1
EXHIBIT 2.2
-------------------------------------------------------------------------------
SENIOR SUBORDINATED LOAN AGREEMENT
Dated as of January 27, 2000
Among
SYNAGRO TECHNOLOGIES, INC.,
as Borrower,
CERTAIN SUBSIDIARY GUARANTORS,
as Guarantors,
and
GTCR CAPITAL PARTNERS, L.P.,
as Lender
-------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page(s)
SECTION 1. DEFINITIONS...................................................................2
1.1 Certain Defined Terms..................................................................2
1.2 Accounting Terms.......................................................................2
SECTION 2. MAKING AND BORROWING OF LOANS.................................................2
2.1 Making and Borrowing of Loans..........................................................2
2.2 Making of Loans; Notice................................................................2
2.3 Use of Proceeds........................................................................3
2.4 The Closing............................................................................3
SECTION 3. TERMS OF THE LOANS............................................................3
3.1 The Note...............................................................................3
3.2 Interest on the Loans..................................................................4
3.3 Payment of Loans.......................................................................4
3.4 Voluntary Prepayments..................................................................4
3.5 Mandatory Prepayments..................................................................4
3.6 Application of Prepayments.............................................................5
3.7 Manner and Time of Payment.............................................................5
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................6
4.1 Organization, Corporate Power and Licenses.............................................6
4.2 Capital Stock and Related Matters......................................................6
4.3 Subsidiaries; Investments..............................................................7
4.4 Authorization; No Breach...............................................................8
4.5 Financial Statements...................................................................8
4.6 Absence of Undisclosed Liabilities.....................................................9
4.7 No Material Adverse Change.............................................................9
4.8 Absence of Certain Developments........................................................9
4.9 Assets................................................................................11
4.10 Real Property.........................................................................11
4.11 Tax Matters...........................................................................12
4.12 Contracts and Commitments.............................................................13
4.13 Intellectual Property Rights..........................................................14
4.14 Litigation, etc.......................................................................15
4.15 Brokerage.............................................................................16
4.16 Governmental Consent, etc.............................................................16
4.17 Insurance.............................................................................16
4.18 Employees.............................................................................16
4.19 Employee Benefit Plans................................................................17
4.20 Compliance with Laws..................................................................18
i
3
4.21 Environmental and Safety Matters......................................................18
4.22 Affiliated Transactions...............................................................19
4.23 Real Property Holding Corporation Status..............................................19
4.24 Customers and Suppliers...............................................................20
4.25 Reports with the Securities and Exchange Commission...................................20
4.26 Investment Company....................................................................20
4.27 Section 203 of the DGCL; Takeover Statute.............................................20
4.28 Public Utility Holding Company Act....................................................20
4.29 Regulation U..........................................................................21
4.30 Solvency, etc.........................................................................21
4.31 Stockholder Consent. .................................................................21
4.32 Disclosure............................................................................21
SECTION 5. CONDITIONS TO LENDER'S OBLIGATION TO MAKE LOANS..............................22
5.1 Conditions to Lender's Obligation to Make the Initial Loan............................22
5.2 Conditions to Lender's Obligations to Make Subsequent Loans After the Closing Date....25
SECTION 6. COVENANTS....................................................................26
6.1 Performance of Documents; etc.........................................................26
6.2 Securities Laws.......................................................................26
6.3 Reports, Certificates and Other Information...........................................27
6.4 Books, Records and Inspections........................................................29
6.5 Insurance.............................................................................29
6.6 Compliance with Laws, Material Contracts; Payment of Taxes and Liabilities............30
6.7 Maintenance of Existence, etc.........................................................30
6.8 Financial Covenants...................................................................30
6.9 Limitations on Debt...................................................................31
6.10 Liens.................................................................................32
6.11 [Reserved]............................................................................33
6.12 Restricted Payments...................................................................33
6.13 Mergers, Consolidations, Sales........................................................33
6.14 Further Assurances....................................................................34
6.15 Transactions with Affiliates..........................................................34
6.16 Employee Benefit Plans................................................................34
6.17 Environmental Laws....................................................................34
6.18 Unconditional Purchase Obligations....................................................35
6.19 Inconsistent Agreements...............................................................35
6.20 Business Activities...................................................................35
6.21 Advances and Other Investments........................................................35
6.22 Other Subordinated Debt...............................................................36
6.23 Foreign Subsidiaries..................................................................36
6.24 Business Plan and Financial Projections...............................................36
6.25 Amendments to Certain Documents.......................................................36
ii
4
6.26 Listing...............................................................................36
6.27 Current Public Information............................................................37
6.28 Section 203 of the DGCL...............................................................37
6.29 Fiscal Year...........................................................................37
6.30 Board.................................................................................37
6.31 Filing of Information Statement.......................................................37
6.32 Amendment to Certificate of Incorporation.............................................37
SECTION 7. EVENTS OF DEFAULT............................................................37
7.1 Events of Default.....................................................................37
7.2 Payment Default.......................................................................37
7.3 Other Debt............................................................................38
7.4 Other Material Obligations............................................................38
7.5 Non-Compliance with Provisions of This Agreement......................................38
7.6 Breach of Representations or Warranties...............................................38
7.7 Involuntary Bankruptcy, Appointment of Receiver, etc..................................38
7.8 Voluntary Bankruptcy, Appointment of Receiver, etc....................................39
7.9 Judgments.............................................................................39
7.10 Dissolution...........................................................................39
7.11 Solvency..............................................................................39
7.12 Injunction............................................................................39
7.13 ERISA; Pension Plans..................................................................39
7.14 Invalidity of Subordinated Loan Documents.............................................40
7.15 Change in Control....................................................................40
7.16 Consequences of Default...............................................................40
SECTION 8. SUBORDINATION................................................................41
SECTION 9. THE GUARANTEES...............................................................41
9.1 The Guarantees........................................................................41
9.2 Guaranteed Obligations Unconditional..................................................41
9.3 Reinstatement.........................................................................42
9.4 Subrogation...........................................................................42
9.5 Contribution..........................................................................42
9.6 Remedies..............................................................................43
9.7 Continuing Guarantee..................................................................44
9.8 Subordination of Guaranteed Obligations...............................................44
SECTION 10. TRANSFERS OF NOTE; LEGENDS...................................................44
10.1 Assignments of Note...................................................................44
10.2 Investment Representations; Restrictive Legend........................................45
10.3 Termination of Restrictions...........................................................45
10.4 Note Legend relating to Subordination.................................................45
10.5 Note Legend relating to Original Issue Discount.......................................46
iii
5
SECTION 11. MISCELLANEOUS................................................................46
11.1 Expenses..............................................................................46
11.2 Indemnity.............................................................................46
11.3 Amendments and Waivers................................................................48
11.4 Independence of Covenants.............................................................48
11.5 Notices...............................................................................48
11.6 Survival of Warranties and Certain Agreements.........................................49
11.7 Failure or Indulgence Not Waiver; Remedies Cumulative.................................49
11.8 Severability..........................................................................50
11.9 Heading...............................................................................50
11.10 Applicable Law........................................................................50
11.11 Successors and Assigns; Subsequent Holders............................................50
11.12 Consent to Jurisdiction and Service of Process........................................50
11.13 Waiver of Jury Trial..................................................................51
11.14 No Personal Obligations...............................................................51
11.15 Counterparts; Effectiveness...........................................................51
11.16 Entirety..............................................................................52
iv
6
SENIOR SUBORDINATED LOAN AGREEMENT
This SENIOR SUBORDINATED LOAN AGREEMENT (this "Agreement") is made as
of January 27, 2000, by and among Synagro Technologies, Inc., a Delaware
corporation (the "Company"), as borrower, the Guarantors (as defined hereafter)
which appear on the signature pages hereto or otherwise execute a counterpart
hereto, as guarantors, and GTCR Capital Partners, L.P., a Delaware limited
partnership, as lender (the "Lender").
RECITALS
WHEREAS, the Company has entered into a Purchase and Sale Agreement,
dated as of October 20, 1999 (the "Acquisition Agreement"), with Xxxx X.
Xxxxxxx, individually, Xxxxxx Xxxxxxx, as trustee of the Xxxx X. Xxxxxxx 1998
Grat, Xxxxxxx X. Xxxxxxxx, individually, Xxxxxxx X. Xxxxxxxx, as executrix of
the estate of Xxxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxxxxx and Xxxxxx Xxxxxx, as
co-trustees of the Xxxxxxx X. Xxxxxxxx Revocable Trust under agreement dated
November 2, 1998, which collectively own, directly or indirectly, all of the
outstanding capital stock, limited partnership interests and limited liability
companies interests listed on Schedule 1 thereto (the "Acquisition");
WHEREAS, the Company has entered into a Purchase Agreement (the
"Preferred Stock Purchase Agreement"), dated as of the date hereof, with GTCR
Fund VII, L.P., a Delaware limited partnership, for the purpose of financing a
part of the Acquisition and to provide future financing to the Company;
WHEREAS, the Company has entered into an Amended and Restated Credit
Agreement (the "Credit Agreement"), dated as of the date hereof, by and among
the Company, various financial institutions (together with their respective
successors and assigns, the "Senior Lenders") and Bank of America, N.A.,
individually and as administrative agent for the Senior Lenders (the "Agent"),
and related documents pursuant to which the Senior Lenders have extended term
and revolving loans to the Company and its Subsidiaries on a senior secured
basis;
WHEREAS, the Lender intends to make available or arrange for Loans to
the Company in the aggregate amount of up to $125,000,000 (including the amount
of the Loan made on the Closing Date), and such Loans will be available to the
Company from time to time on and after the Closing Date on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, on the Closing Date the Lender shall make a Loan to the
Company in the amount of $20,000,000;
WHEREAS, the Guarantors are wholly-owned Subsidiaries of the Company
and desire that the Lender enter into this Agreement for their and its benefit;
WHEREAS, on the Closing Date in connection with the Initial Loan (as
defined hereafter) and from time to time thereafter in connection with the
borrowing of subsequent loans hereunder, the Company shall issue to the Lender
warrants (the "Warrants") to purchase shares of the Company's Convertible
Preferred Stock (the "Warrant Shares"), pursuant to a Warrant Agreement,
-1-
7
dated as of the date hereof, by and between the Company and the Lender (the
"Warrant Agreement"); and
WHEREAS, the Lender, as holder of the Warrants, will enter into a
Registration Agreement (the "Registration Agreement"), dated as of the date
hereof, by and among the Company, the Lender, GTCR Fund VII, L.P., and others.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and conditions set forth below, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used in this Agreement
shall have the meanings set forth in Exhibit A hereto.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered pursuant hereto
shall be prepared, in accordance with GAAP. No Accounting Changes shall affect
the financial covenants, standards or terms contained in this Agreement;
provided, that, the Company shall include a description in each Borrowers'
Certificate and other financial reports required to be delivered hereunder which
explains the differences between the financial statements delivered (which
reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes).
SECTION 2. MAKING AND BORROWING OF LOANS
2.1 Making and Borrowing of Loans. Subject to the terms and conditions
of this Agreement and on the basis of the representations and warranties set
forth herein, the Lender may make loans (each a "Loan," and collectively, the
"Loans") to the Company as set forth in Section 2.2, and the Company may borrow,
prepay and repay such Loans hereunder in accordance with the terms of this
Agreement, at any time and from time to time on any Business Day prior to the
termination of this Agreement. The obligation of the Company to repay any Loan
made by the Lender and borrowed by the Company shall be evidenced by the
Company's execution and delivery to the Lender of the Note described in Section
3.1 below.
2.2 Making of Loans; Notice.
2.2.1. Minimum Amount. Each Loan borrowed by the Company
hereunder shall be in a minimum aggregate principal amount of $100,000 or an
integral multiple thereof.
2.2.2. Initial Loan. The initial Loan shall be made on the
date hereof in the amount of $20,000,000 (the "Initial Loan").
-2-
8
2.2.3. Future Loans; Approved Uses. Subject to the terms and
conditions hereof, the Lender may make or arrange for up to $125,000,000 in
Loans (including the Initial Loan) to the Company as subordinated debt financing
necessary to finance a portion of the purchase price of the Acquisition on the
Closing Date and to finance in part one or more future acquisitions and such
other uses as Lender approves in writing (the "Future Acquisitions"), in each
case as approved by the Board and the Lender (in each case, an "Approved Use").
In order to implement the foregoing, the Lender may make Loans to the Company
from time to time after the Closing, upon the written request of the Board (with
at least ten Business Days' prior notice), solely for purposes of an Approved
Use and subject to the fulfillment of all applicable conditions set forth in
this Agreement. The Lender shall pay or deliver the proceeds of any Loan in
immediately available funds to or upon the order of the Company at a commercial
bank designated by the Company in a notice of borrowing delivered to the Lender.
2.3 Use of Proceeds. The proceeds of any Loans made hereunder and of
the Warrants pursuant to the Warrant Agreement shall be used solely for the
Approved Use approved by the Lender in connection therewith. No portion of the
proceeds of any Loans made hereunder or the Warrants pursuant to the Warrant
Agreement shall be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of any regulation, interpretation or ruling of the FRB, all
as from time to time in effect, refunding of any indebtedness incurred for such
purpose, or making any investment prohibited by foreign trade regulations.
Without limiting the foregoing, the Company agrees that in no event shall any
proceeds of any Loans made hereunder or from the sale of the Warrants pursuant
to the Warrant Agreement be used in any manner which might cause the Loans, the
Warrants or the application of such proceeds to violate any of Regulations U or
X of the FRB or any other regulation of the FRB, or to violate the Exchange Act,
in each case as in effect as of the Closing and as of such use of proceeds.
2.4 The Closing. Subject to the satisfaction of the conditions thereto
set forth in this Agreement, the closing of the Initial Loan made by the Lender
and borrowed by the Company hereunder (the "Closing") shall take place at 10:00
a.m. Chicago time as of the date of this Agreement, at the offices of Xxxxxxxx &
Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or at such other date,
time and/or location(s) or by such other means, including transmission of
signature pages by telecopy as may be agreed upon by the parties hereto (the
"Closing Date").
SECTION 3. TERMS OF THE LOANS
3.1 The Note. The obligation of the Company to repay the aggregate
unpaid principal amount of the Initial Loan and subsequent Loans made hereunder
shall be evidenced by a promissory note in the form attached hereto as Exhibit B
(the "Note"), dated the date hereof, payable as specified in this Section 3,
made to the order of the Lender in an aggregate principal amount of
$125,000,000, and bearing interest and maturing as provided in this Agreement.
The Lender shall, and is hereby authorized by the Company to, endorse on the
schedules annexed to the Note an appropriate notation evidencing the date and
amount of each Loan made by the Lender as well as the date and amount of each
payment of principal and interest by the Company with respect thereto and which
notations shall be presumed correct until the contrary is established; provided
that the failure to make or any
-3-
9
error in making any such notation shall not limit or expand or otherwise affect
the obligations of the Company hereunder or under the Note.
3.2 Interest on the Loans.
3.2.1. The Loans shall bear interest at a rate equal to 12 %
per annum on the unpaid principal amount thereof from and including the Closing
Date until the principal amount shall be paid in full, such interest to be
payable in cash in the manner specified in Section 3.7. Notwithstanding the
foregoing, upon the occurrence of an Event of Default hereunder and for so long
as an Event of Default is continuing, the interest rate, to the extent permitted
by law, on the unpaid principal amount of the Loans shall increase to 14%.
3.2.2. Interest shall be payable with respect to the Loans, in
arrears, on the last day of each Interest Period, upon any prepayment of the
Loans (to the extent of accrued interest on the principal amount of the Loans so
prepaid) and at maturity of the Loans. The "Interest Period" means (i)
initially, the period commencing on the Closing Date (with respect to the
Initial Loan) or on the date any subsequent Loan is made (with respect to
subsequent Loans) and ending on the next succeeding Interest Payment Date and
(ii) thereafter, each quarterly period ending on March 31, June 30, September
30, or December 31, as applicable (each such date for an interest payment, an
"Interest Payment Date"); provided, that, no Interest Period shall extend beyond
the Maturity Date.
3.2.3. Interest on the Loans shall be computed on the basis of
a 360-day year of twelve 30-day months. In computing such interest, the date or
dates of the making of the Loans shall be included and the date of payment shall
be excluded.
3.3 Payment of Loans. The unpaid principal amount of the Loans plus all
accrued and unpaid interest thereon and all other amounts owed thereunder with
respect thereto shall be paid in full in cash on the Maturity Date.
3.4 Voluntary Prepayments. Subject to the terms and conditions of the
Credit Documents, the Loans may be prepaid, at the Company's option, at any time
and from time to time, in whole or in part, without premium, fee or penalty, (a)
upon not less than five (5) Business Days and not more than thirty (30) Business
Days prior written notice to the Lender (which notice shall be irrevocable) and
(b) in an aggregate minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of that amount.
3.5 Mandatory Prepayments.
3.5.1. Asset Sales. Subject to the terms and conditions of the
Credit Documents (which do require application of proceeds), concurrently with
the receipt by the Company or any Subsidiary of any Applicable Asset Sale
Proceeds, the Company shall make a prepayment of the Loans in an amount equal to
100% of such Applicable Asset Sale Proceeds (rounded down, if necessary, to an
integral multiple of $100,000); provided that no such prepayment shall be
required unless the aggregate amount of Applicable Asset Sale Proceeds so
received together with all Applicable Asset Sale Proceeds previously received
and not previously applied to prepay the Loans pursuant to this clause 3.5.1
exceeds $100,000.
-4-
10
3.5.2. Debt Issuances. Subject to terms and conditions of the
Credit Documents, concurrently with the receipt by the Company or any Subsidiary
of any Net Cash Proceeds from the issuance of any Debt (other than Debt
permitted by Section 6.9(a) or (c) and the Loans hereunder), the Company shall
make a prepayment of the Loans in an amount equal to 100% of such Net Cash
Proceeds.
3.5.3. Equity Issuances. Subject to the terms and conditions
of the Credit Documents, concurrently with the receipt by the Company of any Net
Cash Proceeds (other than pursuant to sales of Series D Preferred Stock pursuant
to the Preferred Stock Purchase Agreement) from the issuance of any equity
securities of the Company, the Company shall make a prepayment of the Loans in
an amount equal to 100% of such Net Cash Proceeds; provided that no such
prepayment shall be required with respect to the granting of stock options to
officers, directors and employees of the Company and its Subsidiaries or the
exercise thereof for an aggregate of $2,000,000.
3.5.4. Notice. The Company shall notify the Lender of any
event which could reasonably be expected to give rise to any prepayment to be
made pursuant to Sections 3.5.1 through 3.5.3 as soon as practicable prior to
such prepayment date.
3.5.5. Calculation of Net Proceeds Amounts. Concurrently with
any prepayment of the Loans pursuant to Sections 3.5.1 through 3.5.3, the
Company shall deliver to the Lender a Borrowers' Certificate demonstrating the
calculation of the amount of the proceeds that gave rise to such prepayment.
3.6 Application of Prepayments. All prepayments (whether voluntary or
mandatory) shall include, notwithstanding Section 3.2.2 above, the payment in
cash of accrued and unpaid interest on the principal amount of the Loans so
prepaid and shall be applied first to payment of principal before application to
accrued interest thereon.
3.7 Manner and Time of Payment.
3.7.1. All payments by the Company under the Note of principal
and interest and fees hereunder shall be made without defense, set-off or
counterclaim, in same day funds and delivered to each holder of the Note not
later than 12:00 noon (Chicago time) on the date such payment is due by wire
transfer of immediately available funds to the following account or such other
place as the Lender may from time to time designate:
ABA No. 07100505
Account Number: 5800151556
Account Name: GTCR Capital Partners, X.X.
XxXxxxx National Bank
000 X. XxXxxxx
Xxxxxxx, XX 00000
Reference: Synagro Technologies, Inc.
-5-
11
provided, that, funds received by any such holder after 12:00 noon (Chicago
time) shall be deemed to have been paid by the Company on the next succeeding
Business Day.
3.7.2. Whenever any payment to be made hereunder or under the
Note shall be stated to be due on a day which is not a Business Day, the payment
shall be made on the next succeeding Business Day and such additional period
shall be included in the computation of the payment of interest hereunder or
under the Note.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Lender to enter into this Agreement and to make
Loans to the Company hereunder, the Company and each of the Guarantors
represent, warrant and agree for the benefit of the Lender that:
4.1 Organization, Corporate Power and Licenses. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify (except in
those instances in which the failure to be so qualified or to be validly
existing and in good standing has not and would not reasonably be expected to
have a Material Adverse Effect). The Company possesses all requisite corporate
power and authority and all material licenses, permits and authorizations
necessary to own and operate its properties, to carry on its businesses as now
conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement. The copies of the Company's and
each Subsidiary's charter documents and bylaws which have been furnished to the
Lender's special counsel reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete.
4.2 Capital Stock and Related Matters.
4.2.1. As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of:
(a) 10,000,000 shares of preferred stock, (i) of which 500,000
shares shall be designated as Series A Preferred, none of which shall
be issued and outstanding, (ii) of which 1,458,335 shares shall be
designated as Series B Preferred, none of which shall be issued and
outstanding, (iii) of which 30,000 shares shall be designated as Series
C Convertible Preferred Stock, of which 17,358.824 shares shall be
issued and outstanding, (iv) of which 32,000 shares shall be designated
as Series D Convertible Preferred Stock, of which (a) 5,498.319 shares
shall be issued and outstanding and (b) 17,358.824 shares shall be
reserved for future issuance upon conversion of the Series C
Convertible Preferred Stock, (v) of which 15,000 shares shall be
reserved for future issuance under the Warrant Agreement and (vi) of
which 105,000 shares shall be reserved for future issuance pursuant to
the Preferred Stock Purchase Agreement; and
-6-
12
(b) 100,000,000 shares of Common Stock, of which 17,710,189
shares shall be issued and outstanding, 9,142,858 shares shall be
reserved for issuance upon conversion of the Company's Series D
Convertible Preferred Stock and 4,689,599 shares shall be reserved for
issuance upon exercise of outstanding options and warrants to purchase
Common Stock as set forth on the attached "Capitalization Schedule."
(c) As of the Closing, neither the Company nor any Subsidiary
shall have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any
profit participation features, nor shall it have outstanding any rights
or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its capital
stock or any stock appreciation rights or phantom stock plans, except
for the Convertible Preferred Stock, the Warrants and except as set
forth on the attached "Capitalization Schedule." The Capitalization
Schedule accurately sets forth the following information with respect
to all outstanding options and rights to acquire the Company's capital
stock: the holder, the type of security, the number of shares covered,
the exercise price and the expiration date. As of the Closing, neither
the Company nor any Subsidiary shall be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except as set forth on the
Capitalization Schedule and except pursuant to the Certificates of
Designation. As of the Closing, all of the outstanding shares of the
Company's capital stock shall be validly issued, fully paid and
nonassessable.
4.2.2. There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Warrant Shares, the Warrants, or the Purchased
Preferred or the issuance of the Common Stock issuable upon conversion of the
Warrant Shares or the Purchase Preferred or upon exercise of the Warrants. The
Company has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital stock, and the
offer, sale and issuance of the Warrants and the Purchased Preferred do not
require registration under the Securities Act or any applicable state securities
laws. To the best of the Company's knowledge, there are no agreements between
the Company's stockholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs, except as set forth on the Capitalization Schedule.
4.3 Subsidiaries; Investments. The attached "Subsidiary Schedule"
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which its ownership of property or the
conduct of business requires it to qualify (except in those instances in which
the failure to be so qualified or to be validly existing and in good standing
has not and would not reasonably be expected to have a Material Adverse Effect).
All of the outstanding shares of capital stock of each Subsidiary are validly
issued, full paid and nonassessable, and all such shares are owned by the
Company or
-7-
13
another Subsidiary free and clear of any Lien, except for Liens under the Credit
Documents, and not subject to any option or right to purchase any such shares.
Except as set forth on the Subsidiary Schedule, neither the Company nor any
Subsidiary owns or holds the right to acquire any shares of stock or any other
security or interest in any other Person.
4.4 Authorization; No Breach. The execution, delivery and performance
of this Agreement, the Warrants, the Warrant Agreement, the Preferred Stock
Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement and all other agreements contemplated hereby to which
the Company is a party, the filing of the Certificates of Designation, the
amendment of the Company's Certificate of Incorporation by the Certificate
Amendment and the amendment of the Company's bylaws have been duly authorized by
the Company. This Agreement, the Warrants, the Warrant Agreement, the Preferred
Stock Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement, the Certificates of Designation, the Company's
Certificate of Incorporation (as amended by the Certificate Amendment) and all
other agreements contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms (except as limited by bankruptcy, insolvency or other
laws affecting the enforcement of creditors' rights). Except as set forth on the
attached "Restrictions Schedule," the execution and delivery by the Company of
this Agreement, the Registration Agreement, the Intercreditor Agreement, the
Acquisition Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering, sale and issuance of the Purchased Preferred,
the issuance of the Common Stock upon conversion of the Convertible Preferred
Stock, the issuance of Warrants pursuant to the Warrant Agreement, the issuance
of the Warrant Shares upon exercise of Warrants, the filing of the Certificates
of Designation, the filing of the Certificate Amendment and the amendment of the
Company's bylaws and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, the Certificates of Designation or the charter or bylaws
of the Company or any Subsidiary, or any law, statute, rule or regulation to
which the Company or any Subsidiary is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the Restrictions Schedule, none of the Subsidiaries are
subject to any restrictions upon making loans or advances or paying dividends
to, transferring property to, or repaying any Debt owed to, the Company or
another Subsidiary.
4.5 Financial Statements. Attached hereto as the "Financial Statements
Schedule" are the following financial statements:
4.5.1. the audited consolidated balance sheets of the Company
and its Subsidiaries as of December 31, 1997 and 1998, and the related
statements of income and cash flows (or the equivalent) for the respective
twelve-month periods ended December 31, 1996, 1997 and 1998; and
-8-
14
4.5.2. the unaudited consolidated balance sheet of the Company
and its Subsidiaries as of November 30, 1999 (the "Latest Balance Sheet"), and
the related statements of income and cash flows (or the equivalent) for the
eleven-month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with GAAP, consistently applied, subject in the case of the unaudited
financial statements to the absence of footnote disclosure and changes resulting
from normal year-end adjustments for recurring accruals (none of which would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
The pro forma consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 1999, which gives effect to the Transactions and the
Acquisition, is also attached hereto in the Financial Statement Schedule and is
complete and correct in all material respects and presents fairly in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of such date as if the transactions contemplated by this
Agreement had occurred immediately prior to such date, and such balance sheet
contains all pro forma adjustments necessary in order to fairly reflect such
assumption.
4.6 Absence of Undisclosed Liabilities. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business consistent with past practice (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit), (iii) other liabilities and obligations expressly disclosed in the
other Schedules to this Agreement and (iv) obligations under contracts not
required to be disclosed on the Contracts Schedule.
4.7 No Material Adverse Change. Except as set forth on the attached
"Adverse Change Schedule" or, without duplication, as a result of the Special
Charges, since November 30, 1999, there has been no material adverse change in
the financial condition, operating results, assets, operations, business
prospects, employee relations or customer or supplier relations of the Company
and its Subsidiaries taken as a whole.
4.8 Absence of Certain Developments.
4.8.1. Except as expressly contemplated by this Agreement or
as set forth on the attached "Developments Schedule," since the date of the
Latest Balance Sheet, neither the Company nor any Subsidiary has
-9-
15
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount or incurred or become subject to any
liabilities, except current liabilities incurred in the ordinary course
of business and liabilities under contracts entered into in the
ordinary course of business;
(c) discharged or satisfied any Lien or paid any obligation or
liability, other than current liabilities paid in the ordinary course
of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock or
other equity securities or purchased or redeemed any shares of its
capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities);
(e) mortgaged or pledged any of its properties or assets or
subjected them to any Lien, except for Permitted Encumbrances;
(f) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or canceled any debts or
claims;
(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any proprietary confidential
information to any Person;
(h) suffered any extraordinary losses or waived any rights of
value, whether or not in the ordinary course of business or consistent
with past practice;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(j) made any loans or advances to, guarantees for the benefit
of, or any Investments in, any Persons in excess of $50,000 in the
aggregate;
(k) made any charitable contributions or pledges in excess of
$10,000 in the aggregate;
(l) suffered any damage, destruction or casualty loss
exceeding in the aggregate $100,000, whether or not covered by
insurance;
(m) made any Investment in or taken steps to incorporate any
Subsidiary except for the incorporation of Wholly-Owned Subsidiaries in
connection with Future Acquisitions approved by the Board and the
Lenders; or
-10-
16
(n) entered into any other transaction other than in the
ordinary course of business or entered into any other material
transaction, whether or not in the ordinary course of business
consistent with past practice.
4.8.2. No officer, director, employee or agent of the Company
or any of its Subsidiaries has been or is authorized to make or receive, and the
Company does not know of any such person making or receiving, any bribe,
kickback or other illegal payment.
4.9 Assets. Except as set forth on the attached "Assets Schedule," the
Company and each Subsidiary have good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet and except for
Liens disclosed on the Latest Balance Sheet (including any notes thereto) and
Permitted Encumbrances. Except as described on the Assets Schedule, the
Company's and each Subsidiary's buildings, equipment and other tangible assets
are in good operating condition in all material respects and are fit for use in
the ordinary course of business. The Company and each Subsidiary own, or have a
valid leasehold interest in, all assets necessary for the conduct of their
respective businesses as presently conducted and as presently proposed to be
conducted.
4.10 Real Property.
4.10.1. Owned Properties. The "Owned Real Property Schedule"
attached hereto sets forth a list of all owned real property (the "Owned Real
Property") used by the Company or any of it Subsidiaries in the operation of the
Company's or any of it Subsidiaries' business. With respect to each such parcel
of Owned Real Property and except for Liens in favor of the Senior Lenders: (i)
such parcel is free and clear of all covenants, conditions, restrictions,
easements, liens or other encumbrances, except Permitted Encumbrances; (ii)
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any person the right of use or occupance of any
portion of such parcel; and (iii) there are no outstanding actions or rights of
first refusal to purchase such parcel, or any portion thereof or interest
therein.
4.10.2. Leased Properties. The "Leased Property Schedule"
attached hereto sets forth a list of all of the leases and subleases ("Leases")
and each leased and subleased parcel of real property in which the Company or
any of it Subsidiaries have a leasehold and subleasehold interest (the "Leased
Real Property"). The Company has delivered to the Lender true, correct, complete
and accurate copies of each of the Leases described in the Leased Property
Schedule. With respect to each Lease listed on the Leased Property Schedule: (i)
the Lease is legal, valid, binding, enforceable and in full force and effect;
(ii) the Lease will continue to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the Closing; (iii) neither
the Company nor any of its Subsidiaries nor, to the best of the Company's
knowledge, any other party to the Lease is in breach or default, and no event
has occurred which, with notice or lapse of time, would constitute such a breach
or default or permit termination, modification or acceleration under the Lease;
(iv) to the best of the Company's knowledge, no party to the Lease has
repudiated any provision thereof; (v) to the best of the Company's knowledge,
there are no disputes, oral agreements, or forbearance
-11-
17
programs in effect as to the Lease; (vi) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents delivered to the Lender; and (vii) neither the Company nor any of it
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease.
4.10.3. Real Property Disclosure. Except as disclosed in the
Owned Real Property Schedule and the Leased Property Schedule, there is no Real
Property leased or owned by the Company or any of it Subsidiaries used in the
Company's or any of it Subsidiaries' business.
4.11 Tax Matters.
4.11.1. Except as set forth on the attached "Taxes Schedule":
the Company, each Subsidiary and each Affiliated Group have filed all Tax
Returns which they are required to file under applicable laws and regulations;
all such Tax Returns are complete and correct in all material respects and have
been prepared in compliance with all applicable laws and regulations in all
material respects; the Company, each Subsidiary and each Affiliated Group in all
material respects have paid all Taxes due and owing by them (whether or not such
Taxes are required to be shown on a Tax Return) and have withheld and paid over
to the appropriate taxing authority all Taxes which they are required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third party; neither the Company, any Subsidiary nor any Affiliated Group
has waived any statute of limitations with respect to any Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency; the accrual
for Taxes on the Latest Balance Sheet would be adequate to pay all Tax
liabilities of the Company and its Subsidiaries if their current tax year were
treated as ending on the date of the Latest Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book and Tax
income); since the date of the Latest Balance Sheet, the Company and its
Subsidiaries have not incurred any liability for Taxes other than in the
ordinary course of business; the assessment of any additional Taxes for periods
for which Tax Returns have been filed by the Company, each Subsidiary and each
Affiliated Group shall not exceed the recorded liability therefor on the Latest
Balance Sheet (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); the federal income Tax Returns
of the Company and its Subsidiaries have been audited and closed for all tax
years through 1998; to the best of the Company's knowledge, no foreign, federal,
state or local tax audits or administrative or judicial proceedings are pending
or being conducted with respect to the Company, any Subsidiary or any Affiliated
Group; no information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority; no written notice indicating an intent
to open an audit or other review has been received by the Company from any
foreign, federal, state or local taxing authority; and there are no material
unresolved questions or claims concerning the Company's, any Subsidiary's or any
Affiliated Group Tax liability.
4.11.2. Neither the Company nor any of its Subsidiaries has
made an election under Section 341(f) of the Internal Revenue Code of 1986, as
amended. Neither the Company nor any Subsidiary is liable for the Taxes of
another Person that is not a Subsidiary in a material amount under (a) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign law),
(b) as a transferee or successor, (c) by contract or indemnity or (d) otherwise.
Neither the Company nor any Subsidiary is a party to any tax sharing agreement.
The Company, each Subsidiary and each Affiliated Group have disclosed on their
federal income Tax Returns any position taken for which
-12-
18
substantial authority (within the meaning of IRC Section 6662(d)(2)(B)(i)) did
not exist at the time the return was filed. Neither the Company nor any
Subsidiary has made any payments, is obligated to make payments or is a party to
an agreement that could obligate it to make any payments that would not be
deductible under IRC Section 280G.
4.12 Contracts and Commitments.
4.12.1. Except as expressly contemplated by this Agreement or
as set forth on the attached "Contracts Schedule" or the attached "Employee
Benefits Schedule," neither the Company nor any Subsidiary is a party to or
bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $75,000 or contract
relating to loans to officers, directors or Affiliates;
(c) contract under which the Company or Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding
$100,000;
(d) agreement or indenture relating to borrowed money or other
Debt or the mortgaging, pledging or otherwise placing a Lien on any
material asset or material group of assets of the Company and its
Subsidiaries;
(e) guarantee of any obligation in excess of $100,000 (other
than by the Company of a Wholly-Owned Subsidiary's debts or a guarantee
by a Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any
Subsidiary is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $100,000;
(g) lease or agreement under which the Company or any
Subsidiary is lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by the Company or
any Subsidiary;
(h) assignment, license, indemnification or agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property);
(i) warranty agreement with respect to its services rendered
or its products sold or leased;
-13-
19
(j) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(k) sales, distribution or franchise agreement;
(l) contract, agreement or other arrangement with any officer,
director, stockholder, employee or Affiliate, or any Affiliate of any
officer, director, stockholder or employee;
(m) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world;
(n) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves
consideration in excess of $200,000; or agreement with a term of more
than six months which is not terminable by the Company or any
Subsidiary upon less than 30 days notice without penalty.
4.12.2. All of the contracts, agreements and instruments set
forth on the Contracts Schedule are valid, binding and enforceable in accordance
with their respective terms in all material respects. The Company and each
Subsidiary have performed all material obligations required to be performed by
them and are not in default under or in breach of nor in receipt of any claim of
default or breach under any material contract, agreement or instrument to which
the Company or any Subsidiary is subject; no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance by the Company or any Subsidiary under any
material contract, agreement or instrument to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; and
neither the Company nor any Subsidiary has knowledge of any breach or
anticipated breach by the other parties to any material contract, agreement,
instrument or commitment to which it is a party.
4.12.3. The Lender's special counsel has been supplied with a
true and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
4.13 Intellectual Property Rights.
4.13.1. The attached "Intellectual Property Schedule" contains
a complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company or any Subsidiary, (b) pending
patent applications and applications for registrations of other Intellectual
Property Rights filed by the Company or any Subsidiary, (c) unregistered trade
names and corporate names owned or used by the Company or any Subsidiary and (d)
unregistered trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary, in each case which are
material to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries taken as a whole. The
Intellectual Property Schedule also contains a complete and accurate list of all
licenses
-14-
20
and other rights granted by the Company or any Subsidiary to any third party
with respect to any Intellectual Property Rights and all licenses and other
rights granted by any third party to the Company or any Subsidiary with respect
to any Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. Except as set forth on the Intellectual Property
Schedule, the Company or one of its Subsidiaries owns all right, title and
interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens. The loss or expiration of
any Intellectual Property Right or related group of Intellectual Property Rights
owned or used by the Company or any Subsidiary has not had and would not
reasonably be expected to have a Material Adverse Effect, and no such loss or
expiration is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
reasonably necessary and desirable actions to maintain and protect the
Intellectual Property Rights which they own. To the best of the Company's
knowledge, the owners of any Intellectual Property Rights licensed to the
Company or any Subsidiary have taken all reasonably necessary and desirable
actions to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
4.13.2. (a) The Company and its Subsidiaries own all right,
title and interest in and to all of the Intellectual Property Rights listed on
such schedule, free and clear of all Liens, (b) there have been no claims made
against the Company or any Subsidiary asserting the invalidity, misuse or
unenforceability of any of such Intellectual Property Rights, and, to the best
of the Company's knowledge, there are no grounds for the same, (c) neither the
Company nor any Subsidiary has received any notices of, and is not aware of any
facts which indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any Subsidiary license any rights from a third party), (d) the conduct of the
Company's and each Subsidiary's business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct as
presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (e) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed to
the Company or any Subsidiary have not been infringed, misappropriated or
conflicted by other Persons. The transactions contemplated by this Agreement
shall have no material adverse effect on the Company's or any Subsidiary's
right, title and interest in and to the Intellectual Property Rights listed on
the Intellectual Property Schedule.
4.14 Litigation, etc. Except as set forth on the attached "Litigation
Schedule," there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company and its Subsidiaries with respect to their
businesses or proposed business activities), or pending or threatened by the
Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the best
of the Company's knowledge, any governmental
-15-
21
investigations or inquiries (including, without limitation, inquiries as to the
qualification to hold or receive any license or permit); and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. Neither the
Company nor any Subsidiary is subject to any judgment, order or decree of any
court or other governmental agency, and neither the Company nor any Subsidiary
has received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
4.15 Brokerage. Other than the fees payable by the Company to Xxxxxxx
Xxxxxx Xxxxx Inc. as described in the Financial Advisory Agreement dated
November 16, 1999, as amended by the Amendment dated January 24, 2000, there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Company or any Subsidiary. The Company
shall pay, and hold the Lender harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
4.16 Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as set forth on the attached "Consents Schedule" and except as
expressly contemplated herein or in the exhibits hereto.
4.17 Insurance. The attached "Insurance Schedule" contains a
description of each insurance policy maintained by the Company and its
Subsidiaries with respect to its properties, assets and businesses, and each
such policy is in full force and effect as of the Closing. Neither the Company
nor any Subsidiary is in default with respect to its obligations under any
insurance policy maintained by it, and neither the Company nor any Subsidiary
has been denied insurance coverage. Except as set forth on the Insurance
Schedule, the Company and its Subsidiaries do not have any self-insurance or
co-insurance programs, and the reserves set forth on the Latest Balance Sheet
are adequate to cover all anticipated liabilities with respect to any such
self-insurance or co-insurance programs.
4.18 Employees. The Company is not aware that any of the persons set
forth in the "Schedule of Key Employees" hereto has any plans to terminate
employment with the Company or any Subsidiary. The Company and each Subsidiary
have complied in all material respects with all laws relating to the employment
of labor (including, without limitation, provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and the Company is not aware that it or any
Subsidiary has any material labor relations problems (including, without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances). Neither the Company, its Subsidiaries
nor, to the best of the Company's knowledge, any of their employees is subject
to any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company and its Subsidiaries, except for
agreements between the Company and its present and former employees.
-16-
22
4.19 Employee Benefit Plans.
4.19.1. The attached Employee Benefits Schedule sets forth an
accurate and complete list of each employee benefit plan (as such term is
defined in Section 3(3) of ERISA), and any other bonus, deferred compensation,
incentive compensation, stock, severance or other plan or arrangement, other
than a non-material fringe benefit plan (each of the foregoing, a "Benefit
Plan"), currently maintained or contributed to by the Company and its
Subsidiaries or with respect to which the Company and its Subsidiaries have or
may have any material liability.
4.19.2. None of the Benefit Plans is subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the Code or Section
302 of ERISA. No underfunded defined benefit plan has been, during the five
years preceding the Closing Date, transferred out of the Company's Controlled
Group.
4.19.3. None of the Benefits Plans is a multiemployer plan (as
defined in Section 3(37) of ERISA).
4.19.4. None of the Benefit Plans provides for medical or life
insurance benefits to current or future retired or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service (other than as required under Section 4980B of the Code or applicable
state law).
4.19.5. None of the Benefit Plans obligates the Company or any
Subsidiary to pay any severance or similar benefit solely as a result of a
change in control or ownership within the meaning of Section 280G of the Code.
4.19.6. All required contributions to date by the Company or
any Subsidiary under the terms of any Benefit Plan or applicable law have been
made within the time prescribed by any such plan or applicable law or properly
accrued on the appropriate balance sheet. All contributions, premiums and
expenses payable to or in respect of any Benefit Plan or the operation or
administration thereof relating to any period on or prior to the date hereof
have been paid or properly accrued on the appropriate balance sheet. No material
liability has been assessed or is expected to be incurred by the Company or any
Subsidiary or any trade or business, whether or not incorporated, which is or
would have been at any date of determination occurring within the preceding six
years treated as a single employer under Section 414 of the Code together with
the Company or the Subsidiaries (each such person, a "Related Person") (either
directly or indirectly, including as a result of an indemnification obligation
or any joint and several liability obligations) under or pursuant to Title I or
IV of ERISA or the penalty, excise tax or joint and several liability provisions
of the Code relating to employee benefit plans, and no event, transaction or
condition has occurred or exists that could result in any material liability to
the Buyer, the Company, any Subsidiary or any Related Person or any employee
benefit plan of the Company, any Subsidiary or any Related Person. No actions,
suits, investigations or claims with respect to any Benefit Plan (other than
routine claims for benefits) are pending or, to the knowledge of the Company,
threatened which could reasonably be expected to result in liability to the
Company or any Subsidiary.
-17-
23
4.19.7. Each of the Benefit Plans has been administered in
accordance with its terms in all material respects and is in compliance in all
material respects with applicable laws and regulations including, without
limitation, ERISA and the Code.
4.19.8. Each of the Benefit Plans which is intended to be a
qualified plan within the meaning of Section 401(a) of the Code and the trust
forming a part thereof has received a favorable determination letter from the
IRS to be so qualified and to the extent that each such trust is exempt from
taxation under section 501(a) of the Code, and, to the knowledge of the Company,
nothing has occurred since the date of such determination that could adversely
affect such qualification or tax-exempt status.
4.19.9. With respect to each Benefit Plan, the Company
previously has furnished to the Lender a true and correct copy of, where
applicable, (a) the most recent annual report (Form 5500) filed with the IRS,
(b) the plan document if written, or a description of such plan if not written,
(c) each trust agreement, group annuity contract or other funding arrangement,
if any, relating to such Benefit Plan, (d) the most recent actuarial report or
valuation relating to such Benefit Plan (in the event such Benefit Plan is
subject to Title IV of ERISA, is a non-U.S. pension plan, or provides any
post-employment health, medical or life insurance benefits), (e) the most recent
summary plan description and (f) the most recent determination letter issued by
the IRS.
4.20 Compliance with Laws. Neither the Company nor any Subsidiary has
violated any law or any governmental regulation or requirement which violation
has had or would reasonably be expected to have a Material Adverse Effect and
neither the Company nor any Subsidiary has received notice of any such
violation.
4.21 Environmental and Safety Matters.
4.21.1. Except as set forth on the attached "Environmental
Schedule":
(a) The Company and its Subsidiaries have complied with and
are currently in compliance with all Environmental and Safety
Requirements, and neither the Company nor its Subsidiaries have
received any oral or written notice, report or information regarding
any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) or any corrective, investigatory or remedial obligations
arising under Environmental and Safety Requirements which relate to the
Company or its Subsidiaries or any of their properties or facilities
that has not been complied with.
(b) Without limiting the generality of the foregoing, the
Company and its Subsidiaries have obtained and complied with, and are
currently in compliance with, all material permits, licenses and other
authorizations that may be required pursuant to any Environmental and
Safety Requirements for the occupancy of their properties or facilities
or the operation of their businesses. A list of all such permits,
licenses and other authorizations is set forth on the attached
Environmental Schedule.
-18-
24
(c) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any
obligations on the Company and its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any
government agencies or third parties under any Environmental and Safety
Requirements (including, without limitation, any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) To the best of the Company's knowledge, none of the
following exists at any property or facility owned, occupied or
operated by the Company or any of its Subsidiaries if the existence of
same would violate Environmental Laws:
(i) underground storage tanks or surface
impoundments;
(ii) asbestos-containing materials in any form or
condition; or
(iii) materials or equipment containing
polychlorinated biphenyls.
(e) Neither the Company nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company
or its Subsidiaries pursuant to Environmental and Safety Requirements
(including, without limitation, any liability for response costs,
natural resource damages or attorneys fees pursuant to CERCLA).
(f) Neither the Company nor any of its Subsidiaries has,
either expressly or by operation of law, assumed or undertaken any
liability or corrective, investigatory or remedial obligation of any
other Person relating to any Environmental and Safety Requirements.
(g) No Environmental Lien has attached to any property owned,
leased or operated by the Company or any of its Subsidiaries.
4.22 Affiliated Transactions. Except as set forth on the attached
"Affiliated Transactions Schedule," no officer, director, employee, or
Affiliate of the Company or any Subsidiary or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company or any Subsidiary or has
any material interest in any material property used by the Company or any
Subsidiary.
4.23 Real Property Holding Corporation Status. Since its date of
incorporation, the Company has not been, and as of the date of the Closing shall
not be, a "United States real property holding corporation", as defined in
Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the Treasury
Regulations issued thereunder. The Company has no current plans or intentions
which would cause the Company to become a "United States real property holding
company," and the Company has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Treasury Regulations.
-19-
25
4.24 Customers and Suppliers.
4.24.1. The attached "Customer Schedule" lists the 10 largest
customers of the Company (on a consolidated basis) for each of the two most
recent Fiscal Years and sets forth opposite the name of each such customer the
percentage of consolidated net sales attributable to such customer. The Customer
Schedule also lists any additional current customers which the Company
anticipates shall be among the 10 largest customers for the current Fiscal Year.
4.24.2. Since the date of the Latest Balance Sheet, no
material supplier of the Company or any Subsidiary has indicated that it shall
stop, or materially decrease the rate of, supplying materials, products or
services to the Company or any Subsidiary, and no customer listed on the
Customer Schedule has indicated that it shall stop, or materially decrease the
rate of, buying materials, products or services from the Company or any
Subsidiary.
4.25 Reports with the Securities and Exchange Commission. The Company
has furnished the Lender with complete and accurate copies of its annual report
on Form 10-K for its three most recent Fiscal Years, all other reports or
documents required to be filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act since the filing of the most recent annual report on Form
10-K and its most recent annual report to its stockholders. Such reports and
filings do not contain any material false statements or any misstatement of any
material fact and do not omit to state any fact necessary to make the statements
set forth therein not misleading. The Company has made all filings with the
Securities and Exchange Commission which it is required to make, and the Company
has not received any request from the Securities and Exchange Commission to file
any amendment or supplement to any of the reports described in this paragraph.
4.26 Investment Company. The Company is not an "investment company" as
defined under the Investment Company Act of 1940.
4.27 Section 203 of the DGCL; Takeover Statute. The Board has taken all
actions necessary or advisable so that the restrictions contained in Section 203
of the Delaware General Corporate Law (the "DGCL") applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Documents or the
consummation of the transactions contemplated hereby or thereby, including the
issuance of the Convertible Preferred Stock, the Warrants and all future
issuances of Convertible Preferred Stock. The execution, delivery and
performance of this Agreement or any of the other Documents and the consummation
of the transactions contemplated hereby or thereby will not cause to be
applicable to the Company any "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws.
4.28 Public Utility Holding Company Act. Neither the Company nor any
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
-20-
26
4.29 Regulation U. The Company is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
4.30 Solvency, etc. On the Closing Date and the date of each subsequent
Loan hereunder (or, in the case of any Person which becomes a Guarantor after
the Closing Date, on the date such Person becomes a Guarantor), and immediately
prior to and after giving effect to each borrowing hereunder and under the
Credit Agreement and the use of the proceeds thereof (and after giving effect to
any right of contribution and subrogation), (a) each of the Company's and each
Guarantor's assets will exceed its liabilities and (b) each of the Company and
each Guarantor will be solvent, will be able to pay its debts as they mature,
will own property with fair saleable value greater than the amount required to
pay its debts and will have capital sufficient to carry on its business as then
constituted.
4.31 Stockholder Consent. The Stockholders Consent was executed by the
stockholders of the Company set forth on the attached "Shareholders Consent
Schedule", each of whom owns the number of shares of Common Stock indicated next
to such person's name on the Shareholders Consent Schedule (the "Consenting
Stockholders"). The Consenting Stockholders collectively own a majority of the
outstanding Common Stock. The disclosure provided to the Consenting Stockholders
in connection with the solicitation of the Stockholders Consent did not contain
a material misstatement of fact or an omission of a material fact necessary to
make the statements made, in light of the circumstances in which they were made,
not misleading.
4.32 Disclosure. All information heretofore or contemporaneously
herewith furnished in writing by the Company or any Subsidiary to the Lender for
purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of the Company or any Subsidiary to the Lender pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by the Lender that (a) any projections and
forecasts provided by the Company are based on good faith estimates and
assumptions believed by the Company to be reasonable as of the date of the
applicable projections or assumptions and that actual results during the period
or periods covered by any such projections and forecasts will likely differ from
projected or forecasted results and (b) any information provided by the Company
or any Subsidiary with respect to any Person or assets acquired or to be
acquired by the Company or any Subsidiary shall, for all periods prior to the
date of such acquisition, be limited to the knowledge of the Company or the
acquiring Subsidiary after reasonable inquiry). There is no fact known to the
Company which the Company has not disclosed to the Lender in writing and of
which any of its officers, directors or executive employees is aware (other than
general economic and industry conditions) and which has had or would reasonably
be expected to have a Material Adverse Effect.
On the Closing Date and the date of each subsequent Loan hereunder, or at any
other time at which the Company or its Subsidiaries is required to make
representations and warranties hereunder, each representation and warranty shall
be made after giving effect to each borrowing hereunder and under the Credit
Agreement and the application of the proceeds therefrom including the
acquisition of RESTEC or any Future Acquisitions as if said acquisition had at
that time been made. Without
-21-
27
limiting the foregoing, to the extent representations and warranties are being
made in connection with a Loan the proceeds of which will be used to consummate
the Acquisition or a Future Acquisition, the Company's "Subsidiaries" in such
representations and warranties shall include the entities and businesses being
acquired pursuant to such Acquisition or Future Acquisition.
The Company shall have the right to supplement and amend the Schedules to this
Agreement with respect to events occurring after the date of this Agreement,
which such new event, when scheduled, shall not constitute a breach hereof;
provided that any such amendment or supplement shall be approved by the Lender
and shall be in a form satisfactory to the Lender; and further provided that no
such amendment or supplement shall cure a Default or Event of Default hereunder.
SECTION 5. CONDITIONS TO LENDER'S OBLIGATION TO MAKE LOANS
5.1 Conditions to Lender's Obligation to Make the Initial Loan. The
obligation of the Lender to make the Initial Loan on the Closing Date is subject
to the satisfaction of the following conditions, each as of the Closing Date:
5.1.1. Representations and Warranties; No Default.
(a) All representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct in all
material respects (other than representations and warranties qualified
by a materiality standard including, without limitation, a Material
Adverse Effect qualifier, which shall be true and correct in all
respects).
(b) No Default or Event of Default shall exist as of the
Closing Date or would result from the consummation of the borrowings
made by the Company on the Closing Date.
5.1.2. Documents Satisfactory; Transactions Consummated. Each
of the Documents shall have been duly executed and delivered by the respective
parties thereto and shall be in full force and effect. All of the terms,
conditions and provisions of each of such documents shall be satisfactory to the
Lender in all respects in form and substance, and no term, condition or
provision thereof shall have been supplemented, amended, modified or waived
without the Lender's consent.
5.1.3. Opinion of Counsel to the Company. The Lender shall
have received an opinion from Xxxxx, Xxxxxxx & Xxxx LLP special counsel for the
Company, which shall be addressed to the Lender, dated the Closing Date and in
form and substance reasonably satisfactory to the Lender.
5.1.4. Opinion of Company General Counsel. The Lender shall
have received an opinion from Xxxxx X. Xxxxxx XX, general counsel for the
Company, which shall be addressed to the Lender, dated the Closing Date and in
form and substance reasonably satisfactory to the Lender.
5.1.5. Restec Acquisition Opinions. The Lender shall have
received an opinion (or permission to rely on an opinion) from each of the
special counsels to the sellers in the Acquisition,
-22-
28
which shall be addressed to the Lender, relating to the transactions
consummating the Acquisition, dated the Closing Date and in form and substance
reasonably satisfactory to the Lender.
5.1.6. Delivery of Documents. The Lender shall have received
the following items, each of which shall be in form and substance reasonably
satisfactory to the Lender:
(a) Executed copies of this Agreement, the Note issued in the
name of the Lender, the Warrant Agreement and the Warrants issued in
the name of the Lender.
(b) Resolutions of the Board and each board of directors of
each Subsidiary of the Company approving the transactions contemplated
by the Documents, and approving and authorizing the execution, delivery
and performance of each Document to which it is a party and approving
and authorizing the borrowing of the Loans, the execution, delivery and
payment of the Note of the obligations thereunder, in each case
certified as of the Closing Date by the secretary or an assistant
secretary of the Company as being in full force and effect without
modification or amendment. Certified copies of the resolutions duly
adopted by the Board exempting the Lender from Section 203 of the DGCL
and authorizing the filing of the Certificate Amendment as contemplated
herein.
(c) A copy of the certificate of incorporation of the Company
certified by the secretary of State of Delaware, together with a good
standing certificate from the secretary of state of Delaware as to the
Company, to be dated a recent date prior to the Closing Date.
(d) A certificate of the Company, signed on its behalf by a
duly authorized officer, dated the Closing Date (the statements made in
which certificate shall be true on and as of such date) certifying as
to (A) a true and correct copy of the charter of such Person and any
amendments thereto, (B) a true and correct copy of the by-laws of such
Person as in effect on the Closing Date, and (C) the completeness and
accuracy of the representations and warranties contained in Documents
as of the Closing Date, including the absence of any event occurring
and continuing, or resulting from the Transactions, that constitutes a
Default or an Event of Default.
(e) A certificate of the secretary of the Company certifying
the names and true signatures of the officers of the Company, as
applicable, executing the Documents.
(f) True and correct copies of all of the Documents.
(g) Copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the Transactions.
(h) A certificate of the chief financial officer of the
Company as to (a) consolidated financial statements for the Acquisition
and its Subsidiaries for the periods required under Rule 3-05 of
Regulation S-X of the SEC, including balance sheets, income statements
and cash flow statements audited by independent public accountants of
recognized national standing and prepared in conformity with GAAP, (b)
a pro forma balance sheet of the Company and its Subsidiaries as of the
Closing Date after giving effect
-23-
29
to the Acquisition and the transactions contemplated hereby and
reflecting estimated purchase accounting adjustments, prepared by the
chief financial officer of the Company, and (c) the business plan and
financial projections of the Company and its Subsidiaries for Fiscal
Years 2000 through 2004.
(i) A Borrower's Certificate in a form reasonably satisfactory
to the Lender, dated the Closing Date, stating that the conditions
specified in Sections 5.1.1 and 5.1.2 and Sections 5.1.9 through 5.1.16
(inclusive) have been satisfied.
5.1.7. Corporate/Capital Structure. The Lender shall be
satisfied with the ownership, corporate and legal structure and capitalization
of the Company and its Subsidiaries, including, without limitation, the terms
and conditions of their respective charters and by-laws, the terms of the
Company's and such Subsidiaries' capital stock, options, warrants or other
securities and any agreements related thereto.
5.1.8. Lender's Equity. The Lender shall have received the
Warrants to be issued to it pursuant to the Warrant Agreement.
5.1.9. No Material Adverse Change. Nothing shall have occurred
(and the Lender shall not be aware of any facts or conditions not previously
known) which the Lender shall determine has or reasonably could be expected to
have, a Material Adverse Effect.
5.1.10. Litigation. There shall exist no action, suit,
investigation, litigation or proceeding affecting the Company or any of its
Subsidiaries or any of their respective properties pending or, to the knowledge
of the Company, threatened before any court, governmental agency or arbitrator
that (i) could reasonably be expected to have a Material Adverse Effect or (ii)
purports to affect the legality, validity or enforceability of the Documents or
the consummation of the transactions contemplated hereby and thereby. No order,
judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the Lender from making the Loans.
5.1.11. Certain Fees. On the Closing Date, the Company shall
pay all expenses of the Lender (including, without limitation, legal fees and
expenses) incurred in connection with the negotiation and execution of this
Agreement and the other Documents.
5.1.12. No Violation of Regulations U or X. The making of the
Loans shall not violate Regulations U or X of the FRB.
5.1.13. Monitoring Agreement. The Company shall have entered
into the Monitoring Agreement, the Monitoring Agreement shall be in full force
and effect, and any fees due thereunder shall have been paid in full.
5.1.14. Authorization; Listing. The Company's shares issuable
upon conversion of the Convertible Preferred shall have been duly authorized and
reserved for issuance and such shares shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
-24-
30
5.1.15. Rights Plan. The Company shall have amended its Rights
Agreement to provide that the provisions of such agreement will not be triggered
by the execution, delivery or performance of this Agreement or any of the other
Documents or the consummation of the transactions contemplated hereby or
thereby.
5.1.16. Stockholder Consent. A majority of the Company's
stockholders shall have executed an action on written consent (the "Stockholders
Consent") (and such consent shall continue to be in full force and effect)
approving (i) the amendment to the Company's Certificate of Incorporation in the
form set forth on Exhibit E hereto (the "Certificate Amendment") and (ii) the
issuance of the Convertible Preferred Stock (including the issuance of Warrant
Shares) and the Common Stock issuable upon conversion of the Convertible
Preferred Stock and the Company shall have delivered such executed consents to
the Lender.
5.2 Conditions to Lender's Obligations to Make Subsequent Loans After
the Closing Date. The obligation of the Lender to make subsequent Loans to the
Company hereunder after the Closing Date is subject to the satisfaction of the
following conditions, each as of the date of each such subsequent Loan:
5.2.1. Representations and Warranties. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (other than representations and warranties qualified by
a materiality standard including, without limitation, a Material Adverse Effect
qualifier, which shall be true and correct in all respects) as of the making of
such subsequent Loan, before and after giving effect to such Loan and to the
application of the proceeds therefrom, with the same effect as though such
representations and warranties had been made on and as of such date, except that
(a) references to financial statements and the Latest Balance Sheet in such
representations and warranties shall be deemed to refer for this purpose to the
financial statements required to be provided to the Lender pursuant to Section
6.3 hereof and the latest consolidated balance sheet of the Company required to
be provided to the Lender pursuant to Section 6.3 hereof, respectively, and (b)
references to the date of this Agreement, the Closing Date and the like shall be
deemed to refer to the date of the making of such subsequent Loan.
5.2.2. No Default. No Default or Event of Default shall exist
as of the date of such subsequent Loan or would result from the consummation of
the borrowings made by the Company on the date of such subsequent Loan.
5.2.3. Approved Use. The Lender shall have received evidence
satisfactory to it that the proceeds of such subsequent Loan will be used for
the Approved Use. The Lender shall have approved any Future Acquisition being
financed therewith and the Lender shall have received such documents and
deliveries in connection therewith as requested by the Lender.
5.2.4. Acquisitions. No default or material breach of
performance shall have occurred under the agreements related to the Future
Acquisition, if any, for which the Loan is being made, and all of the buyers'
material conditions to closing thereunder shall have been satisfied and not
waived (except with the Lender's consent).
-25-
31
5.2.5. Opinion of Counsel to the Company. The Lender shall
have received an opinion from the special counsel for the Company, which shall
be addressed to the Lender, dated the date of the making of such subsequent Loan
and in form and substance reasonably satisfactory to the Lender.
5.2.6. Opinion of Company General Counsel. The Lender shall
have received an opinion from Xxxxx X. Xxxxxx XX, general counsel for the
Company, or his successor, if any, which shall be addressed to the Lender, dated
the Closing Date and in form and substance reasonably satisfactory to the
Lender.
5.2.7. Acquisition Opinions. To the extent the Company or any
of its Subsidiaries receives (or is otherwise entitled to rely on) an opinion of
counsel in connection with any Future Acquisition, such opinion shall also be
addressed to the Lender or the Lender shall otherwise be entitled to rely
thereon.
5.2.8. Amendment to Certificate of Incorporation. The
Company's Certificate of Incorporation shall have been amended to include the
provisions set forth in the Certificate Amendments, shall be in full force and
effect under the laws of the State of Delaware as of the making of such
subsequent Loan and shall not have been further amended or modified other than
as permitted hereunder or pursuant to the Preferred Stock Purchase Agreement.
5.2.9. Preferred Stock Financing. The Purchaser (as defined in
the Preferred Stock Purchase Agreement) shall have (or will concurrently with
the funding of the subsequent Loan) purchased from the Company for cash
Convertible Preferred Stock pursuant to the Preferred Stock Purchase Agreement
in an amount equal to the aggregate outstanding principal balance of the Loans
including the Loan then being requested by the Company.
At the time of making an additional borrowing under a subsequent Loan hereunder,
the Company shall deliver a Borrower's Certificate to the Lender stating that
the conditions specified in Sections 5.2.1 through 5.2.4 (inclusive) and Section
5.2.8 and 5.2.9 have been fully satisfied as of such time.
SECTION 6. COVENANTS
The Company covenants and agrees that so long as the Note or any Loan
Obligations remain outstanding:
6.1 Performance of Documents; etc. The Company will comply with all of
the covenants, agreements and conditions contained in the Subordinated Loan
Documents and the Other Documents (other than the Credit Documents) to which it
is party.
6.2 Securities Laws.
6.2.1. Integration. The Company will take all action that is
appropriate or necessary to assure that its offerings of other securities will
not be integrated for purposes of the Securities Act
-26-
32
with the offerings of the Note by the Company to the Lender in any manner that
would require the registration of such offering of the Note under the Securities
Act.
6.2.2. Available Information. While the Note is a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act, the
Company will, during any period in which it is not subject to Section 13 or
15(d) of the Exchange Act, make available to the Lender in connection with any
sale thereof and, subject to the provisions of Section 15(d), any prospective
purchaser of the Note, in each case as soon as is reasonably practicable upon
written request of such holder, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act (or any successor
thereto).
6.3 Reports, Certificates and Other Information. Furnish to the Lender:
6.3.1. Audit Report. Promptly when available and in any event
within 90 days after the close of each Fiscal Year: (a) a copy of the annual
audit report of the Company and its Subsidiaries for such Fiscal Year, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Year and consolidated statements of earnings and cash
flow of the Company and its Subsidiaries for such Fiscal Year certified without
qualification by Xxxxxx Xxxxxxxx LLP or other independent auditors of recognized
standing selected by the Company and reasonably acceptable to the Lender,
together with a written statement from such accountants to the effect that in
making the examination necessary for the signing of such annual audit report by
such accountants, they have not become aware of any Event of Default or Default
that has occurred and is continuing or, if they have become aware of any such
event, describing it in reasonable detail and (b) consolidating balance sheets
of the Company and its Subsidiaries as of the end of such Fiscal Year and
consolidating statements of earnings for the Company and its Subsidiaries for
such Fiscal Year, certified by the chief financial officer of the Company.
6.3.2. Quarterly Reports. Promptly when available and in any
event within 45 days after the end of each Fiscal Quarter (except the last
Fiscal Quarter) of each Fiscal Year, consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of such Fiscal Quarter,
together with consolidated and consolidating statements of earnings and
consolidated statements of cash flow for such Fiscal Quarter and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such Fiscal Quarter, certified by the chief financial officer of the Company.
6.3.3. Monthly Reports. Promptly when available and in any
event within 30 days after the end of each of the first two months of each
Fiscal Quarter, consolidated and consolidating balance sheets of the Company and
its Subsidiaries as of the end of such month, together with consolidated and
consolidating statements of earnings for such month and for the period beginning
with the first day of the applicable Fiscal Year and ending on the last day of
such month, certified by the chief financial officer of the Company.
6.3.4. Compliance Certificates. Contemporaneously with the
furnishing of a copy of each annual audit report pursuant to Section 6.3.1 and
of each set of quarterly statements pursuant to Section 6.6.2, (a) a duly
completed compliance certificate in the form of Exhibit C, with appropriate
insertions, dated the date of such annual report or such quarterly statements
and signed
-27-
33
by the chief financial officer of the Company, containing a computation of each
of the financial ratios and restrictions set forth in Section 6.8 and to the
effect that such officer has not become aware of any Event of Default or Default
that has occurred and is continuing or, if there is any such event, describing
it and the steps, if any, being taken to cure it; and (b) an updated
organizational chart listing all Subsidiaries and the locations of their
businesses.
6.3.5. Reports to SEC and to Shareholders. Promptly upon the
filing or sending thereof, copies of all regular, periodic or special reports of
the Company or any Subsidiary filed with the SEC (excluding exhibits thereto,
provided that the Company shall promptly deliver any such exhibit to the Lender
upon request therefor); copies of all registration statements of the Company or
any Subsidiary filed with the SEC (other than on Form S-8); and copies of all
proxy statements or other communications made to shareholders generally
concerning material developments in the business of the Company or any of its
Subsidiaries.
6.3.6. Notice of Default, Litigation and ERISA Matters.
Promptly upon becoming aware of any of the following, written notice describing
the same and the steps being taken by the Company or the Subsidiary affected
thereby with respect thereto:
(a) the occurrence of an Event of Default or a Default;
(b) any litigation, arbitration or governmental investigation
or proceeding not previously disclosed by the Company to the Lender
which has been instituted or, to the knowledge of the Company, is
threatened against the Company or any of its Subsidiaries or to which
any of the properties of any thereof is subject which, if adversely
determined, might reasonably be expected to have a Material Adverse
Effect;
(c) the institution of any steps by any member of the
Controlled Group or any other Person to terminate any Pension Plan, or
the failure of any member of the Controlled Group to make a required
contribution to any Pension Plan (if such failure is sufficient to give
rise to a lien under Section 302(f) of ERISA) or to any Multiemployer
Pension Plan, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Company furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan or
Multiemployer Pension Plan which could result in the incurrence by any
member of the Controlled Group of any material liability, fine or
penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any notice
that any Multiemployer Pension Plan is in reorganization, that
increased contributions may be required to avoid a reduction in plan
benefits or the imposition of an excise tax, that any such plan is or
has been funded at a rate less than that required under Section 412 of
the Code, that any such plan is or may be terminated, or that any such
plan is or may become insolvent;
(d) any cancellation (without replacement) or material change
in any insurance maintained by the Company or any Subsidiary thereof;
-28-
34
(e) any event (including any violation of any Environmental
Law or the assertion of any Environmental Claim) which has had or would
reasonably be expected to have a Material Adverse Effect;
(f) any event or circumstance which requires the Company to
give notice to the Senior Lenders under the Credit Documents; or
(g) any notice of default received by it under any Credit
Document.
6.3.7. Subsidiaries. Promptly upon any change in the list of
its Subsidiaries from that set forth on the attached "Subsidiaries Schedule" (or
in the most recent notice pursuant to this Section), notification of such
change.
6.3.8. Management Reports. Promptly upon the request of the
Lender, copies of all detailed financial and management reports submitted to the
Company by independent auditors in connection with each annual or interim audit
made by such auditors of the books of the Company.
6.3.9. Projections. As soon as practicable and in any event
within 60 days after the commencement of each Fiscal Year, financial projections
for the Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Lender prior
to the Closing Date.
6.3.10. Other Information. From time to time such other
information concerning the Company and its Subsidiaries as the Lender may
reasonably request.
6.4 Books, Records and Inspections. Keep, and cause each Subsidiary to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, the Lender or any
representative thereof upon reasonable prior notice to inspect the properties
and operations of the Company and of such Subsidiary; and permit, and cause each
Subsidiary to permit, at any reasonable time during normal business hours and
with reasonable notice (or at any time without notice if an Event of Default
exists), the Lender or any representative thereof to visit any or all of its
offices, to discuss its financial matters with its officers and its independent
auditors (and the Company hereby authorizes such independent auditors to discuss
such financial matters with the Lender or any representative thereof whether or
not any representative of the Company or any Subsidiary is present), and to
examine (and, at the expense of the Company or the applicable Subsidiary,
photocopy extracts from) any of its books or other corporate records.
6.5 Insurance. Maintain, and cause each Subsidiary to maintain, with
responsible insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of the
Lender, furnish to the Lender a certificate setting forth in reasonable detail
the nature and extent of all insurance maintained by the Company and its
Subsidiaries.
-29-
35
6.6 Compliance with Laws, Material Contracts; Payment of Taxes and
Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material
respects with all material applicable laws (including Environmental Laws),
rules, regulations, decrees, orders, judgments, licenses, material contracts and
permits; and (b) pay, and cause each Subsidiary to pay, prior to delinquency,
all Federal taxes and all other material taxes and other governmental charges
against it or any of its property, as well as claims of any kind which, if
unpaid, might become a Lien on any of its property; provided that the foregoing
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
6.7 Maintenance of Existence, etc. Maintain and preserve, and (subject
to Section 6.13) cause each Subsidiary to maintain and preserve, (a) its
existence and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing does
not have a Material Adverse Effect).
6.8 Financial Covenants.
6.8.1. Fixed Charge Coverage Ratio. So long as the Lender and
its Affiliates hold at least 50% of the outstanding interests in the Note, not
permit the Fixed Charge Coverage Ratio at any time to be less than the
applicable ratio set forth below:
COMPUTATION FIXED CHARGE
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
Closing Date through 12/31/00 0.85 to 1.0
1/01/01 through 12/31/01 0.95 to 1.0
1/01/02 through 12/31/02 1.00 to 1.0
1/01/03 and thereafter 1.05 to 1.0.
6.8.2. Minimum Interest Coverage. Not permit the Interest
Coverage Ratio as of the last day of any Computation Period to be less than the
applicable ratio set forth below:
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
Closing Date through 12/31/00 1.49 to 1.0
1/01/01 through 12/31/01 1.70 to 1.0
1/01/02 and thereafter 1.91 to 1.0
6.8.3. Funded Debt to Adjusted EBITDA Ratio. Not permit the
Funded Debt to Adjusted EBITDA Ratio as of the last day of any Computation
Period to exceed the applicable ratio set forth below:
-30-
36
COMPUTATION FUNDED DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
Closing Date through 12/31/00 5.18 to 1.0
1/01/01 through 12/31/01 4.89 to 1.0
1/01/02 through 12/31/02 4.60 to 1.0
1/01/03 through 12/31/03 4.31 to 1.0
1/01/04 and thereafter 4.03 to 1.0.
6.8.4. Senior Funded Debt to Adjusted EBITDA Ratio. Not permit
the Senior Funded Debt to Adjusted EBITDA Ratio as of the last day of any
Computation Period to exceed the applicable ratio set forth below:
COMPUTATION SENIOR FUNDED DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
Closing Date through 12/31/00 4.03 to 1.0
1/01/01 through 12/31/01 3.77 to 1.0
1/01/02 through 12/31/02 3.45 to 1.0
1/01/03 through 12/31/03 3.16 to 1.0
1/01/04 and thereafter 2.88 to 1.0.
6.8.5. Debt to Capitalization Ratio. Not permit the ratio of
(a) Funded Debt to (b) the sum of Funded Debt plus Net Worth at any time to
exceed the applicable percentage set forth below during any period set forth
below:
DEBT TO
CAPITALIZATION
PERIOD: PERCENTAGE
------- --------------
Closing Date through 12/31/00 75%
1/01/01 through 12/31/01 70%
1/01/02 and thereafter 65%
6.8.6. Capital Expenditures. The Company will not permit the
aggregate amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate Future Acquisitions approved by the Lender which constitute Capital
Expenditures) made by the Company and its Subsidiaries during any period of 12
consecutive months to exceed the product of (i) 1.50 (or, for any date of
determination during the period from the date of the acquisition of EPIC through
December 31, 2000, 1.75) multiplied by (ii) the depreciation of the Company and
its Subsidiaries during the preceding period of 12 consecutive months
(calculated on a pro forma basis giving effect to acquisitions and sales and
other dispositions made subsequent to such preceding 12 months).
6.9 Limitations on Debt. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except:
-31-
37
(a) Debt under the Credit Agreement or Permitted Refinancing
Debt with respect thereto in an aggregate principal amount at any one
time outstanding (including loans, the nominal amount of outstanding
letters of credit and all unused commitments) not to exceed (as
determined from time to time, the "Maximum Senior Indebtedness") (i)
$10,000,000 of revolving Senior Indebtedness, (ii) $100,000,000 of term
Senior Indebtedness, (iii) $15,000,000 of additional Senior
Indebtedness (whether revolving or term), and (iv) up to $10,000,000 of
additional Senior Indebtedness (whether revolving or term) incurred to
fund the Rhode Island Project in each case with respect to this Section
6.9 less the aggregate principal amount of any permanent reductions of
commitments for revolving Senior Indebtedness or repayments of term
Senior Indebtedness under the instruments governing such Senior
Indebtedness (including, without limitation, payments actually applied
to the Senior Indebtedness pursuant to Section 3.5 hereof) and
guaranties in respect of Debt described in the foregoing clauses (i),
(ii) and (iii);
(b) unsecured seller Debt which represents all or part of the
purchase price payable in connection with a Future Acquisition approved
by the Lender and the existing Debt listed on the attached "Unsecured
Seller Debt Schedule"; provided that the aggregate principal amount of
all such Debt (other than (i) the Debt designated with an asterisk on
the Unsecured Seller Debt Schedule, and (ii) an unsecured seller note
payable in connection with the acquisition of EPIC not in excess of
$6,000,000, the payment of which is contingent upon the performance of
EPIC) shall not at any time exceed $7,500,000;
(c) Debt arising under Capital Leases, Debt secured by Liens
permitted by subsection 6.10(c) or (d) and other Debt outstanding on
the date hereof and listed on the attached "Capital Lease Debt
Schedule", and refinancings of any such Debt so long as the terms
applicable to such refinanced Debt are no less favorable to the Company
or the applicable Subsidiary than the terms in effect immediately prior
to such refinancing, provided that the aggregate amount of all such
Debt at any time outstanding shall not exceed $15,000,000;
(d) Debt of Subsidiaries owed to the Company;
(e) Hedging Obligations of the Company for the hedging of
interest payments on the Senior Indebtedness to the extent required by
the Credit Agreement;
(f) unsecured Debt of the Company to Subsidiaries;
(g) the RESTEC Bonds; provided that the RESTEC Bonds must be
repaid or defeased not later than 360 days after the Closing Date; and
(h) the Loans made hereunder.
6.10 Liens. Not, and not permit any Subsidiary to, create or permit to
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
-32-
38
(a) Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or being
contested in good faith by appropriate proceedings and, in each case,
for which it maintains adequate reserves;
(b) Liens arising in the ordinary course of business (such as
(i) Liens of carriers, warehousemen, mechanics and materialmen and
other similar Liens imposed by law and (ii) Liens incurred in
connection with worker's compensation, unemployment compensation and
other types of social security (excluding Liens arising under ERISA) or
in connection with surety bonds, bids, performance bonds and similar
obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any deposits or advances or
borrowed money or the deferred purchase price of property or services,
and, in each case, for which it maintains adequate reserves;
(c) Liens identified in the attached "Liens Schedule";
(d) subject to the limitation set forth in Section 6.9(c), (i)
Liens existing on property at the time of the acquisition thereof by
the Company or any Subsidiary (and not created in contemplation of such
acquisition) and (ii) Liens that constitute purchase money security
interests on any property securing debt incurred for the purpose of
financing all or any part of the cost of acquiring such property,
provided that any such Lien attaches to such property within 60 days of
the acquisition thereof and such Lien attaches solely to the property
so acquired;
(e) attachments, appeal bonds, judgments and other similar
Liens, for sums not exceeding $1,000,000 arising in connection with
court proceedings, provided the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the
Company or any Subsidiary; and
(g) Liens in favor of the Senior Lenders arising under the
Credit Documents.
6.11 [Reserved].
6.12 Restricted Payments. Not, and not permit any Subsidiary to, (a)
declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders, or (d) set aside funds for any of the foregoing;
provided that any Subsidiary may declare and pay dividends to the Company or to
any other Wholly-Owned Subsidiary.
6.13 Mergers, Consolidations, Sales. Not, and not permit any Subsidiary
to, be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell,
-33-
39
transfer, convey or lease all or any substantial part of its assets, or sell or
assign with or without recourse any receivables, except for (a) any such merger
or consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into the Company or into, with or to any other
Wholly-Owned Subsidiary; (b) any such purchase or other acquisition by the
Company or any Wholly-Owned Subsidiary of the assets or stock of any
Wholly-Owned Subsidiary; and (c) any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any other
Person where (1) such assets (in the case of an asset purchase) are for use, or
such Person (in the case of a stock purchase) is, or after the acquisition will
be, engaged in the business activities permitted by Section 6.20; (2)
immediately before or after giving effect to such purchase or acquisition, no
Event of Default or Default shall have occurred and be continuing; (3) the
aggregate consideration to be paid by the Company and its Subsidiaries
(including any Debt assumed or issued in connection therewith, the amount
thereof to be calculated in accordance with GAAP) in connection with such
purchase or other acquisition after the date hereof (or any series of related
acquisitions) is less than $3,000,000 for any single transaction or series of
related transactions and less than $10,000,000 in the aggregate for all such
transactions; (4) the Company is in pro forma compliance with all the financial
ratios and restrictions set forth in Section 6.8; and (5) the proceeds of any of
the Loans hereunder are not used to finance such transactions. Notwithstanding
the foregoing, the Company shall not, and shall not permit any Subsidiary to,
consummate any such merger, consolidation or purchase described above within the
120 days immediately following the Closing Date without the prior written
consent of the Lender other than Future Acquisitions approved by the Lender.
6.14 Further Assurances. Take, and cause each Subsidiary to take, such
actions as are necessary, or as the Lender may reasonably request, from time to
time to ensure that the obligations of the Company and the Guarantors hereunder
and under the other Subordinated Loan Documents are enforceable in accordance
with their terms and are guaranteed by all of the Subsidiaries of the Company
(including, promptly upon the acquisition or creation thereof, the execution by
any Subsidiary acquired or created after the date hereof of a counterpart to
this Agreement); provided that no Foreign Subsidiary shall have an obligation to
execute a counterpart hereto; and provided further that, so long as the RESTEC
Bonds issued by such Subsidiary are outstanding, neither of Netco-Waterbury,
Limited Partnership nor New Haven Residuals, Limited Partnership shall have an
obligation to execute a counterpart hereto.
6.15 Transactions with Affiliates. Not, and not permit any Subsidiary
to, enter into, or cause, suffer or permit to exist any transaction, arrangement
or contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
6.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
6.17 Environmental Laws. Conduct, and cause each Subsidiary to conduct,
its operations and keep and maintain its property in material compliance with
all Environmental Laws (other than Immaterial Laws).
-34-
40
6.18 Unconditional Purchase Obligations. Not, and not permit any
Subsidiary to, enter into or be a party to any contract for the purchase of
materials, supplies or other property or services, if such contract requires
that payment be made by it regardless of whether or not delivery is ever made of
such materials, supplies or other property or services; provided that the
foregoing shall not prohibit the Company or any Subsidiary from entering into
options for the purchase of particular assets or businesses.
6.19 Inconsistent Agreements. Not, and not permit any Subsidiary to,
enter into any agreement containing any provision which would be violated or
breached by any borrowing by the Company hereunder or by the performance by the
Company or any Subsidiary of any of its obligations hereunder or under any other
Subordinated Loan Document.
6.20 Business Activities. Not, and not permit any Subsidiary to, engage
in any line of business other than the management, processing, collection,
handling and disposal of non-hazardous bio-solid waste, animal manures, and
green or other organic waste or similar non-hazardous waste-related business
activities.
6.21 Advances and Other Investments. Not, and not permit any Subsidiary
to, make, incur, assume or suffer to exist any Investment in any other Person,
except (without duplication) the following:
(a) equity Investments existing on the Closing Date in
Wholly-Owned Subsidiaries identified on the Subsidiaries Schedule;
(b) equity Investments in Subsidiaries acquired after the
Closing Date in transactions approved by the Lender including approved
Future Acquisitions (unless not required to be approved pursuant to
Section 6.13);
(c) in the ordinary course of business, contributions by the
Company to the capital of any of its Subsidiaries, or by any such
Subsidiary to the capital of any of its Subsidiaries;
(d) in the ordinary course of business, Investments by the
Company in any Subsidiary or by any of the Subsidiaries in the Company,
by way of intercompany loans, advances or guaranties, all to the extent
permitted by Section 6.9;
(e) Suretyship Liabilities permitted by Section 6.9;
(f) loans to officers and employees not exceeding (i) $115,000
in the aggregate to any single individual or (ii) $287,500 in the
aggregate for all such individuals;
(g) good faith deposits and escrow accounts in connection with
prospective acquisitions of stock or assets for Future Acquisitions
approved by the Lender;
(h) Cash Equivalent Investments; and
-35-
41
(i) bank deposits in the ordinary course of business; provided
that the aggregate amount of all such deposits (excluding (x) amounts
in payroll accounts or for accounts payable, in each case to the extent
that checks have been issued to third parties, and (y) amounts
maintained (in the ordinary course of business consistent with past
practice) in accounts of any Person which is acquired by the Company or
a Subsidiary in accordance with the terms hereof during the 45 days
following the date of such acquisition) which are maintained with any
bank other than a Senior Lender shall not at any time exceed (x) in the
case of such deposits with any single bank, $115,000 for three
consecutive Business Days and (y) in the case of all such deposits,
$1,115,000 for three consecutive Business Days;
provided that no Investment otherwise permitted by clause (b), (c), (d), (e),
(f) or (g) shall be permitted to be made if, immediately before or after giving
effect thereto, any Event of Default or Default shall have occurred and be
continuing.
6.22 Other Subordinated Debt. The Company shall not and shall not
permit any of its Subsidiaries to, directly or indirectly, incur, create, or
suffer to exist any Debt that by its express terms is subordinate or junior in
right of payment (to any extent) to any Debt of the Company or a Guarantor
unless, by its terms or by the terms of the instrument creating or evidencing
it, such Debt (A) has a maturity and Weighted Average Life to Maturity longer
than the Loans and (B) is subordinate or junior in right of payment to the Loans
(or, in the case of a Guarantor, to the Guaranty).
6.23 Foreign Subsidiaries. Not at any time permit more than 10% of its
consolidated assets to be owned by, or more than 10% of its consolidated
revenues for any Fiscal Quarter to be earned by, Foreign Subsidiaries.
6.24 Business Plan and Financial Projections. Not later than ten
Business Days after the Closing Date, deliver to the Lender a business plan and
financial projections of the Company and its Subsidiaries for Fiscal Years 2000
through 2006.
6.25 Amendments to Certain Documents. The Company shall not make or
agree to any amendment to or modification of, or waive any of its rights under,
any of the terms of the Credit Agreement or any other agreement or instrument
governing any document relating to Debt which would (a) have the effect of (i)
breaching the covenant set forth in Section 6.9(a) hereof, (ii) increasing the
principal amount payable thereon or redemptions thereof, or (iii) providing for
earlier payment in respect of principal or redemptions or otherwise or (b)
otherwise adversely affect the interest of the Lender.
6.26 Listing. The Company shall use its reasonable best efforts to
continue to have the Common Stock listed on the NASDAQ SmallCap Market
("Nasdaq") or a national securities exchange for so long as any of the
Convertible Preferred Stock or any shares into which the Convertible Preferred
Stock is convertible are outstanding. Prior to the Closing, the Company shall
prepare and submit to Nasdaq a listing application covering the shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock and shall
obtain approval for the listing of such shares, subject to official notice of
issuance.
-36-
42
6.27 Current Public Information. The Company shall file all reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder and shall take such further
action as any holder or holders of the Convertible Preferred Stock may
reasonably request, all to the extent required to enable such holders to sell
the Convertible Preferred Stock pursuant to Rule 144 adopted by the SEC under
the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the SEC. Upon request, the
Company shall deliver to any holder of the Convertible Preferred Stock a written
statement as to whether it has complied with such requirements.
6.28 Section 203 of the DGCL. The Board shall not adopt any resolution
containing any provisions relating to the exemption from Section 203 of the DGCL
granted to the Lender which would adversely affect or otherwise impair the
rights of the Lender thereunder.
6.29 Fiscal Year. The Company will not change its Fiscal Year from that
currently in effect.
6.30 Board. The maximum number of directors on the Board shall be fixed
at no more than six; provided that the maximum number of directors on the Board
may be increased as a result of the exercise of any special rights to elect
directors upon events of default or events of noncompliance granted to the
holders of the Convertible Preferred Stock and the Lender or the holders of the
Note hereunder.
6.31 Filing of Information Statement. Within twenty (20) days after the
Closing, the Company shall file with the SEC an information statement pursuant
to Section 14(c) and Regulation 14C of the Exchange Act regarding the
Stockholders Consent. The Company shall comply with all of its obligations
pursuant to Section 14(c) and Regulation 14C of the Exchange Act in connection
with the Stockholders Consent.
6.32 Amendment to Certificate of Incorporation. Twenty-one calender
days after the date that the Company sends or gives its shareholders the
information statement required pursuant to Section 14(c) and Regulation 14C of
the Exchange Act relating to the Stockholders Consent, the Company shall file
the Certificate Amendment. The Company and the Board shall at all times comply
with and give effect to the provisions of the Certificate Amendment.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. If one or more of the following events set forth
in Sections 7.2 through 7.15 hereof shall occur and be continuing it shall
constitute an event of default hereunder (the "Events of Default").
7.2 Payment Default. The Company shall fail to pay (i) any principal of
the Note when the same becomes due and payable, whether upon maturity,
prepayment, acceleration or otherwise, (ii) any interest on the Note, for a
period of five (5) days after the same shall become due and payable
-37-
43
or (iii) any other amount due hereunder within five (5) days after the same
shall become due and payable; or
7.3 Other Debt. (i) The Company shall fail to pay in excess of
$2,000,000 in the aggregate of Senior Indebtedness (including interest and fees)
when due (whether upon maturity, prepayment, acceleration or otherwise); (ii)
the maturity of the Senior Indebtedness shall have been accelerated (whether by
having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); (iii) the Company shall fail to pay in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt (including interest and fees) of the Company or any Subsidiary when
due (whether upon maturity, prepayment, acceleration or otherwise); or (iv) in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt of the Company or any Subsidiary shall have been accelerated (whether
by having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); provided that the default by RESTEC under
any "non-transfer" provision in connection with the RESTEC Bonds shall not
constitute an Event of Default hereunder; or
7.4 Other Material Obligations. Default in the payment when due, or in
the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
7.5 Non-Compliance with Provisions of This Agreement. (a) Failure by
the Company or its Subsidiaries to comply with or to perform any covenant set
forth in Sections 6.7 through 6.15 or Sections 6.25, 6.28, 6.29, 6.30, 6.31 or
6.32; or (b) failure by the Company or its Subsidiaries to comply with or to
perform any other provision of this Agreement (and not constituting an Event of
Default under any of the other provisions of this Section 7) and continuance of
such failure for 30 days after notice thereof to the Company from the Lender; or
7.6 Breach of Representations or Warranties. Any representation or
warranty made by the Company in this Agreement or in any statement or
certificate at any time given by them in writing pursuant hereto or in
connection herewith or therewith is false or misleading (i) in any respect, in
the case of representations or warranties qualified by a materiality standard
including, without limitation, a "material adverse effect" qualifier, or (ii) in
any respect which is material to the business, assets, property, operations,
results, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, in the case of all other representations or
warranties, in each case on the date made or furnished; or
7.7 Involuntary Bankruptcy, Appointment of Receiver, etc. (a) A court
having jurisdiction shall enter a decree or order for relief in respect of the
Company or any Subsidiary in an involuntary case under the Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not dismissed, stayed or discharged within 60
days after
-38-
44
filing; or any other similar relief is not granted and remains unstayed or
undismissed under any applicable federal or state law; or (b) an involuntary
case is commenced against the Company or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Company or any of its Subsidiaries
or over all or a substantial part of any of their respective properties shall
have been entered; or an interim receiver, trustee or other custodian of the
Company or any of its Subsidiaries for all or a substantial part of their
respective properties is involuntarily appointed, such events under this clause
(b) continue for 60 days unless dismissed, bonded, stayed, vacated or
discharged; or
7.8 Voluntary Bankruptcy, Appointment of Receiver, etc. (a) The Company
or any of its Subsidiaries shall have an order for relief entered with respect
to it or commence a voluntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or (b) the Company or any of its Subsidiaries makes any assignment for
the benefit of creditors; or (c) the board of directors of the Company or any of
its Subsidiaries (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing; or
7.9 Judgments. Final judgments which exceed an aggregate of $1,000,000
shall be rendered against the Company or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments; or
7.10 Dissolution. Any order, judgment or decree is entered against the
Company or any of its Subsidiaries decreeing the dissolution or split up of the
Company or such Subsidiary and such order remains undischarged or unstayed for a
period in excess of thirty (30) days; or
7.11 Solvency. The Company or any of its Subsidiaries ceases to be
solvent or admits in writing its present or prospective inability to pay its
debts as they become due; or
7.12 Injunction. The Company or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business for more than thirty (30) days; or
7.13 ERISA; Pension Plans. (i) Institution of any steps by the Company
or any other Person to terminate a Pension Plan if as a result of such
termination the Company could be required to make a contribution to such Pension
Plan, or could incur a liability or obligation to such Pension Plan, in excess
of $1,000,000; (ii) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA; or (iii)
there shall occur any withdrawal or partial withdrawal from a Multiemployer
Pension Plan and the withdrawal liability (without unaccrued interest) to
Multiemployer Pension Plans as a result of such withdrawal (including any
outstanding
-39-
45
withdrawal liability that the Company and the Controlled Group have incurred on
the date of such withdrawal) exceeds $1,000,000; or
7.14 Invalidity of Subordinated Loan Documents. Any of the Subordinated
Loan Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and effect or is
declared to be null and void, or the Company or its Subsidiaries denies that it
has any further liability under any Subordinated Loan Documents to which it is
party, or gives notice to such effect; or
7.15 Change in Control. (a) Any Person or group of Persons (within the
meaning of Section 13 or 14 of the Exchange Act, but excluding (i) the executive
managers of the Company as of the Closing Date and (ii) GTCR Capital Partners,
L.P., GTCR Fund VII, L.P. ("GTCR Fund VII") and their respective Affiliates)
shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of the outstanding voting stock of the Company equal to
the greater of (x) 25% of the then outstanding shares of voting stock of the
Company and (y) the proportion of the then outstanding shares of voting stock of
the Company held by GTCR Fund VII and its Affiliates; or (b) during any 12-month
period, individuals who at the beginning of such period constituted the Board
(together with any directors designated by the holders of the Convertible
Preferred Stock or the Lender and new directors whose election by the Board or
whose nomination for election by the Company's shareholders was approved by a
vote of at least majority of the directors who either were directors at
beginning of such period or whose election or nomination was previously so
approved) cease for any reason to constitute a majority of the Board; (each of
clauses (a) and (b) constituting a "Change of Control");
7.16 Consequences of Default. Upon the occurrence and continuation of
any Event of Default (but subject to the terms of the Intercreditor Agreement):
7.16.1. With respect to any Event of Default (i) by the
Guarantors or (ii) by the Company other than pursuant to Section 7.7 or 7.8
hereof, the Lender may, and shall upon the request of the Majority Holders, upon
30 days prior written notice to the Lender, and upon written notice to the
Company, declare the Note to be due and payable, whereupon the principal amount
of the Note, together with accrued interest thereon, shall automatically become
immediately due and payable, without any other notice of any kind, and without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company.
7.16.2. The Lender may exercise the rights granted to holders
of the Notes in Article Ninth, Part B of the Company's Certificate of
Incorporation (as in effect following amendment by the Certificate Amendment) to
elect an additional director to the Company's Board.
7.16.3. With respect to any Event of Default by the Company
pursuant to Section 7.7 or 7.8 hereof, the principal amount of the Note,
together with accrued interest thereon, shall automatically become immediately
due and payable, without any other notice of any kind, and without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Company.
-40-
46
7.16.4. If any Event of Default exists, each holder of the
Note shall also have any other rights which such holder is entitled to under any
contract or agreement at any time and any other rights which such holder may
have pursuant to applicable law.
SECTION 8. SUBORDINATION
The Lender shall enter into a Subordination and Intercreditor Agreement
("Intercreditor Agreement") with the Agent substantially in the form of the
attached Exhibit D.
SECTION 9. THE GUARANTEES
9.1 The Guarantees. In order to induce the Lender to enter into this
Agreement and to make the Loans hereunder and in recognition of the direct
benefits to be received by each Guarantor from the Loans hereunder, each
Guarantor hereby agrees with the Lender as follows (the "Guaranty"):
9.1.1. Each Guarantor hereby unconditionally guarantees, as
primary obligor and not merely as a surety, jointly and severally with each
other Guarantor, to the Lender and its successors and assigns the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the principal of, and interest on the Loans and all other Loan Obligations of
the Company. Each Guarantor further agrees that if the Company shall fail to pay
any of its Loan Obligations in full when due (whether at stated maturity, by
acceleration or otherwise), such Guarantor will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Loan Obligations, the same will be promptly
paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal. The
obligations of the Guarantors hereunder are referred to herein as the
"Guaranteed Obligations."
9.2 Guaranteed Obligations Unconditional. The Guaranteed Obligations
are absolute and unconditional irrespective of the value, genuineness, validity,
regularity or enforceability of this Agreement, the Note, any Document, or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Loan Obligations, and to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 9.2 that the obligations of each Guarantor
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder, which shall remain absolute and
unconditional as provided above:
(i) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with
any of the Loan Obligations shall be extended, or such
performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement, the Note or any Document or any other
agreement or instrument referred to herein or therein shall be
done or omitted; or
-41-
47
(iii) the maturity of any of the Loan Obligations shall be
accelerated, or any such Loan Obligations shall be modified,
supplemented or amended in any respect, or any right under
this Agreement, the Note, any Document or any other agreement
or instrument referred to herein or therein shall be waived or
any other guarantee of any such Loan Obligations or any
security therefor shall be released or exchanged in whole or
in part or otherwise dealt with.
9.2.1. Each Guarantor hereby expressly waives diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that the Lender exhaust any right, power or remedy or proceed
against the Company under this Agreement, the Note, any Document or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Loan
Obligations.
9.3 Reinstatement. The obligations of each Guarantor under this Section
9 shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Company in respect of the Loan Obligations is
rescinded or must be otherwise restored by any holder of any such Loan
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees, on a joint and several
basis, that it will indemnify the Lender and any of its successors or assigns on
demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Lender or such successors or assigns in
connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
9.4 Subrogation. Each Guarantor hereby waives all rights of subrogation
or contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Bankruptcy Code) or
otherwise by reason of any payment or performance by it pursuant to the
provisions of this Section 9.
9.5 Contribution.
9.5.1. At any time a payment in respect of the Loan
Obligations is made under this Guaranty, the right of contribution, if any, of
each Guarantor against any other Guarantor required to make any payment to such
Guarantor pursuant to this Section 9 (a "Contributor") shall be determined as
provided in the immediately following sentence, with the right of contribution
of each Guarantor to be revised and restated as of each date on which a payment
(a "Relevant Payment") is made on the Loan Obligations under this Guaranty. At
any time that a Relevant Payment is made by a Guarantor that results in the
aggregate payments made by such Guarantor in respect of the Loan Obligations
including the Relevant Payment exceeding such Guarantor's Contribution
Percentage (as hereinafter defined) of the aggregate payments made by all
Guarantors in respect of the Loan Obligations (such excess, the "Aggregate
Excess Amount"), each such Guarantor shall have a right of contribution against
each Contributor who has made payments in respect of the Loan Obligations in an
aggregate amount less than such Contributor's Contribution Percentage of the
aggregate payments made by all Guarantors in respect of the Loan Obligations
(the aggregate amount of such deficit, the "Aggregate Deficit Amount") in an
amount equal to (x) a fraction the numerator of which is the Aggregate Excess
Amount of such Guarantor and the denominator of which is the Aggregate Excess
Amount of all
-42-
48
Guarantors multiplied by (y) the Aggregate Deficit Amount of such Contributor. A
Guarantor's right of contribution, if any, pursuant to the preceding sentences
shall arise at the time of each computation, subject to adjustment at the time
of any subsequent computation; provided, however, that no Guarantor may take any
action to enforce such right until the Loan Obligations have been irrevocably
paid in full in cash and the Note and the Loan Agreement have been terminated;
it being expressly recognized and agreed by all parties hereto that any
Guarantor's right of contribution arising pursuant to this Section 9 against any
Contributor shall be expressly junior and subordinate to such Contributor's
obligations and liabilities in respect of the Loan Obligations and any other
obligations owing under this Guaranty. As used in this Guaranty, (i) each
Contributor's "Contribution Percentage" shall mean the percentage obtained by
dividing (x) the Adjusted Guarantor Net Worth of such Contributor by (y) the
aggregate Adjusted Guarantor Net Worth of all Guarantors of the respective Loan
Obligations; (ii) the "Adjusted Guarantor Net Worth" of each Guarantor shall
mean the greater of (x) the Guarantor Net Worth of such Guarantor or (y) zero;
and (iii) the "Guarantor Net Worth" of each Guarantor shall mean the amount by
which the fair salable value of such Guarantor's assets (other than its equity
interests in another Guarantor and its rights under this Section 9) on the later
of the date it first became a Guarantor hereunder and the last date on which the
maximum aggregate amount of Loan Obligations which it guarantees pursuant to
this Guaranty is increased over that amount which it guaranteed pursuant to this
Guaranty on the date it first became a Guarantor hereunder exceeds its existing
debts and other liabilities (including contingent liabilities, but without
giving effect to any Loan Obligations arising under this Guaranty and any
liabilities of such Guarantor in respect of intercompany indebtedness to the
Company or any of its Subsidiaries or any Affiliate of any such Person), in each
case after giving effect to all transactions occurring on such date.
9.5.2. Each Guarantor recognizes and acknowledges that the
rights to contribution arising hereunder shall constitute an asset in favor of
the party entitled to such contribution. In this connection, each Guarantor has
the right to, and hereby does expressly, waive its contribution right against
any other Guarantor to the extent that after giving effect to such waiver such
Guarantor would remain solvent, in the determination of the Lender.
9.5.3. In any action or proceeding involving any state
corporate law, or any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of any
Guarantor under Section 9 hereof would otherwise, taking into account the
provisions of Section 9.5.1 above be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 9, then, notwithstanding any
other provision hereof to the contrary, the amount of such liability shall,
without any further action by such Guarantor, the Company, the Lender or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
9.6 Remedies. Each Guarantor agrees that, as between such Guarantor and
the Lender, the Loan Obligations and the Note may be declared to be forthwith
due and payable as provided in Section 7 of this Agreement (and shall be deemed
to have become automatically due and payable in the circumstances provided in
such Section 7) for purposes of Section 9.1 notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such Loan Obligation being
deemed to have become automatically due and payable), in which case such Loan
Obligations (whether or
-43-
49
not due and payable by the Company) shall forthwith become due and payable by
such Guarantor for purposes of Section 9.1.
9.7 Continuing Guarantee. The guarantee in this Section 9 is a
continuing guarantee, and shall apply to all of the Loan Obligations whenever
arising. Notwithstanding anything to the contrary in this Agreement, upon (i)
the release by the Lenders under this Agreement and the Note of all guarantees
of a Guarantor, or (ii) the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Guarantor (or all or substantially all
of its assets) to an entity which is not a Subsidiary of the Company and which
sale or disposition is otherwise in compliance with the terms of this Agreement,
such Guarantor shall be deemed released from all obligations under this Section
9 without any further action required on the part of the Lender.
9.8 Subordination of Guaranteed Obligations. Notwithstanding anything
to the contrary in this Agreement, the Company, each Guarantor and the Lender,
in making the Loans hereunder, agrees and covenants that the Guaranteed
Obligations shall be subordinated and junior in right of payment to the prior
payment in full of the Senior Indebtedness, in the same manner, and to the same
extent, as the Loan Obligations are subordinated and junior in right of payment
to the Senior Indebtedness pursuant to the Intercreditor Agreement, if any.
SECTION 10. TRANSFERS OF NOTE; LEGENDS
10.1 Assignments of Note.
10.1.1. Subject to the terms and conditions of the Credit
Documents, the Lender shall have the right at any time, to sell, assign,
transfer or negotiate all or any part of the Loans and the Note to one or more
Persons, and may grant participations in all or any part of the Note or the
Loans evidenced thereby to one or more Persons, provided in either case that
such Person is an Eligible Assignee. In the case of any sale, assignment,
transfer or negotiation of all or part of the Loans and the Note authorized
under this Section 10.1 (but not in the case of a participation), the assignee,
transferee or recipient shall have, to the extent of such sale, assignment,
transfer or negotiation, the same rights, benefits and obligations as it would
if it were a Lender with respect to such Note or the Loans evidenced thereby.
10.1.2. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of the Note and
for the transfer of the same. Upon surrender for registration of transfer of the
Note at the principal office of the Company, the Company shall, at its expense,
promptly execute and deliver one or more new Note of like tenor and of a like
aggregate principal amount, registered in the name(s) of such transferee(s) and,
in the case of a transfer in part, a new Note in the appropriate partial amount
registered in the name(s) of such transferor(s).
10.1.3. In connection with any sales, assignments or transfers
of the Note, the transferor shall give notice to the Company and the Lender of
the identity of such parties and obtain agreements from the transferees that all
nonpublic information given to such parties pursuant to this Agreement will be
held in strict confidence pursuant to a confidentiality agreement reasonably
satisfactory to the Company.
-44-
50
10.2 Investment Representations; Restrictive Legend.
10.2.1. Investment Representations. The Lender individually
(but not on behalf of any other subsequent holder of the Note) represents and
warrants that as of the Closing Date:
(a) Restrictions on Transfer. The Lender has been advised that
the Note has not been registered under the Securities Act or any state
securities laws and, therefore, cannot be resold unless they are
registered under the Securities Act and applicable state securities
laws or unless an exemption from such registration requirements is
available. The Lender is aware that the Company is under no obligation
to effect any such registration with respect to the Note or to file for
or comply with any exemption from registration. The Lender is receiving
the Note from the Company hereunder for its own account and not with a
view to, or for resale in connection with, the distribution thereof in
violation of the Securities Act; provided, however, that except as
provided in the Intercreditor Agreement, if any, the disposition of the
Lender's property shall at all times be and remain in its control.
(b) Accredited Investor, etc. The Lender has such knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of such investment, is able to incur a
complete loss of such investment and to bear the economic risk of such
investment for an indefinite period of time. The Lender is an
"accredited investor" as that term is defined in Regulation D under the
Securities Act.
10.2.2. Restrictive Legend. The Note shall bear a legend in
substantially the following form:
"THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION
UNDER THE ACT IS NOT REQUIRED."
10.3 Termination of Restrictions. The restrictions imposed by Section
10.4 hereof upon the transferability of the Note shall cease and terminate as to
the Note (i) when, in the opinion of counsel reasonably acceptable to the
Company, such restrictions are no longer required in order to assure compliance
with the Securities Act or (ii) when such Note shall have been registered under
the Securities Act or transferred pursuant to Rule 144 thereunder. Whenever such
restrictions shall cease and terminate as to the Note or such Note shall be
transferable under paragraph (k) of Rule 144, the holder thereof shall be
entitled to receive from the Company, without expense, new certificates not
bearing the legend set forth in Section 11.3 hereof.
10.4 Note Legend relating to Subordination. The Note shall bear a
legend in substantially the following form:
-45-
51
"THIS NOTE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE
SUBORDINATE PURSUANT TO A SUBORDINATION AND INTERCREDITOR AGREEMENT
(THE "INTERCREDITOR AGREEMENT") TO THE INDEBTEDNESS (INCLUDING
INTEREST) OWED BY THE COMPANY PURSUANT TO A SENIOR CREDIT AGREEMENT;
AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE INTERCREDITOR AGREEMENT; AND A COPY OF
THE INTERCREDITOR AGREEMENT SHALL BE AVAILABLE UPON REQUEST TO THE
COMPANY BY THE HOLDER HEREOF WITHOUT CHARGE."
10.5 Note Legend relating to Original Issue Discount. The Note shall
bear a legend in substantially the following form:
"THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN
REQUEST TO THE CHIEF EXECUTIVE OFFICER OF SYNAGRO
TECHNOLOGIES, INC. IN HOUSTON, TEXAS, INFORMATION REGARDING
THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE
AND YIELD TO MATURITY WILL BE MADE AVAILABLE."
SECTION 11. MISCELLANEOUS
11.1 Expenses. If and only if the transactions contemplated hereby
shall be consummated, the Company agrees to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and related
documents and all costs of furnishing all opinions by counsel for the Company
(including, without limitation, any opinions requested by the Lender as to any
legal matters arising hereunder), and of the Company's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, (ii) the reasonable fees, expenses and disbursements
of counsel to the Lender in connection with the negotiation, preparation, and
execution of the Documents and with the review of other documents related to the
Transactions and any Future Acquisitions, and any amendments and waivers hereto
or thereto and (iii) after the occurrence of an Event of Default, all costs and
expenses (including reasonable attorneys' fees) incurred by the Lender in
enforcing any obligations of or in collecting any payments due hereunder or
under the Note by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a workout, or any insolvency or bankruptcy
proceedings.
11.2 Indemnity.
11.2.1. General. In addition to the payment of expenses
pursuant to Section 11.1, whether or not the transactions contemplated hereby
shall be consummated, the Company (as "Indemnitor") agrees to indemnify, pay and
hold the Lender, and the officers, directors, employees, agents, and Affiliates
of the Lender (collectively called the "Indemnitees") harmless from and against
any and all other liabilities, costs, expenses liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of one counsel for such Indemnitees in connection
-46-
52
with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against that Indemnitee, in
any manner relating to or arising out of this Agreement, the Loans or the other
documents related to the Transactions, the Lender's agreement to make the Loans
or the use or intended use of the proceeds of any of the proceeds thereof to the
Company (the "Indemnified Liabilities"); provided, that, the Indemnitor shall
not have any obligation to an Indemnitee hereunder with respect to an
Indemnified Liability to the extent that such Indemnified Liability arises from
the gross negligence or willful misconduct of that Indemnitee. THIS INDEMNITY
INDEMNIFIES THE INDEMNITEES AGAINST THEIR OWN NEGLIGENCE. Each Indemnitee shall
give the Indemnitor prompt written notice of any claim that might give rise to
Indemnified Liabilities setting forth a description of those elements of such
claim of which such Indemnitee has knowledge; provided, that, any failure to
give such notice shall not affect the obligations of the Indemnitor unless (and
then solely to the extent) such Indemnitor is prejudiced. The Indemnitor shall
have the right at any time during which such claim is pending to select counsel
to defend and control the defense thereof and settle any claims for which they
are responsible for indemnification hereunder (provided, that, the Indemnitor
will not settle any such claim without (i) the appropriate Indemnitee's prior
written consent which consent shall not be unreasonably withheld or (ii)
obtaining an unconditional release of the appropriate Indemnitee from all claims
arising out of or in any way relating to the circumstances involving such claim)
so long as in any such event the Indemnitor shall have stated in a writing
delivered to the Indemnitee that, as between the Indemnitor and the Indemnitee,
the Indemnitor is responsible to the Indemnitee with respect to such claim to
the extent and subject to the limitations set forth herein; provided, that, the
Indemnitor shall not be entitled to control the defense of any claim in the
event that in the reasonable opinion of counsel for the Indemnitee there are one
or more material defenses available to the Indemnitee which are not available to
the Indemnitor; provided, further, that with respect to any claim as to which
the Indemnitee is controlling the defense, the Indemnitor will not be liable to
any Indemnitee for any settlement of any claim pursuant to this Section 11.2
that is effected without its prior written consent. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them. No
Indemnitee (in its capacity as the Lender or holder of the Warrants or Warrant
Shares) shall be liable for any indirect or consequential damages in connection
with its activities relating to this Agreement, the Note or other documents
relating to the Transactions.
11.2.2. Environmental Liabilities. Without limiting the
generality of the indemnity set out in Section 11.2.1 above, the Company shall
defend, protect, indemnify and hold harmless the Lender and all other
Indemnitees from and against any and all actions, causes of action, suits,
losses, liabilities, damages, injuries, penalties, fees, costs, expenses and
claims of any and every kind whatsoever paid, incurred or suffered by, or
asserted against, the Lender or any other Indemnitee for, with respect to, or as
a direct or indirect result of, the past, present or future environmental
condition of any property owned, operated or used by the Company, any
Subsidiary, their predecessors or successors or of any offsite treatment,
storage or disposal location associated therewith, including, without
limitation, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, release, or threatened release into, onto or from, any such
property or location of any toxic, chemical or hazardous substance, material or
waste (including, without limitation, any losses,
-47-
53
liabilities, damages, injuries, penalties, fees, costs, expenses or claims
asserted or arising under CERCLA, any so-called "Superfund" or "Superlien" law,
or any other federal, state, local or foreign statute, law, ordinance, code,
rule, regulation, order or decree regulating, relating to or imposing liability
or standards on conduct concerning, any toxic, chemical or hazardous substance,
material or waste), regardless of whether caused by, or within the control of,
the Company or any Subsidiary.
11.3 Amendments and Waivers. No amendment, modification, termination,
waiver or consent of any provision of this Agreement, shall in any event be
effective without the written consent of the Majority Holders and the Company;
provided, that, no amendment, modification, termination, waiver or consent of
any provision of this Agreement, shall, unless in writing and signed by all the
holders of Notes, do any of the following: (a) increase or subject the Lender to
any additional obligations, (b) reduce the principal of, or interest on the
Loans or any fees, premiums or other amounts payable hereunder, (c) postpone any
date fixed for any payment of principal of, or premium or interest on, the Loan
or any fees or other amounts payable hereunder (other than as a result of
waiving a prepayment required under Section 3.2 or a Default or Event of Default
giving rise to a right of acceleration, which shall each be by written consent
of the Majority Holders), or (d) amend this Section 11.3. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on the Company in any case shall
entitle the Company to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.3 shall be binding upon each Lender
at the time outstanding and each future holder thereof.
11.4 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
11.5 Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and delivered personally, mailed by certified or registered mail, return
receipt requested and postage prepaid, sent via a nationally recognized
overnight courier, or via facsimile. Such notices, demands and other
communications will be sent to the address indicated below:
If to the Company:
Synagro Technologies, Inc.
0000 Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Chief Financial Officer
Telecopier No.: (000) 000-0000
-48-
54
With a copy to:
Xxxxx Xxxxxxx & Xxxx LLP
3400 Chase Tower
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
If to the Lender:
GTCR Capital Partners, L.P.
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party;
provided, that, the failure to deliver copies of notices as indicated above
shall not affect the validity of any notice. Any such communication shall be
deemed to have been received (i) when delivered, if personally delivered or sent
by nationally recognized overnight courier or sent via facsimile or (ii) on the
third Business Day following the date on which the piece of mail containing such
communication is posted if sent by certified or registered mail.
11.6 Survival of Warranties and Certain Agreements.
11.6.1. All agreements, representations and warranties made
herein shall survive the execution and delivery of this Agreement and the
execution and delivery of the Note, and shall continue until the repayment of
the Note and the Loan Obligations in full; provided, that, if all or any part of
such payment is set aside, the representations and warranties contained herein
shall continue as if no such payment had been made.
11.6.2. Notwithstanding anything in this Agreement or implied
by law to the contrary, the agreements of the Company set forth in Sections 11.1
and 11.2 shall survive the payment of the Note and the termination of this
Agreement.
11.7 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of the Lender in the exercise of any power, right or
privilege hereunder or under the Note shall
-49-
55
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under this
Agreement or the Note are cumulative to and not exclusive of, any rights or
remedies otherwise available.
11.8 Severability. If and to the extent that any provision in this
Agreement or the Note shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions of the Agreement or obligations of the Company under such provisions,
or of such provision or obligation in any other jurisdiction, or of such
provision to the extent not invalid, illegal or unenforceable shall not in any
way be affected or impaired thereby.
11.9 Heading. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
11.10 Applicable Law. This Agreement shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of Illinois
without regard to the principles of conflicts of laws.
11.11 Successors and Assigns; Subsequent Holders of Note. This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of the Lender. The terms and provisions of this
Agreement and all certificates delivered pursuant hereto shall inure to the
benefit of any assignee or transferee of the Note, to the extent the assignment
is permitted hereunder, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon the Lender shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. The Company's rights or any interest therein or hereunder
may not be assigned without the written consent of the Majority Holders.
11.12 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST THE COMPANY WITH RESPECT TO THIS AGREEMENT OR THE
NOTE MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN
THE STATE OF ILLINOIS LOCATED IN THE CITY OF CHICAGO, ILLINOIS AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS AGREEMENT SUBJECT, HOWEVER, TO RIGHTS OF APPEAL.
THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF COPIES OF ANY SUMMONS
AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR
PROCEEDING BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY DELIVERING A COPY
OF SUCH PROCESS TO SUCH PARTY, AT ITS ADDRESS SPECIFIED IN SECTION 11.5, OR BY
ANY OTHER METHOD PERMITTED BY APPLICABLE LAW. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF
ANY OTHER JURISDICTION.
-50-
56
11.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES,
TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR THE VALIDITY, PROTECTION, INTERPRETATION,
COLLECTION OR ENFORCEMENT THEREOF. NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE
LENDER FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT
CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY
RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER THE OTHER DOCUMENTS,
OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; THE COMPANY
HEREBY WAIVES, RELEASES AND AGREES NOT TO XXX UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES. THE COMPANY AGREES THAT THIS SECTION 11.13 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE LENDER WOULD NOT EXTEND TO
THE COMPANY ANY MONIES HEREUNDER IF THIS SECTION 11.13 WERE NOT PART OF THIS
AGREEMENT.
11.14 No Personal Obligations. Notwithstanding anything to the contrary
contained herein or in any other Document, it is expressly understood and the
Lender expressly agrees that nothing contained herein, in any other Document or
in any other document contemplated hereby or thereby (whether from a covenant,
representation, warranty or other provision herein) shall create, or be
construed as creating, any personal liability of any shareholder, director,
officer, employee, agent, partner or Affiliate of the Company or its
Subsidiaries, in its capacity as such or otherwise, with respect to (a) any
payment obligation of the Company or its Subsidiaries, (b) any obligation of the
Company or its Subsidiaries to perform any covenant, undertaking,
indemnification or agreement, either express or implied, contained herein or in
any other Document, (c) any other claim or liability to the Lender under or
arising under this Agreement or any other Document, in any other document
contemplated hereby or thereby or (d) any credit extended or loan made;
provided, that, nothing herein shall be deemed to be a waiver of claims arising
from fraud.
11.15 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and written or telephonic notification of such execution and
authorization of delivery thereof has been received by the Company and the
Lender.
-51-
57
11.16 Entirety. This Agreement and the Documents embody the entire
agreement among the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
* * * * *
-52-
58
IN WITNESS WHEREOF, the parties hereto have caused this Senior
Subordinated Loan Agreement to be executed by the respective duly authorized
officers of the undersigned and by the undersigned as of the date first written
above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ XXXX X. XXXXXX
--------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman/CEO
GTCR CAPITAL PARTNERS, L.P.
By: GTCR Mezzanine Partners, L.P.
Its: General Partner
By: GTCR Partners VI, L.P.
Its: General Partner
By: GTCR Xxxxxx Xxxxxx, L.L.C.
Its: General Partner
By: /s/ XXXXX X. XXXXXXX
--------------------------
Name: Xxxxx X. Xxxxxxx
Its: Principal
59
Counterpart signature page to Senior Subordinated Loan Agreement dated as of
January 27, 2000 among Synagro Technologies, Inc., GTCR Capital Partners, L.P.
and certain Guarantors:
SYNAGRO WEST, INC.
SYNAGRO OF CALIFORNIA, INC.
SYNAGRO COMPOSTING COMPANY OF CALIFORNIA, INC.
SYNAGRO MIDWEST, INC.
SYNAGRO OF MICHIGAN, INC.
SYNAGRO OF WISCONSIN, INC.
SYNAGRO SOUTHWEST, INC.
SYNAGRO OF TEXAS - VITAL-CYCLE, INC.
SYNAGRO OF TEXAS - CDR, INC.
SYNAGRO SOUTHEAST, INC.
SYNAGRO OF NORTH CAROLINA - AMSCO, INC.
SYNAGRO OF FLORIDA - ANTI-POLLUTION, INC.
SYNAGRO OF NORTH CAROLINA - EWR, INC.
SYNAGRO OF FLORIDA - A&J, INC.
SYNAGRO NORTHEAST, INC.
SYNAGRO MID-ATLANTIC, INC.
ORGANI-GRO, INC.
ST INTERCO, INC.
COMPOSTING CORPORATION OF AMERICA
MICHIGAN ORGANIC RESOURCES, INC.
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
NEW HAVEN RESIDUALS SYSTEMS, INC.
RESIDUAL TECHNOLOGIES SYSTEMS, INC.
FAIRHAVEN RESIDUAL SYSTEMS, INC.
NEW ENGLAND TREATMENT COMPANY, INC.
NETCO-CONNECTICUT, INC.
NETCO-WATERBURY SYSTEMS, INC.
NETCO-RESIDUALS MANAGEMENT SYSTEMS, INC.
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
60
NETCO-RESIDUALS MANAGEMENT, LIMITED
PARTNERSHIP
By: Netco-Residuals Management Systems, Inc.,
its General Partner
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
RESIDUAL TECHNOLOGIES, LIMITED PARTNERSHIP
By: Residual Technologies Systems, Inc.,
its General Partner
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
FAIRHAVEN RESIDUALS, LIMITED PARTNERSHIP
By: Fairhaven Residual Systems, Inc.,
its General Partner
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
PROVIDENCE SOILS, LLC
By: Synagro Technologies, Inc.
its Member
By: /s/ XXXX X. ROME
------------------------
Name: Xxxx X. Rome
Title: Executive Vice President
61
List of Exhibits
Exhibit A Definitions
Exhibit B Form of Note
Exhibit C Compliance Certificate
Exhibit D Form of Intercreditor Agreement
Exhibit E Form of Amendment to Restated Certificate of Incorporation
List of Disclosure Schedules
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Owned Real Property Schedule
Leased Property Schedule
Taxes Schedule
Contracts Schedule
Employee Benefits Schedule
Intellectual Property Schedule
Litigation Schedule
Consents Schedule
Shareholders Consent Schedule
Insurance Schedule
Schedule of Key Employees
Employee Benefit Schedule
Environmental Schedule
Affiliated Transactions Schedule
Customer Schedule
Unsecured Seller Debt Schedule
Capital Lease Debt Schedule
Liens Schedule
62
EXHIBIT A
DEFINITIONS
"Accounting Changes" shall mean changes in GAAP or interpretations of
GAAP occurring after the Closing Date.
"Acquisition" has the meaning set forth in the recitals to the
Agreement.
"Acquisition Agreement" has the meaning set forth in the recitals to
the Agreement.
"Act" has the meaning set forth in Section 10.2.2 to the Agreement.
"Adjusted Capital Expenditures" means Capital Expenditures other than
Capital Expenditures made from the proceeds of asset sales.
"Adjusted EBITDA" means, for any period, EBITDA for such period;
provided that in calculating Adjusted EBITDA, (a) the consolidated net income of
any Person acquired by the Company or any Subsidiary during such period (plus,
to the extent deducted in determining such consolidated net income, interest
expense, income tax expense, depreciation and amortization of such Person) shall
be included on a pro forma basis for such period (assuming the consummation of
each such acquisition and the incurrence or assumption of any Debt in connection
therewith occurred on the first day of such period, but adjusted to add back
non-recurring expenses and other items disclosed in the report of Xxxxxx
Xxxxxxxx LLP dated on or about January 27, 2000 (such as owner compensation) or
otherwise disclosed in connection with Future Acquisitions approved by the
Lender, in each case to the extent disclosed to and reasonably approved by the
Majority Holders) based upon (i) to the extent available, (x) the audited
consolidated balance sheet of such acquired Person and its consolidated
Subsidiaries as at the end of the fiscal year of such Person preceding the
acquisition of such Person and the related audited consolidated statements of
income, stockholders' equity and cash flows for such fiscal year and (y) any
subsequent unaudited financial statements for such Person for the period prior
to the acquisition of such Person so long as such statements were prepared on a
basis consistent with the audited financial statements referred to above or (ii)
to the extent the items listed in clause (i) are not available, such historical
financial statements and other information as is disclosed to, and reasonably
approved by, the Majority Holders; (b) the consolidated net income of any Person
(or division or similar business unit) disposed of by the Company or any
Subsidiary during such period (plus, to the extent deducted in determining such
consolidated net income, interest expense, income tax expense, depreciation and
amortization of such Person (or division or business unit)) shall be excluded on
a pro forma basis for such period (assuming the consummation of such disposition
occurred on the first day of such period) and (c) the Special Charges (net of
any Recoveries received or taken), if applicable, shall be added to EBITDA.
"Adjusted Guarantor Net Worth" has the meaning set forth in Section
9.5.1 of this Agreement.
-i-
63
"Affiliate," as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly,
indirectly or beneficially, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise. The Lender nor any parent of the Lender
nor any Subsidiary of the Lender shall not be treated as an Affiliate of the
Company nor shall be deemed to be a holder of 5% or more of any class of equity
securities of the Company.
"Affiliated Group" means any affiliated group as defined in IRC Section
1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
the Company or any of its Subsidiaries was a member.
"Agent" has the meaning set forth in the recitals to the Agreement.
"Agreement" means this Senior Subordinated Loan Agreement, as from time
to time in effect, of which this Exhibit is a part.
"Applicable Asset Sale Proceeds" means the Net Cash Proceeds from any
Asset Sale, excluding (i) Net Cash Proceeds from any Asset Sale of
transportation, processing and spreading equipment so long as such Net Cash
Proceeds are used to purchase similar transportation, processing or spreading
equipment within six months after such Asset Sale and (ii) the first $250,000 of
Net Cash Proceeds received from all other Asset Sales in any Fiscal Year.
"Approved Use" has the meaning set forth in Section 2.2.3 to the
Agreement.
"Asset Sale" means the sale, lease, assignment or other transfer for
value by the Company or any Subsidiary to any Person (other than the Company or
any Subsidiary) of any asset or right of the Company or such Subsidiary
(including any sale or other transfer of stock of any Subsidiary, whether by
merger, consolidation or otherwise).
"Bankruptcy Code" means Title 11 of the United States Code, as now and
hereafter in effect, or any successor statute.
"Benefit Plan" has the meaning set forth in Section 4.19.1 of the
Agreement.
"Board" means the Board of Directors of the Company.
"Borrowers' Certificate" means, as applied to any company, a
certificate executed on behalf of such company by its chairman of the board (if
an officer), its chief executive officer, its president or its Chief Financial
Officer; provided, that, every Borrowers' Certificate with respect to the
compliance with a condition precedent to the making of loans hereunder shall
include (i) a statement that the officer or officers making or giving such
Borrowers' Certificate have read such condition and any definitions or other
provisions contained in this Agreement relating thereto, (ii) a statement of
-ii-
64
the signers that they have made or have caused to be made such examination or
investigation as they deem necessary to enable them to certify that such
condition has been complied with, and (iii) a statement that such condition has
been complied with.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the States of Illinois or Texas or is
a day on which banking institutions located in Chicago, Illinois or Houston,
Texas are authorized or required by law or other governmental action to close.
"Capital Expenditures" means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent financed (i)
from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.
"Capital Lease" means, with respect to any Person, any lease of (or
other agreement conveying the right to use) any real or personal property by
such Person that, in conformity with GAAP, is accounted for as a capital lease
on the balance sheet of such Person.
"Cash Equivalent Investment" means, at any time, (a) any evidence of
Debt, maturing not more than one year after such time, issued or guaranteed by
the United States Government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by a Bank or its holding company) rated at
least A-l by Standard & Poor's Ratings Group or P-l by Xxxxx'x Investors
Service, Inc., (c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or bankers acceptance, maturing not more than one
year after such time, or overnight Federal Funds transactions that are issued or
sold by a commercial banking institution that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not less
than $500,000,000, (d) any repurchase agreement entered into with any Bank (or
other commercial banking institution of the stature referred to in clause (c))
which (i) is secured by a fully perfected security interest in any obligation of
the type described in any of clauses (a) through (c) and (ii) has a market value
at the time such repurchase agreement is entered into of not less than 100% of
the repurchase obligation of such Bank (or other commercial banking institution)
thereunder and (e) investments in short-term asset management accounts offered
by any Bank for the purpose of investing in loans to any corporation (other than
the Company or an Affiliate of the Company), state or municipality, in each case
organized under the laws of any state of the United States or of the District of
Columbia.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), as amended, or any other Environmental and
Safety Requirements.
"Certificate Amendment" has the meaning set forth in Section 5.1.14 to
the Agreement.
"Certificates of Designation" means the Company's Certificates of
Designation filed pursuant to the Preferred Stock Purchase Agreement relating to
the Convertible Preferred Stock.
-iii-
65
"Change of Control" has the meaning set forth in Section 7.15 of the
Agreement.
"Chief Financial Officer" means the highest ranking officer of any
company then in charge of the financial matters of such company.
"Closing" has the meaning set forth in Section 2.4 to the Agreement.
"Closing Date" has the meaning set forth in Section 2.4 to the
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Common Stock" means the Company's common stock, par value $.002 per
share.
"Company" has the meaning set forth in the preamble to this Agreement.
"Computation Period" means each period of four consecutive Fiscal
Quarters ending on the last day of a Fiscal Quarter.
"Consolidated Net Income" means, with respect to the Company and its
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any extraordinary gains during such
period.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414 of the Code or
Section 4001 of ERISA.
"Contributor" has the meaning set forth in Section 9.5.1 to the
Agreement.
"Contribution Percentage" has the meaning set forth in Section 9.5.1 to
the Agreement.
"Convertible Preferred Stock" means the Company's Series D Convertible
Preferred Stock, par value $.002 per share, and each other series of the
Company's convertible preferred stock issued, or from time to time issuable,
pursuant to the Preferred Stock Purchase Agreement and the exercise of Warrants
issued pursuant to the Warrant Agreement.
"Credit Agreement" has the meaning set forth in the recitals to the
Agreement, together with any schedules, exhibits, appendices or other
attachments thereto, as such agreement may be amended, restated, extended,
renewed, supplemented, refinanced, replaced or otherwise modified from time to
time (including, without limitation, by increasing the amount of available
borrowings thereunder or adding any direct or indirect Subsidiaries of the
Company as additional borrowers or guarantors thereunder) and whether by the
same or any other agent, lender or group of lenders.
"Credit Documents" means, collectively, the Credit Agreement, the
related security agreements, guarantees, pledge agreements, notes and the other
documents executed in connection
-iv-
66
therewith, the Intercreditor Agreement, and each other document or instrument
executed by the Company, any Subsidiary of the Company or any other obligor
under any such documents, including any schedules, exhibits, appendices or other
attachments thereto.
"Debt" of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all obligations of such Person as
lessee under Capital Leases which have been or should be recorded as liabilities
on a balance sheet of such Person, (c) all obligations of such Person to pay the
deferred purchase price of property or services (excluding trade accounts
payable in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall have
been assumed by such Person (it being understood that if such Person has not
assumed or otherwise become personally liable for any such indebtedness, the
amount of the Debt of such Person in connection therewith shall be limited to
the lesser of the face amount of such indebtedness or the fair market value of
all property of such Person securing such indebtedness), (e) all obligations,
contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker's acceptances issued for the account of
such Person (including the letters of credit), (f) all Hedging Obligations of
such Person, (g) all Suretyship Liabilities of such Person and (h) all Debt of
any partnership in which such Person is a general partner. The amount of any
Person's Debt in respect of any obligation to pay the deferred purchase price of
property or services where such obligation (including any such obligation
evidenced by a note or similar instrument) is contingent upon sales, revenues,
the achievement of a particular business goal or any similar test shall be the
maximum amount which (at any date of determination) is reasonably expected to be
paid in respect of such obligation as estimated by the Company (subject to the
approval of the Lender, which shall not be unreasonably withheld).
"Default" means any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"DGCL" has the meaning set forth in Section 4.27 of the Agreement.
"Documents" means the Credit Documents, the Subordinated Loan
Documents, the Acquisition Agreement, the Warrant Agreement, the Warrants, the
Preferred Stock Purchase Agreement, the Registration Agreement, the Professional
Services Agreement, the Monitoring Agreement and all documents, certificates and
agreements delivered with respect thereto, in each case, together with any
schedules, exhibits, appendices or other attachments thereto.
"EBITDA" means, for any period, Consolidated Net Income for such period
plus to the extent deducted in determining such Consolidated Net Income,
Interest Expense, income tax expense, depreciation and amortization for such
period.
"Eligible Assignee" means (i) any Lender or any affiliate (as defined
in the Exchange Act) of any Lender, (ii) any commercial bank, insurance company,
mutual fund, (iii) any investment fund or finance company or other entity that
is an institutional "accredited investor" (as defined in Regulation D under the
Securities Act) and which extends credit or buys loans as one of its businesses
(such commercial bank, insurance company, mutual fund, investment fund, finance
company or other entity
-v-
67
collectively referred to herein as a "Finance Company"), which, in the case of
any Finance Company, together with such Finance Company's affiliates (as defined
in the Exchange Act), has assets or assets under management equal to or greater
than $500,000,000.
"Environmental Claims" means all claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release of Hazardous Substances or injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed and enforceable duties, licenses, authorizations
and permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
"Environmental Lien" shall mean any Lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to any liability of
the Company or any Subsidiary arising under any Environmental and Safety
Requirements.
"Environmental and Safety Requirements" shall mean all federal, state,
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).
"EPIC" means Environmental Protection & Improvement Co., a New Jersey
corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute.
"Event of Default" has the meaning set forth in Section 7.1 of the
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of the Company and its
Subsidiaries, which period shall be the 12-month period ending on December 31 of
each year. References to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1999") refer to the Fiscal Year ending on
December 31 of such calendar year.
"Fixed Charge Coverage Ratio" means:
-vi-
68
(a) for any Computation Period ending on or prior to December 31, 2000,
the ratio of (i) Adjusted EBITDA less Adjusted Capital Expenditures for such
Computation Period to (ii) the sum of Interest Expense to the extent payable in
cash for such Computation Period plus the actual aggregate amount of all
principal payments on Debt required to be made by the Company and its
Subsidiaries during such Computation Period; provided that (x) in calculating
Capital Expenditures, capital expenditures of any Person (or division or similar
business unit) acquired by the Company or any Subsidiary during such period
shall be included on a pro forma basis for such period and the capital
expenditures of any Person (or division or similar business unit) disposed of by
the Company or any Subsidiary during such period shall be excluded on a pro
forma basis for such period and (y) in calculating Interest Expense, any Debt
incurred or assumed in connection with the acquisition of any Person (or
division or similar business unit) shall be assumed to have been incurred or
assumed on the first day of such period and any Debt assumed by any Person
(other than the Company or any Subsidiary) in connection with the disposition of
any Person (or division or similar business unit) disposed of by the Company or
any Subsidiary during such period shall be assumed to have been repaid on the
first day of such period; and
(b) for any Computation Period thereafter, the ratio of (i) EBITDA less
Adjusted Capital Expenditures for such Computation Period to (ii) the sum of
Interest Expense to the extent payable in cash for such Computation Period plus
the actual aggregate amount of all principal payments on Debt required to be
made by the Company and its Subsidiaries during such Computation Period.
"Foreign Subsidiary" means each Subsidiary of the Company which is
organized under the laws of any jurisdiction other than, and which is conducting
the majority of its business outside of, the United States or any state thereof.
"FRB" means the Board of Governors of the Federal Reserve System or any
successor thereto.
"Funded Debt" means all Debt of the Company and its Subsidiaries,
excluding (i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations and (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries.
"Funded Debt to Adjusted EBITDA Ratio" means, for any Computation
Period, the ratio of (i) Funded Debt as of the last day of such Computation
Period to (ii) Adjusted EBITDA for such Computation Period.
"Future Acquisitions" has the meaning set forth in Section 2.2.3 to the
Agreement.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
-vii-
69
"GTCR Fund VII" has the meaning set forth in Section 7.15 to the
Agreement.
"Guaranteed Obligations" has the meaning set forth in Section 9.1.1 of
the Agreement.
"Guarantor" means, on any day, each Subsidiary that has executed a
counterpart of this Agreement (or is required to execute a counterpart of this
Agreement on that date).
"Guarantor Net Worth" has the meaning set forth in Section 9.5.1 of the
Agreement.
"Guaranty" has the meaning set forth in Section 9.1 of the Agreement.
"Hazardous Substances" means any hazardous waste, as defined by 42
U.S.C. Section 6903(5), any hazardous substance as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33)
or any toxic substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Law, excluding household hazardous waste.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate, currency and commodity swap
agreements, cap agreements and collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates or commodity prices.
"Immaterial Law" means any provision of any Environmental Law the
violation of which will not (a) violate any judgment, decree or order which is
binding upon the Company or any Subsidiary, (b) result in or threaten any injury
to public health or the environment or any material damage to the property of
any Person or (c) result in any liability or expense (other than any de minimis
liability or expense) for the Company or any Subsidiary; provided that no
provision of any Environmental Law shall be an Immaterial Law if the Lender has
notified the Company that the Lender has determined in good faith that such
provision is material.
"Indemnified Liabilities" has the meaning set forth in Section 11.2 of
the Agreement.
"Indemnitees" has the meaning set forth in Section 11.2 of the
Agreement.
"Indemnitors" has the meaning set forth in Section 11.2 of the
Agreement.
"Initial Loan" has the meaning set forth in Section 2.2.2 of the
Agreement.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how,
-viii-
70
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium).
"Intercreditor Agreement" has the meaning set forth in Section 8 of the
Agreement.
"Interest Coverage Ratio" means, for any Computation Period, the ratio
of (a) EBITDA for such Computation Period plus, if applicable, any Special
Charges (net of any Recoveries received or taken) to (b) Interest Expense to the
extent payable in cash for such Computation Period.
"Interest Expense" means, as to any Person for any Computation Period,
the consolidated interest expense of the Company and its Subsidiaries for such
Computation Period (including all imputed interest on Capital Leases).
"Interest Payment Date" has the meaning set forth in Section 3.2.2 of
the Agreement.
"Interest Period" has the meaning set forth in Section 3.2.2 of the
Agreement.
"Investment" means, relative to any Person, (a) any loan or advance
made by such Person to any other Person (excluding any commission, travel or
similar advances made to directors, officers and employees of the Company or any
of its Subsidiaries), (b) any Suretyship Liability of such Person, (c) any
ownership or similar interest held by such Person in any other Person and (d)
deposits and the like relating to prospective acquisitions of businesses.
"Leases" has the meaning set forth in Section 4.10.2 of the Agreement.
"Lender" shall have the meaning set forth in the preamble to the
Agreement, and shall also mean any assignees of the Note pursuant to Section 10
of the Agreement.
"Lien" means, with respect to any Person, any interest granted by such
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
"Loan" and "Loans" have the meaning set forth in Section 2.1 of the
Agreement.
"Loan Obligations" mean any and all obligations of the Company or the
Guarantors under the Subordinated Loan Documents, including, without limitation,
the obligation to pay principal, interest, expenses, attorneys' fees and
disbursements, indemnities and other amounts payable thereunder or in connection
therewith or related thereto.
"Majority Holders" means the holders in interest of more than 50% of
the aggregate principal amount of the Note and Loans evidenced thereby.
-ix-
71
"Margin Stock" means any "margin stock" as defined in Regulation U of
the FRB.
"Material Adverse Effect" means a material adverse change in, or a
material adverse effect on, (a) the business, assets, property, operations,
results, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole or (b) the validity or enforceability of the
Agreements, the Note, the Warrants, the Warrant Agreement, or the Registration
Agreement or the rights or remedies, taken as a whole, of the Lender thereunder.
"Maturity Date" means January 27, 2008.
"Maximum Senior Indebtedness" has the meaning set forth in Section 6.9
hereof.
"Monitoring Agreement" means that certain Monitoring Agreement, dated
as of the date hereof, between the Company and GTCR Xxxxxx Xxxxxx, L.L.C.
"Multiemployer Pension Plan" means a multiemployer plan, as such term
is defined in Section 4001(a)(3) of ERISA, and to which the Company or any
member of the Controlled Group may have any liability.
"Nasdaq" has the meaning set forth in Section 6.26 of the Agreement.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the aggregate cash proceeds
(including cash proceeds received by way of deferred payment of principal
pursuant to a note, installment receivable or otherwise, but only as and when
received) received by the Company or any Subsidiary pursuant to such Asset Sale,
net of (i) the direct costs relating to such Asset Sale (including sales
commissions and legal, accounting and investment banking fees), (ii) taxes paid
or reasonably estimated by the Company to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and (iii) amounts required to be applied to the repayment of any
Debt secured by a Lien on the asset subject to such Asset Sale (other than Debt
hereunder); and
(b) with respect to any issuance of equity securities or Debt, the
aggregate cash proceeds received by the Company or any Subsidiary pursuant to
such issuance, net of the direct costs relating to such issuance (including
sales and underwriter's discounts and commissions and legal, accounting and
investment banking fees).
"Net Worth" means the Company's consolidated stockholders' equity
(including the Convertible Preferred Stock but excluding any equity attributable
to any preferred stock which is mandatorily redeemable, or redeemable at the
option of the holder thereof, prior to one year following the final stated
maturity of the Loans).
"1999 Special Charges" means up to $1,500,000 of special charges taken
by the Company in the 1999 Fiscal Year (of which not more than $500,000 may be
cash payable after January 27, 2000).
-x-
72
"Note" has the meaning set forth in Section 3.1 of this Agreement.
"Other Documents" means the Documents other than the Subordinated Loan
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
Multiemployer Pension Plan), and to which the Company or any member of the
Controlled Group may have any liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
"Permitted Encumbrances" means (a) statutory liens for current taxes or
other governmental charges with respect to the Real Property not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings by the Company and for which appropriate reserves have
been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which are not, individually
or in the aggregate, material to the operation of the Company's or its
Subsidiaries' business; (c) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated by the current use and operation of the Real
Property; and (d) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the Real Property which do not
materially impair the occupancy or use of the Real Property for the purposes for
which it is currently used in connection with the Company's or its Subsidiaries'
business.
"Permitted Refinancing Debt" means any Debt issued in exchange for, or
the net proceeds of which are used to refinance, renew, replace, defease or
refund the Senior Indebtedness (including, without limitation, the stated
amounts of letters of credit and all unused commitments); provided that: (1) the
principal amount of such Debt does not exceed the Maximum Senior Indebtedness
(including, without limitation, the stated amounts of letters of credit and all
unused commitments) at the time of such refinancing renewal, replacement,
defeasance or refunding (plus the amount of reasonable fees and expenses
incurred in connection therewith); (2) such Debt has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Senior Indebtedness being refinanced, renewed, replaced, defeased or refunded
and such Debt has a final maturity equal to or later than the Senior
Indebtedness being refinanced, renewed, replaced, defeased or refunded ; (3)
such Debt is ranked superior in right of payment to the Loans on terms at least
as favorable to the holders of the Loans as those, if any, contained in the
documentation governing the Senior Indebtedness (including the Intercreditor
Agreement); (4) the annual interest rate with respect to such Debt (x) if it is
a fixed rate, it is not more than 2% per annum more than, and such interest is
payable no more frequently than, that of the Senior Indebtedness as in effect on
the date hereof and (y) if it is a variable rate, the index used for the
calculation of the annual interest rate is substantially similar to and the
margins applied to such index are not more than 2% per annum more than, and such
interest is payable no more frequently than, that of the Senior Indebtedness as
in effect on the date
-xi-
73
hereof; (5) such Debt is incurred by the Company; and (6) such Debt satisfies
the provisions of the subsection of Section 6.9(a) pursuant to which the Debt
being refinanced was incurred.
"Person" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivision thereof.
"Preferred Stock Purchase Agreement" has the same meaning in the
recitals to the Agreement.
"Professional Services Agreement" means that certain Professional
Services Agreement, dated as of the date hereof, between the Company and GTCR
Xxxxxx Xxxxxx, L.L.C.
"Purchased Preferred" means the Convertible Preferred Stock purchased
from time to time pursuant to the Preferred Stock Purchase Agreement.
"Real Property" means the Owned Real Property and Leased Real Property.
"Recoveries" means, without duplication, (i) any amounts (including
insurance proceeds and proceeds from any judgment or settlement) received by the
Company or any Subsidiary arising out of any other matter which gave rise to any
Special Charge and (ii) any reversal of any reserve established in connection
with any Special Charge.
"Registration Agreement" has the meaning set forth in the recitals to
the Agreement.
"Regulations U and X" means Regulations U and X of the FRB as in effect
from time to time.
"Related Person" has the meaning set forth in Section 4.19.6 of the
Agreement.
"Relevant Payment" has the meaning set forth in Section 9.5.1 of the
Agreement.
"Release" shall have the meaning set forth in CERCLA.
"RESTEC" means the Persons and interests acquired pursuant to the
Acquisition.
"RESTEC Bonds" means the Sewage Sludge Disposal Facility Revenue Bonds
(Netco-Waterbury, Limited Partnership Project - 1995 Series) and the Sewage
Sludge Disposal Facility Revenue Bonds (New Haven Residuals, Limited Partnership
Project - 1996 Series).
"Rhode Island Project" means the proposed project in which RESTEC would
develop a soil manufacturing facility to process biosolids in Rhode Island for
which a proposal was submitted in response to a request for proposals issued by
the Rhode Island Resource Recovery Corporation. RESTEC originally contemplated a
joint venture for this project, but both of its proposed partners have now
agreed to sell their rights to the project to RESTEC for contingent payments.
-xii-
74
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Senior Funded Debt" means the remainder of (a) Funded Debt minus (b)
Subordinated Debt.
"Senior Funded Debt to Adjusted EBITDA Ratio" means, for any
Computation Period, the ratio of (i) Senior Funded Debt as of the last day of
such Computation Period to (ii) Adjusted EBITDA for such Computation Period.
"Senior Indebtedness" means all obligations of the Company now or
hereafter incurred pursuant to the Credit Documents, including any increase,
refinancing, refunding, renewal, extension or replacement thereof permitted
hereunder, whether for principal, premium (if any), interest, fees or expenses
payable thereon or pursuant thereto.
"Senior Lenders" has the meaning set forth in the recitals to the
Agreement.
"Special Charges" means 1999 Special Charges and any charge taken by
the Company with respect to below market stock option prices provided for stock
options granted to its employees in conjunction with investments by GTCR VII,
the Lender and/or their Affiliates.
"Stockholders Consent" has the meaning set forth in Section 5.1.15 to
the Agreement.
"Subordinated Debt" means (a) the Loan Obligations, (b) and any other
Debt of the Company which is subordinated to the Senior Lenders.
"Subordinated Loan Documents" means, collectively, this Agreement, the
Note, and the Guaranties, including all exhibits, schedules and other
attachments thereto.
"Subsidiary" means, with respect to any Person, a corporation,
partnership, limited liability company or other entity of which such Person
and/or its other Subsidiaries own, directly or indirectly, such number of
outstanding shares or other ownership interests as have more than 50% of the
ordinary voting power for the election of directors or other managers of such
entity. Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of the Company.
"Suretyship Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
-xiii-
75
"Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Transactions" means those transactions contemplated by the Documents.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"Voting Agreement" means that voting agreement, dated as of the date
hereof, by and among the Lender, the purchasers under the Preferred Stock
Purchase Agreement and certain stockholders of the Company.
"Warrant Agreement" has the meaning set forth in the recitals to the
Agreement.
"Warrants" has the meaning set forth in the recitals to the Agreement.
"Warrant Shares" has the meaning set forth in the recitals to the
Agreement.
"Weighted Average Life to Maturity" means, when applied to any Debt at
any date, the number of years obtained by dividing (a) the sum of the products
obtained by multiplying (x) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (y) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (b) the then outstanding principal amount of such
Debt.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
-xiv-
