now and
---------------
hereafter in effect, or any successor statute.
"Benefit Plan" has the meaning set forth in Section 4.19.1 of the
------------ --------------
Agreement.
"Board" means the Board of Directors of the Company.
-----
"Borrowers' Certificate" means, as applied to any company, a certificate
----------------------
executed on behalf of such company by its chairman of the board (if an officer),
its chief executive officer, its president or its Chief Financial Officer;
provided, that, every Borrowers' Certificate with respect to the compliance with
-------- ----
a condition precedent to the making of loans hereunder shall include (i) a
statement that the officer or officers making or giving such Borrowers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement of
-ii-
the signers that they have made or have caused to be made such examination or
investigation as they deem necessary to enable them to certify that such
condition has been complied with, and (iii) a statement that such condition has
been complied with.
"Business Day" means any day excluding Saturday, Sunday and any day which
------------
is a legal holiday under the laws of the States of Illinois or Texas or is a day
on which banking institutions located in Chicago, Illinois or Houston, Texas are
authorized or required by law or other governmental action to close.
"Capital Expenditures" means all expenditures which, in accordance with
--------------------
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
"Capital Lease" means, with respect to any Person, any lease of (or other
-------------
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such Person.
"Cash Equivalent Investment" means, at any time, (a) any evidence of Debt,
--------------------------
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, or corporate demand notes, in
each case (unless issued by a Bank or its holding company) rated at least A-l by
Standard & Poor's Ratings Group or P-l by ▇▇▇▇▇'▇ Investors Service, Inc., (c)
any certificate of deposit (or time deposits represented by such certificates of
deposit) or bankers acceptance, maturing not more than one year after such time,
or overnight Federal Funds transactions that are issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any Bank (or other
commercial banking institution of the stature referred to in clause (c)) which
----------
(i) is secured by a fully perfected security interest in any obligation of the
type described in any of clauses (a) through (c) and (ii) has a market value at
----------- ---
the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such Bank (or other commercial banking institution)
thereunder and (e) investments in short-term asset management accounts offered
by any Bank for the purpose of investing in loans to any corporation (other than
the Company or an Affiliate of the Company), state or municipality, in each case
organized under the laws of any state of the United States or of the District of
Columbia.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980 ("CERCLA"), as amended, or any other Environmental and
Safety Requirements.
"Certificate Amendment" has the meaning set forth in Section 5.1.14 to the
--------------------- ------
Agreement.
"Certificates of Designation" means the Company's Certificates of
---------------------------
Designation filed pursuant to the Preferred Stock Purchase Agreement relating
to the Convertible Preferred Stock.
-iii-
"Change of Control" has the meaning set forth in Section 7.15 of the
----------------- ------------
Agreement.
"Chief Financial Officer" means the highest ranking officer of any company
-----------------------
then in charge of the financial matters of such company.
"Closing" has the meaning set forth in Section 2.4 to the Agreement.
------- -----------
"Closing Date" has the meaning set forth in Section 2.4 to the Agreement.
------------ -----------
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor statute.
"Common Stock" means the Company's common stock, par value $.002 per share.
------------
"Company" has the meaning set forth in the preamble to this Agreement.
-------
"Computation Period" means each period of four consecutive Fiscal Quarters
------------------
ending on the last day of a Fiscal Quarter.
"Consolidated Net Income" means, with respect to the Company and its
-----------------------
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any extraordinary gains during such
---------
period.
"Controlled Group" means all members of a controlled group of corporations
----------------
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code or Section 4001 of ERISA.
"Contributor" has the meaning set forth in Section 9.5.1 to the Agreement.
----------- --------------
"Contribution Percentage" has the meaning set forth in Section 9.5.1 to the
----------------------- -------------
Agreement.
"Convertible Preferred Stock" means the Company's Series D Convertible
---------------------------
Preferred Stock, par value $.002 per share, and each other series of the
Company's convertible preferred stock issued, or from time to time issuable,
pursuant to the Preferred Stock Purchase Agreement and the exercise of Warrants
issued pursuant to the Warrant Agreement.
"Credit Agreement" has the meaning set forth in the recitals to the
----------------
Agreement, together with any schedules, exhibits, appendices or other
attachments thereto, as such agreement may be amended, restated, extended,
renewed, supplemented, refinanced, replaced or otherwise modified from time to
time (including, without limitation, by increasing the amount of available
borrowings thereunder or adding any direct or indirect Subsidiaries of the
Company as additional borrowers or guarantors thereunder) and whether by the
same or any other agent, lender or group of lenders.
"Credit Documents" means, collectively, the Credit Agreement, the related
----------------
security agreements, guarantees, pledge agreements, notes and the other
documents executed in connection
-iv-
therewith, the Intercreditor Agreement, and each other document or instrument
executed by the Company, any Subsidiary of the Company or any other obligor
under any such documents, including any schedules, exhibits, appendices or other
attachments thereto.
"Debt" of any Person means, without duplication, (a) all indebtedness of
----
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person
(including the letters of credit), (f) all Hedging Obligations of such Person,
(g) all Suretyship Liabilities of such Person and (h) all Debt of any
partnership in which such Person is a general partner. The amount of any
Person's Debt in respect of any obligation to pay the deferred purchase price of
property or services where such obligation (including any such obligation
evidenced by a note or similar instrument) is contingent upon sales, revenues,
the achievement of a particular business goal or any similar test shall be the
maximum amount which (at any date of determination) is reasonably expected to be
paid in respect of such obligation as estimated by the Company (subject to the
approval of the Lender, which shall not be unreasonably withheld).
"Default" means any event, act or condition which with notice or lapse of
-------
time, or both, would constitute an Event of Default.
"DGCL" has the meaning set forth in Section 4.27 of the Agreement.
---- ------------
"Documents" means the Credit Documents, the Subordinated Loan Documents,
---------
the Acquisition Agreement, the Warrant Agreement, the Warrants, the Preferred
Stock Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement and all documents, certificates and
agreements delivered with respect thereto, in each case, together with any
schedules, exhibits, appendices or other attachments thereto.
"EBITDA" means, for any period, Consolidated Net Income for such period
------
plus to the extent deducted in determining such Consolidated Net Income,
----
Interest Expense, income tax expense, depreciation and amortization for such
period.
"Eligible Assignee" means (i) any Lender or any affiliate (as defined in
-----------------
the Exchange Act) of any Lender, (ii) any commercial bank, insurance company,
mutual fund, (iii) any investment fund or finance company or other entity that
is an institutional "accredited investor" (as defined in Regulation D under the
Securities Act) and which extends credit or buys loans as one of its businesses
(such commercial bank, insurance company, mutual fund, investment fund, finance
company or other entity
-v-
collectively referred to herein as a "Finance Company"), which, in the case of
any Finance Company, together with such Finance Company's affiliates (as defined
in the Exchange Act), has assets or assets under management equal to or greater
than $500,000,000.
"Environmental Claims" means all claims, however asserted, by any
---------------------
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release of Hazardous Substances or injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed and enforceable duties, licenses, authorizations
and permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
"Environmental Lien" shall mean any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity, relating to any liability of the Company or
any Subsidiary arising under any Environmental and Safety Requirements.
"Environmental and Safety Requirements" shall mean all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).
"EPIC" means Environmental Protection & Improvement Co., a New Jersey
----
corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor statute.
"Event of Default" has the meaning set forth in Section 7.1 of the
---------------- -----------
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, and any successor statute.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries,
-----------
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1999") refer to the Fiscal Year ending on December 31 of
such calendar year.
"Fixed Charge Coverage Ratio" means:
---------------------------
-vi-
(a) for any Computation Period ending on or prior to December 31, 2000, the
ratio of (i) Adjusted EBITDA less Adjusted Capital Expenditures for such
Computation Period to (ii) the sum of Interest Expense to the extent payable in
cash for such Computation Period plus the actual aggregate amount of all
principal payments on Debt required to be made by the Company and its
Subsidiaries during such Computation Period; provided that (x) in calculating
--------
Capital Expenditures, capital expenditures of any Person (or division or similar
business unit) acquired by the Company or any Subsidiary during such period
shall be included on a pro forma basis for such period and the capital
--- -----
expenditures of any Person (or division or similar business unit) disposed of by
the Company or any Subsidiary during such period shall be excluded on a pro
---
forma basis for such period and (y) in calculating Interest Expense, any Debt
-----
incurred or assumed in connection with the acquisition of any Person (or
division or similar business unit) shall be assumed to have been incurred or
assumed on the first day of such period and any Debt assumed by any Person
(other than the Company or any Subsidiary) in connection with the disposition of
any Person (or division or similar business unit) disposed of by the Company or
any Subsidiary during such period shall be assumed to have been repaid on the
first day of such period; and
(b) for any Computation Period thereafter, the ratio of (i) EBITDA less
Adjusted Capital Expenditures for such Computation Period to (ii) the sum of
Interest Expense to the extent payable in cash for such Computation Period plus
the actual aggregate amount of all principal payments on Debt required to be
made by the Company and its Subsidiaries during such Computation Period.
"Foreign Subsidiary" means each Subsidiary of the Company which is
------------------
organized under the laws of any jurisdiction other than, and which is conducting
the majority of its business outside of, the United States or any state thereof.
"FRB" means the Board of Governors of the Federal Reserve System or any
---
successor thereto.
"Funded Debt" means all Debt of the Company and its Subsidiaries, excluding
-----------
(i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations and (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries.
"Funded Debt to Adjusted EBITDA Ratio" means, for any Computation Period,
------------------------------------
the ratio of (i) Funded Debt as of the last day of such Computation Period to
(ii) Adjusted EBITDA for such Computation Period.
"Future Acquisitions" has the meaning set forth in Section 2.2.3 to the
-------------------
Agreement.
"GAAP" means generally accepted accounting principles set forth from time
----
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
-vii-
"GTCR Fund VII" has the meaning set forth in Section 7.15 to the Agreement.
------------- ------------
"Guaranteed Obligations" has the meaning set forth in Section 9.1.1 of the
----------------------
Agreement.
"Guarantor" means, on any day, each Subsidiary that has executed a
---------
counterpart of this Agreement (or is required to execute a counterpart of this
Agreement on that date).
"Guarantor Net Worth" has the meaning set forth in Section 9.5.1 of the
------------------- -------------
Agreement.
"Guaranty" has the meaning set forth in Section 9.1 of the Agreement
-------- -----------
"Hazardous Substances" means any hazardous waste, as defined by 42 U.S.C.
--------------------
(S)6903(5), any hazardous substance as defined by 42 U.S.C. (S)9601(14), any
pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance regulated by
any Environmental Law, excluding household hazardous waste.
"Hedging Obligations" means, with respect to any Person, all liabilities of
-------------------
such Person under interest rate, currency and commodity swap agreements, cap
agreements and collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
"Immaterial Law" means any provision of any Environmental Law the violation
--------------
of which will not (a) violate any judgment, decree or order which is binding
upon the Company or any Subsidiary, (b) result in or threaten any injury to
public health or the environment or any material damage to the property of any
Person or (c) result in any liability or expense (other than any de minimis
-- -------
liability or expense) for the Company or any Subsidiary; provided that no
provision of any Environmental Law shall be an Immaterial Law if the Lender has
notified the Company that the Lender has determined in good faith that such
provision is material.
"Indemnified Liabilities" has the meaning set forth in Section 11.2 of the
----------------------- ------------
Agreement.
"Indemnitees" has the meaning set forth in Section 11.2 of the Agreement.
----------- ------------
"Indemnitors" has the meaning set forth in Section 11.2 of the Agreement.
----------- ------------
"Initial Loan" has the meaning set forth in Section 2.2.2 of the Agreement.
------------
"Intellectual Property Rights" means all (i) patents, patent applications,
----------------------------
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos and corporate names and registrations and applications for
registration thereof together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer
software, data, data bases and documentation thereof, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how,
-viii-
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium).
"Intercreditor Agreement" has the meaning set forth in Section 8 of the
----------------------- ---------
Agreement.
"Interest Coverage Ratio" means, for any Computation Period, the ratio of
-----------------------
(a) EBITDA for such Computation Period plus, if applicable, any Special Charges
(net of any Recoveries received or taken) to (b) Interest Expense to the extent
payable in cash for such Computation Period.
"Interest Expense" means, as to any Person for any Computation Period, the
----------------
consolidated interest expense of the Company and its Subsidiaries for such
Computation Period (including all imputed interest on Capital Leases).
"Interest Payment Date" has the meaning set forth in Section 3.2.2 of the
--------------------- -------------
Agreement.
"Interest Period" has the meaning set forth in Section 3.2.2 of the
--------------- -------------
Agreement.
"Investment" means, relative to any Person, (a) any loan or advance made by
----------
such Person to any other Person (excluding any commission, travel or similar
advances made to directors, officers and employees of the Company or any of its
Subsidiaries), (b) any Suretyship Liability of such Person, (c) any ownership or
similar interest held by such Person in any other Person and (d) deposits and
the like relating to prospective acquisitions of businesses.
"Leases" has the meaning set forth in Section 4.10.2 of the Agreement.
------
"Lender" shall have the meaning set forth in the preamble to the Agreement,
------
and shall also mean any assignees of the Note pursuant to Section 10 of the
----------
Agreement.
"Lien" means, with respect to any Person, any interest granted by such
----
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
"Loan" and "Loans" have the meaning set forth in Section 2.1 of the
---- ----- -----------
Agreement.
"Loan Obligations" mean any and all obligations of the Company or the
----------------
Guarantors under the Subordinated Loan Documents, including, without limitation,
the obligation to pay principal, interest, expenses, attorneys' fees and
disbursements, indemnities and other amounts payable thereunder or in connection
therewith or related thereto.
"Majority Holders" means the holders in interest of more than 50% of the
----------------
aggregate principal amount of the Note and Loans evidenced thereby.
-ix-
"Margin Stock" means any "margin stock" as defined in Regulation U of the
------------
FRB.
"Material Adverse Effect" means a material adverse change in, or a material
-----------------------
adverse effect on, (a) the business, assets, property, operations, results,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or (b) the validity or enforceability of the
Agreements, the Note, the Warrants, the Warrant Agreement, or the Registration
Agreement or the rights or remedies, taken as a whole, of the Lender thereunder.
"Maturity Date" means January 27, 2008.
-------------
"Maximum Senior Indebtedness" has the meaning set forth in Section 6.9
---------------------------
hereof.
"Monitoring Agreement" means that certain Monitoring Agreement, dated as of
--------------------
the date hereof, between the Company and GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, L.L.C.
"Multiemployer Pension Plan" means a multiemployer plan, as such term is
--------------------------
defined in Section 4001(a)(3) of ERISA, and to which the Company or any member
------------------
of the Controlled Group may have any liability.
"Nasdaq" has the meaning set forth in Section 6.26 of the Agreement.
------ ------------
"Net Cash Proceeds" means:
-----------------
(a) with respect to any Asset Sale, the aggregate cash proceeds (including
cash proceeds received by way of deferred payment of principal pursuant to a
note, installment receivable or otherwise, but only as and when received)
received by the Company or any Subsidiary pursuant to such Asset Sale, net of
(i) the direct costs relating to such Asset Sale (including sales commissions
and legal, accounting and investment banking fees), (ii) taxes paid or
reasonably estimated by the Company to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and (iii) amounts required to be applied to the repayment of any
Debt secured by a Lien on the asset subject to such Asset Sale (other than Debt
hereunder); and
(b) with respect to any issuance of equity securities or Debt, the
aggregate cash proceeds received by the Company or any Subsidiary pursuant to
such issuance, net of the direct costs relating to such issuance (including
sales and underwriter's discounts and commissions and legal, accounting and
investment banking fees).
"Net Worth" means the Company's consolidated stockholders' equity
---------
(including the Convertible Preferred Stock but excluding any equity attributable
to any preferred stock which is mandatorily redeemable, or redeemable at the
option of the holder thereof, prior to one year following the final stated
maturity of the Loans).
"1999 Special Charges" means up to $1,500,000 of special charges taken by
--------------------
the Company in the 1999 Fiscal Year (of which not more than $500,000 may be cash
payable after January 27, 2000).
-x-
"Note" has the meaning set forth in Section 3.1 of this Agreement.
---- -----------
"Other Documents" means the Documents other than the Subordinated Loan
---------------
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
------------ -------
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
----
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
------------
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
------------
"Permitted Encumbrances" means (a) statutory liens for current taxes or
----------------------
other governmental charges with respect to the Real Property not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings by the Company and for which appropriate reserves have
been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which are not, individually
or in the aggregate, material to the operation of the Company's or its
Subsidiaries' business; (c) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated by the current use and operation of the Real
Property; and (d) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the Real Property which do not
materially impair the occupancy or use of the Real Property for the purposes for
which it is currently used in connection with the Company's or its Subsidiaries'
business.
"Permitted Refinancing Debt" means any Debt issued in exchange for, or the
--------------------------
net proceeds of which are used to refinance, renew, replace, defease or refund
the Senior Indebtedness (including, without limitation, the stated amounts of
letters of credit and all unused commitments); provided that: (1) the principal
-------- ----
amount of such Debt does not exceed the Maximum Senior Indebtedness (including,
without limitation, the stated amounts of letters of credit and all unused
commitments) at the time of such refinancing renewal, replacement, defeasance or
refunding (plus the amount of reasonable fees and expenses incurred in
connection therewith); (2) such Debt has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the Senior
Indebtedness being refinanced, renewed, replaced, defeased or refunded and such
Debt has a final maturity equal to or later than the Senior Indebtedness being
refinanced, renewed, replaced, defeased or refunded ; (3) such Debt is ranked
superior in right of payment to the Loans on terms at least as favorable to the
holders of the Loans as those, if any, contained in the documentation governing
the Senior Indebtedness (including the Intercreditor Agreement); (4) the annual
interest rate with respect to such Debt (x) if it is a fixed rate, it is not
more than 2% per annum more than, and such interest is payable no more
frequently than, that of the Senior Indebtedness as in effect on the date hereof
and (y) if it is a variable rate, the index used for the calculation of the
annual interest rate is substantially similar to and the margins applied to such
index are not more than 2% per annum more than, and such interest is payable no
more frequently than, that of the Senior Indebtedness as in effect on the date
-xi-
hereof; (5) such Debt is incurred by the Company; and (6) such Debt satisfies
the provisions of the subsection of Section 6.9(a) pursuant to which the Debt
--------------
being refinanced was incurred.
"Person" means and includes natural persons, corporations, limited
------
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivision thereof.
"Preferred Stock Purchase Agreement" has the same meaning in the recitals
----------------------------------
to the Agreement.
"Professional Services Agreement" means that certain Professional Services
-------------------------------
Agreement, dated as of the date hereof, between the Company and GTCR ▇▇▇▇▇▇
▇▇▇▇▇▇, L.L.C.
"Purchased Preferred" means the Convertible Preferred Stock purchased from
-------------------
time to time pursuant to the Preferred Stock Purchase Agreement.
"Real Property" means the Owned Real Property and Leased Real Property.
-------------
"Recoveries" means, without duplication, (i) any amounts (including
----------
insurance proceeds and proceeds from any judgment or settlement) received by the
Company or any Subsidiary arising out of any other matter which gave rise to
any Special Charge and (ii) any reversal of any reserve established in
connection with any Special Charge.
"Registration Agreement" has the meaning set forth in the recitals to the
----------------------
Agreement.
"Regulations U and X" means Regulations U and X of the FRB as in effect
-------------------
from time to time.
"Related Person" has the meaning set forth in Section 4.19.6 of the
-------------- --------------
Agreement.
"Relevant Payment" has the meaning set forth in Section 9.5.1 of the
---------------- -------------
Agreement.
"Release" shall have the meaning set forth in CERCLA.
-------
"RESTEC" means the Persons and interests acquired pursuant to the
------
Acquisition.
"RESTEC Bonds" means the Sewage Sludge Disposal Facility Revenue Bonds
------------
(Netco -Waterbury, Limited Partnership Project - 1995 Series) and the Sewage
Sludge Disposal Facility Revenue Bonds (New Haven Residuals, Limited Partnership
Project - 1996 Series).
"Rhode Island Project" means the proposed project in which RESTEC would
--------------------
develop a soil manufacturing facility to process biosolids in Rhode Island for
which a proposal was submitted in response to a request for proposals issued by
the Rhode Island Resource Recovery Corporation. RESTEC originally contemplated a
joint venture for this project, but both of its proposed partners have now
agreed to sell their rights to the project to RESTEC for contingent payments.
-xii-
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Senior Funded Debt" means the remainder of (a) Funded Debt minus (b)
------------------ -----
Subordinated Debt.
"Senior Funded Debt to Adjusted EBITDA Ratio" means , for any Computation
-------------------------------------------
Period, the ratio of (i) Senior Funded Debt as of the last day of such
Computation Period to (ii) Adjusted EBITDA for such Computation Period.
"Senior Indebtedness" means all obligations of the Company now or hereafter
-------------------
incurred pursuant to the Credit Documents, including any increase, refinancing,
refunding, renewal, extension or replacement thereof permitted hereunder,
whether for principal, premium (if any), interest, fees or expenses payable
thereon or pursuant thereto.
"Senior Lenders" has the meaning set forth in the recitals to the
--------------
Agreement.
"Special Charges" means 1999 Special Charges and any charge taken by the
---------------
Company with respect to below market stock option prices provided for stock
options granted to its employees in conjunction with investments by GTCR VII,
the Lender and/or their Affiliates.
"Stockholders Consent" has the meaning set forth in Section 5.1.15 to the
-------------------- --------------
Agreement.
"Subordinated Debt" means (a) the Loan Obligations, (b) and any other Debt
-----------------
of the Company which is subordinated to the Senior Lenders.
"Subordinated Loan Documents" means, collectively, this Agreement, the
---------------------------
Note, and the Guaranties, including all exhibits, schedules and other
attachments thereto.
"Subsidiary" means, with respect to any Person, a corporation, partnership,
----------
limited liability company or other entity of which such Person and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares or
other ownership interests as have more than 50% of the ordinary voting power for
the election of directors or other managers of such entity. Unless the context
otherwise requires, each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Company.
"Suretyship Liability" means any agreement, undertaking or arrangement by
--------------------
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
-xiii-
"Tax" or "Taxes" means federal, state, county, local, foreign or other
--- -----
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
----------
Taxes, including any schedules attached thereto and including any amendment
thereof.
"Transactions" means those transactions contemplated by the Documents.
------------
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"Voting Agreement" means that voting agreement, dated as of the date
----------------
hereof, by and among the Lender, the purchasers under the Preferred Stock
Purchase Agreement and certain stockholders of the Company.
"Warrant Agreement" has the meaning set forth in the recitals to the
-----------------
Agreement.
"Warrants" has the meaning set forth in the recitals to the Agreement.
--------
"Warrant Shares" has the meaning set forth in the recitals to the
--------------
Agreement.
"Weighted Average Life to Maturity" means, when applied to any Debt at any
---------------------------------
date, the number of years obtained by dividing (a) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (y) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (b) the then outstanding principal amount of such
Debt.
"Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary
-----------------------
of which all of the outstanding capital stock or other ownership interests are
owned by such Person or another Wholly-Owned Subsidiary of such Person.
-xiv-