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EXHIBIT 10.28
CONVERTIBLE LOAN AGREEMENT
BY AND BETWEEN
EARTHCARE RESOURCE MANAGEMENT OF FLORIDA, INC.
EARTHCARE RESOURCE MANAGEMENT OF SOUTH FLORIDA, INC.
EARTHCARE ACQUISITION SUB, INC.
AS BORROWER
AND
EARTHCARE COMPANY
AS PARENT
AND
SAGEMARK CAPITAL, LP
AS LENDER
This Convertible Loan Agreement (the "Agreement") is entered into as of
MARCH 30, 2001, by and among EARTHCARE COMPANY (a Delaware corporation) as
parent (hereinafter referred to as "Parent"), EARTHCARE RESOURCE MANAGEMENT OF
FLORIDA, INC., a Florida corporation, EARTHCARE RESOURCE MANAGEMENT OF SOUTH
FLORIDA, INC. (a Florida corporation) and EARTHCARE ACQUISITION SUB, INC., (an
Illinois corporation) as co-borrowers (hereinafter collectively referred to as
"BORROWER") and Sagemark Capital as lender (together with any assignees or
successors in interest referred to as "LENDER")
WITNESSETH:
WHEREAS, Borrower seeks to obtain $1,500,000 in financing through issuance
of Convertible Debentures, such funds to be used for the purpose of general
working capital and the payment of transaction expenses and fees; and
WHEREAS, Borrower agrees to issue this indebtedness; and
WHEREAS, Borrower and Parent have requested that Lender provide such as
herein provided, and Lender is willing to furnish such to Borrower and Lender
upon the terms and subject to the conditions and for the considerations
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein contained
and for other valuable consideration, receipt and sufficiency of which is
acknowledged, the parties hereto agree as follows:
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Loan Agreement (continued)
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ARTICLE I - DEFINITION OF TERMS
SECTION 1.01. DEFINITIONS.
(a) For the purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the respective meanings assigned to
them in this Article I or in the section or recital referred to below:
"Affiliate" with respect to any Person shall mean (i) any person directly or
indirectly owning, controlling or holding power to vote 10% or more of the
outstanding voting securities of any Person; (ii) any person, 10% or more
of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by any Person; (iii) any person
directly or indirectly controlling, controlled by or under common control
with any Person; (iv) any officer, director or partner of any Person; and
(v) if a Person is an officer, director or partner, any company for which
any Person acts in such capacity. For purposes of this Agreement, any
partnership of which any Person is a general partner, or any joint venture
in which any Person is a joint venturer, is an Affiliate of each Person.
"Capital Expenditure" shall mean, with respect to any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and
including expenditures for capitalized lease obligations) by Borrower
during such period that are required by GAAP to be included in or reflected
by the property, plant, or equipment or similar fixed asset accounts in the
balance sheet of Borrower.
"Capital Lease" shall mean any lease of property, real or personal, which is
in substance a financing lease and which would be capitalized on a balance
sheet of the lessee, including without limitation, any lease under which
(i) such lessee will have an obligation to purchase the property for a
fixed sum, (ii) an option to purchase the property at an amount less than a
reasonable estimate of the fair market value of such property as of the
date such lease is executed, or (iii) the term of the lease approximates or
exceeds the expected useful life of the property leased thereunder.
"Collateral" shall mean each and all of the following wherever located and
whether now existing or owned or hereafter created or acquired: the
accounts; the general intangibles; the negotiable collateral; the
inventory; Borrower's books; the equipment; the real estate collateral; any
money, deposit accounts or other assets of Borrower in which Lender receive
a lien or which hereafter comes into the possession, custody or control of
Lender; and all products an proceeds of every nature of any of the
foregoing, including, but not limited to, proceeds of insurance covering
the collateral and any and all accounts, general intangibles, negotiable
collateral, inventory, contract rights, instruments, documents and chattel
paper, equipment, money, deposit accounts or other tangible and intangible
property of Borrower resulting from the sale or other disposition of the
Collateral, and the proceeds and products thereof.
"Consolidated Subsidiaries" shall mean those corporations of which 50% or more
of the voting stock is owned by Borrower and their financial statements are
consolidated with those of the Borrower.
"Conversion " or "Conversion Rights" shall mean exchange of, or the rights to
exchange, the Principal Amount of the loan, or any part thereof, for fully
paid and non assessable Common Stock on the terms and conditions as
provided in the Debenture.
"Conversion Price" shall mean the conversion price as then in effect as
stipulated in the Debentures.
"Common Stock" shall mean the Parent's common stock, $0.0001 par value.
"Debentures" shall mean the Debentures executed by Borrower and made payable
to the order of the Lender in the aggregate principal amount of $1,500,000
and delivered pursuant to the terms of this Agreement, together with any
renewals, extensions or modifications thereof.
"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the
rights of creditors generally.
"Default" shall mean an event with notice or lapse of time or both, could
become an Event of Default.
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Loan Agreement (continued)
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"Dividends", in respect of any corporation, shall mean (i) cash distributions
or any other distributions on, or in respect of, any class of capital stock
of such corporation, except for distributions made solely in shares of
stock of the same class, and (ii) any and all funds, cash and other
payments made in respect of the redemption, repurchase or acquisition of
such stock, unless such stock shall be redeemed or acquired through the
exchange of such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, together with all regulations issued pursuant thereto.
"Event of Default" shall mean any of the events specified in Article VII.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis, set forth in the opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, or their
successors, which are applicable in the circumstances as of the date in
question. The requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current
period are comparable in all material respects to those applied in a
preceding period.
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Parent Borrower or a
Subsidiary or any of its or their businesses, operations or properties.
"Guaranty" of any Person shall mean any contract, agreement or understanding
of such Person pursuant to which such Person in effect guarantees the
payment of any Indebtedness of any other Person (the "Primary Obligor") in
any manner, whether directly or indirectly, including without limitation
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds primarily for the
purpose of assuring the holder of such Indebtedness of the ability of the
Primary Obligor to make payment; or (iii) otherwise to assure the holder of
the Indebtedness of the Primary Obligor against loss in respect thereof,
except that "Guaranty" shall not include the endorsement by Borrower or a
Subsidiary in the ordinary course of business of negotiable instruments or
documents for deposit or collection.
"Holder" shall mean the owner of Registrable Securities.
"Indebtedness" shall mean, with respect to any Person, (a) indebtedness for
borrowed money or for the deferred purchase price of property or services
in respect of which such Person is liable, contingently or otherwise, as
obligor or otherwise or any commitment by which such Person assures a
creditor against loss, including contingent reimbursement obligations with
respect to letter of credit, (b) indebtedness guaranteed in any manner by
such Person, including guarantees in the form of an agreement to repurchase
or reimburse, (c) obligations under leases which shall have been or should
be, in accordance with GAAP, recorded as capital leases, in respect of
which obligations such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such
Person assures a creditor against loss, and (d) any unfunded obligation of
such Person to any employee/employer benefit plan.
"Investment" in any Person shall mean any investment, whether by means of
share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person.
"IRS Code" shall mean the Internal Revenue Code of 1986, as amended, together
with all regulations issued thereunder.
"Lien" shall mean any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
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Loan Agreement (continued)
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"Loan" shall mean the money lent to Borrower pursuant to this Agreement, along
with any accrued interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the initial disbursement of
Loan funds which shall occur on a date 30 days from the date hereof or such
earlier date on which Borrower requests, and Lender approve, as the date at
which the initial advance of the Loan funds shall be consummated, provided
that such date may be mutually extended beyond 30 days, but only by written
agreement of the parties hereto.
"Loan Documents" shall mean this Agreement, the Debentures, Warrant, Personal
Guaranty (including any renewals, extensions and refundings thereof), and
any other agreements or documents (and with respect to this Agreement, and
such other agreements and documents, any amendments or supplements thereto
or modifications thereof) executed or delivered pursuant to the terms of
this Agreement.
"Majority in Interest" shall mean Lender holding among them at least 50.1% of
the then outstanding Loan.
"Material Adverse Effect" or "Material Adverse Change" shall mean any change,
factor or event that shall (i) have a material adverse effect upon the
validity, performance or enforceability of any material provision of any
Loan Documents, (ii) have a material adverse effect upon the financial
condition or business operations of Parent or Borrower or any Subsidiaries,
(iii) have a material adverse effect upon the ability of the Parent or
Borrower to fulfill its material obligations under the Loan Documents, or
(iv) any event that causes a Default or Event of Default.
"Obligation" shall mean: (i) all present and future indebtedness, obligations
and liabilities of Borrower to Lender arising pursuant to this Agreement,
regardless of whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, joint, several, or joint and several;
(ii) all present and future indebtedness, obligations and liabilities of
Borrower to Lender arising pursuant to or represented by the Debentures and
all interest accruing thereon, and reasonable attorneys' fees incurred in
the enforcement or collection thereof; (iii) all present and future
indebtedness, obligations and liabilities of Borrower and any Subsidiary
evidenced by or arising pursuant to any of the Loan Documents; (iv) all
costs incurred by Lender, including but not limited to reasonable
attorneys' fees and legal expenses related to this transaction; and (v) all
renewals, extensions and modifications of the indebtedness referred to in
the foregoing clauses, or any part thereof.
"Other Taxes" shall have the meaning set forth in Section 2.09(b).
"Permitted Liens" shall mean: (i) Liens (if any) granted to Lender to secure
the Obligation; (ii) pledges or deposits made to secure payment of worker's
compensation insurance (or to participate in any fund in connection with
worker's compensation insurance), unemployment insurance, pensions or
social security programs; (iii) Liens imposed by mandatory provisions of
law such as for landlord's, materialmen's, mechanics', warehousemen's and
other like Liens arising in the ordinary course of business, securing
Indebtedness whose payment is not yet due; (iv) Liens for taxes,
assessments and governmental charges or levies imposed upon a Person or
upon such Person's income or profits or property, if the same are not yet
due and payable or if the same are being contested in good faith and as to
which adequate cash reserves have been provided or if an extension is
obtained with respect thereto; (v) Liens arising from good faith deposits
in connection with tenders, leases, real estate bids or contracts (other
than contracts involving the borrowing of money), pledges or deposits to
secure public or statutory obligations and deposits to secure (or in lieu
of) surety, stay, appeal or customs bonds and deposits to secure the
payment of taxes, assessments, customs duties or other similar charges;
(vi) Liens associated with the Bank Credit Agreement, CIB Marine and SMH
(vii) mortgages, financing statements, equipment leases or other
encumbrances incurred in connection with the acquisition of property or
equipment or the replacement of existing property or equipment, provided
that such liens shall be limited to the property or equipment then being
acquired.
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Loan Agreement (continued)
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"Person" shall include an individual, a corporation, a joint venture, a
general or limited partnership, a trust, an unincorporated organization or
a government or any agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan or other plan maintained by Parent
or Borrower for employees of Parent or Borrower and/or any Subsidiaries and
covered by Title IV of ERISA, or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code of 1986, as amended.
"Principal Amount" shall mean, as of any time, the then aggregate outstanding
face amount of the Debentures after any conversions or redemptions and
after giving effect to any installment payments received by Lender.
"Registrable Securities" shall mean (i) the Common Stock issued upon
Conversion of the Debentures or exercise of the Warrant issued in
conjunction with this financing, or (ii) any Common Stock issued upon
Conversion of the Debentures or exercise of any warrant, right or other
security which is issued with respect to the Common Stock referred to in
clause (i) above by way of stock dividend; any other distribution with
respect to or in exchange for, or in replacement of Common Stock; stock
split; or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization; excluding in all cases,
however, any Registrable Security that is not a Restricted Security and any
Registrable Securities sold or transferred by a person in a transaction in
which the rights under this Agreement are not assigned.
"Registrable Securities Then Outstanding" shall mean an amount equal to the
number of Registrable Securities outstanding which have been issued
pursuant to the Conversion of the Debentures or the exercise of the
Warrant.
"Restricted Security" shall mean a security that has not been (i) registered
under the 1933 Act or (ii) distributed to the public pursuant to Rule 144
(or any similar provisions that are in force) under the ▇▇▇▇ ▇▇▇.
"SEC" shall mean the Securities and Exchange Commission.
"1933 Act" shall refer to the Securities Act of 1933, as amended.
"1934 Act" shall refer to the Securities Exchange Act of 1934, as amended.
"Solvent" shall mean, with respect to any Person on a particular date, that on
such date: (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person; (ii) the present fair salable
value, in the ordinary course of business, of the assets of such Person is
not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured;
(iii) such Person is able to realize upon its assets and pay its debts and
other liabilities, contingent obligations and other commitments as they
mature in the normal course of business; (iv) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature; and (v)
such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's property
would constitute unreasonably small capital after giving due consideration
to the prevailing practice in the industry in which such Person is engaged.
In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in
light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Subsidiary" shall mean any corporation whether now existing or hereafter
acquired of which fifty percent (50%) or more of the Voting Shares are
owned, directly or indirectly, by Borrower or Parent.
"Voting Shares" of any corporation shall mean shares of any class or classes
(however designated) having ordinary voting power for the election of at
least a majority of the members of the Board of Directors (or
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Loan Agreement (continued)
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other governing bodies) of such corporation, other than shares having such
power only by reason of the happening of a contingency.
SECTION 1.02. OTHER DEFINITION PROVISIONS.
(a) All terms defined in this Agreement shall have the above-defined
meanings when used in the Debentures or any other Loan Documents, certificate,
report or other document made or delivered pursuant to this Agreement, unless
the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the plural and
vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(d) References to financial statements and reports shall be deemed to be a
reference to such statements and reports prepared in accordance with GAAP on the
basis used by Parent or Borrower in prior years, for all periods after the date
hereof so as to properly reflect the financial condition, and the results of
operations and statement of cash flows, of Parent or Borrower and its
Consolidated Subsidiaries, if any.
(e) Accounting terms not specifically defined above, or not defined in the
Agreement, shall be construed in accordance with GAAP as recognized as of this
date by the American Institute of Certified Public Accountants.
ARTICLE II - LOAN PROVISIONS
SECTION 2.01. LOAN CLOSING.
(a) Subject to the terms and conditions of this Agreement, and the
compliance with such terms and conditions by all parties, Lender agree to lend
to Borrower, and Borrower agrees to borrow from Lender, the aggregate sum of up
to ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) which shall be
disbursed no later than five days of the Loan Closing as follows:
Sagemark Capital, LP $1,500,000
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Total $1,500,000
(b) Such disbursements are to be at such time and subject to the
conditions as provided hereunder and such borrowing shall be evidenced by
Borrower's duly executed Debentures (in one or more counterparts in the
aggregate sum of $1,500,000 substantially in the form of Exhibit 2.01(b)
attached hereto and made a part hereof, with appropriate insertion of names,
dates and amounts. In the event of any differences in terms between this
Agreement and the Debentures, the Debentures will be controlling; provided,
however, that the holder of the Debentures shall be entitled to all the rights
and benefits of the Lender provided in this Agreement.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at the
offices of Earthcare Company, Dallas, Texas.
SECTION 2.02. USE OF PROCEEDS.
(a) Borrower intends to use the money advanced hereunder, along with
funding from other sources, for working capital and the payment of fees and
expenses.
SECTION 2.03. INTEREST RATE AND INTEREST PAYMENTS.
(a) Interest on the Principal Amount outstanding from time to time shall
accrue at the rate of 14.00% per annum, with the first installment payable on
MAY 1, 2001 and subsequent payments at the first day of each month thereafter.
Overdue principal and interest on the Debentures shall bear interest, to the
extent permitted by applicable law, at a rate of 18.00% per annum. Interest on
the Principal Amount of each Debenture shall be calculated, from time to time,
on the basis of the actual days elapsed in a year consisting of 365 days.
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Loan Agreement (continued)
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SECTION 2.04. MATURITY.
(a) If not sooner redeemed or converted, the Debentures shall mature on
APRIL 1, 2002, at which time all the remaining unpaid principal, interest and
any other charges then due under the Agreement shall be due and payable in full.
SECTION 2.06. OPTIONAL REDEMPTION.
(a) Optional principal redemption on each Debenture shall be as provided
for in such Debentures.
SECTION 2.07 LOAN CLOSING COSTS.
(a) Borrower agrees to pay to Lender, a Loan Closing Fee of 5% of the
amount of Loan funds disbursed at each Loan Closing, such to be due and payable
at Loan Closing and netted out of the loan proceeds. Borrower agrees to pay all
legal and other cost associated with closing this loan.
(c) Lender agrees to a similar fee arrangement on any additional funds
provided under this Loan Agreement or similar agreement between Lender and
Borrower.
SECTION 2.08. PLACEMENT FEE.
There are no placement fees being paid in connection with this loan.
SECTION 2.09. TAXES.
(a) Each Debenture shall be exchangeable for shares of Parent's Common
Stock on such terms hereunder and shall be made without deduction for any
present or future taxes, duties, charges or withholdings, (excluding, in the
case of the Lender, any foreign taxes, any federal, state or local income taxes
and any franchise taxes or taxes imposed upon it by the jurisdiction, or any
political subdivision thereof, under which the Lender are organized or is
qualified to do business) and all liabilities with respect thereto (herein
"Taxes") shall be paid by Parent. If Parent shall be required by law to deduct
any Taxes for which Parent is responsible under the preceding sentence from any
sum payable hereunder to any Lender: (i) the sum payable shall be increased so
that after making all required deductions, such Lender receive an amount equal
to the sum it would have received had no such deductions been made; (ii) Parent
shall make such deductions; and (iii) Parent shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law.
(b) Except as otherwise set forth in this Agreement or the other Loan
Documents, Borrower shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Loan Documents or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) Borrower and Parent shall indemnify Lender for the full amount of
Taxes and Other Taxes reasonably paid by Lender or any liability (including any
penalties or interest assessed because of Borrower's defaults) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. This indemnification shall be made within thirty (30) days
from the date Lender make written demand therefor and has delivered to Borrower
all documentation with respect thereto reasonably requested by Borrower. Lender
shall subrogate any and all rights and claims relating to such Taxes and Other
Taxes to Borrower upon payment of said indemnification.
(d) Without prejudice to the survival of any other agreement of Borrower
or Parent hereunder, the agreements and obligations of Borrower in this Section
2.09 shall survive the payment in full of the Loan.
SECTION 2.10 STOCK CONVERSION RIGHTS.
(a) Each Debenture shall be exchangeable for shares of Common Stock on
such terms and in such amounts as shall be stated in such Debenture. The holders
of the stock issued upon exercise of the right of conversion as provided in said
Debenture shall be entitled to all the rights of the Lender as stated in this
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Loan Agreement (continued)
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Agreement or the other Loan Documents to the extent such rights are specifically
stated to survive the surrender of the Debenture for conversion as therein
provided.
SECTION 2.11 REGISTRATION RIGHTS AGREEMENT.
(a) The holder of shares of Common Stock issued upon Conversion shall be
entitled to registration rights as provided in Article XIII of this Agreement to
the extent set forth therein.
ARTICLE III - CONDITIONS PRECEDENT
SECTION 3.01. DOCUMENT REQUIREMENTS.
(a) The obligations of Lender to advance funds at the Loan Closing are
subject to the condition precedent that, on or before the date of such advance,
Lender shall have received the following in form and substance satisfactory to
Lender:
(i) One or more duly executed Debentures with the insertions of date,
amount and conversion features and aggregating one million five hundred thousand
dollars ($1,500,000.00) each in amounts as requested by Lender, which shall be
styled as follows:
Sagemark Capital, LP
(ii) One or more duly executed Warrant for the purchase of 680,000 shares
of common stock.
(iii) One or more duly executed Guaranty from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
(iv) Copies of resolutions, as adopted by the Parent's and Borrower's
Board of Directors, approving the execution, delivery and performance of this
Agreement, the Debentures, and the other Loan Documents, including the
transactions contemplated herein and accompanied by a certificate of the
Secretary or Assistant Secretary of Borrower and Parent stating that such
resolutions have been duly adopted, are true and correct, have not been altered
or repealed and are in full force and effect.
(v) A signed certificate of the Secretary or Assistant Secretary of the
Borrower and Parent which shall certify the names of the officers of Borrower
and Parent authorized to sign each of the Loan Documents to be executed by such
officer, together with the true signatures of each of such officers. It is
herewith stipulated and agreed that Lender may thereafter rely conclusively on
the validity of this certificate as a representation of the officers of Borrower
and Parent duly authorized to act with respect to the Loan Documents until such
time as Lender shall receive a further certificate of the Secretary or Assistant
Secretary of Borrower and Parent canceling or amending the prior certificate and
submitting the signatures of the officers thereupon authorized in such further
certificate.
(vi) Certificates of good standing (or other similar instrument) for the
Borrower and Parent issued by the Secretary of State of the state of
incorporation of Borrower, and certificates of qualification and good standing
for Borrower and Parent issued by the Secretary of State of each of the states
wherein the failure to be qualified to do business as a foreign corporation
would have a Material Adverse Effect, dated within fifteen (15) days of Loan
Closing.
(vii) Lender shall be furnished with, and shall have approved, such
consents from Marine Bank and the financial institutions party to the Amended
and Restated Credit Agreement dated as of February 15, 2000 (the "BANK CREDIT
AGREEMENT"), among Parent and/or Borrower, various financial institutions,
BankBoston, N.A., as Syndication Agent, and Bank of America, N.A., as
Administrative Agent, as may be required for Parent and/or Borrower to enter
into this Agreement.
(vii) Such other information and documents as may reasonably be required
by Lender and Lender' counsel to substantiate Parent and Borrower's compliance
with the requirements of this Agreement.
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Loan Agreement (continued)
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan hereunder, Borrower and Parent represents and
warrants to Lender that:
SECTION 4.01. ORGANIZATION, QUALIFICATION, STANDING, CAPITAL STOCK, ETC.
The Borrower and Parent are corporations duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, has the
corporate power to own its properties and to carry on its businesses as the same
are now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned by
it or the nature of its businesses makes such qualification necessary, except
where the failure to so qualify would not have a Material Adverse Effect.
Parent's Equity Structure is a follows:
OUTSTANDING SHARES OF COMMON STOCK 14,570,114
OUTSTANDING SHARES OF PREFERRED STOCK 12,915,000
COMMON SHARES RESERVED FOR:
OPTIONS 1,015,829
WARRANTS 1,438,969
CONVERTIBLE NOTES 7,978,620
CONVERTIBLE PREFERRED STOCK 5,903,681
Except as stated in this Section 4.01, the Parent or Borrower has not reserved
any additional shares for issuance (except as expressly required by this
Agreement) and has not issued any shares of its Common Stock. There are not
outstanding, nor is the Parent or Borrower subject to any agreement,
arrangement, or understanding under which there may become outstanding, any
option, warrant, or other right to purchase or subscribe to, or security
convertible into or exchangeable for, any shares of capital stock of any class
of the Borrower. The Parent's Subsidiaries are identified in Item 1 of the Form
10-K and such Item correctly states the jurisdiction of organization and the
extent of the Parent's ownership of outstanding voting securities of each such
Subsidiary. All such voting securities are owned by Parent.
SECTION 4.02. AUTHORIZATION AND POWER.
(a) Parent and Borrower have the corporate power and requisite authority
to execute, deliver and perform the Loan Documents to be executed by Parent and
Borrower. The Parent and Borrower are duly authorized to, and has taken all
corporate action necessary to authorize, execute, deliver and perform the Loan
Documents executed by Parent and Borrower. The Parent and Borrower are and will
continue to be duly authorized to perform the Loan Documents executed by Parent
and Borrower.
SECTION 4.03. ENFORCEABLE OBLIGATIONS.
(a) The Loan Documents to which it is a party have been duly executed and
delivered by the Parent and Borrower and are the legal and binding obligations
of the Parent and Borrower, enforceable in accordance with their respective
terms, except as limited by any applicable bankruptcy, insolvency or similar
laws now or hereafter in effect affecting creditors rights and debtor's
obligations.
SECTION 4.04. NO LIENS.
(a) Except for Permitted Liens, all of the properties and assets owned by
the Borrower and Parent are free and clear of all Liens and other adverse claims
of any nature, and Borrower and Parent have good and marketable title to such
properties and assets.
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Loan Agreement (continued)
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SECTION 4.05. FINANCIAL CONDITION.
(a) The Form 10-K, one or more copies of which have been furnished to you,
contains consolidated balance sheets of the Parent and its consolidated
Subsidiary, and the consolidated statements of income, stockholders' equity, and
cash flows of the Parent and its consolidated Subsidiaries for each of the three
years ended December 31, 1999, including notes thereto, and the opinion of
PriceWaterhouseCoopers LLP, independent certified public accountants with
respect to such financial statements. The Form 10-Q, one or more copies of which
have been furnished to you, contains the unaudited consolidated balance sheet of
the Parent and its consolidated Subsidiaries at, and the unaudited consolidated
statements of income, stockholders' equity, and cash flows of the Parent and its
consolidated Subsidiaries for the period ended, September 31, 2000. All of the
foregoing financial statements are complete and correct in all material respects
and fairly present in all material respects the consolidated financial condition
of the Parent and its consolidated Subsidiaries at the respective dates of said
balance sheets and the consolidated results of operations of the Parent and its
consolidated Subsidiaries for the respective periods covered thereby. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as otherwise noted therein). There were no material
liabilities, direct or indirect, fixed or contingent, of the Parent and its
consolidated Subsidiaries as of the respective dates of such balance sheets that
are not reflected therein or in the notes thereto. There has been no material
change in the consolidated condition, financial or otherwise, or operations of
the Parent and its consolidated Subsidiaries since September 30, 2000, nor has
the Parent or any Subsidiaries, except for the execution, delivery, and
performance of this Agreement, incurred any Indebtedness for borrowed money,
incurred any material liability, contingent or otherwise, except in the ordinary
course of business (including acquisitions of business and assets), or entered
into any material commitment or other transaction not in the ordinary course of
business since such date. Each financial statement delivered by Borrower and
Parent to Lender prior to the date of this Agreement is true and correct, fairly
presents the financial condition of Borrower and Parent, and has been prepared
in accordance with generally accepted accounting principles, consistently
applied; as of the date of this Agreement, there are no obligations, liabilities
or indebtedness (including contingent and indirect liabilities) which are
material to Borrower or Parent and not reflected in such financial statements;
and no material adverse changes have occurred in the financial condition or
business of Borrower or Parent since the date of the most recent financial
statements which Borrower and Parent have delivered to Lender.
SECTION 4.06. FULL DISCLOSURE.
(a) To the best of Parent's and Borrower's knowledge and belief after
current investigation, there is no material facts that have not disclosed to
Lender which could reasonably be expected to have a Material Adverse Effect.
Neither the financial statements referenced in Section 4.06 hereof, nor any
business plan, offering memorandum or prospectus, certificate or statement
delivered herewith or heretofore by Borrower or Parent to Lender in connection
with the negotiations of this Agreement, contained any untrue statement of a
material fact or omitted to state any material fact necessary to keep the
statements contained herein or therein from being misleading.
SECTION 4.07. NO DEFAULT.
(a) No Default or Event of Default under this Agreement has occurred or is
continuing.
SECTION 4.08. MATERIAL AGREEMENTS.
(a) The Parent or Borrower are not in default in any material respect
under any material contract, lease, loan agreement, indenture, mortgage,
security agreement or other material agreement or obligation to which it is a
party or by which any of its properties is bound.
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Loan Agreement (continued)
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SECTION 4.09. NO LITIGATION.
(a) There are no actions, suits, investigations, arbitrations or
administrative proceedings pending, or to the knowledge of Parent and Borrower
threatened, against Parent or Borrower that would have a Material Adverse
Effect, and there has been no change in the status of any of the actions, suits,
investigations, litigation or proceedings disclosed to Lender which could have a
Material Adverse Effect on Parent or Borrower or on any transactions
contemplated by any Loan Document.
SECTION 4.10. BURDENSOME CONTRACTS.
(a) To the best knowledge of the Borrower and Parent, they are not a party
to, or bound by, any contract or agreement, the faithful performance of which is
so onerous so as to create or to likely create a Material Adverse Effect.
SECTION 4.11. TAXES.
(a) All tax returns required to be filed by Parent and Borrower in any
jurisdiction have been filed and all taxes (including mortgage recording taxes),
assessments, fees and other governmental charges upon Parent and Borrower or
upon any of its properties, income or franchises have been paid except for
immaterial amounts and taxes being contested by Parent and Borrower in good
faith and by appropriate proceedings. To the best knowledge of Parent and
Borrower, there is no proposed tax assessment against Borrower and there is no
basis for such assessment.
SECTION 4.12 PRINCIPAL OFFICE, ETC.
(a) The principal office and principal place of business of the Parent is:
EarthCare Company
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The principal office and place of business of the Borrower is:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SECTION 4.13. COMPLIANCE WITH LAW.
(a) To the best knowledge of Parent and Borrower, Parent and Borrower are
in compliance in all material respects with all laws, rules, regulations, orders
and decrees which are applicable to Parent and Borrower or its properties by
reason of any Governmental Authority which are material to the conduct of the
business of Parent and Borrower or any of its properties.
SECTION 4.14 PATENTS, TRADEMARKS AND COPYRIGHTS.
(a) To the best of Parent and Borrower's knowledge and belief after
current investigation, Parent and Borrower owns all patents, trademarks and
copyrights, if any, necessary to conduct its business or possesses licenses or
other rights, if any, therefor. To its knowledge, Parent and Borrower has the
right to use such proprietary rights without infringing or violating the rights
of any third parties. No claim has been asserted by any person to the ownership
of or right to use any such proprietary right or challenging or questioning the
validity or effectiveness of any such license or agreement which would have a
Material Adverse Effect. To Parent and Borrower's knowledge, each of the
proprietary rights is valid and subsisting, and has not been canceled, abandoned
or otherwise terminated.
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Loan Agreement (continued)
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SECTION 4.15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) All representations and warranties by Parent and Borrower herein shall
survive the Loan Closing and any subsequent Loan Closings and the delivery of
the Debentures, and any investigation at any time made by or on behalf of any
Lender shall not diminish Lender' right to rely on Parent and Borrower's
representations and warranties as herein set forth.
ARTICLE V - AFFIRMATIVE COVENANTS
So long as any part of the Debentures remains unpaid or has not been
redeemed or converted hereunder, and until such payment, redemption or
conversion in full, unless the Majority in Interest shall otherwise consent in
writing, Parent and Borrower agrees that:
SECTION 5.01. FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS.
(a) The Parent and Borrower shall accurately and fairly maintain its books
of account in accordance with GAAP, employ a firm of independent certified
public accountants, which firm is and shall be one of the six largest national
accounting firms or which is approved by the Majority in Interest, to make
annual audits of its accounts in accordance with generally accepted auditing
standards; permit the Lender and their representatives to have access to and to
examine its properties, books and records (and to copy and make extracts
therefrom) at such reasonable times and intervals as the Lender may request; and
to discuss its affairs, finances and accounts with its officers and auditors,
all to such reasonable extent and at such reasonable times and intervals as the
Lender may request.
(b) The Parent and Borrower shall provide the following reports and
information to the Lender:
(i) As soon as available, and in any event within forty-five (45)
days after the close of each quarter, the Parents's report on Form 10-Q with
exhibits for said period. In addition, the Lender may at their sole discretion
request internal monthly reports for specific periods.
(ii) As soon as available, and in any event within ninety (107) days
after the close of each year, the Parents's report on Form 10-K with exhibits
for said period.
(iii) So long as any Debenture remains outstanding, promptly (but in
any event within five (5) business days) upon learning of the occurrence of a
Default or an Event of Default deliver a certificate signed by the Chief
Executive Officer or Chief Financial Officer of the Borrower and Parent
describing such Default or Event of Default and stating what steps are being
taken to remedy or cure the same.
(iv) Promptly (but in any event within five (5) business days) upon
the receipt thereof by the Borrower or Parent or the Board of Directors of the
Borrower or Parent, copies of all reports, all management letters and other
detailed information submitted to the Borrower or the Board by independent
accountants in connection with each annual or interim audit or review of the
accounts or affairs of the Borrower or Parent made by such accountants.
(v) With reasonable promptness, such other information relating to
the finances, properties, business and affairs of the Parent, Borrower and each
Subsidiary, as Lender may reasonably request from time to time.
(vi) Promptly upon its becoming available, one copy of each
financial statement, report, press release, notice or proxy statement sent by
Borrower or Parent to stockholders generally, and of each regular or periodic
report, registration statement or prospectus filed by Parent with any securities
exchange or the SEC or any successor agency, and of any order issued by any
Governmental Authority in any proceeding to which the Borrower or Parent is a
party.
SECTION 5.02. OPERATION REVIEW.
(a) Borrower and Parent agree that it will review its operations with
Lender. Such operations reviews will be in such depth and detail as Lender shall
reasonably request. Operations reviews, which usually will
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Loan Agreement (continued)
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require a day or less to complete, will be held as reasonably necessary,
generally once a fiscal quarter. Borrower and Parent agree to furnish Lender any
additional information with respect to Borrower's or Parent's financial
condition, properties and business operations as Lender may ask from time to
time.
SECTION 5.03. PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
(a) Borrower and Parent shall, and shall cause its Subsidiaries (if any)
to, pay and discharge (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any property
belonging to it, before delinquent, (ii) all lawful claims (including claims for
labor, materials and supplies), which, if unpaid, might give rise to a Lien upon
any of its property other than Permitted Liens, and (iii) all of its other
Indebtedness, except as prohibited hereunder; provided, however, that Borrower
and Parent and its Subsidiaries, if any, shall not be required to pay any such
tax, assessment, charge or levy if and so long as the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and appropriate accruals and reserves therefor have been established
in accordance with GAAP.
SECTION 5.04. MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS.
(a) Borrower and Parent shall, and shall cause its Subsidiaries (if any)
to, preserve and maintain its corporate existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, and conduct its business in an orderly and efficient manner consistent
with good business practices and in accordance with all valid regulations and
orders of any Governmental Authority. Borrower and Parent shall keep its
principal place of business within the United States.
SECTION 5.05. SEC FILING AND MAINTENANCE OF SEC REPORTING REQUIREMENTS.
(a) So long as Parent has a class of securities registered pursuant to
Section 12 of the 1934 Act, Parent shall duly file, when due, all reports and
statements required of a company whose securities are registered for public
trading under and pursuant to the 1934 Act, as amended, and any rules and
regulations issued thereunder, and to preserve and maintain its registration
thereunder and all of the rights of its security holders normally associated
with a publicly traded stock company.
SECTION 5.06. NOTICE OF DEFAULT.
(a) Borrower and Parent shall furnish to Lender, immediately upon becoming
aware of the existence of any condition or event which constitutes a Default or
would with the passage of time become a Default or an Event of Default, written
notice specifying the nature and period of existence thereof and the action
which Borrower and Parent are taking or proposes to take with respect thereto.
SECTION 5.07. OTHER NOTICES.
(a) Borrower and Parent shall promptly notify Lender of (i) any Material
Adverse Change, (ii) any default under any material agreement, contract or other
instrument to which it is a party or by which any of its properties are bound,
or any acceleration of the maturity of any Indebtedness owing by Borrower,
Parent or its Subsidiaries, if any, (iii) any material adverse claim that would
have a Material Adverse Effect against or affecting Borrower, Parent or its
Subsidiaries, if any, or any of its properties, and (iv) the commencement of,
and any material determination in, any litigation with any third party or any
proceeding before any Governmental Authority, the negative result of which has a
Material Adverse Effect on Borrower, Parent and its Subsidiaries.
SECTION 5.08. BOOKS AND RECORDS; ACCESS.
(a) Borrower and Parent shall, and shall cause each of its Subsidiaries
(if any) to, maintain complete and accurate books and records of its
transactions in accordance with GAAP. Borrower and Parent shall give each duly
authorized representative of Lender access during all normal business hours to,
and shall permit such representative to examine, copy or make excerpts from, any
and all books, records and documents in the possession of Borrower, Parent and
its Subsidiaries and relating to its affairs, and to
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Loan Agreement (continued)
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inspect any of the properties of Borrower and its Subsidiaries, if any. Borrower
and Parent shall make a copy of this Agreement, along with any waivers,
consents, modifications or amendments, available for review at its principal
office by Lender or Lender' representatives.
SECTION 5.09. COMPLIANCE WITH LAW.
(a) Borrower and Parent shall, and shall cause each of its Subsidiaries
(if any) to, comply with all applicable laws, rules, regulations, and all orders
of any Governmental Authority applicable to it or any of its property, business
operations or transactions, a breach of which could reasonably be expected to
have a Material Adverse Effect.
SECTION 5.10. INSURANCE.
(a) Borrower and Parent shall, and shall cause each of its Subsidiaries
(if any) to, maintain such worker's compensation insurance, liability insurance
and insurance on its properties, assets and business, now owned or hereafter
acquired, against such casualties, risks and contingencies, and in such types
and amounts, as are consistent with customary practices and standards of
companies engaged in similar businesses.
SECTION 5.11. FURTHER ASSURANCES.
(a) Borrower and Parent shall, and shall cause each of its Subsidiaries
(if any) to, make, execute or endorse, and acknowledge and deliver or file or
cause the same to be done, all such notices, certifications and additional
agreements, undertakings, transfers, assignments, or other assurances, and take
any and all such other action, as Lender may, from time to time, deem reasonably
necessary or proper in connection with any of the Loan Documents, or the
obligations of Borrower and Parent or its Subsidiaries, if any, thereunder,
which Lender may request from time to time.
SECTION 5.12. INDEMNITY BY BORROWER.
(a) Borrower and Parent shall indemnify, save, and hold harmless, Lender
and their directors, officers, agents, attorneys, and employees (singularly or
collectively, the "Indemnitee") from and against (i) any and all claims,
demands, actions or causes of action that are asserted against any Indemnitee if
the claim, demand, action or cause of action directly or indirectly relates to
this Agreement and the other Loan Documents issued pursuant thereto, the use of
proceeds of the Loans, or the relationship of Borrower and Lender under this
Agreement or any transaction contemplated pursuant to this Agreement, (ii) any
administrative or investigative proceeding by any Governmental Authority
directly or indirectly related to a claim, demand, action or cause of action
described in clause (i) above, and (iii) any and all liabilities, losses, costs,
or expenses (including reasonable attorneys' fees and disbursements) that any
Indemnitee suffers or incurs as a result of any of the foregoing; provided,
however, that Borrower and shall have no obligation under this Section 5.12 to
any Indemnitees with respect to any of the foregoing arising out of the
negligence or willful misconduct of any Indemnitees or the breach by the Lender
or its assignees of this Agreement or any other Loan Document or other document
executed in connection with any of the aforesaid, the breach by any Indemnitees
of any agreement or commitment with other parties, the violation or alleged
violation of any law, rule or regulation by any Indemnitees, or from the
transfer or disposition by Lender of any Debenture or the Common Stock issued
upon Conversion of the Debenture. If any claim, demand, action or cause of
action is asserted against any Indemnitee, such Indemnitee shall promptly notify
Borrower and Parent, but the failure to so promptly notify Borrower and Parent
shall not affect Parent's or Borrower's obligations under this Section unless
such failure materially prejudices Parent's or Borrower's right to participate
in the contest of such claim, demand, action or cause of action, as hereinafter
provided. In the event that such indemnitee's failure to properly notify the
Borrower or Parent materially prejudices Parent's or Borrower's right to
participate in the contest of such claim, demand, action, or cause of action,
then said Indemnitee shall have no right to receive, and Borrower and Parent
shall have no obligation to pay, any indemnification amounts hereunder. Borrower
and Parent may elect to defend any such claim,
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Loan Agreement (continued)
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demand, action or cause of action (at its own expense) asserted against said
Indemnitee and, if requested by Borrower and Parent in writing and so long as no
Default or Event of Default shall have occurred and be continuing, such
Indemnitee (at Borrower's or Parent's expense) shall in good faith contest the
validity, applicability and amount of such claim, demand, action or cause of
action and shall permit Borrower or Parent to participate in such contest. Any
Indemnitee that proposes to settle or compromise any claim or proceeding for
which Borrower or Parent may be liable for payment to or on behalf of an
Indemnitee hereunder shall give Borrower and Parent written notice of the terms
of such proposed settlement or compromise reasonably in advance of settling or
compromising such claim or proceeding and shall obtain Parent's or Borrower's
written concurrence thereto. In the event that said Indemnitee fails to obtain
Borrower's or Parent's prior written consent to any such settlement or
compromise, said Indemnitee shall have no right to receive and Borrower and
Parent shall have no obligation to pay any indemnification amounts hereunder.
Each Indemnitee may employ counsel in enforcing its rights hereunder and in
defending against any claim, demand, action, or cause of action covered by this
Section 5.12; provided, however, that each Indemnitee shall endeavor, but shall
not be obligated, in connection with any matter covered by this Section which
also involves any other Indemnitee, to use reasonable efforts to avoid
unnecessary duplication of effort by counsel for all Indemnitees, including by
allowing Borrower and Parent to select one lawyer for all parties, such
selection to be subject to the approval of such parties, which approval shall
not be unreasonably withheld. Any obligation or liability of Borrower and Parent
to any Indemnitee under this Section 5.12 shall survive the expiration or
termination of this Agreement and the repayment of the Debentures.
ARTICLE VI - NEGATIVE COVENANTS
So long as any part of the Debentures have not been redeemed or converted
hereunder, and until such redemption or conversion in full, unless the Majority
in Interest shall otherwise consent in writing, Borrower agrees that, unless
permitted otherwise:
SECTION 6.01. FORBEARANCE FROM RESTRICTIONS ON RIGHTS OF HOLDERS OF DEBENTURES.
(a) The Borrower or Parent will not enter into any agreement or instrument
or otherwise agree to any covenant that would in any way limit the right of the
Lenders to convert the Debentures into Common Stock.
SECTION 6.02. CERTAIN TRANSACTIONS.
(a) Borrower or Parent shall not, and shall not permit its Subsidiaries
(if any) to, enter into any transaction with, or pay any management fees to, any
Affiliate.
SECTION 6.03. LIMITATION ON SALE OF PROPERTIES.
(a) Borrower or Parent shall not, and shall not permit its Subsidiaries
(if any) to (i) sell, assign, convey, exchange, lease or otherwise dispose of
any of its properties, rights, assets or business, whether now owned or
hereafter acquired, except in the ordinary course of its business and for a fair
consideration, or (ii) sell, assign or discount any accounts receivable except
in the ordinary course of business or to secure bank or commercial working
capital loans in the ordinary course of business.
SECTION 6.04. NO AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS.
(a) Borrower or Parent shall not, and shall not permit its Subsidiaries
(if any) to, materially amend its Articles of Incorporation or bylaws except as
is necessary to fulfill the conditions of this Agreement.
SECTION 6.05. LIMITATION ON INCREASED EXECUTIVE COMPENSATION AND BONUS, PROFIT
SHARING OR OTHER INCENTIVE PAYMENTS.
(a) Borrower or Parent will not increase the salary, bonus, or other
compensation programs (whether in cash, securities, or other property, and
whether payment is deferred or current) of its top five executive
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Loan Agreement (continued)
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officers unless such compensation increase is approved by a majority of the
Board or a Compensation Committee of the Board of Directors, a majority of whom
shall non-employee Directors.
(b) Borrower or Parent shall not pay any bonus, profit sharing or other
incentive payments until such plans are formally adopted by the majority of the
Board or a Compensation Committee of the Board of Directors, a majority of which
shall be non-employee Directors.
SECTION 6.06. RESTRICTED PAYMENTS.
(a) So long as any Debentures are outstanding, Parent or Borrower shall
not (i) declare or pay any dividend on any common stock or preferred stock that
exceeds five percent (5%) of Net Operating Income as defined by GAAP for the
most recent 12 month period, or (ii) purchase, redeem, decrease, or otherwise
acquire any shares of common stock or any preferred stock. The payment of an in
kind dividend (non cash) on the Parent's currently issued and outstanding
mandatory convertible preferred stock shall be excluded for the purposes of this
section. Borrower may not advance or loan money to Parent.
SECTION 6.07. NEGATIVE PLEDGE.
(a) Borrower or Parent shall not mortgage, assign, encumber, incur, assume
or grant a security interest in or lien upon the proceeds of the sale of the
stock or assets of any of its assets other than liens now existing in favor of
Bank of America NA as agent bank in the Bank Credit Agreement, CIB Marine, Sun
Trust, Community Bank of Manatee, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and various equipment
lessors.
(b) Borrower or Parent shall not borrow any amounts under the Bank Credit
Agreement in excess of the outstanding Loans and Letters of Credit (as such
terms are defined in the Bank Credit Agreement as in effect on the date hereof)
on the date hereof and upon repayment of any such Loans or termination of such
Letters of Credit with any proceeds from the sale of the EarthAmerica division
or the EarthLiquid division, Borrower or Parent shall not request the Banks to
extend any new Loans or Letters of Credit as to the amount so repaid. It being
understood that so long as the Debenture is outstanding, Borrower or Parent
shall be entitled to borrow, repay, and reborrow amounts under the Bank Credit
Agreement only as to funds generated from the operations of Borrower's or
Parent's business and not from the sale of any assets of Borrower or Parent.
ARTICLE VII - EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT.
(a) An "Event of Default" shall exist if any one or more of the following
events (herein collectively called "Events of Default") shall occur and be
continuing:
(i) Borrower shall fail to pay (or shall state in writing an intention not
to pay or its inability to pay), not later than ten (10) days after the due
date, any installment of interest on or principal of, any Debenture or any fee,
expense or other payment required hereunder;
(ii) Any representation or warranty made under this Agreement, or any of
the other Loan Documents, or in any certificate or statement furnished by
Borrower, Parent or guarantor to Lender pursuant hereto or in connection
herewith or with the Loans hereunder, shall prove to be untrue or inaccurate in
any material respect as of the date on which such representation or warranty was
made;
(iii) Default shall occur in the performance of any of the covenants or
agreements of Borrower, Parent or of its Subsidiaries (if any) contained herein,
or in any of the other Loan Documents, which is not remedied within fifteen (15)
days after written notice thereof to Borrower from Lender;
(iv) Default shall occur in the payment of any Indebtedness in excess of
one hundred thousand dollars ($100,000) of the Borrower, Parent or its
Subsidiaries (if any), or default shall occur in respect of any note,
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Loan Agreement (continued)
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loan agreement or credit agreement relating to any such Indebtedness, and such
default shall continue for more than the period of grace, if any, specified
therein or any such indebtedness shall become due before its stated maturity by
acceleration of the maturity thereof or shall become due by its terms and shall
not be promptly paid or extended;
(v) Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the Borrower or Parent in accordance with the
respective terms thereof, or shall in any way be terminated except as otherwise
provided for therein or become or be declared ineffective or inoperative, or
shall in any way whatsoever cease to give or provide the respective rights,
titles, interests, remedies, powers or privileges intended to be created
thereby;
(vi) Borrower, Parent or its Subsidiaries (if any) shall (A) apply for or
consent to the appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself, or of all or substantially all of such Person's assets,
(B) file a voluntary petition in bankruptcy, admit in writing that such Person
is unable to pay such Person's debts as they become due or generally not pay
such Person's debts as they become due, (C) make a general assignment for the
benefit of creditors, (D) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (E) file an answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against such Person in any bankruptcy,
reorganization or insolvency proceeding, or (F) take corporate action for the
purpose of effecting any of the foregoing;
(vii) An involuntary petition or complaint shall be filed against
Borrower, Parent or any of its Subsidiaries (if any) seeking bankruptcy or
reorganization of such Person or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of such Person, or all or substantially all of
such Person's assets, and such petition or complaint shall not have been
dismissed within sixty (60) days of the filing thereof or an order, order for
relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower, Parent or its subsidiary (if any) or
appointing a receiver, custodian, trustee, intervenor or liquidator of such
Person, or of all or substantially all of such Person's assets;
(viii) Any final judgment for the payment of money, in excess of $50,000
individually or $100,0000 in the aggregate, shall be rendered against the
Borrower or Parent; or
(ix) The Parent shall fail to issue and deliver shares of Common Stock as
provided in the Debentures or Warrant;
SECTION 7.02. REMEDIES UPON EVENT OF DEFAULT.
(a) If an Event of Default shall have occurred and be continuing for a
period of fifteen (15) days, then Lender may exercise any one or more of the
following rights and remedies, and any other remedies provided in any of the
Loan Documents, as the Majority in Interest in their sole discretion may deem
necessary or appropriate:
(i) declare the unpaid Principal Amount (after application of any payments
or installments received by Lender) of, and all interest then accrued but unpaid
on, the Debentures and any other liabilities hereunder to be forthwith due and
payable by Parent of Borrower, whereupon the same shall forthwith become due and
payable without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any kind, all of
which Borrower and Parent hereby expressly waives, anything contained herein or
in the Debentures to the contrary notwithstanding;
(ii) reduce any claim to judgment; and
(iii) without notice of default or demand, pursue and enforce any of
Lender' rights and remedies under the Loan Documents, or otherwise provided
under or pursuant to any applicable law or agreement, all of which rights may be
specifically enforced.
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Loan Agreement (continued)
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SECTION 7.03. PERFORMANCE BY LENDER.
(a) Should Borrower or Parent fail to perform any covenant, duty or
agreement contained herein or in any of the other Loan Documents, Lender may
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower or Parent. In such event, Borrower or Parent shall, at the request of
Lender, promptly pay any amount reasonably expended by Lender in such
performance or attempted performance to Lender at their principal office in
Dallas, Texas, together with interest thereon, at the interest rate specified in
the Debenture, from the date of such expenditure until paid. Notwithstanding the
foregoing, it is expressly understood that Lender assume no liability or
responsibility for the performance of any duties of Borrower or Parent hereunder
or under any of the other Loan Documents.
SECTION 7.04. PAYMENT OF EXPENSES INCURRED BY LENDER.
(a) Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any, provided herein,
Borrower and Parent agree to pay and shall pay all costs and expenses (including
Lender' attorney's fees and expenses) reasonably incurred by Lender or their
Agent in connection with the preservation and enforcement of Lender' rights
under this Agreement, the Debentures, or any other Loan Document.
ARTICLE VIII - REGISTRATION RIGHTS
SECTION 8.01. DEMAND FOR REGISTRATION.
(a) Parent hereby agrees to file a registration statement under the 1933
Act covering the Registrable Securities at any time it shall receive a written
request from the Holders of at least twenty-five percent (25%) of the
Registrable Securities Then Outstanding (or a lesser percent if the anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed $1,000,000). The Parent shall, within 5 days of its receipt thereof, give
written notice of such request to all Holders of record of Registrable
Securities. The Holders of said Registrable Securities shall then have 5 days
from the date of mailing of such notice by the Parent to request that all or a
portion of their respective Registrable Securities be included in said
registration. The Parent hereby agrees, within 75 days of the receipt of the
initial written registration request, to file the registration under the 1933
Act of all Registrable Securities which the Holders thereof (the "Initiating
Holders") have requested and use its absolute best efforts to cause said
registration to be declared effective. In the event that the Parent fails to
file a registration statement covering the Registrable Securities within the
time frames herein set forth, the Conversion Price of the Debentures issued
pursuant to this Agreement shall decrease by $0.05 per month until said
registration statement is declared filed. If the Parent fails to use it absolute
best efforts to cause said registration to be declared effective, the Conversion
Price of the Debentures issued pursuant to this Agreement shall decrease by
$0.05 per month until said registration statement is declared effective.
SECTION 8.02. OBLIGATIONS OF THE PARENT.
Whenever required to effect the registration of any Registrable Securities
pursuant to this Agreement, the Parent shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best lawful efforts to cause such
registration statement to become effective, and use its best efforts to keep
such registration statement effective until all such Registrable Securities have
been distributed;
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities covered
by such registration statement;
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Loan Agreement (continued)
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(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) Use its best lawful efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Parent shall not be required in connection therewith or as a
condition thereto to qualify as a broker-dealer in any states or jurisdictions
or to do business or to file a general consent to service of process in any such
states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Parent and the Holders of a majority of the Registrable
Securities to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
SECTION 8.03. FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the Parent to
take any action pursuant to this Article XIII that the selling Holders shall
furnish to the Parent any and all information reasonably requested by the
Parent, its officers, directors, employees, counsel, agents or representatives,
the underwriter or underwriters, if any, and the SEC or any other Governmental
Authority, including but not limited to: (i) such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities, as shall be required to effect the registration
of their Registrable Securities, and (ii) the identity of and compensation to be
paid to any proposed underwriter or broker-dealer to be employed in connection
therewith.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the 1933 Act, the Parent
shall give the Holders of Registrable Securities on whose behalf such
Registrable Securities are to be registered and their underwriters, if any, and
their respective counsel and accountants, at such Holders' sole cost and expense
(except as otherwise set forth herein), such access to copies of the Parent's
records and documents and such opportunities to discuss the business of the
Parent with its officers and the independent public accountants (in the presence
of the Parent) who have certified its financial statements as shall be
reasonably necessary in the opinion of such Holders and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the 1933 Act, after written notice to Parent.
SECTION 8.04. EXPENSES OF REGISTRATION.
All expenses, other than underwriting discounts and commissions incurred
in connection the registrations contemplated herein, including, without
limitation, all registration, filing and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Parent, and the
reasonable fees and disbursements of one counsel for the selling Holders, shall
be borne by the Parent.
SECTION 8.05. INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
If any Registrable Securities are included in a registration statement
under this Article XIII:
(a) To the extent permitted by law, the Parent will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any underwriter
(as defined in the ▇▇▇▇ ▇▇▇) for such Holder and
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Loan Agreement (continued)
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each person, if any, who controls such Holder or underwriter within the meaning
of the 1933 Act or the 1934 Act, against any losses, claims, damages,
liabilities (joint or several) or any legal or other costs and expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, costs, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact with respect to the Parent or its
securities contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements therein; (ii) the omission or alleged omission to state therein a
material fact with respect to the Parent or its securities required to be stated
therein or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Parent of the 1933 Act, the 1934 Act, any
federal or state securities law or any rule or regulation promulgated under the
1933 Act, the 1934 Act or any state securities law. Notwithstanding the
foregoing, the indemnity agreement contained in this Section 8.05(a) shall not
apply and the Parent shall not be liable (i) in any such case for any such loss,
claim, damage, costs, expenses, liability or action to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person, or
(ii) for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the prior written consent of
the Parent, which consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless the Parent, each of its directors and officers who
have signed the registration statement, each Person, if any, who controls the
Parent within the meaning of the 1933 Act or the 1934 Act, each of the Parent's
employees, agents, counsel and representatives, any underwriter and any other
Holder selling securities in such registration statement, or any of its
directors or officers, or any person who controls such Holder, against any
losses, claims, damages, costs, expenses, liabilities (joint or several) to
which the Parent or any such director, officer, controlling person, employee,
agent, representative, underwriter, or other such Holder, or director, officer
or controlling person thereof, may become subject, under the 1933 Act, the 1934
Act or other federal or state law, only insofar as such losses, claims, damages,
costs, expenses or liabilities or actions in respect thereto arise out of or are
based upon any Violation, in each case to the extent and only to the extent that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such.
Each such Holder will indemnify any legal or other expenses reasonably incurred
by the Parent or any such director, officer, employee, agent representative,
controlling person, underwriter or other Holder, or officer, director or of any
controlling person thereof, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 8.05(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, costs, expenses, liability
or action if such settlement is effected without the prior written consent of
the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section 8.05
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 8.05, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with the reasonable fees and expenses of such counsel to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
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Loan Agreement (continued)
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actual or potential conflict of interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve the indemnifying party of its
obligations under this Section 8.05, except to the extent that the failure
results in a failure of actual notice to the indemnifying party and such
indemnifying party is materially prejudiced in its ability to defend such action
solely as a result of the failure to give such notice.
(d) If the indemnification provided for in this Section 8.05 is
unavailable to an indemnified party under this Section in respect of any losses,
claims, damages, costs, expenses, liabilities or actions referred to herein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, costs, expenses, liabilities or actions
in such proportion as is appropriate to reflect the relative fault of the
Parent, on the one hand and of the Holder, on the other, in connection with the
Violation that resulted in such losses, claims, damages, costs, expenses,
liabilities or actions. The relative fault of the Parent, on the one hand, and
of the Holder, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of the material fact or
the omission to state a material fact relates to information supplied by the
Parent or by the Holder, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Parent, on the one hand, and the Holders, on the other hand, agree
that it would not be just and equitable if contribution pursuant to this Section
8.05 were determined by a pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of losses, claims, damages, costs, expenses,
liabilities and actions referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such indemnified party in connection with
defending any such action or claim. Notwithstanding the provisions of this
Section 8.05, neither the Parent nor the Holders shall be required to contribute
any amount in excess of the amount by which the total price at which the
securities were offered to the public exceeds the amount of any damages which
the Parent or each such Holder has otherwise been required to pay by reason of
such Violation. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
SECTION 8.06. ASSIGNMENT OF REGISTRATION RIGHTS.
(a) Subject to the terms and conditions of this Agreement, and the
Debentures, the right to cause the Parent to register Registrable Securities
pursuant to this Agreement may be assigned by Holder to any transferee or
assignee of such securities; provided that said transferee or assignee is a
transferee or assignee of at least five percent (5%) of the Registrable
Securities and provided that the Parent is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act; it being the intention that so long as Holder
holds any Registrable Securities hereunder, either Holder or its transferee or
assignee of at least five percent may exercise the demand right to registration
and piggy-back registration rights hereunder. Other than as set forth above, the
parties hereto hereby agree that the registration rights hereunder shall not be
transferable or assigned and any contemplated transfer or assignment in
contravention of this Agreement shall be deemed null and void and of no effect
whatsoever.
SECTION 8.07. OTHER MATTERS.
(a) Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, with respect to each offering of the
Registrable Securities, whether each Holder is offering such
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Loan Agreement (continued)
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Registrable Securities in an underwritten or non-underwritten offering, such
Holder will comply with Rules 10b-2, 10b-6 and 10b-7 of the 1934 Act and such
other or additional anti-manipulation rules then in effect until such offering
has been completed, and in respect of any non-underwritten offering, in writing
will inform the Parent, any other Holders who are selling shareholders, and any
national securities exchange upon which the securities of the Parent are listed,
that the Registrable Securities have been sold and will, upon the Parent's
request, furnish the distribution list of the Registrable Securities. In
addition, upon the request of the Parent, each Holder will supply the Parent
with such documents and information as the Parent may reasonably request with
respect to the subject matter set forth and described in this Section 8.10.
(b) Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Parent of
the happening of any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein by reference,
untrue in any material respect or which requires the making of any changes in
the registration statement, the prospectus or any document incorporated therein
by reference, in order to make the statements therein not misleading in any
material respect, such Holder will forthwith discontinue disposition of
Registrable Securities under the prospectus related to the applicable
registration statement until such Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing by the
Parent that the use of the prospectus may be resumed, and has received copies of
any additional or supplemental filings which are incorporated by reference in
the prospectus.
(c) The Parent hereby agrees not to effect any public sale or other
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such equity securities, during the period
commencing on the 7th day prior to, and ending on the 120th day (subject to
extension as provided in Section 8.03 hereof) following the effective date of
any underwritten demand registration, other than pursuant to Form S-8.
SECTION 8.08 TERMINATION OF RIGHTS.
(a) The Holders' right to demand registration granted to Holders
terminates under this Article XIII after the Holders have exercised two demand
registration rights at the expense of the Parent as provided in Article XIII of
this Agreement.
ARTICLE IX - SBIC PROVISIONS
The Borrower and Parent acknowledges that the Lender is a small
business investment company licensed by the United States Small Business
Administration, and makes the following representations, warranties and
covenants to the Lender:
9.01 SMALL BUSINESS CONCERN.
(a) The Borrower represents and warrants to the Lender that the Borrower,
taken together with its "affiliates" (as that term is defined in 13 C.F.R.
Section 121.103), is a "Small Business Concern" within the meaning of 15 U.S.C.
Section 662(5), that is Section 103(5) of the Small Business Investment Act of
1958, as amended (the "Act"), and the regulations thereunder, including 13
C.F.R. Section 107, and meets the applicable size eligibility criteria set forth
in 13 C.F.R. Section 121.301(c)(1) or the industry standard covering the
industry in which the Borrower is primarily engaged as set forth in 13 C.F.R.
Section 121.301(c)(2). Neither the Borrower nor any of its subsidiaries
presently engages in any activities for which a small business investment
company is prohibited from providing funds by the SBIC Act, including 13 C.F.R.
Section 107.
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Loan Agreement (continued)
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9.02 SMALL BUSINESS ADMINISTRATION DOCUMENTATION.
(a) On or before the Closing Date, Lender shall have received SBA Form 480
(Size Status Declaration) and SBA Form 652 (Assurance of Compliance) which have
been completed and executed by the Borrower, and SBA Form 1031 (Portfolio
Finance Report), Parts A and B of which have been completed by the Borrower (the
"SBA Documents").
9.03 INSPECTION.
(a) The Borrower will permit the Lender or its representatives, at
Borrower's expense, and examiners of the SBA to visit and inspect the properties
and assets of the Borrower, to examine its books of account and records, and to
discuss the Borrower's affairs, finances and accounts with the Borrower's
officers, senior management and accountants, all at such reasonable times as may
be requested by the Lender or SBA.
9.04 INFORMATIONAL COVENANT.
(a) Within sixty (60) days after the end of the fiscal year of the
Borrower, the Borrower will furnish or cause to be furnished to Lender
information required by the SBA concerning the economic impact of the Lender's
investment, for (or as of the end of ) each fiscal year, including but not
limited to, board minutes, information concerning full-time equivalent
employees; Federal, state and local income taxes paid; gross revenue; source of
revenue growth; after-tax profit and loss; and Federal, state and local income
tax withholding. Such information shall be forwarded by Borrower on a form
provided by the Lender. The Borrower also will furnish or cause to be furnished
to the Lender such other information regarding the business, affairs and
condition of the Borrower as the Lender may from time to time reasonably
request.
9.05 USE OF PROCEEDS.
(a) The Borrower certifies that it will use the proceeds from the Loan for
the purposes and in the amounts set forth on Schedule 2.02. The Borrower will
deliver to the Lender from time to time promptly following the Lender's request,
a written report, certified as correct by an officer, verifying the purposes and
amounts for which proceeds from the Loan have been disbursed. The Borrower will
supply to the Lender such additional information and documents as the Lender
reasonably requests with respect to its use of proceeds, and will permit the
Lender to have access to any and all Borrower records and information and
personnel as the Lender deems necessary to verify how such proceeds have been or
are being used, and to assure that the proceeds have been used for the purposes
specified on Schedule 202.
9.06 ACTIVITIES AND PROCEEDS.
(a) Neither the Borrower nor any of its affiliates (as defined above) will
engage in any activities or use directly or indirectly the proceeds from the
Loan for any purpose for which a small business investment company is prohibited
from providing funds by the SBIC Act, including 13 C.F.R. Section 107.
(b) Without obtaining the prior written approval of the Lender, the
Borrower will not change within one (1) year of the Closing Date the Borrower's
business activity consisting of services relating to the nonhazardous liquid
waste industry: bulk liquid waste transportation, liquid waste collection,
processing, treatment and disposal, maintenance, plumbing and pumping and
services relating to the nonhazardous solid waste industry to a business
activity which a small business investment company is prohibited from providing
funds by the SBIC Act. The Borrower agrees that any such changes in its business
activity without such prior written consent of the Lender will constitute a
material breach of the obligations of the Borrower under this Agreement and the
Loan Documents.
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Loan Agreement (continued)
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ARTICLE X - MISCELLANEOUS
SECTION 10.01. STRICT COMPLIANCE.
(a) Any waiver by Lender of any breach or any term or condition of this
Agreement or the other Loan Documents shall not be deemed a waiver of any other
breach, nor shall any failure to enforce any provision of this Agreement or the
other Loan Documents operate as a waiver of such provision or of any other
provision, nor constitute nor be deemed a waiver or release of the Borrower or
Parent for anything arising out of, connected with or based upon this Agreement
or the other Loan Documents.
SECTION 10.02. WAIVERS AND MODIFICATIONS.
(a) All modifications, consents, amendments or waivers (herein "Waivers")
of any provision of this Agreement, the Debentures or any other Loan Documents,
and any consent to departure therefrom, shall be effective only if the same
shall be in writing by the Majority in Interest and then shall be effective only
in the specific instance and for the purpose for which given. No notice or
demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand. No
failure to exercise, and no delay in exercising, on the part of Lender, any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right. The rights of Lender hereunder and under the other
Loan Documents shall be in addition to all other rights provided by law.
SECTION 10.03. NOTICES.
(a) Any notices or other communications required or permitted to be given
by this Agreement or any other documents and instruments referred to herein must
be (i) given in writing and personally delivered, mailed by prepaid certified,
registered mail or sent by overnight service such as Federal Express, or (ii)
made by telex or facsimile transmission delivered or transmitted to the party to
whom such notice or communication is directed, with confirmation thereupon given
in writing and personally delivered or mailed by prepaid certified or registered
mail.
(b) Any notice to be mailed, sent or personally delivered shall be mailed
or delivered to the principal offices of the party to whom such notice is
addressed, as that address is specified herein on the signature page hereof. Any
such notice or other communication shall be deemed to have been given (whether
actually received or not) on the day it is mailed, postage prepaid, or sent by
overnight service or personally delivered or, if transmitted by telex or
facsimile transmission, on the day that such notice is transmitted; provided,
however, that any notice by telex or facsimile transmission, received by
Borrower, Parent or Lender after 4:00 p.m., Standard Time at the recipient's
address, on any day, shall be deemed to have been given on the next succeeding
day. Any party may change its address for purposes of this Agreement by giving
notice of such change to the other parties pursuant to this Section 10.03.
SECTION 10.04. CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
(a) Any suit, action or proceeding against the Borrower or Parent with
respect to this Agreement, the Debentures or any judgment entered by any court
in respect thereof, may be brought in the courts of the State of Texas, County
of Dallas, or in the United States courts located in the State of Texas as
Lender in their sole discretion may elect, and Borrower or Parent hereby submits
to the non-exclusive jurisdiction of such courts for the purpose of any such
suit, action or proceeding. Borrower or Parent hereby irrevocably waives any
objections which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
Debenture brought in the courts located in the State of Texas, County of Dallas,
and hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in any inconvenient forum.
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Loan Agreement (continued)
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SECTION 10.05. ARBITRATION
(a) Upon the demand of the Lender, Parent or Borrower (collectively the
"parties"), made before the institution of any judicial proceeding or not more
than 60 days after service of a complaint, third party complaint, cross-claim or
counterclaim or any answer thereto or any amendment to any of the above, any
Dispute (as defined below) shall be resolved by binding arbitration in
accordance with the terms of this arbitration clause. A "Dispute" shall include
any action, dispute, claim, or controversy of any kind, whether founded in
contract, tort, statutory or common law, equity, or otherwise, now existing or
hereafter occurring between the parties arising out of, pertaining to or in
connection with this Agreement, any document evidencing, creating, governing, or
securing any indebtedness guaranteed pursuant to the terms hereof, or any
related agreements, documents, or instruments (the "Documents"). The parties
understand that by this Agreement they have decided that the Disputes may be
submitted to arbitration rather that being decided through litigation in court
before a judge or jury and that once decided by an arbitrator the claims
involved cannot later be brought, filed, or pursued in court. IF BORROWER SHALL
FAIL TO PAY (OR SHALL STATE IN WRITING AN INTENTION NOT TO PAY OR ITS INABILITY
TO PAY), NOT LATER THAN TEN (10) DAYS AFTER THE DUE DATE, ANY INSTALLMENT OF
INTEREST ON OR PRINCIPAL OF, ANY DEBENTURE OR ANY FEE, EXPENSE OR OTHER PAYMENT
REQUIRED HEREUNDER, LENDER MAY, AT THEIR SOLE OPTION, ENFORCE THEIR RIGHTS
OUTSIDE THE ARBITRATION PROVISION FOUND IN THIS SECTION 10.05 OR ANY DEBENTURE.
(b) Arbitrations conducted pursuant to this Agreement, including selection
of arbitrators, shall be administered by the American Arbitration Association
("Administrator") pursuant to the Commercial Arbitration rules of the
Administrator. Arbitrations conducted pursuant to the terms hereof shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of the United
States Code), and to the extent the foregoing are inapplicable, unenforceable or
invalid, the laws of the State of Texas. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction; provided, however,
that nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. 91 or similar
governing state law. Any party who fails to submit to binding arbitration
following a lawful demand by the opposing party shall bear all costs and
expenses, including reasonable attorney's fees, incurred by the opposing party
in compelling arbitration of any Dispute.
(c) No provision of, nor the exercise of any rights under, this
arbitration clause shall limit the right of any party to (i) foreclose against
any real or personal property Collateral or other security, (ii) exercise
self-help remedies (including repossession and setoff rights) or (iii) obtain
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver from a court
having jurisdiction. Such rights can be exercised at any time except to the
extent such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action as described above
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other exercise of rights under this
section shall be a Dispute hereunder.
(d) Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law of the State of Texas. Arbitrator(s) may make an
award of attorneys' fees and expenses if permitted by law or the agreement of
the parties. All statutes of limitation applicable to any Dispute shall apply to
any proceeding in accordance with this arbitration clause. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than 5 years practice in commercial law in the
State of Texas. With respect to a Dispute in which the claims or amounts in
controversy do not exceed five hundred thousand dollars ($500,000), a single
arbitrator shall be chosen and shall resolve the Dispute. In such case the
arbitrator shall have authority to render an award up to but not to exceed five
hundred thousand dollars ($500,000) including all damages of any kind
whatsoever, costs, fees and expenses. Submission to a single arbitrator shall be
a waiver of all parties' claims to recover more than
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Loan Agreement (continued)
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five hundred thousand dollars ($500,000). A Dispute involving claims or amounts
in controversy exceeding five hundred thousand dollars ($500,000) shall be
decided by a majority vote of a panel of three arbitrators ("Arbitration
Panel"), one of whom must possess the qualifications to sit as a single
arbitrator in a Dispute decided by one arbitrator. If the arbitration is
consolidated with one conducted pursuant to the terms of an agreement between
the Lender and the Borrower or Parent related to the indebtedness guaranteed,
then the Arbitration Panel shall be one which meets the criteria set forth
between the Lender, Parent of Borrower. Arbitrator(s) may, in the exercise of
their discretion, at the written request of a party, (i) consolidate in a single
proceeding any multiple party claims that are substantially identical and all
claims arising out of a single loan or series of loans including claims by or
against borrower(s), guarantors, sureties and/or owners of Collateral if
different from the Borrower, and (ii) administer multiple arbitration claims as
class actions in accordance with Rule 23 of the Federal Rules of Civil
Procedure. The arbitrator(s) shall be empowered to resolve any dispute regarding
the terms of this Agreement or the arbitrability of any Dispute or any claim
that all or any part (including this provision) is void or voidable but shall
have no power to change or alter the terms of this Agreement. The award of the
arbitrator(s) shall be in writing and shall specify the factual and legal basis
for the award.
(e) To the maximum extent practicable, the Administrator, the
arbitrator(s) and the parties shall take any action necessary to require that an
arbitration proceeding hereunder be concluded within 180 days of the filing of
the Dispute with the Administrator. The arbitrator(s) shall be empowered to
impose sanctions for any party's failure to proceed within the times established
herein. Arbitration proceedings hereunder shall be conducted in Texas at a
location determined by the Administrator. In any such proceeding a party shall
state as a counterclaim any claim which arises out of the transaction or
occurrence or is in any way related to the Documents which does not require the
presence of a third party which could not be joined as a party in the
proceeding, The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of the Documents and repayment in full of
sums owed to Lender by Borrower unless the parties otherwise expressly agree in
writing. Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by applicable law or
regulation.
SECTION 10.06. INVALID PROVISIONS.
(a) If any provision of any Loan Document is held to be illegal, invalid
or unenforceable under present or future laws during the term of this Agreement,
such provision shall be fully severable; such Loan Document shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of such Loan Document; and the remaining provisions of such
Loan Document shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from such
Loan Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision shall be added as part of such Loan Document a provision
mutually agreeable to Borrower, Parent and Lender as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. In the event Borrower, Parent and Lender are unable to
agree upon a provision to be added to the Loan Document within a period of ten
(10) business days after a provision of the Loan Document is held to be illegal,
invalid or unenforceable, then a provision acceptable to independent
arbitrators, such to be selected in accordance with the provisions of the
American Arbitration Association, as similar in terms to the illegal, invalid or
unenforceable provision as is possible and be legal, valid and enforceable shall
be added automatically to such Loan Document. In either case, the effective date
of the added provision shall be the date upon which the prior provision was held
to be illegal, invalid or unenforceable.
SECTION 10.07. MAXIMUM INTEREST RATE.
(a) Regardless of any provision contained in any of the Loan Documents,
Lender shall never be entitled to receive, collect or apply as interest on the
Debentures any amount in excess of interest calculated
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Loan Agreement (continued)
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at the Maximum Rate, and, in the event that any Lender ever receives, collects
or applies as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of the Obligation is paid in
full, any remaining excess shall forthwith be paid to Borrower. In determining
whether or not the interest paid or payable under any specific contingency
exceeds interest calculated at the Maximum Rate, Borrower and Lender shall, to
the maximum extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest;
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
pro rate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Debentures; provided that, if the
Debentures are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds interest calculated at the Maximum Rate, Lender shall
refund to Borrower the amount of such excess or credit the amount of such excess
against the principal amount of the Debentures and, in such event, Lender shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of interest
calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious rate of
interest (if any) permitted by applicable law on such day that at any time, or
from time to time, may be contracted for, taken, reserved, charged or received
on the Indebtedness evidenced by the Debentures under the laws which are
presently in effect of the United States of America and the State of Texas or by
the laws of any other jurisdiction which are or may be applicable to the holders
of the Debentures and such Indebtedness or, to the extent permitted by law,
under such applicable laws of the United States of America and the State of
Texas or by the laws of any other jurisdiction which are or may be applicable to
the holder of the Debentures and which may hereafter be in effect and which
allow a higher maximum nonusurious interest rate than applicable laws now allow.
SECTION 10.08. PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURES.
(a) The Lender shall have the right to enter into a participation
agreement with any other party with respect to the Debentures, or to sell all or
any part of the Debentures, but any participation or sale shall not affect the
rights and duties of such Lender hereunder vis-a-vis Borrower. In the event that
all or any portion of the Loan shall be, at any time, assigned, transferred or
conveyed to other parties, any action, consent or waiver (except for compromise
or extension of maturity), to be given or taken by Lender hereunder (herein
"Action"), shall be such action as taken by Majority in Interest.
(b) Assignment or sale of the Debentures shall be effective, on the books
of the Borrower only upon (i) endorsement of the Debenture, or part thereof, to
the proposed new holder, along with a current notation of the amount of payments
or installments received and net Principal Amount yet unfunded or unpaid, and
presentment of such Debenture to the Borrower for issue of a replacement
Debenture, or Debentures, in the name of the new holder; (ii) a designation by
the holders of a single Lender' Agent for Notice, such agent to be the sole
party to whom Borrower shall be required to provide notice when notice to Lender
are required hereunder and who shall be the sole party authorized to represent
Lender in regard to modification or waivers under the Debenture, this Agreement,
or other Loan Documents; and (iii) delivery of an opinion of counsel, reasonably
satisfactory to Borrower, that transfer shall not require registration or
qualification under applicable state or federal securities laws.
(c) So long as the Borrower is not in default hereunder, the Lender shall
not sell or assign an interest in the Debentures or rights under this Agreement
to any Person that the Borrower reasonably identifies to Lender as being engaged
as a competitor.
SECTION 10.09 CONFIDENTIALITY.
(a) All financial reports or information which are furnished to Lender, or
their director designee or other representatives, pursuant to this Agreement or
pursuant to the Debentures or other Loan Documents
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Loan Agreement (continued)
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shall be treated as confidential unless and to the extent that such information
has been otherwise disclosed by the Borrower or Parent, but nothing herein
contained shall limit or impair Lender' right to disclose such reports to any
appropriate Governmental Authority, or to use such information to the extent
pertinent to an evaluation of the Obligation, or to enforce compliance with the
terms and conditions of this Agreement, or to take any lawful action which
Lender deem necessary to protect their interests under this Agreement.
(b) Lender, THEIR director designees, and agents shall use their
reasonable best efforts to protect and preserve the confidentiality of such
information except for such disclosure as shall be required for compliance by
Lender or THEIR director designees with SEC reporting requirements or otherwise
as a matter of law.
SECTION 10.10. BINDING EFFECT.
(a) The Loan Documents shall be binding upon and inure to the benefit of
Borrower, Parent and Lender and their respective successors, assigns and legal
representatives; provided, however, that Borrower or Parent may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
SECTION 10.11. NO THIRD PARTY BENEFICIARY.
(a) The parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or render Lender
liable to any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, or for debts or claims accruing to any
such persons against Borrower. Notwithstanding anything contained herein or in
the Debentures, or in any other Loan Document, no conduct by any or all of the
parties hereto, before or after signing this Agreement nor any other Loan
Document, shall be construed as creating any right, claim or cause of action
against Lender, or any of their officers, directors, agents or employees, in
favor of any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, nor to any other person or entity
other than Borrower.
SECTION 10.12. ENTIRETY.
(a) This Agreement and the Debentures and the other Loan Documents issued
pursuant thereto contain the entire agreement between the parties and supersede
all prior agreements and understandings, if any, relating to the subject matter
hereof and thereof.
SECTION 10.13. HEADINGS.
(a) Section headings are for convenience of reference only and, except as
a means of identification of reference, shall in no way affect the
interpretation of this Agreement.
SECTION 10.14. SURVIVAL.
(a) All representations and warranties made by Borrower and Parent herein
shall survive delivery of the Debentures and the making of the Loans.
SECTION 10.15. MULTIPLE COUNTERPARTS.
(a) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 10.16. GOVERNING LAW.
(a) THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND
DELIVERED, AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE
SUBSTANTIVE LAWS OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF THIS LOAN AGREEMENT AND ALL OF THE
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Loan Agreement (continued)
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OTHER LOAN DOCUMENTS. THIS WRITTEN LOAN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(signature page follows)
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Loan Agreement (continued)
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed, sealed, and delivered, as of the day and year first above written.
Address for Notice: PARENT
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ EARTHCARE COMPANY
By:
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Vice President and Chief Financial Officer
Attest by:
-----------------------------------
Name:
Title:
Address for Notice: BORROWER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ RESOURCE MANAGEMENT ▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ INC.,
By:
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Vice President and Chief Financial Officer
Attest by:
-----------------------------------
Name:
Title:
Address for Notice: BORROWER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ RESOURCE MANAGEMENT ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ FLORIDA, INC.,
By:
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Vice President and Chief Financial Officer
Attest by:
-----------------------------------
Name:
Title:
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Loan Agreement (continued)
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Address for Notice: BORROWER
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ACQUISITION SUB, INC.
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By:
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇
Vice President and Chief Financial Officer
Attest by:
-----------------------------------
Name:
Title:
LENDER
Address for Notice:
700 Gemini, Suite 104 SAGEMARK CAPITAL, L.P.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By:
-------------------------------------------
Sagemark Management, LLC, General Partner
Print Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Authorized Member
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