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Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
FEBRUARY 17, 2000 (JANUARY 27, 2000)
SYNAGRO TECHNOLOGIES, INC.
(Exact name of registrant as
specified in its charter)
DELAWARE 0-21054 76-0511324
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1800 BERING, SUITE 1000
HOUSTON, TEXAS 77057
(Address of principal executive offices and zip code)
(713) 369-1700
(Registrant's telephone number,
including area code)
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ITEM 5. OTHER EVENTS
On January 27, 2000, Synagro Technologies, Inc., a Delaware corporation
("Synagro"), entered into three related financing transactions consisting of
equity, subordinated indebtedness and senior secured indebtedness (collectively,
the "Financing Transactions"). The equity component of the Financing
Transactions ("Equity Financing") was entered into pursuant to the terms of the
Purchase Agreement ("Purchase Agreement") with GTCR Fund VII, L.P. ("GTCR
Fund"), a copy of which is attached hereto as Exhibit 2.1. The subordinated debt
component of the Financing Transactions ("Subordinated Debt Financing") was
entered into pursuant to the terms of the Senior Subordinated Loan Agreement
("Subordinated Loan Agreement") with GTCR Capital Partners, L.P. ("GTCR
Capital"), a copy of which is attached hereto as Exhibit 2.2. The senior secured
debt component of the Financing Transactions ("Senior Debt Financing") was
entered into pursuant to the terms of the Amended and Restated Senior Credit
Agreement with Bank of America, N.A., Canadian Imperial Bank of Commerce, and
certain other lenders ("Senior Credit Agreement"), a copy of which is attached
hereto as Exhibit 2.3.
The detailed terms of the Financing Transactions are contained in the
Purchase Agreement, the Subordinated Loan Agreement and the Senior Credit
Agreement, which are attached as exhibits hereto, and are incorporated herein by
reference. The following discussion sets forth a description of the material
terms of the Purchase Agreement, the Subordinated Loan Agreement and the Senior
Credit Agreement. The description herein is qualified in its entirety by
reference to the Purchase Agreement, the Subordinated Loan Agreement and the
Senior Credit Agreement.
Equity Financing
Terms of Purchase Agreement
Pursuant to the terms of the Purchase Agreement, GTCR Fund agreed to
provide up to $125 million in equity financing to fund acquisitions and for
certain other uses, in each case as approved by the Board of Directors of
Synagro and GTCR Fund ("Approved Use"). Prior to the date of this Current
Report, Synagro has issued 17,778.224 shares of Series C Convertible Preferred
Stock (the "Series C Preferred Stock") and 2,641.176 shares of Series D
Convertible Preferred Stock (the "Series D Preferred Stock") pursuant to the
terms of the Purchase Agreement. Synagro may issue an additional 104,580.6
shares of convertible preferred stock to GTCR Fund for an Approved Use under the
terms of the Purchase Agreement.
If Synagro desires additional funds from GTCR Fund under the terms of the
Purchase Agreement, Synagro shall submit a request to GTCR Fund specifying the
proposed use. GTCR Fund is under no obligation to approve the request, and if
it is denied, Synagro may proceed with an acquisition only if it is permitted
under the covenants discussed below. If, however, GTCR Fund approves the
request, Synagro may issue up to an additional 104,580.6 shares of convertible
preferred stock at a price of $1,000 per share (such amounts to be adjusted from
time to time as a result of stock dividends, stock splits, recapitalization and
similar events). In connection with each such purchase, the Board shall
designate a series of convertible preferred stock that has identical terms as
Series D Preferred Stock, but with a conversion price mutually agreed upon by
the Board and the majority holders of outstanding
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preferred stock, taking into account, among other things, an assumed equity
value for Synagro equal to the result of (i) seven multiplied by Synagro's
earnings before interest, taxes and amortization minus (ii) Synagro's
outstanding indebtedness.
In order to consummate a subsequent purchase under the terms of the
Purchase Agreement, the representations and warranties of Synagro set forth in
the Purchase Agreement must be true and correct in all material respects.
Further, no default or event of default may exist as of the date of such
subsequent purchase or would result from the consummation of the borrowings by
Synagro under the Subordinated Loan Agreement. In addition, GTCR Capital shall
have loaned (or will loan concurrently with the funding of the subsequent
purchase) to Synagro pursuant to the Subordinated Loan Agreement an amount equal
to the purchase price for the convertible preferred stock being purchased by
GTCR Fund. Finally, GTCR Fund must receive standard closing documents in form
and substance acceptable to GTCR Fund.
Terms of Preferred Stock
The following is a summary of the preferences, powers and rights of the
Series C Preferred Stock set forth in the Certificate of Designations,
Preferences and Rights of the Series C Preferred Stock, which was filed with the
Secretary of State of the State of Delaware on January 26, 2000 ("Series C
Certificate of Designation"), and the Series D Preferred Stock set forth in the
Certificate of Designations, Preferences and Rights of the Series D Preferred
Stock, which was filed with the Secretary of State of the State of Delaware on
January 26, 2000 ("Series D Certificate of Designation"). The summary is
qualified in its entirety by reference to the full text of the Series C
Certificate of Designation and the Series D Certificate of Designation, which
are attached hereto as Exhibits 2.4 and 2.5 respectively.
As set forth below, the designations, preferences and rights of the
Series C Preferred Stock are identical to the Series D Preferred Stock with
respect to priority, liquidation, dividends, redemption and events of
non-compliance. The sole differences between Series C Preferred Stock and Series
D Preferred Stock relate to number of authorized shares, voting rights and
conversion. Unless otherwise indicated, Series C Preferred Stock and Series D
Preferred Stock shall be referred to collectively as "Preferred Stock."
Number of Authorized Shares. The number of authorized shares of Series
C Preferred Stock is 30,000. The number of authorized shares of Series D
Preferred Stock is 32,000.
Priority. With respect to dividends and distributions upon liquidation,
dissolution and winding-up of Synagro, the Preferred Stock is senior to the
Common Stock or any other equity securities of Synagro.
Liquidation. The liquidation value of each share of Preferred Stock is
$1,000 per share ("Liquidation Value"). Upon any liquidation, dissolution or
winding up of Synagro (whether voluntary or involuntary), each holder of
Preferred Stock shall be entitled to be paid, before any distribution or payment
is made upon any equity securities of Synagro other than Preferred Stock
("Junior Securities"), an amount in cash equal to the aggregate Liquidation
Value of all shares held by such holder (plus all accrued and unpaid dividends
thereon), and the holders of Preferred
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Stock shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of Synagro, Synagro's assets to be
distributed among the holders of the Preferred Stock are insufficient to permit
payment to such holders of the aggregate amount which they are entitled to be
paid, then the entire assets available to be distributed to Synagro's
stockholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Preferred Stock held by each such holder.
Dividends. Dividends on each share of the Preferred Stock shall accrue
on a daily basis at the rate of 8% per annum on aggregate Liquidation Value of
the shares, plus all accumulated and unpaid dividends thereon from and including
the date of issuance of such share. Dividends shall continue to accrue until the
first to occur of (a) the date on which the Liquidation Value of such share
(plus all accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of Synagro or the redemption of such share by
Synagro, (b) the date on which such share is converted (provided that accrued
and unpaid dividends on converted shares of Series C Preferred Stock will
continue to accrue with respect to the resulting shares of Series D Preferred
Stock), or (c) the date on which such share is otherwise acquired by Synagro.
Accrued and unpaid dividends shall accumulate on a quarterly basis. So long as
any shares of Preferred Stock remain outstanding, without the prior written
consent of the holders of a majority of the outstanding such shares, Synagro
shall not directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities.
Voting Rights of Series C Preferred Stock. Except as otherwise required
by applicable law, the Series C Preferred Stock shall have no voting rights;
provided that each holder of Series C Preferred Stock shall be entitled to
notice of all stockholders meetings at the same time and in the same manner as
notice is given to all stockholders entitled to vote at such meetings.
Voting Rights of Series D Preferred Stock. At any time that the holders
of the Series D Preferred Stock, together with any other series of convertible
preferred stock that may be subsequently issued under the Purchase Agreement
(collectively, "Convertible Preferred Stock") hold less than a majority of the
outstanding Common Stock (assuming conversion of the Convertible Preferred
Stock), or, if such holders own a majority of such shares, until the first
meeting following the attainment of majority ownership (a "Majority Ownership
Event"), such holders shall be entitled to vote separately as a single class to
the exclusion of all other classes of Synagro's capital stock, with each share
of Convertible Preferred Stock entitled to one vote, to elect a pro rata share
of the Board based on such holders' ownership percentage of Common Stock
(assuming conversion of the Convertible Preferred Stock, but excluding Common
Stock actually held by such holders), to serve on the Board until their
successors are duly elected by the holders of the Convertible Preferred Stock or
they are removed from office (with or without cause) by the holders of the
Convertible Preferred Stock. In determining such pro rata share, fractional
numbers of directors less than 0.5 shall be rounded down and fractional numbers
of directors equal to or greater than 0.5 shall be rounded up to the next whole
director; provided that if such holders have the right to elect in excess of two
directors but less than three directors, fractional numbers of directors less
than 0.64 shall be rounded down and fractional numbers of directors equal to or
greater than 0.64 shall be rounded up to the next whole director. Furthermore,
until the occurrence of a Majority Ownership Event, the holders of the
Convertible Preferred Stock shall be entitled to notice of all stockholders
meetings in accordance with Synagro's bylaws, and except in the
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election of directors and as otherwise required by applicable law, the holders
of the Convertible Preferred Stock shall be entitled to vote together with the
holders of the Common Stock voting together as a single class on all matters (i)
submitted to the stockholders for a vote and (ii) to the extent and in the
manner permitted by applicable law, pursuant to a written consent in lieu of a
stockholders meeting, in each case with each share of Common Stock entitled to
one vote per share and each share of Convertible Preferred Stock entitled to one
vote for each share of Common Stock issuable upon conversion of the Convertible
Preferred Stock as of the record date for such vote or, if no record date is
specified, as of the date of such vote.
Following the occurrence of a Majority Ownership Event, the holders of
Convertible Preferred Stock shall be entitled to notice of all stockholders
meetings in accordance with Synagro's bylaws, and except as otherwise required
by applicable law, the holders of the Convertible Preferred Stock shall be
entitled to vote together with the holders of the Common Stock voting together
as a single class on all matters (including the election of directors) (i)
submitted to the stockholders for a vote and (ii) to the extent and in the
manner permitted by applicable law, pursuant to a written consent in lieu of a
stockholders meeting, in each case with each share of Common Stock entitled to
one vote per share and each share of Convertible Preferred Stock entitled to one
vote for each share of Common Stock issuable upon conversion of the Convertible
Preferred Stock as of the record date for such vote or, if no record date is
specified, as of the date of such vote.
Conversion of Series C Preferred Stock. A holder of Series C Preferred
Stock may convert all or any portion of the Series C Preferred Stock (including
any fraction of a share) held by such holder into an identical number of shares
of Series D Preferred Stock; provided that a conversion of shares of Series C
Preferred Stock cannot take place until the later of (a) the date that is 21
calendar days after the date that an information statement is delivered to the
stockholders of Synagro, and (b) the date upon which the waiting period for the
filing made by Synagro on February 15, 2000, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, expires or is terminated. All
accrued dividends which have not been paid prior to the conversion of shares of
Series C Preferred Stock shall continue to accrue and shall be obligations with
respect to the converted shares of Series D Preferred Stock. Synagro is required
to maintain a reserve of shares of Series D Preferred Stock for issuance upon
conversion of the Series C Preferred Stock.
In the event that there is a recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
Synagro's assets or other transaction, in each case which is effected in such a
manner that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock ("Organic Change"), then prior to the consummation
of such transaction, Synagro must make appropriate provisions to insure that
each of the holders of Series C Preferred Stock shall thereafter have the right
to acquire and receive such shares of stock, securities or assets as such holder
would have received in connection with such Organic Change if such holder had
converted its Series C Preferred Stock immediately prior to such Organic Change.
Synagro may not effect any such consolidation, merger or sale, unless prior to
the consummation of the transaction, the successor entity resulting from
consolidation or merger or
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the entity purchasing such assets assumes, in writing, the obligation to deliver
to each such holder such shares of stock, securities or assets as such holder
may be entitled to acquire.
Conversion of Series D Preferred Stock. At any time and from time to
time, any holder of Series D Preferred Stock may convert all or any portion of
the Series D Preferred Stock (including any fraction of a share) held by such
holder, and to the extent elected by such holder, any accrued and unpaid
dividends thereon, into a number of shares of Common Stock computed by dividing
(i) the sum of (a) the number of shares to be converted multiplied by the
Liquidation Value and (b) the amount of such accrued and unpaid dividends by
(ii) the Conversion Price (as defined below) then in effect. The initial
conversion price shall be $2.50 per share; provided that in order to prevent
dilution, the Conversion Price may be adjusted in accordance with the terms of
the Series D Certificate of Designation for certain issuances of Common Stock,
options, warrants, convertible securities or other equity securities at a price
less than the current market price (but excluding the issuances of Preferred
Stock or Warrants). The Series D Certificate of Designation provides for similar
conversion rights upon an Organic Change as the Series C Certificate of
Designation.
Redemption. Shares of Preferred Stock are subject to mandatory
redemption by Synagro on January 26, 2010, at a price per share equal to the
Liquidation Value thereof (plus accrued and unpaid dividends). Further, upon the
consent of the holders of a majority of the outstanding shares of Preferred
Stock, Synagro may redeem all or any portion of the shares of Preferred Stock at
any time prior to the mandatory redemption date at a price per share equal to
the Liquidation Value thereof (plus all accrued and unpaid dividends).
If a Change in Ownership (as defined below) has occurred, Synagro has
entered into a written agreement with respect to a Change in Ownership or
Synagro obtains a written proposal for a Change in Ownership, Synagro must give
prompt written notice of such Change in Ownership to each holder of Preferred
Stock, and Synagro shall give each holder of Preferred Stock prompt written
notice of any subsequent material change in the terms or timing of such
transaction. The holder or holders of a majority of the Preferred Stock then
outstanding may require Synagro to redeem all or any portion of the Preferred
Stock owned by such holders at a price per share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends) by giving written notice to
Synagro of such election prior to the later of (i) 10 days after receipt of
written notice from Synagro and (ii) 10 days prior to the consummation of the
Change in Ownership (the "Expiration Date"). Synagro shall give prompt written
notice of any such election to all other holders of Preferred Stock within five
days after the receipt thereof, and each such holder shall have until the later
of the Expiration Date or five days after receipt of such second notice to
request redemption hereunder (by giving written notice to Synagro) of all or any
portion of the Preferred Stock owned by such holder. Upon receipt of such
elections, Synagro shall be obligated to redeem the aggregate number of shares
specified therein on the later of (y) the occurrence of the Change in Ownership
or (z) five days after Synagro's receipt of such elections. If any proposed
Change in Ownership does not occur, all requests for redemption in connection
therewith shall be automatically rescinded and Synagro shall have no liability
in connection therewith. The term "Change in Ownership" means any sale, transfer
or issuance or series of sales, transfers and/or issuances of Common Stock by
Synagro or any holders thereof which results in any person or group of persons
(as the term "group" is used under the Securities
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Exchange Act of 1934), other than the holders of Common Stock and Preferred
Stock as of January 27, 2000, owning more than 50% of the Common Stock
outstanding at the time of such sale, transfer or issuance or series of sales,
transfers and/or issuances.
If Synagro enters into a written agreement providing for a Fundamental
Change (as defined below), Synagro shall give written notice of such Fundamental
Change describing in reasonable detail the material terms and date of
consummation thereof to each holder of Preferred Stock, and Synagro shall give
each holder of Preferred Stock prompt written notice of any material change in
the terms or timing of such transaction. The holder or holders of a majority of
the shares then outstanding may require Synagro to redeem all or any portion of
the Preferred Stock owned by such holders at a price per share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by
giving written notice to Synagro of such election prior to the later of (a) ten
days prior to the consummation of the Fundamental Change or (b) ten days after
receipt of notice from Synagro. Synagro shall give prompt written notice of such
election to all other holders of Preferred Stock (but in any event within five
days prior to the consummation of the Fundamental Change), and each such holder
shall have until two days after the receipt of such notice to request redemption
(by written notice given to Synagro) of all or any portion of the Preferred
Stock owned by such holder. Upon receipt of such elections, Synagro shall be
obligated to redeem the aggregate number of shares specified therein upon the
consummation of such Fundamental Change. If any proposed Fundamental Change does
not occur, all requests for redemption in connection therewith shall be
automatically rescinded and the Corporation shall have no liability in
connection therewith. The term "Fundamental Change" means (a) any sale or
transfer of more than 50% of the assets of Synagro and its subsidiaries on a
consolidated basis in any transaction or series of transactions (other than
sales in the ordinary course of business consistent with past practice) and (b)
any merger or consolidation to which Synagro is a party, except for a merger in
which Synagro is the surviving corporation, the terms of the Preferred Stock are
not changed and the Preferred Stock is not exchanged for cash, securities or
other property, and after giving effect to such merger, the holders of Synagro's
outstanding capital stock possessing a majority of the voting power (under
ordinary circumstances) to elect a majority of the Board immediately prior to
the merger shall continue to own Synagro's outstanding capital stock possessing
the voting power (under ordinary circumstances) to elect a majority of the
Board.
Events of Noncompliance. The Series C and Series D Certificates of
Designation define an "Event of Noncompliance" as the following: (i) Synagro
fails to make any required redemption payment with respect to the Preferred
Stock, whether or not such payment is legally permissible or is prohibited by
any agreement to which Synagro is subject; (ii) Synagro breaches or otherwise
fails to perform or observe certain covenants or agreements set forth in the
respective Certificate of Designation or in the Purchase Agreement; (iii) any
representation or warranty contained in the Purchase Agreement or required to be
furnished to any holder of Preferred Stock pursuant to the Purchase Agreement,
or any information contained in writing required to be furnished by Synagro or
any subsidiary to any holder of Preferred Stock, is false or misleading; (iv)
Synagro or any subsidiary makes an assignment for the benefit of creditors or
admits in writing its inability to pay its debts generally as they become due or
is involved in certain bankruptcy or similar insolvency proceedings, as more
thoroughly discussed in the respective Certificates of Designation; (v) a
judgment in excess of $1,000,000 is rendered against Synagro
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or any subsidiary and, within 60 days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60 days after
the expiration of any such stay, such judgment is not discharged; (vi) there is
an acceleration of the maturity of any debt for borrowed money of Synagro or any
subsidiary (whether by having become due and payable by its terms or by having
been declared due and payable prior to its stated maturity) or any payment
default or defaults aggregating more than $2,000,000 under the terms applicable
to any debt of Synagro or any subsidiary (subject to any applicable grace
period), whether by acceleration or otherwise; or (vii) Synagro 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 15 days.
If an Event of Noncompliance has occurred and is continuing and has not
been cured within 45 days after Synagro has received written notice thereof from
a majority of the holders of Preferred Stock, the dividend rate on the Preferred
Stock shall increase immediately by an increment of two percentage points. Any
such increase of the dividend rate shall terminate as of the close of business
on the date on which no Event of Noncompliance exists.
If an Event of Noncompliance (other than an Event of Noncompliance
related to bankruptcy or insolvency of Synagro) has occurred and is continuing,
and has not been cured within 45 days after Synagro has received written notice
thereof from a majority of the holders of Preferred Stock, the holder or holders
of a majority of the Preferred Stock then outstanding may demand (by written
notice delivered to Synagro) immediate redemption of all or any portion of the
Preferred Stock owned by such holder or holders at a price per share equal to
the Liquidation Value thereof (plus all accrued and unpaid dividends). Synagro
shall give prompt written notice of such election to the other holders of
Preferred Stock (but in any event within five days after receipt of the initial
demand for redemption), and each such other holder may demand immediate
redemption of all or any portion of such holder's Preferred Stock by giving
written notice thereof to Synagro within seven days after receipt of Synagro's
notice.
If an Event of Noncompliance related to the bankruptcy or insolvency of
the Company has occurred, all of the shares of Preferred Stock then outstanding
shall be subject to immediate redemption by Synagro (without any action on the
part of the holders) at a price per share equal to the Liquidation Value thereof
(plus all accrued and unpaid dividends). Synagro shall immediately redeem all
shares of Preferred Stock upon the occurrence of such Event of Noncompliance.
If any Event of Noncompliance related to failure by Synagro to make a
required redemption payment has occurred and is continuing, and has not been
cured within 45 days after Synagro has received written notice thereof from a
majority of the holders of Preferred Stock, the number of directors constituting
the Board shall, at the request of a majority of the Preferred Stock then
outstanding, be increased by one member, and the holders of Preferred Stock
shall have the special right, voting together as a single class (with each share
being entitled to one vote) and to the exclusion of all other classes of
Synagro's stock, to elect an individual to fill such newly created directorship,
to fill any vacancy of such directorship and to remove any individual elected to
such directorship. The newly created directorship shall constitute a separate
class of directors, and the director elected by the holders of the Preferred
Stock shall be entitled
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to cast a number of votes on each matter considered by the Board (including for
purposes of determining the existence of a quorum) equal to the sum of the
number of votes entitled to be cast by all of the other directors plus one. Such
special right shall continue until such time as there is no longer any Event of
Noncompliance in existence, at which time such special right shall terminate.
Registration Rights Agreement
In accordance with the Purchase Agreement and the Subordinated Loan
Agreement, Synagro entered into a Registration Rights Agreement with GTCR Fund
and GTCR Capital on January 27, 2000 ("Registration Rights Agreement"), a copy
of which is attached hereto as Exhibit 2.6. For purposes of the Registration
Rights Agreement, the term "Registerable Securities" is defined as (i) any
Common Stock issued or issuable upon conversion of the Preferred Stock (A)
issued pursuant to the Purchase Agreement or (B) issued or issuable upon
exercise of the Warrants, and (ii) any other shares of Common Stock issued or
issuable directly or indirectly with respect to the securities referred to in
clause (i) above by way of a stock dividend or stock split or in connection with
an exchange or combination of shares, recapitalization, merger, consolidation,
or other reorganization. The Registration Rights Agreement also sets forth
certain instances in which shares will cease to be Registerable Securities.
Demand Registrations. Subject to certain restrictions set forth in the
Registration Rights Agreement, the holders of a majority of the Registerable
Securities may request registration under the Securities Act of all or any
portion of their Registerable Securities on Form S-1 or any similar long-form
registration ("Long-Form Registrations"), or on Form S-2 or S-3 (including
pursuant to Rule 415 under the Securities Act) or any similar short-form
registration ("Short-Form Registrations"), if available. All such registrations
are referred to as "Demand Registrations." Each request for a Demand
Registration shall specify the approximate number of Registerable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten days after receipt of any such request, Synagro shall give
written notice of such requested registration to all other holders of
Registerable Securities and shall include in such registration all Registerable
Securities with respect to which Synagro has received written requests for
inclusion therein within 15 days after the receipt of Synagro's notice. In the
case of an underwritten offering, Synagro shall have the right to select the
investment banker(s) and manager(s) to administer the offering, subject to the
approval of the holders of a majority of the Registerable Securities included in
such Demand Registration, which approval shall not be unreasonably withheld.
Pursuant to the terms of the Registration Rights Agreement, the holders
of Registerable Securities shall be entitled to request two Long-Form
Registrations plus one additional Long-Form Registration for each additional $25
million invested in Synagro (either on one or multiple occasions) through the
purchase of Convertible Preferred Stock pursuant to the Purchase Agreement, in
which Synagro shall pay all registration expenses. All Long-Form Registrations
shall be underwritten registrations.
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In addition to the Long-Form Registrations, the holders of Registerable
Securities shall be entitled to request an unlimited number of Short-Form
Registrations in which Synagro shall pay all Registration Expenses; provided,
however, that all Short-Form Registrations shall be for a minimum of $10 million
of Registerable Securities, based on the anticipated per share price range for
such offering. Demand Registrations shall be Short-Form Registrations whenever
Synagro is permitted to use any applicable short form. Synagro shall use its
best efforts to make Short-Form Registrations on Form S-3 available for the sale
of Registerable Securities.
Synagro shall not include in any Demand Registration any securities
which are not Registerable Securities without the prior written consent of the
holders of a majority of the Registerable Securities included in such
registration. If a Demand Registration is an underwritten offering and the
managing underwriters advise Synagro in writing that, in their opinion, the
number of Registerable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registerable
Securities and other securities, if any, which can be sold in an orderly manner
in such offering within a price range acceptable to the holders of a majority of
the Registerable Securities to be included in such registration, then Synagro
shall include in such registration, prior to the inclusion of any securities
which are not Registerable Securities, the number of Registerable Securities
requested to be included which, in the opinion of such underwriters, can be sold
in an orderly manner within the price range of such offering, pro rata among the
respective holders thereof on the basis of the amount of Registerable Securities
owned by each such holder.
Piggy-back Registrations. Whenever Synagro proposes to register any of
its securities under the Securities Act (other than (i) pursuant to a Demand
Registration, or (ii) in connection with registrations on Form S-4, S-8 or any
successor or similar forms) and the registration form to be used may be used for
the registration of Registerable Securities (a "Piggyback Registration"),
Synagro shall give prompt written notice to all holders of Registerable
Securities of its intention to effect such a registration and shall include in
such registration all Registerable Securities with respect to which Synagro has
received written requests for inclusion therein within 20 days after the receipt
of Synagro's notice. The Registration Expenses of the holders of Registerable
Securities shall be paid by Synagro in all Piggyback Registrations. If a
Piggyback Registration is an underwritten primary registration on behalf of
Synagro, and the managing underwriters advise Synagro in writing that, in their
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to Synagro, then Synagro shall include in such
registration (i) first, the securities Synagro proposes to sell, and (ii)
second, all other securities (including the Registerable Securities) requested
to be included in such registration, pro rata among the holders of such
securities on the basis of the number of shares owned by each such holder. If a
Piggyback Registration is an underwritten secondary registration on behalf of
holders of Synagro's securities other than holders of Registerable Securities,
and the managing underwriters advise Synagro in writing that, in their opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the holders of a majority of the Registerable
Securities to be included in such registration, then Synagro shall include in
such registration (i) first, the securities requested to be included therein by
the holders requesting such registration and (ii) second, all other securities
(including Registerable Securities) requested to be included in
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such registration, pro rata among the holders of such securities on the basis of
the number of shares owned by each such holder.
Professional Services Agreement
In connection with the transactions contemplated by the Purchase
Agreement, Synagro and GTCR Fund entered into a Professional Services Agreement
on January 27, 2000, whereby GTCR Fund agreed to provide certain management and
financial services for Synagro. As consideration for such services, Synagro
agreed that at the time of any purchase of convertible preferred stock under the
Purchase Agreement, Synagro will pay GTCR Fund a placement fee equal to 0.5% of
the amount paid to Synagro in connection with such purchase. The Professional
Services Agreement will continue in effect until such time as GTCR Fund ceases
to own at least 25% of the preferred stock issued under the Purchase Agreement.
A copy of this Professional Services Agreement is attached hereto as Exhibit
2.7.
Agreements Concerning Employment Rights
On January 27, 2000, the Company and each of Ross M. Patten, Mark A.
Rome, Alvin L. Thomas, II and J. Paul Withrow (collectively, the "Executives")
entered into Agreements Concerning Employment Rights ("Employment Rights
Agreements"), copies of which are attached hereto as Exhibits 2.8, 2.9, 2.10 and
2.12, respectively. Pursuant to the Employment Rights Agreements, each of the
Executives waived all rights to the acceleration of stock options and all rights
resulting from a change in control under their respective employment contracts,
which may arise now or in the future in connection with the transactions
contemplated by the Purchase Agreement, Subordinated Loan Agreement and Warrant
Agreement. The Employment Rights Agreements also amended the employment
contracts of each of the Executives to (i) increase the annual salary payable to
each Executive ($225,000 per year to Mr. Patten, and $175,000 per year to
Messrs. Rome, Thomas and Withrow), (ii) provide that each Executive shall be
entitled to participate in an annual bonus pool, which shall provide for a bonus
of up to 50% of base salary in the discretion of the board of directors, (iii)
extend the term of employment for Messrs. Rome, Thomas and Withrow so that the
remaining term is always 24 months, and (iv) amend the definition of "Change of
Control" to conform with the Purchase Agreement, Subordinated Loan Agreement and
Warrant Agreement and to exclude the transactions contemplated by such
agreements.
The Employment Rights Agreements provide that in the event that (i)
Executive's employment is terminated by the Company for any reason other than
Cause (as defined), death or disability, (ii) Executive terminates his
employment with the Company for Good Reason (as defined), or (iii) a Change in
Control occurs, then the Executive shall have the right to receive an option
payment from the Company. In satisfying this obligation, the Company shall at
its option (x) issue options to purchase a certain number registered shares of
the Company's common stock ("Base Option Amount") at an exercise price of $2.50
per share, which shall be fully vested and non-transferable, and shall expire 90
days from the date of issue, (y) issue registered shares of the Company's common
stock equal to the result of (A) the product of the Base Option Amount,
multiplied by the fair market value per share of the Company's common stock less
$2.50, divided by (B) the fair market value per share of the Company's common
stock, or (z) a cash payment equal to the product of the Base Option Amount,
multiplied by the fair market value per share of
10
<PAGE> 12
the Company's common stock less $2.50. The Base Option Amount for Mr. Patten is
950,000 shares, and the Base Option Amount for Messrs. Rome, Thomas and Withrow
is 450,000 shares.
Board Representation
In accordance with the terms the Purchase Agreement and the Series D
Certificate of Designation, Synagro increased the size of its board of directors
from 4 to 5 members on January 27, 2000, and appointed David A. Donnini to fill
such newly created directorship. At such time that GTCR Fund converts the shares
of Series C Preferred Stock which it currently holds, Synagro will be obligated
under the terms of the Purchase Agreement and the Series D Certificate of
Designation to increase the size of its board of directors from 5 to 6 members,
and GTCR Fund shall have the right to designate the person to fill such newly
created vacancy.
Equity issued by Company under Financings
In connection with the financing on January 27, 2000, Synagro issued
17,358.824 shares of Series C Preferred Stock and 2,641.176 shares of Series D
Preferred Stock to GTCR Fund for an aggregate purchase price of $20 million.
Synagro also issued a Warrant (as defined below) for the purchase of 2,857.143
shares of Series D Preferred Stock to GTCR Capital in connection with the
borrowing of $20 million under the Subordinated Loan Agreement, which Warrant
was immediately exercised by GTCR Capital.
In connection with the financing on February 4, 2000, Synagro issued
419.4 shares of Series C Preferred Stock to GTCR Fund for an aggregate purchase
price of $419,400. Synagro also issued a Warrant for the purchase of 59.915
shares of Series C Preferred Stock to GTCR Capital in connection with the
borrowing of $419,400 under the Subordinated Loan Agreement, which Warrant was
immediately exercised by GTCR Capital.
As of the date of this Current Report, GTCR Fund owns 17,778.224 shares
of Series C Preferred Stock and 2,641.176 shares of Series D Preferred Stock,
and GTCR Capital owns 59.915 shares of Series C Preferred Stock and 2,857.143
shares of Series D Preferred Stock. If all such shares of Series C Preferred
Stock were converted into Series D Preferred Stock, and then all shares of
Series D Preferred were subsequently converted, Synagro would be required to
issue 9,334,583 shares of Common Stock, which would represent approximately
32.9% of the total outstanding shares of Synagro Common Stock.
Subordinated Debt Financing
Terms of Subordinated Loan Agreement
Pursuant to the terms of the Subordinated Loan Agreement, GTCR Capital
agreed to provide up to $125 million in subordinated debt financing to fund
acquisitions and for certain other uses, in each case as approved by the Board
of Directors of Synagro and GTCR Capital. Prior to the date of this Current
Report, Synagro has incurred $20,419,400 of indebtedness under the terms of the
Subordinated Loan Agreement. Synagro may incur an additional $104,580,600 in
indebtedness under the terms of the Subordinated Loan Agreement.
11
<PAGE> 13
If Synagro desires additional funds from GTCR Capital under the terms
of the Subordinated Loan Agreement, Synagro shall submit a request to GTCR
Capital specifying the proposed use. GTCR Capital is under no obligation to
approve the request, and if it is denied, Synagro may proceed with an
acquisition only if it is permitted under the covenants set forth in the
Purchase Agreement (which also apply to the Subordinated Loan Agreement) and no
GTCR Capital loan funds will be used for the acquisition. If, however, GTCR
Capital approves the request, Synagro may borrow up to an additional
$104,580,600 in subordinated indebtedness. In order to consummate a subsequent
loan under the terms of the Subordinated Loan Agreement, the representations and
warranties of Synagro set forth in the Subordinated Loan Agreement must be true
and correct in all material respects. Further, no default or event of default
may exist as of the date of such subsequent loan or would result from the
consummation of the borrowings by Synagro under the Subordinated Loan Agreement.
GTCR Fund shall have purchased (or will purchase concurrently with the funding
of the subsequent loan) Preferred Stock from Synagro pursuant to the Purchase
Agreement in an amount equal to the subsequent loan. Finally, GTCR Capital must
receive standard closing documents in form and substance acceptable to GTCR
Capital.
The loans under the Subordinated Loan Agreement ("Loans") shall bear
interest at a rate equal to 12% per annum on the unpaid principal amount
thereof; provided, that upon an Event of Default (as defined below) and for so
long as it is continuing, the interest rate on the unpaid principal amount of
the Loans shall be 14%. Interest shall be payable with respect to the Loans, in
arrears, on the last day of each quarterly period ending on March 31, June 30,
September 30 and December 31, as applicable (provided that the initial interest
payment shall be payable upon the next succeeding date), upon prepayment of the
Loans and at the maturity of the Loans. The unpaid principal amount of the Loans
plus all accrued and unpaid interest must be paid in full on January 27, 2008.
The Subordinated Loan Agreement does permit Synagro to make prepayments on the
loan, in full or in part, upon 30 days prior written notice; provided that any
prepayment amount must be at least $1 million and in integrals of $250,000. The
Subordinated Loan Agreement also requires that Synagro use certain proceeds from
asset sales, debt issuances and equity issuances to prepay the Loans. The Loans
are guaranteed by substantially all of the subsidiaries of Synagro. The Loans
are evidenced by a promissory note.
Warrant Agreement
In connection with the Subordinated Loan Agreement, Synagro and GTCR
Capital entered into the Warrant Agreement dated January 27, 2000 ("Warrant
Agreement"), a copy of which is attached hereto as Exhibit 2.13. A copy of the
Form of Warrant is attached hereto as Exhibit 2.14. Under the terms of the
Warrant Agreement, Synagro is required to issue a warrant to purchase Preferred
Stock ("Warrant") to GTCR in connection with any loan under the Subordinated
Loan Agreement. The number of shares issuable upon the exercise of a Warrant is
equal to the product of (A) the result of the fraction, the numerator of which
is the dollar amount of the loans being made at the respective closing, and the
denominator of which is the dollar value of the Preferred Stock being issued
pursuant to the Purchase Agreement at such closing, and (B) the result of (i)
the number of shares of Preferred Stock being issued pursuant to the Purchase
Agreement, divided by 0.875, minus (ii) the number of shares of Preferred Stock
being issued pursuant to the Purchase Agreement. Each Warrant is fully vested
upon issuance, and is
12
<PAGE> 14
exercisable for a period of 10 years from the date of issuance. The exercise
price is equal to $.01 per share. For a description of the Warrants issued by
Synagro pursuant to the Warrant Agreement see the Section entitled "Equity
Financing -- Equity Issued by Company in Connection with Financings."
Monitoring Agreement
In connection with the transactions contemplated by the Subordinated
Loan Agreement, Synagro and GTCR Capital entered into a Monitoring Agreement on
January 27, 2000 ("Monitoring Agreement") a copy of which is attached hereto as
Exhibit 2.15. Under the Monitoring Agreement, Synagro agreed that at the time of
any financing under the Subordinated Loan Agreement, Synagro will pay GTCR
Capital a monitoring fee equal to 0.5% of the aggregate amount of such
financing. The Monitoring Agreement shall terminate upon the sale of Synagro or
at such time as all loan obligations under the Subordinated Loan Agreement have
been paid in full.
Senior Debt Financing
Pursuant to the terms of the Senior Credit Agreement, Bank of America,
N.A. and certain other lenders (the "Senior Lenders") agree to provide up to
$110,000,000 in senior debt financing to fund acquisitions permitted by the
Senior Credit Agreement, for working capital to refinance existing debt, for
capital expenditures and for other general corporate purposes. As of the date of
this Current Report, Synagro has borrowed $47,500,000 of indebtedness under the
terms of the Senior Credit Agreement. The loan commitments under the Senior
Credit Agreement are divided as follows:
(i) Revolving Loans up to $10,000,000 outstanding at any one time
available prior to July 27, 2006. Bank of America may make Swing Line
Loans as a utilization of part of the Revolving Loan commitment, to be
repaid and shared pro rata by all of the Senior Lenders.
(ii) Term A Loans (which once repaid may not be reborrowed) of up
to $40,000,000 available prior to April 27, 2000; provided, however,
that Synagro must reserve $13,500,000 of availability under this
commitment until the RESTEC Bonds have been paid in full or defeased;
and provided further that if the RESTEC Bonds have not been paid or
defeased prior to April 27, 2000, then the Term A Loans may only be
used for such purpose up to June 26, 2000.
(iii) Term B Loan (which once repaid may not be reborrowed) of
$30,000,000 made on the closing date.
(iv) Acquisition Loans up to $30,000,000 outstanding at any
one time available on a revolving basis prior to January 27, 2001;
provided, however, that lenders holding at least 66.6% of the total
loan commitments must approve the acquisitions made with proceeds from
the Acquisition Loans, provided, further, that certain financial ratios
must be met before Synagro can borrow Acquisition Loans.
(v) Synagro has the ability to obtain up to $5,000,000 in
letters of credit outstanding at any one time from the Senior Lenders
as a subset of the Revolving Loans.
13
<PAGE> 15
In addition to the foregoing, the obligation of the Senior Lenders to make any
loan which would be used to finance the acquisition of Rehbein, Inc.,
Ecosystematics, Inc., AKH Water Management, Inc., Davis Water Analysis, Inc. or
Whiteford Environmental, Inc. (the "Secondary Acquired Companies") is subject to
the further condition that (1) Synagro has borrowed at least 15% of the total
funds required for the acquisition and any previous acquisitions of a Secondary
Acquired Company as subordinated loans pursuant to the Subordinated Loan
Agreement, (2) Synagro has issued Series C and D Preferred Stock to GTCR Fund
for a purchase price of at least 15% of the funds required for the acquisition
and any previous acquisitions of Secondary Acquired Companies, and (3) Synagro
meets certain financial ratios.
Any funding of Senior Loans after the closing date is subject, in
addition to the requirements set forth above, to the requirement that the
representations and warranties of Synagro set forth in the Senior Credit
Agreement must be true and correct in all material respects, that no default or
event of default exists as of the date of such loan, that no litigation or other
proceeding shall be pending or threatened which might have a material adverse
effect, that no development shall have occurred in any existing litigation or
proceeding which might have a material adverse effect, and that the Senior
Lenders have received certain confirmatory documents in form and substance
acceptable to the Senior Lenders confirming that Synagro is meeting all of its
covenants, including financial covenants under the Senior Credit Agreement.
The loans under the Senior Credit Agreement (the "Senior Loans") shall
bear interest at a varying pricing schedule, as described in the Senior Credit
Agreement. Upon the occurrence of an event of default, the interest rate
applicable to each Senior Loan shall be increased by 2%. Interest shall be
payable with respect to prime rate based loans on the last day of each calendar
month and at the maturity of the Senior Loans. Interest shall be payable with
respect to Eurodollar Loans on the last day of each interest period, but no less
than once every three months, and at the maturity of the Senior Loans. The
unpaid principal balance of the Senior Loans (other than the Revolving Loans)
shall be payable in amounts and on the dates described in the Senior Credit
Agreement. The Revolving Loans shall be repaid in full on July 27, 2006. The
Senior Credit Agreement does permit Synagro to make prepayments on the Senior
Loans, in full or in part provided that each prepayment of a Revolving Loan must
be at least $100,000 or an integral thereof, and prepayments of all other Loans
must be of at least $300,000 and in $100,000 integrals. Prepayments of
Eurodollar Loans prior to the end of an interest period must be accompanied by
payment of the losses to the Senior Lender caused by the prepayment.
The Senior Loans are secured by all of the assets of Synagro and all of
its subsidiaries, and are guaranteed by substantially all of the subsidiaries of
Synagro.
14
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 2.1 Purchase Agreement, dated January 27, 2000, by and
between Synagro Technologies, Inc. and GTCR Fund VII,
L.P.
Exhibit 2.2 Senior Subordinated Loan Agreement, dated January 27,
2000, by and among Synagro Technologies, Inc.,
certain subsidiary guarantors and GTCR Capital
Partners, L.P.
Exhibit 2.3 Amended and Restated Credit Agreement, dated January
27, 2000, by and among Synagro Technologies, Inc.,
Bank of America, N.A., Canadian Imperial Bank of
Commerce, and certain other lenders.
Exhibit 2.4 Certificate of Designations, Preferences and Rights
of Series C Convertible Preferred Stock of Synagro
Technologies, Inc.
Exhibit 2.5 Certificate of Designations, Preferences and Rights
of Series D Convertible Preferred Stock of Synagro
Technologies, Inc.
Exhibit 2.6 Registration Rights Agreement dated January 27, 2000,
by and among Synagro Technologies, Inc., GTCR Fund
VII, Inc. and GTCR Capital Partners, L.P.
Exhibit 2.7 Professional Services Agreement, dated January 27,
2000, by and between Synagro Technologies, Inc. and
GTCR Fund VII, L.P.
Exhibit 2.8 Amendment Concerning Employment Rights, dated January
27, 2000, by and between Synagro Technologies, Inc.
and Ross M. Patten.
Exhibit 2.9 Amendment Concerning Employment Rights, dated January
27, 2000, by and between Synagro Technologies, Inc.
and Mark A. Rome.
Exhibit 2.10 Amendment Concerning Employment Rights, dated January
27, 2000, by and between Synagro Technologies, Inc.
and Alvin L. Thomas, II.
Exhibit 2.11 Employment Agreement, dated May 10, 1999, by and
between Synagro Technologies, Inc. and J. Paul
Withrow.
Exhibit 2.12 Amendment Concerning Employment Rights, dated January
27, 2000, by and between Synagro Technologies, Inc.
and J. Paul Withrow.
Exhibit 2.13 Warrant Agreement, dated January 27, 2000, by and
between Synagro Technologies, Inc. and GTCR Capital
Partners, L.P.
Exhibit 2.14 Form of Warrant.
Exhibit 2.15 Monitoring Agreement, dated January 27, 2000, by and
between Synagro Technologies, Inc. and GTCR Capital
Partners, L.P.
15
<PAGE> 17
Exhibit 99.1 Press Release dated January 27, 2000, relating to the
acquisition of New England Treatment Company, Inc.,
Residual Technologies, Limited Partnership, Fairhaven
Residuals, Limited Partnership, NETCO-Waterbury
Limited Partnership, NETCO-Residual Management,
Limited Partnership, New Haven Residuals, Limited
Partnership, Providence Soils, LLC, Fairhaven
Residual Systems, Inc., NETCO-Connecticut, Inc.,
NETCO-Residuals Management Systems, Inc.,
NETCO-Waterbury Systems, Inc., New Haven Residual
Systems, Inc., and Residual Technologies Systems,
Inc.
Exhibit 99.2 Press Release dated February 4, 2000, relating to the
acquisition of Ecosystematics, Inc., AKH Water
Management, Inc. and Davis Water Analysis, Inc.
16
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYNAGRO TECHNOLOGIES, INC.
Dated: February 17, 2000 By: /s/ J. Paul Withrow
---------------------------------------
J. Paul Withrow, Executive Vice
President and Chief Financial Officer
17
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Purchase Agreement, dated January 27, 2000, by and between
Synagro Technologies, Inc. and GTCR Fund VII, L.P.
2.2 Senior Subordinated Loan Agreement, dated January 27, 2000,
by and among Synagro Technologies, Inc., certain subsidiary
guarantors and GTCR Capital Partners, L.P.
2.3 Amended and Restated Credit Agreement, dated January 27,
2000, by and among Synagro Technologies, Inc., Bank of
America, N.A., Canadian Imperial Bank of Commerce, and
certain other lenders.
2.4 Certificate of Designations, Preferences and Rights of Series
C Convertible Preferred Stock of Synagro Technologies, Inc.
2.5 Certificate of Designations, Preferences and Rights of Series
D Convertible Preferred Stock of Synagro Technologies, Inc.
2.6 Registration Rights Agreement dated January 27, 2000, by and
among Synagro Technologies, Inc., GTCR Fund VII, Inc. and
GTCR Capital Partners, L.P.
2.7 Professional Services Agreement, dated January 27, 2000, by
and between Synagro Technologies, Inc. and GTCR Fund VII,
L.P.
2.8 Amendment Concerning Employment Rights, dated January 27,
2000, by and between Synagro Technologies, Inc. and Ross M.
Patten.
2.9 Amendment Concerning Employment Rights, dated January 27,
2000, by and between Synagro Technologies, Inc. and Mark A.
Rome.
2.10 Amendment Concerning Employment Rights, dated January 27,
2000, by and between Synagro Technologies, Inc. and Alvin L.
Thomas, II.
2.11 Employment Agreement, dated May 10, 1999, by and between
Synagro Technologies, Inc. and J. Paul Withrow.
2.12 Amendment Concerning Employment Rights, dated January 27,
2000, by and between Synagro Technologies, Inc. and J. Paul
Withrow.
2.13 Warrant Agreement, dated January 27, 2000, by and between
Synagro Technologies, Inc. and GTCR Capital Partners, L.P.
2.14 Form of Warrant.
2.15 Monitoring Agreement, dated January 27, 2000, by and between
Synagro Technologies, Inc. and GTCR Capital Partners, L.P.
99.1 Press Release dated January 27, 2000, relating to the
acquisition of New England Treatment Company, Inc., Residual
Technologies, Limited Partnership, Fairhaven Residuals,
Limited Partnership, NETCO-Waterbury Limited Partnership,
NETCO-Residual Management, Limited Partnership, New Haven
Residuals, Limited Partnership, Providence Soils, LLC,
Fairhaven Residual Systems, Inc., NETCO-Connecticut, Inc.,
NETCO-Residuals Management Systems, Inc., NETCO-Waterbury
Systems, Inc., New Haven Residual Systems, Inc., and Residual
Technologies Systems, Inc.
99.2 Press Release dated February 4, 2000, relating to the
acquisition of Ecosystematics, Inc., AKH Water Management,
Inc. and Davis Water Analysis, Inc.
</TABLE>
<PAGE> 1
EXECUTION
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
Dated as of January 27, 2000
Between
SYNAGRO TECHNOLOGIES, INC.
and
GTCR FUND VII, L.P.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Authorization and Closing...........................................................................-1-
1A. Authorization of the Stock....................................................................-1-
1B. Purchase and Sale of the Stock................................................................-1-
1C. The Closing...................................................................................-2-
Section 2. Conditions of Purchaser's Obligation at the Closing.................................................-2-
2A. Representations and Warranties; Covenants.....................................................-2-
2B. Certificates of Designation...................................................................-2-
2C. Professional Services Agreement...............................................................-2-
2D. Registration Agreement........................................................................-3-
2E. Other Documents...............................................................................-3-
2F. Authorization; Listing........................................................................-3-
2G. Amendment of Rights Agreement.................................................................-3-
2H. Shareholder Consent...........................................................................-3-
2I. Waiver of Vesting Upon Change in Control......................................................-3-
2J. Increase in Board Size; Appointment of Director...............................................-4-
2K. Closing Documents.............................................................................-4-
2L. Opinion of the Company's Counsel..............................................................-4-
2M. Opinion of Company General Counsel............................................................-4-
2N. Restec Acquisition Opinions...................................................................-5-
2O. Fees and Expenses.............................................................................-5-
2P. Compliance with Applicable Laws...............................................................-5-
2Q. Waiver........................................................................................-5-
Section 3. Conditions to Purchaser's Obligation to Make Subsequent Purchases After the Closing Date............-5-
3A. Representations and Warranties................................................................-5-
3B. No Default....................................................................................-5-
3C. Approved Use..................................................................................-6-
3D. Acquisitions..................................................................................-6-
3E. Subordinated Debt Financing...................................................................-6-
3F. Certificates of Designation...................................................................-6-
3G. Opinion of Counsel to the Company.............................................................-6-
3H. Opinion of Company General Counsel............................................................-6-
3I. Acquisition Opinions..........................................................................-7-
3J. Closing Documents.............................................................................-7-
3K. Compliance with Applicable Laws...............................................................-7-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 4. Covenants...........................................................................................-7-
4A. Financial Statements and Other Information....................................................-7-
(i) Audit Report.........................................................................-7-
(ii) Quarterly Reports....................................................................-8-
(iii) Monthly Reports......................................................................-8-
(iv) Reports to SEC and to Shareholders...................................................-8-
(v) Notice of Default, Litigation and ERISA Matters......................................-8-
(vi) Management Reports...................................................................-9-
(vii) Projections.........................................................................-10-
(viii) Other Information...................................................................-10-
4B. Inspection of Property.......................................................................-10-
4C. Listing......................................................................................-10-
4D. Section 203 of the DGCL......................................................................-10-
4E. Conversion of Series C Preferred.............................................................-11-
4F. Restrictions.................................................................................-11-
4G. Affirmative Covenants........................................................................-15-
4H. Current Public Information...................................................................-16-
4I. Public Disclosures...........................................................................-16-
4J. Unrelated Business Taxable Income............................................................-16-
4K. Hart-Scott-Rodino Compliance.................................................................-16-
4L. Rights Agreement.............................................................................-17-
4M. Filing of Information Statement..............................................................-17-
4N. Filing of Charter Amendment..................................................................-17-
4O. Board of Director Nominations................................................................-17-
4P. Authorization of Sixth Director..............................................................-17-
Section 5. Transfer of Restricted Securities..................................................................-18-
Section 6. Representations and Warranties of the Company......................................................-18-
6A. Shareholders Consent.........................................................................-18-
6B. Waiver of Vesting Upon Change in Control.....................................................-19-
6C. Organization, Corporate Power and Licenses...................................................-19-
6D. Capital Stock and Related Matters............................................................-19-
6E. Subsidiaries; Investments....................................................................-21-
6F. Authorization; No Breach.....................................................................-21-
6G. Financial Statements.........................................................................-22-
6H. Absence of Undisclosed Liabilities...........................................................-22-
6I. No Material Adverse Change...................................................................-23-
6J. Absence of Certain Developments..............................................................-23-
6K. Assets.......................................................................................-24-
6L. Real Property................................................................................-25-
(a) Owned Properties........................................................................-25-
(b) Leased Properties.......................................................................-25-
(c) Real Property Disclosure................................................................-25-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
6M. Tax Matters..................................................................................-26-
6N. Contracts and Commitments....................................................................-27-
6O. Intellectual Property Rights.................................................................-29-
6P. Litigation, etc..............................................................................-30-
6Q. Brokerage....................................................................................-30-
6R. Governmental Consent, etc....................................................................-30-
6S. Insurance....................................................................................-31-
6T. Employees....................................................................................-31-
6U. Employee Benefit Plans.......................................................................-31-
6V. Compliance with Laws.........................................................................-33-
6W. Environmental and Safety Matters.............................................................-33-
6X. Affiliated Transactions......................................................................-34-
6Y. Real Property Holding Corporation Status.....................................................-34-
6Z. Customers and Suppliers......................................................................-35-
6AA. Reports with the Securities and Exchange Commission..........................................-35-
6BB. Investment Company...........................................................................-35-
6CC. Section 203 of the DGCL; Takeover Statute....................................................-35-
6DD. Rights Agreement.............................................................................-36-
6EE. Disclosure...................................................................................-36-
Section 7. Definitions........................................................................................-37-
Section 8. Miscellaneous......................................................................................-48-
8A. Expenses.....................................................................................-48-
8B. Remedies.....................................................................................-48-
8C. Purchaser's Investment Representations.......................................................-49-
8D. Consent to Amendments........................................................................-49-
8E. Survival of Representations and Warranties...................................................-49-
8F. Successors and Assigns.......................................................................-50-
8G. Generally Accepted Accounting Principles.....................................................-50-
8H. Severability.................................................................................-50-
8I. Counterparts.................................................................................-50-
8J. Entire Agreement.............................................................................-50-
8K. Descriptive Headings; Interpretation.........................................................-50-
8L. Governing Law................................................................................-51-
8M. Notices......................................................................................-51-
8N. Indemnification..............................................................................-52-
(a) General.............................................................................-52-
(b) Environmental Liabilities...........................................................-53-
8O. Standstill...................................................................................-53-
</TABLE>
-iii-
<PAGE> 5
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of
January 27, 2000, between Synagro Technologies, Inc., a Delaware corporation
(the "Company") and GTCR Fund VII, L.P., a Delaware limited partnership ("GTCR
Fund VII" or the "Purchaser"). Except as otherwise indicated herein, capitalized
terms used herein are defined in Section 7 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Stock. The Company shall authorize
the issuance and sale to the Purchaser of 17,358.824 shares of its Series C
Convertible Preferred Stock, par value $.002 per share (the "Series C
Preferred"), having the rights and preferences set forth in Exhibit A attached
hereto, and up to 2,641.176 shares of its Series D Convertible Preferred Stock,
par value $.002 per share (the "Series D Preferred"), having the rights and
preferences set forth in Exhibit B attached hereto. The Series C Preferred and
the Series D Preferred are collectively referred to herein as the "Closing
Preferred Stock." The Series D Preferred is convertible into shares of the
Company's Common Stock, par value $0.002 per share (the "Common Stock").
1B. Purchase and Sale of the Stock.
(a) At the Closing (as defined in Section 1C below), subject
to the terms and conditions set forth herein, the Company shall sell to the
Purchaser and the Purchaser shall purchase from the Company, 17,358.824 shares
of Series C Preferred and 2,641.176 shares of Series D Preferred, at a price of
$1,000.00 per share.
(b) The Company engages in the biosolids management business
and from time to time undertakes acquisitions which are synergistic with or
otherwise complementary to its business. The Purchaser intends to provide up to
$125 million in equity financing to the Company as the equity portion of the
debt and equity financing necessary to fund such acquisitions (the "Future
Acquisitions") and for certain other uses, in each case as approved by the Board
of Directors of the Company (the "Board") and the Purchaser (an "Approved Use").
In order to implement the foregoing, the Purchaser may purchase from time to
time after the Closing, upon the written request of the Board in connection with
an Approved Use, up to an additional 105,000 shares of one or more series of
Future Convertible Preferred Stock at a price of $1,000 per share (such amounts
to be adjusted from time to time as a result of stock dividends, stock splits,
recapitalization and similar events). In connection with each such purchase, the
Board shall designate a series of Future Convertible Preferred Stock with a
conversion price mutually agreed upon by the Board and the
<PAGE> 6
Majority Holders (a "New Series"), taking into account, among other things, an
assumed equity value for the Company equal to the result of (i) seven multiplied
by the Company's earnings before interest, taxes and amortization minus (ii) the
Company's outstanding indebtedness.
1C. The Closing. The closing of the purchase and sale of the
Closing Preferred Stock to be purchased pursuant to Section 1B(a) (the
"Closing") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on January 27, 2000, or at
such other place or on such other date as may be mutually agreeable to the
Company and the Purchaser. At the Closing, the Company shall deliver to the
Purchaser stock certificates evidencing the Closing Preferred Stock to be
purchased by the Purchaser, registered in the Purchaser's name, upon payment of
the purchase price thereof by a cashier's or certified check, or by wire
transfer of immediately available funds to such account as designated by the
Company.
Section 2. Conditions of Purchaser's Obligation at the
Closing. The obligation of the Purchaser to purchase and pay for the Closing
Preferred Stock to be purchased by it at the Closing is subject to the
satisfaction as of the Closing of the following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 6 hereof 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) at
and as of the Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein, and the Company shall
have performed in all material respects all of the covenants required to be
performed by it hereunder prior to the Closing.
2B. Certificates of Designation. The Company shall have duly
adopted, executed and filed with the Secretary of State of Delaware a
Certificate of Designation of Rights and Preferences establishing the terms and
the relative rights and preferences of the Series C Preferred and the Series D
Preferred in the form set forth in Exhibits A and B hereto, respectively, (the
"Closing Certificates of Designation"), and the Company shall not have adopted
or filed any other document designating terms, relative rights or preferences of
its preferred stock, other than the certificates of designation establishing the
terms of the Series A Preferred and Series B Preferred. The Closing Certificates
of Designation shall be in full force and effect as of the Closing under the
laws of Delaware and shall not have been amended or modified.
2C. Professional Services Agreement. The Company shall have
entered into the Professional Services Agreement in form and substance
substantially similar to Exhibit C attached hereto and the Professional Services
Agreement shall be in full force and effect as of the Closing.
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<PAGE> 7
2D. Registration Agreement. The Company and the Purchaser
shall have entered into a registration agreement in form and substance
substantially similar to Exhibit D attached hereto (the "Registration
Agreement"), and the Registration Agreement shall be in full force and effect as
of the Closing.
2E. Other Documents. Each of the other Documents shall have
been duly executed and delivered by the respective parties thereto and shall be
in full force and effect.
2F. Authorization; Listing. The Common Stock issuable upon
conversion of the Series D Preferred shall have been duly authorized and
reserved for issuance and such Common Stock shall have been approved for listing
on the NASDAQ SmallCap Market ("Nasdaq"), subject to official notice of
issuance.
2G. Amendment of Rights Agreement. The Company shall have
amended its Rights Agreement to the extent set forth in the representation in
Section 6DD.
2H. Shareholder Consent. A majority of the Company's
shareholders shall have executed an action on written consent (the "Shareholders
Consent") approving (a) the conversion of Series C Preferred to Series D
Preferred, (b) the issuance of the Common Stock issuable upon conversion of all
of the shares of Preferred Stock (including the Series D Preferred issuable upon
conversion of the Series C Preferred) and all of the Warrant Shares, in each
case whether issued on the date hereof or in the future and (c) the amendment to
Company's Restated Certificate of Incorporation as set forth in Exhibit E (the
"Charter Amendment"), and the Company shall have delivered such executed consent
to the Purchaser.
2I. Waiver of Vesting Upon Change in Control. Each employee
and director of the Company who has the right (whether granted in an agreement,
by action of the Board or otherwise) to have his or her options to purchase the
Company's stock vest upon a "change in control" shall have executed a waiver
providing that the Purchaser's and Lender's investment in the Company pursuant
to the Purchase Agreement, the Subordinated Loan Agreement and the Warrant
Agreement, whether on the date hereof or in the future, shall not be considered
a "change in control" and shall not trigger vesting of such person's options. In
addition, each employee who has an agreement with the Company that contains
provisions allowing such agreement to be terminated upon a "change in control"
or requiring the payment of severance upon a "change in control" shall have
executed a waiver providing that the Purchaser's and Lender's investment in the
Company pursuant to the Purchase Agreement, the Subordinated Loan Agreement and
the Warrant Agreement, whether on the date hereof or in the future, shall not be
considered a "change in control" for purposes of such agreement.
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<PAGE> 8
2J. Increase in Board Size; Appointment of Director. The Board
shall have authorized an increase in the number of persons constituting the
entire Board from four to five directors, and the Board shall have elected David
A. Donnini to fill such newly created vacancy and to serve as a director of the
Company.
2K. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(a) an Officer's Certificate, dated the date of the
Closing, stating that the conditions specified in Section 1 and
Sections 2A through 2J, inclusive, have been fully satisfied;
(b) certified copies of the resolutions duly adopted
by the Board authorizing the execution, delivery and performance of
this Agreement and the other Documents, the issuance and sale of the
Closing Preferred Stock and the consummation of all other transactions
contemplated by this Agreement; authorizing the execution and filing of
the Closing Certificates of Designation; exempting GTCR Fund VII, GTCR
Capital Partners, L.P. and their affiliates and associates from Section
203 of the Delaware General Corporate Law; authorizing the amendment to
the Rights Agreement; and authorizing the Charter Amendment.
(c) certified copies of the Closing Certificates of
Designation and the Company's bylaws, each as in effect at the Closing;
and
(d) copies of all third party and governmental
consents, approvals and filings required in connection with the
consummation of the transactions hereunder (including, without
limitation, all blue sky law filings and waivers of all preemptive
rights and rights of first refusal).
2L. Opinion of the Company's Counsel. The Purchaser shall have
received an opinion from Locke, Liddell & Sapp LLP special counsel for the
Company, which shall be addressed to the Purchaser, dated the Closing Date and
in form and substance reasonably satisfactory to the Purchaser.
2M. Opinion of Company General Counsel. The Purchaser shall
have received an opinion from Alvin L. Thomas II, general counsel for the
Company, which shall be addressed to the Purchaser, dated the Closing Date and
in form and substance reasonably satisfactory to the Purchaser.
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<PAGE> 9
2N. Restec Acquisition Opinions. The Purchaser shall have
received an opinion (or permission to rely on an opinion) from each of the
special counsels to the sellers in the Acquisition, relating to the transactions
consummating the Acquisition, dated the Closing Date and in form and substance
reasonably satisfactory to the Purchaser.
2O. Fees and Expenses. The Company shall have reimbursed each
Purchaser for its fees and expenses as provided in Section 8A hereof.
2P. Compliance with Applicable Laws. The purchase of Closing
Preferred Stock by the Purchaser hereunder shall not be prohibited by any
applicable law or governmental regulation, shall not subject the Purchaser to
any penalty or liability under or pursuant to any applicable law or governmental
regulation, and shall be permitted by laws and regulations of the jurisdictions
to which the Purchaser is subject.
2Q. Waiver. Any condition specified in this Section 2 may be
waived only if such waiver is set forth in a writing executed by the Purchaser.
Section 3. Conditions to Purchaser's Obligation to Make
Subsequent Purchases After the Closing Date. The Purchaser's obligation to
purchase any Future Convertible Preferred Stock of the Company pursuant to
Section 1B(b) after the Closing Date is subject to the satisfaction of the
following conditions, each as of the date of each such subsequent purchase:
3A. 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 purchase, before and after giving effect to such purchase 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 Purchaser pursuant to
Section 4A hereof and the latest consolidated balance sheet of the Company
required to be provided to the Purchaser pursuant to Section 4A 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 purchase.
3B. No Default. No Default or Event of Default (as such terms
are defined in the Subordinated Loan Agreement) shall exist as of the date of
such subsequent purchase or would result from the consummation of the borrowings
by the Company under the Subordinated Loan Agreement made concurrently with such
purchase of Future Convertible Preferred Stock.
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<PAGE> 10
3C. Approved Use. The Purchaser shall have received evidence
satisfactory to it that the proceeds of such subsequent purchase will be used
for the Approved Use. The Purchaser shall have approved the respective Future
Acquisition or other Approved Use being financed therewith and the Purchaser
shall have received such documents and deliveries in connection therewith as
reasonably requested by the Purchaser.
3D. Acquisitions. No default or material breach of performance
shall have occurred under the agreements related to the Future Acquisition, if
any, for which the Future Convertible Preferred Stock is being purchased, and
all of the buyers' material conditions to closing thereunder shall have been
satisfied and not waived (except with the Purchaser's consent).
3E. Subordinated Debt Financing. The Lender shall have loaned
(or will loan concurrently with the funding of the subsequent purchase) to the
Company pursuant to the Subordinated Loan Agreement an amount equal to the
purchase price for the Future Convertible Preferred Stock being purchased by the
Purchaser.
3F. Certificates of Designation. The Company shall have duly
adopted, executed and filed with the Secretary of State of Delaware a
Certificate of Designation of Rights and Preferences establishing the terms and
the relative rights and preferences of the New Series, which shall be identical
in all respects the Series D Preferred Certificate of Designation set forth in
Exhibit B hereto except with respect to the conversion price as agreed to by the
Board and the Majority Holders pursuant to Section 1B(b) hereof (the "Future
Certificate of Designation"), and the Company shall not have adopted or filed
any other document designating terms, relative rights or preferences of its
preferred stock, other than the certificates of designation establishing the
terms of the Series A, Series B, Series C and Series D Preferred Stock and any
other previously issued New Series. The Future Certificate of Designation shall
be in full force and effect as of such Subsequent Closing under the laws of
Delaware and shall not have been amended or modified.
3G. Opinion of Counsel to the Company. The Purchaser shall
have received an opinion from the special counsel for the Company, which shall
be addressed to the Purchaser, dated the date of the Subsequent Closing and in
form and substance reasonably satisfactory to the Purchaser.
3H. Opinion of Company General Counsel. The Purchaser shall
have received an opinion from Alvin L. Thomas II, general counsel for the
Company, or his successor, if any, which shall be addressed to the Purchaser,
dated the Subsequent Closing Date and in form and substance reasonably
satisfactory to the Purchaser.
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<PAGE> 11
3I. 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 Purchaser or the Purchaser shall otherwise be entitled to rely
thereon.
3J. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(a) an Officer's Certificate, dated the date of the
purchase of the Future Convertible Preferred Stock (each a "Subsequent
Closing"), stating that the conditions specified in Sections 3A through
3F, inclusive, have been fully satisfied;
(b) certified copies of the resolutions duly adopted
by the Board authorizing the issuance and sale of the Future
Convertible Preferred Stock and the filing of a Future Certificate of
Designation to create the New Series.
(c) certified copies of the Company's certificate of
incorporation and all of its certificates of designation and the
Company's bylaws, each as in effect at the Subsequent Closing; and
(d) copies of all third party and governmental
consents, approvals and filings required in connection with the
consummation of the transactions hereunder (including, without
limitation, all blue sky law filings and waivers of all preemptive
rights and rights of first refusal).
3K. Compliance with Applicable Laws. The purchase of Future
Convertible Preferred Stock by the Purchaser hereunder shall not be prohibited
by any applicable law or governmental regulation, shall not subject the
Purchaser to any penalty or liability under or pursuant to any applicable law or
governmental regulation, and shall be permitted by laws and regulations of the
jurisdictions to which the Purchaser is subject.
Section 4. Covenants.
4A. Financial Statements and Other Information. The Company
shall deliver to the Purchaser (so long as the Purchaser holds any Preferred
Stock) and to each holder of at least 15% of the Investor Preferred:
(i) 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
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<PAGE> 12
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 Arthur
Andersen LLP or other independent auditors of recognized standing selected by
the Company and reasonably acceptable to the Purchaser, 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.
(ii) 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.
(iii) 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.
(iv) 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 Purchaser 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.
(v) 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:
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<PAGE> 13
(a) the occurrence of an Event of Default or a
Default under the Subordinated Loan Agreement or an Event of Noncompliance;
(b) any litigation, arbitration or governmental
investigation or proceeding not previously disclosed by the Company to the
Purchaser 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; provided that such matter would reasonably be
expected to have a Material Adverse Effect.
(d) any cancellation (without replacement) or
material change in any insurance maintained by the Company or any Subsidiary
thereof, which would reasonably be expected to have a Material Adverse Effect;
(e) any event (including any violation of any
Environmental Law or the assertion of any Environmental Claim) which 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.
(vi) Management Reports. Promptly upon the request of
the Purchaser, copies of all detailed financial and management reports submitted
to the Company by independent
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<PAGE> 14
auditors in connection with each annual or interim audit made by such auditors
of the books of the Company.
(vii) 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
Purchaser prior to the Closing Date.
(viii) Other Information. From time to time such
other information concerning the Company and its Subsidiaries as the Purchaser
may reasonably request.
4B. Inspection of Property. The Company shall permit any
representatives designated by the Purchaser (so long as the Purchaser holds any
Preferred Stock) or any holder of at least 15% of the outstanding Investor
Preferred, upon reasonable notice and during normal business hours and such
other times as any such holder may reasonably request, to (i) visit and inspect
any of the properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries; provided that
the Company shall have the right to have its chief financial officer present at
any meetings with the Company's independent accountants.
4C. Listing. The Company shall use its reasonable best efforts
to continue to have its Common Stock listed on Nasdaq or a national securities
exchange for so long as any Preferred Shares 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 Closing
Preferred Stock (including the Series D Preferred issuable upon conversion of
the Series C Preferred) and shall obtain approval for the listing of such
shares, subject to official notice of issuance. Prior to each Subsequent
Closing, the Company shall prepare and submit to Nasdaq a listing application
covering the shares of Common Stock issuable upon conversion of the series of
Future Convertible Preferred Stock to be purchased in connection with such
Subsequent Closing and shall obtain approval for the listing of such shares,
subject to official notice of issuance.
4D. 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 Purchaser or its Affiliates which would adversely
affect or otherwise impair the rights of the Purchaser or its Affiliates
thereunder.
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<PAGE> 15
4E. Conversion of Series C Preferred. The Company shall not
take any action that would adversely affect or limit the rights of the Purchaser
or its Affiliates to convert the Series C Preferred into Series D Preferred, in
accordance with the terms thereof.
4F. Restrictions. For so long as the Purchaser holds shares of
Investor Preferred convertible into at least 15% of the outstanding shares of
Common Stock (after giving effect to such conversion), the Company shall not,
without the prior written consent of the Majority Holders:
(a) directly or indirectly declare or pay any
dividends or make any distributions upon any of its equity securities,
other than payments of dividends on, or redemption payments in respect
of, the Preferred Stock pursuant to the Certificates of Designation;
(b) directly or indirectly redeem, purchase or
otherwise acquire, or permit any Subsidiary to redeem, purchase or
otherwise acquire, any of the Company's equity securities (including,
without limitation, warrants, options and other rights to acquire
equity securities) other than redemptions of Preferred Stock pursuant
to the Certificates of Designation;
(c) except as expressly contemplated by this
Agreement or pursuant to obligations currently in effect, authorize,
issue, sell or enter into any agreement providing for the issuance
(contingent or otherwise), or permit any Subsidiary to authorize,
issue, sell or enter into any agreement providing for the issuance
(contingent or otherwise) of, (i) any notes or debt securities
containing equity features (including, without limitation, any notes or
debt securities convertible into or exchangeable for equity securities,
issued in connection with the issuance of equity securities or
containing profit participation features) or (ii) any equity securities
(or any securities convertible into or exchangeable for any equity
securities) or rights to acquire any equity securities, other than the
issuance of equity securities by a Subsidiary to the Company or another
Subsidiary; provided, that, this Section 4F(c) shall not prevent the
Company from (x) authorizing or issuing options to its employees and
directors in an amount representing not more than 15% of the
then-outstanding Common Stock (assuming exercise of the Warrants and
conversion of all Preferred Stock) or (y) issuing equity securities in
connection with an acquisition approved by the Purchaser;
(d) make, or permit any Subsidiary to, make, incur,
assume or suffer to exist any Investment in any other Person, except
(without duplication) the following:
(i) equity Investments existing on the Closing Date
in wholly-owned Subsidiaries identified on the
Subsidiaries Schedule;
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<PAGE> 16
(ii) equity Investments in Subsidiaries acquired
after the Closing Date in transactions approved by
the Purchaser including approved Future Acquisitions
(unless not required to be approved pursuant to
Section 4F(e));
(iii) 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;
(iv) 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 of the Subordinated Loan
Agreement;
(v) Suretyship Liabilities permitted by Section 6.9
of the Subordinated Loan Agreement;
(vi) 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;
(vii) good faith deposits and escrow accounts in
connection with prospective acquisitions of stock or
assets for Future Acquisitions approved by the
Lender;
(viii) Cash Equivalent Investments; and
(ix) 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;
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<PAGE> 17
provided that no Investment otherwise permitted by clause (ii), (iii), (iv),
(v), (vi) or (vii) shall be permitted to be made if, immediately before or after
giving effect thereto, any Event of Default or Default or any Event of
Noncompliance shall have occurred and be continuing.
(e) be a party to, or 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, 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
engaged, or after the acquisition will be, in the business activities
permitted by Section 4F(f); (2) immediately before or after giving
effect to such purchase or acquisition, no Event of Default or Default
s under the Subordinated Loan Agreement 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 of the Subordinated
Loan Agreement; and (5) the proceeds of any of the Preferred Stock
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 Purchaser other than
Future Acquisitions approved by the Purchaser.
(f) enter into, or permit any Subsidiary to enter
into, the ownership, active management or operation of any business
other than the management, processing, collection, handling and
disposal of non-hazardous bio-solid waste, animal manures, and green
and other organic waste or similar non-hazardous waste-related business
activities;
(g) enter into, or 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
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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.
(h) become subject to, or permit any of its
Subsidiaries to become subject to, any agreement or instrument which by
its terms would (under any circumstances) restrict (A) the right of any
Subsidiary to make loans or advances or pay dividends to, transfer
property to, or repay any Debt owed to, the Company or any Subsidiary
or (B) the Company's right to perform the provisions of this Agreement,
the Certificates of Designation, the Bylaws or the other Documents;
(i) except as expressly contemplated by this
Agreement, make any amendment to the Certificates of Designation or the
Bylaws, or file any resolution of the Board with the Secretary of the
State of Delaware, in each case containing any provisions which would
increase the number of authorized shares of capital stock or adversely
affect or otherwise impair the rights or the relative preferences and
priorities of the holders of the Preferred Stock under this Agreement,
the Certificates of Designation, the Bylaws or the other Documents; or
(j) create, incur, assume or suffer to exist or
permit any Subsidiary to, create, incur, assume or suffer to exist any
Debt, except:
(i) 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") (A) $10,000,000 of revolving
Senior Indebtedness, (B) $100,000,000 of term Senior
Indebtedness, (C) $15,000,000 of additional Senior
Indebtedness (whether revolving or term) and (D) 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 4F(i) 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 of the
Subordinated Loan Agreement) and (D) guaranties in
respect of Debt described in the foregoing clauses
(A), (B) and (C);
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<PAGE> 19
(ii) 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;
(iii) Debt arising under Capital Leases, Debt secured
by Liens permitted by subsection 6.10(c) or (d) of
the Subordinated Loan Agreement 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;
(iv) Debt of Subsidiaries owed to the Company;
(v) Hedging Obligations of the Company for the
hedging of interest payments on the Senior
Indebtedness to the extent required by the Credit
Agreement;
(vi) unsecured Debt of the Company to Subsidiaries;
(vii) the RESTEC Bonds; provided that the RESTEC
Bonds must be repaid or defeased not later than 360
days after the Closing Date; and
(viii) the Loans made pursuant to the Subordinated
Loan Agreement.
4G. Affirmative Covenants. For so long as the Purchaser holds
shares of Investor Preferred convertible into at least 15% of the outstanding
shares of Common Stock (after giving effect to such conversion), the Company
shall, and shall cause each Subsidiary to:
(a) comply with all applicable laws, rules and
regulations of all governmental authorities, the violation of which
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole, and pay
and
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discharge when payable all taxes, assessments and governmental charges
(except to the extent the same are being contested in good faith and
adequate reserves therefor have been established); and
(b) enter into and maintain appropriate nondisclosure
and noncompete agreements with its key employees.
4H. Current Public Information. At all times after the Company
has filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
4I. Public Disclosures. The Company shall not, nor shall it
permit any Subsidiary to, disclose the Purchaser's name or identity as an
investor in the Company in any press release or other public announcement or in
any document or material filed with any governmental entity, without the prior
written consent of the Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
give written notice to the Purchaser describing in reasonable detail the
proposed content of such disclosure and shall permit the Purchaser to review and
comment upon the form and substance of such disclosure.
4J. Unrelated Business Taxable Income. The Company shall not
engage in any transaction which is reasonably likely to cause GTCR Fund VII or
any of its limited partners which are exempt from income taxation under Section
501(a) of the IRC and, if applicable, any pension plan that any such trust may
be a part of, to recognize unrelated business taxable income as defined in
Section 512 and Section 514 of the IRC.
4K. Hart-Scott-Rodino Compliance. In connection with any
transaction in which the Company is involved (an "HSR Transaction") which is
required to be reported under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended from time to time (the "HSR Act"),
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<PAGE> 21
the Company and GTCR Fund VII shall prepare and file all documents with the
Federal Trade Commission and the United States Department of Justice which may
be required to comply with the HSR Act, and shall promptly furnish all materials
thereafter requested by any of the regulatory agencies having jurisdiction over
such filings, in connection with an HSR Transaction. The Company and GTCR Fund
VII shall take all reasonable actions and shall file and use reasonable best
efforts to have declared effective or approved all documents and notifications
with any governmental or regulatory bodies, as may be necessary or may
reasonably be requested under federal antitrust laws for the consummation of the
HSR Transaction; provided that in no event shall the Company or GTCR Fund VII or
any of its Affiliates be required to divest any of its assets or Subsidiaries.
If GTCR Fund VII is required to make a filing under the HSR Act in connection
with an HSR Transaction, the Company will provide to GTCR Fund VII all necessary
information relating to the Company for such filing and will pay all fees
associated with such filing.
4L. Rights Agreement. The Company will not further amend the
Rights Agreement, or adopt any similar rights plan or rights agreement, in a
manner that conflicts with, or restricts the Purchaser or any of its Affiliates
to a greater extent than the amendment to the Rights Agreement as set forth in
the representation in Section 6DD.
4M. Filing of Information Statement. Within twenty (20) days
after the Closing, the Company shall file with the Securities and Exchange
Commission an information statement pursuant to Section 14(c) and Regulation 14C
of the Securities Exchange Act (an "Information Statement") regarding the
Shareholders Consent. The Company shall comply with all of its obligations
pursuant to Section 14(c) and Regulation 14C of the Securities Exchange Act in
connection with the Shareholders Consent.
4N. Filing of Charter Amendment. Twenty-one calender days
after the date that the Company sends or gives its shareholders the Information
Statement relating to the Shareholders Consent, the Company shall file the
Charter Amendment.
4O. Board of Director Nominations. For so long as the
Purchaser holds shares of Investor Preferred convertible into at least 15% of
the outstanding shares of Common Stock (after giving effect to such conversion),
the Purchaser and the Nominating Committee of the Board shall have the right to
mutually approve all nominations to elect or appoint persons to serve as members
of the Board, other than directors elected pursuant to the Closing Certificates
of Designation and the Future Certificates of Designation.
4P. Authorization of Sixth Director. At such time as the
holders of the Series C Preferred convert such shares into Series D Preferred,
the Board shall authorize an increase in the number of persons constituting the
entire Board from five to six directors.
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<PAGE> 22
Section 5. Transfer of Restricted Securities.
(a) Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 of the Securities and Exchange Commission (or any similar rule or rules then
in force) if such rule or rules are available and (iii) subject to the
conditions specified in clause (b) below, any other legally available means of
transfer.
(b) In connection with the transfer of any Restricted
Securities (other than a transfer described in Sections 5(a)(i) or (ii) above),
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
Kirkland & Ellis or other counsel which (to the Company's reasonable
satisfaction) is knowledgeable in securities law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of Kirkland & Ellis
or such other counsel that no subsequent transfer of such Restricted Securities
shall require registration under the Securities Act, the Company shall promptly
upon such contemplated transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in Section 8C.
If the Company is not required to deliver new certificates for such Restricted
Securities not bearing such legend, the holder thereof shall not transfer the
same until the prospective transferee has confirmed to the Company in writing
its agreement to be bound by the conditions contained in this Section and
Section 8C.
(c) Upon the request of the Purchaser, the Company
shall promptly supply to the Purchaser or its prospective transferees all
information regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the Securities and Exchange Commission.
Section 6. Representations and Warranties of the Company. As a
material inducement to the Purchaser to enter into this Agreement and purchase
the Preferred Stock, the Company hereby represents and warrants to the Purchaser
that:
6A. Shareholders Consent. The Shareholders 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 Shareholders Consent did not
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<PAGE> 23
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.
6B. Waiver of Vesting Upon Change in Control. Each employee
and director of the Company who has the right (whether granted in an agreement,
by action of the Board or otherwise) to have his or her options to purchase the
Company's stock vest upon a "change in control" has executed a waiver providing
that the Purchaser's and Lender's investment in the Company pursuant to the
Purchase Agreement, the Subordinated Loan Agreement and the Warrant Agreement,
whether on the date hereof or in the future, shall not be considered a "change
in control" and shall not trigger vesting of such person's options. In addition,
each employee who has an agreement with the Company that contains provisions
allowing such agreement to be terminated upon a "change in control" or requiring
the payment of severance upon a "change in control" has executed a waiver
providing that the Purchaser's and Lender's investment in the Company pursuant
to the Purchase Agreement, the Subordinated Loan Agreement and the Warrant
Agreement, whether on the date hereof or in the future, shall not be considered
a "change in control" for purposes of such agreement.
6C. 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
Purchaser's special counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
6D. Capital Stock and Related Matters.
(a) As of the Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of:
(1) 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 Preferred, of which
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<PAGE> 24
17,358.824 shares shall be issued and outstanding, (iv) of which 32,000 shares
shall be designated as Series D Preferred, 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 Preferred, (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 this
Agreement; and
(2) 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 Series D Preferred, 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."
(b) 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 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,
the expiration date and whether such security vests upon a "change in control".
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.
(c) 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
Preferred Stock or the issuance of the Common Stock issuable upon conversion of
the Warrant Shares or the Preferred Stock 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 Preferred Stock do not require
registration under the Securities Act or any applicable state securities laws.
To the best of the Company's knowledge, there are no agreements between the
Company's stockholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's affairs,
except as set forth on the Capitalization Schedule.
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<PAGE> 25
6E. 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 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.
6F. Authorization; No Breach. The execution, delivery and
performance of this Agreement and the other Documents, the filing of the
Certificates of Designation and the amendment of the Company's bylaws have been
duly authorized by the Company. This Agreement, the other Documents and the
Certificates of Designation 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 and the other Documents,
the offering, sale and issuance of the Preferred Stock, the issuance of the
Common Stock upon conversion of the Series C Preferred, 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, 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
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<PAGE> 26
loans or advances or paying dividends to, transferring property to, or repaying
any Debt owed to, the Company or another Subsidiary.
6G. Financial Statements. Attached hereto as the "Financial
Statements Schedule" are the following financial statements:
(a) 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, 1997 and 1998; and
(b) 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.
6H. 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
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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 contract not required to be disclosed on
the Contracts Schedule.
6I. No Material Adverse Change. Except as set forth on the
attached "Adverse Change Schedule," 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.
6J. Absence of Certain Developments.
(i) 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
(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;
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(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 Purchaser; or
(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.
(ii) 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.
6K. 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
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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.
6L. Real Property.
(a) 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.
(b) 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 Purchaser 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 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
Purchaser; and (vii) neither the Company nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the Lease.
(c) 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.
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6M. Tax Matters.
(a) 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.
(b) 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 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
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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.
6N. Contracts and Commitments.
(i) 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;
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(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;
(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; or
(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.
(ii) 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 and; neither the Company nor any Subsidiary has any
present expectation or intention of not fully performing all such obligations;
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.
(iii) The Purchaser'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.
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6O. Intellectual Property Rights.
(a) The attached "Intellectual Property Schedule"
contains a complete and accurate list of all (i) patented or registered
Intellectual Property Rights owned or used by the Company or any Subsidiary,
(ii) pending patent applications and applications for registrations of other
Intellectual Property Rights filed by the Company or any Subsidiary, (iii)
unregistered trade names and corporate names owned or used by the Company or any
Subsidiary and (iv) unregistered trade marks, 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 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.
(b) (i) 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, (ii) 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, (iii)
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), (iv) 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
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<PAGE> 34
future conduct as presently contemplated infringe, misappropriate or conflict
with any Intellectual Property Rights of other Persons and (v) 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.
6P. 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
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.
6Q. Brokerage. Other than fees payable by the Company to
Sanders Morris and Mundy 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 Purchaser 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.
6R. 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
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<PAGE> 35
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.
6S. 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.
6T. Employees. The Company is not aware that any of the
persons set forth in the "Key Employees Schedule" 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.
6U. Employee Benefit Plans.
(a) 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.
(b) 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.
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(c) None of the Benefits Plans is a multiemployer plan (as
defined in Section 3(37) of ERISA).
(d) 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).
(e) 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.
(f) 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.
(g) 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.
(h) 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
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<PAGE> 37
occurred since the date of such determination that could adversely affect such
qualification or tax- exempt status.
(i) 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.
6V. 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.
6W. Environmental and Safety Matters.
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.
(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
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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.
6X. 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.
6Y. 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
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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.
6Z. Customers and Suppliers.
(a) 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.
(b) 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.
6AA. Reports with the Securities and Exchange Commission. The
Company has furnished the Purchaser 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 Securities 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.
6BB. Investment Company. The Company is not an "investment
company" as defined under the Investment Company Act of 1940.
6CC. Section 203 of the DGCL; Takeover Statute. The Board of
Directors has taken all actions necessary or advisable so that the restrictions
contained in Section 203 of the Delaware General Corporate Law ("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 Series C Preferred, the Series D
Preferred, the Warrants and all issuances of Future 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
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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.
6DD. Rights Agreement. The Rights Agreement has been amended
to provide that the Purchaser, GTCR Capital Partners, L.P. and their Affiliates
shall be an "Exempt Person" (and therefore not an "Acquiring Person") under such
plan and that the Rights Agreement is otherwise inapplicable to the execution
and delivery of this Agreement, the other Documents and the transactions
contemplated hereby and thereby, including the issuance of the Series C
Preferred, the Series D Preferred, the Warrants and all issuances of Future
Convertible Preferred Stock. No "Distribution Date" has occurred within the
meaning of the Rights Agreement, and the consummation of the transactions
contemplated hereby and by the other Documents will not result in the occurrence
of a Distribution Date. The Company has taken all action required to render the
Rights Agreement (and the "Rights" thereunder) inapplicable to this Agreement,
the other Documents and the transactions contemplated hereby and thereby.
6EE. Disclosure. All information heretofore or
contemporaneously herewith furnished in writing by the Company or any Subsidiary
to the Purchaser 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 Purchaser
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 Purchaser 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 Purchaser 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 purchase of Preferred Stock
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 purchase of Preferred
Stock hereunder, each borrowing under the Subordinated Loan Agreement and
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under the Credit Agreement and the application of the proceeds therefrom
including the acquisition of RESTEC or any Future Acquisitions as if such
acquisition had at that time been made. Without limiting the foregoing, to the
extent representations and warranties are being made in connection with a
purchase of Preferred Stock 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
Purchaser and shall be in a form satisfactory to the Purchaser; and further
provided that no such amendment or supplement shall cure a breach hereunder.
Section 7. Definitions. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"Acquisition" is defined in the definition of Acquisition
Agreement.
"Acquisition Agreement" means the Purchase and Sale Agreement,
dated as of October 20, 1999 together with all amendments, with Paul A. Toretta,
individually, Eileen Toretta, as trustee of the Paul A. Toretta 1998 Grat,
Frances A. Guerrera, individually, Frances A. Guerrera, as executrix of the
estate of Richard J. Guerrera, and Frances A. Guerrera and Robert Dionne, as co-
trustees of the Richard J. Guerrera 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").
"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. For purposes of this Agreement, all
holdings of Preferred Stock by Persons who are Affiliates of each other shall be
aggregated for purposes of meeting any threshold tests under this Agreement.
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"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.
"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 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 Moody's
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, as amended, or any other Environmental
and Safety Requirements.
"Certificates of Designation" means, collectively, the Closing
Certificates of Designation and, once they have been filed with the Delaware
Secretary of State, the Future Certificates of Designation.
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"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.
"Credit Agreement" means the Amended and Restated 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, 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, 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 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
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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 Purchaser, 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.
"Documents" means this Agreement, the Credit Documents, the
Subordinated Loan Documents, the Acquisition Agreement, the Warrant Agreement,
the Warrants, the Registration Agreement, the Monitoring Agreement, the
Professional Services Agreement and all documents, certificates and agreements
delivered with respect thereto, in each case, together with any schedules,
exhibits, appendices or other attachments thereto.
"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).
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"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 of
the Subordinated Loan Agreement.
"Event of Noncompliance" is defined in the Certificates of
Designation of the Series C Preferred and Series D Preferred.
"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.
"Future Convertible Preferred Stock" means future series
(i.e., series E, F, G, etc.) of the Company's preferred stock (other than the
Series C Preferred and Series D Preferred) that are identical in terms to the
Series D Preferred in all respects other than their conversion price and that
are issued in connection with this 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.
"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
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agreements, and all other agreements or arrangements designed to protect such
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.
"Intercreditor Agreement" has the meaning set forth in the
Subordinated Loan 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, 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).
"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.
"Investor Preferred" means (i) the Preferred Stock issued
hereunder (including, without limitation, pursuant to Section 1B(b)) and (ii)
any Preferred Stock issued or issuable with respect to the Preferred Stock
referred to in clause (i) above by way of stock dividends or stock splits or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular shares of Investor Preferred, such
shares shall cease to be Investor Preferred when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar rule then in force).
"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
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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.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular IRC Section shall be interpreted to include any
revision of or successor to that Section regardless of how numbered or
classified.
"Lender" means GTCR Capital Partners, L.P.
"Majority Holders" means the holders of a majority of the
Investor Preferred.
"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 this
Agreement or any of the other Documents or the rights or remedies, taken as a
whole, of the Purchaser thereunder.
"Monitoring Agreement" means that certain Monitoring
Agreement, dated as of the date hereof, between the Company and GTCR Golder
Rauner, 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.
"Officer's Certificate" means a certificate signed by the
Company's president or its chief financial officer on behalf of the Company,
stating that (i) the Company has made or has caused to be made such
investigations as are necessary in order to verify the accuracy of the
information set forth in such certificate and (ii) to the best of the Company's
knowledge, such certificate does not misstate any material fact and does not
omit to state any fact necessary to make the certificate not misleading.
"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
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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 greater 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 hereof; (5) such Debt is incurred by the Company; and (6)
such Debt satisfies the provisions of the subsection of Section 6.9(a) of the
Subordinated Loan Agreement pursuant to which the Debt being refinanced was
incurred.
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"Person" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"Preferred Stock" means, collectively, the Closing Preferred
Stock and the Future Convertible Preferred Stock.
"Professional Services Agreement" means that certain
Professional Services Agreement, dated as of the date hereof, between the
Company and GTCR Golder Rauner, L.L.C.
"Real Property" means the Owned Real Property and Leased Real
Property.
"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).
"Restricted Securities" means (i) the Preferred Stock issued
hereunder and pursuant to Section 1B(b) hereof and (ii) any securities issued
with respect to the securities referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) become eligible for sale pursuant to Rule 144(k) (or any similar provision
then in force) under the Securities Act or (c) been otherwise transferred and
new certificates for them not bearing the Securities Act legend set forth in
Section 8C have been delivered by the Company in accordance with Section 5(ii).
Whenever any particular securities cease to be Restricted Securities, the holder
thereof shall be entitled to receive from the Company, without expense, new
securities of like tenor not bearing a Securities Act legend of the character
set forth in Section 8C.
"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.
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"Rights Agreement" means the Rights Agreement, dated as of
December 20, 1996, between the Corporation and Intercontinental Registrar &
Transfer Agency, Inc., as Rights Agent.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental
body or agency succeeding to the functions thereof.
"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" is defined in the definition of Credit
Agreement.
"Series A Preferred" means the Company's Series A Junior
Participating Preferred Stock, par value $.002 per share.
"Series B Preferred" means the Company's Series B Redeemable
Preferred Stock, par value $.002 per share.
"Subordinated Loan Agreement" means the Senior Subordinated
Loan Agreement dated as of the date hereof by and among the Company, certain
Subsidiary guarantors and GTCR Capital Partners, L.P.
"Subordinated Loan Documents" means, collectively, the
Subordinated Loan Agreement, any related notes and guaranties, including all
exhibits, schedules and other attachments thereto.
"Subsidiary" means any corporation of which the securities
having a majority of the ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries.
"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
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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.
"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.
"Warrant Agreement" is defined in the definition of Warrants.
"Warrants" means the warrants to purchase shares of the
Company's Convertible Preferred Stock (the "Warrant Shares") issued by the
Company to GTCR Capital Partners, L.P. in connection with the borrowing of
subsequent loans under the Subordinated Loan Agreement, pursuant to a Warrant
Agreement, dated as of the date hereof, by and between the Company and GTCR
Capital Partners, L.P. (the "Warrant Agreement").
"Warrant Shares" is defined in the definition of Warrants.
"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
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(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.
Section 8. Miscellaneous.
8A. Expenses. If the transactions contemplated hereby are
consummated, the Company agrees to pay, and hold the Purchaser and all holders
of Investor Preferred harmless against liability for the payment of, (i) the
reasonable fees and expenses of their counsel arising in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement (including, without limitation, fees
and expenses arising with respect to any subsequent purchase of Preferred Stock
pursuant to Section 1B(b) hereof), (ii) the reasonable fees and expenses
incurred with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of this Agreement, the Registration
Agreement, the Professional Services Agreement, the Monitoring Agreement, the
other agreements contemplated hereby and the Certificates of Designation, (iii)
stamp and other taxes which may be payable in respect of the execution and
delivery of this Agreement or the issuance, delivery or acquisition of any
shares of Preferred Stock purchased hereunder or in accordance with Section
1B(b) hereof, (iv) the fees and expenses incurred with respect to the
interpretation or enforcement of the rights granted under this Agreement, the
Registration Agreement, the Professional Services Agreement, the Monitoring
Agreement, the other agreements contemplated hereby, the Certificates of
Designation and the Company's bylaws and (v) such reasonable travel expenses,
legal fees and other out-of-pocket fees and expenses as have been or may be
incurred by the Purchaser, its Affiliates and its Affiliates' directors,
officers and employees in connection with any Company-related financing and in
connection with the rendering of any other services by the Purchaser or its
Affiliates (including, but not limited to, fees and expenses incurred in
attending board of directors or other Company-related meetings).
8B. Remedies. Each holder of Investor Preferred shall have all
rights and remedies set forth in this Agreement and the Certificates of
Designation and all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
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8C. Purchaser's Investment Representations. The Purchaser
hereby represents (i) that it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws, (ii) that
it is an "accredited investor" and a sophisticated investor for purposes of
applicable U.S. federal and state securities laws and regulations, (iii) that
this Agreement and each of the other agreements contemplated hereby constitutes
(or will constitute) the legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, and (iv) that the execution, delivery
and performance of this Agreement and such other agreements by the Purchaser
does not and will not violate any laws, and does not and will not conflict with,
violate or cause a breach of any agreement, contract or instrument to which such
purchaser is subject. Notwithstanding the foregoing, nothing contained herein
shall prevent the Purchaser and subsequent holders of Restricted Securities from
transferring such securities in compliance with the provisions of Section 5
hereof. Each certificate for Restricted Securities shall be imprinted with a
legend in substantially the following form:
"The securities represented by this certificate were
originally issued on January 27, 2000 and have not been
registered under the Securities Act of 1933, as amended. The
transfer of the securities represented by this certificate is
subject to the conditions specified in the Purchase Agreement,
dated as of January 27, 2000 by and among the issuer (the
"Company") and certain investors, and the Company reserves the
right to refuse the transfer of such securities until such
conditions have been fulfilled with respect to such transfer.
A copy of such conditions shall be furnished by the Company to
the holder hereof upon written request and without charge."
8D. Consent to Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Majority Holders. No other course of dealing between the Company
and the holder of any Preferred Stock or any delay in exercising any rights
hereunder or under the Certificates of Designation shall operate as a waiver of
any rights of any such holders. For purposes of this Agreement, shares of
Preferred Stock held by the Company or any Subsidiaries shall not be deemed to
be outstanding.
8E. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive until the earlier of (i) the redemption of
the Preferred Stock and (2) a period of four (4) years from the Closing or from
any subsequent closing of additional issuances of Preferred Stock hereunder, as
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applicable, regardless of any investigation made by the Purchaser or on its
behalf (the "Survivability Period").
8F. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not. In addition, and whether or not any express assignment has been made,
the provisions of this Agreement which are for the Purchaser's benefit as a
purchaser or holder of Preferred Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Preferred Stock. The rights and
obligations of the Purchaser under this Agreement and the agreements
contemplated hereby may be assigned by such Purchaser at any time, in whole or
in part, to any investment fund managed by GTCR Golder Rauner, L.L.C., or any
successor thereto.
8G. Generally Accepted Accounting Principles. Where any
accounting determination or calculation is required to be made under this
Agreement or the exhibits hereto, such determination or calculation (unless
otherwise provided) shall be made in accordance with GAAP, consistently applied,
except that if because of a change in GAAP the Company would have to alter a
previously utilized accounting method or policy in order to remain in compliance
with GAAP, such determination or calculation shall continue to be made in
accordance with the Company's previous accounting methods and policies.
8H. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8I. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
8J. Entire Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
8K. Descriptive Headings; Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a Section of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
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8L. Governing Law. The corporate law of Delaware shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement and the exhibits and schedules hereto shall be governed by and
construed in accordance with the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
8M. 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.
1800 Bering Drive, Suite 1000
Houston, TX 77057
Attention: Chief Financial Officer
Telecopier No.: (713) 369-1760
With a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis Street
Houston, TX 77002-3095
Attention: Michael T. Peters
Telecopier No.: (713) 223-3717
If to the Purchaser:
GTCR Fund VII, L.P.
c/o GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
Telecopier No.: (312) 382-2201
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<PAGE> 56
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
Telecopier No.: (312) 861-2200
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.
8N. Indemnification.
(a) General. In consideration of the Purchaser's
execution and delivery of this Agreement and acquiring the Preferred Stock
hereunder and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Purchaser and each other holder of Preferred Stock and all of their officers,
directors, employees and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (i) third parties claims relating
to (x) any transaction financed or to be financed in whole or in part, directly
or indirectly, with the proceeds of the issuance of the Preferred Stock or (y)
the execution, delivery, performance or enforcement of this Agreement and any
other instrument, document or agreement executed pursuant hereto by any of the
Indemnitee, (ii) a breach of a representation or warranty by the Company of any
Subsidiary hereunder in any respect, in the case of representations or
warranties qualified by a materiality standard, including, without limitation, a
"material adverse effect" qualifier, or in any respect which is material to the
business, assets, property, operations, results or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, in the case of
all other representations and warranties or (iii) a breach of a covenant by the
Company or any Subsidiary under this Agreement or any instrument or other
document executed in connection with the transactions contemplated hereby.
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<PAGE> 57
Notwithstanding the foregoing, Indemnified Liabilities shall not include costs
and expenses incurred by any Indemnitee in connection with (i) any violations of
law or governmental regulations by such Indemnitee, (ii) any acts of willful
misconduct or gross negligence by such Indemnitee or (iii) any actions against
such Indemnitee by creditors of such Indemnitee or shareholders or creditors of
such Indemnitee's parent companies. THIS INDEMNITY INDEMNIFIES THE INDEMNITEES
AGAINST THEIR OWN NEGLIGENCE. To the extent that the foregoing undertaking by
the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) Environmental Liabilities. Without limiting the
generality of the indemnity set out in Section 8N(a) above, the Company shall
defend, protect, indemnify and hold harmless the Purchaser 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, each Purchaser 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, 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.
8O. Standstill. During the term of this Agreement, the
Purchaser, together with any 13d Group (as hereinafter defined) of which it is a
part, shall not at any time (i) purchase, offer or agree to purchase, announce
an intention to purchase, or otherwise beneficially own, directly or indirectly,
any securities or material assets of the Company or any of its Subsidiaries
other than the Investor Preferred or shares of Common Stock to be issued upon
conversion of such shares or the exercise of the Warrants, (ii) publicly
disclose any intention, plan or arrangement inconsistent with the foregoing or
(iii) form, join or in any way participate in a 13d Group in connection with any
of the foregoing. The term "13d Group" means a group within the meaning of
Section 13(d)(3) of the Securities Exchange Act, but not including any person
entitled to file a statement on Schedule 13G.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement on the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
--------------------------
Name: Ross M. Patten
Its: Chairman/CEO
GTCR FUND VII, L.P.
By: GTCR Partners VII, L.P.
Its: General Partner
By: GTCR Golder Rauner, L.L.C.
Its: General Partner
By: /s/ DAVID A. DONNINI
--------------------------
Name: David A. Donnini
Its: Principal
SIGNATURE PAGE TO THE PURCHASE AGREEMENT
<PAGE> 59
LIST OF EXHIBITS
Exhibit A -- Certificate of Designation of Series C Preferred
Exhibit B -- Certificate of Designation of Series D Preferred
Exhibit C -- Form of Professional Services Agreement
Exhibit D -- Form of Registration Agreement
Exhibit E -- Amendment to Restated Certificate of Incorporation
LIST OF DISCLOSURE SCHEDULES
Shareholders Consent Schedule
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
Intellectual Property Schedule
Litigation Schedule
Consents Schedule
Insurance Schedule
Key Employees Schedule
Employee Benefits Schedule
Environmental Schedule
Affiliated Transactions Schedule
Customer Schedule
Unsecured Seller Debt Schedule
<PAGE> 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
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
iv
<PAGE> 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 Paul A.
Toretta, individually, Eileen Toretta, as trustee of the Paul A. Toretta 1998
Grat, Frances A. Guerrera, individually, Frances A. Guerrera, as executrix of
the estate of Richard J. Guerrera, and Frances A. Guerrera and Robert Dionne, as
co-trustees of the Richard J. Guerrera 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,
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<PAGE> 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").
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<PAGE> 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 Kirkland &
Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, 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
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<PAGE> 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.
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<PAGE> 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, L.P.
LaSalle National Bank
135 S. LaSalle
Chicago, IL 60603
Reference: Synagro Technologies, Inc.
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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;
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<PAGE> 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
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<PAGE> 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
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<PAGE> 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 Sanders
Morris Mundy 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.
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<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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.
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<PAGE> 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
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<PAGE> 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 Locke, Liddell & Sapp 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 Alvin L. Thomas II, 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,
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<PAGE> 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
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<PAGE> 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.
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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).
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<PAGE> 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 Alvin L. Thomas II, 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
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<PAGE> 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 Arthur Andersen 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
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<PAGE> 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;
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<PAGE> 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.
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<PAGE> 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:
<TABLE>
<CAPTION>
COMPUTATION FIXED CHARGE
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
<S> <C>
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.
</TABLE>
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:
<TABLE>
<CAPTION>
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
<S> <C>
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
</TABLE>
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:
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<PAGE> 36
<TABLE>
<CAPTION>
COMPUTATION FUNDED DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
<S> <C>
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.
</TABLE>
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:
<TABLE>
<CAPTION>
COMPUTATION SENIOR FUNDED DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
<S> <C>
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.
</TABLE>
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:
<TABLE>
<CAPTION>
DEBT TO
CAPITALIZATION
PERIOD: PERCENTAGE
------- --------------
<S> <C>
Closing Date through 12/31/00 75%
1/01/01 through 12/31/01 70%
1/01/02 and thereafter 65%
</TABLE>
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:
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<PAGE> 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:
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<PAGE> 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,
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<PAGE> 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).
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<PAGE> 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
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(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.
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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
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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
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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
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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.
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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
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(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
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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
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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.
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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:
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"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
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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,
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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.
1800 Bering Drive, Suite 1000
Houston, TX 77057
Attention: Chief Financial Officer
Telecopier No.: (713) 369-1760
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With a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis Street
Houston, TX 77002-3095
Attention: Michael T. Peters
Telecopier No.: (713) 223-3717
If to the Lender:
GTCR Capital Partners, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
Telecopier No.: (312) 382-2201
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
Telecopier No.: (312) 861-2200
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
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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.
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<PAGE> 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 SUE 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.
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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.
* * * * *
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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/ ROSS M. PATTEN
--------------------------
Name: Ross M. Patten
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 Golder Rauner, L.L.C.
Its: General Partner
By: /s/ DAVID A. DONNINI
--------------------------
Name: David A. Donnini
Its: Principal
<PAGE> 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/ MARK A. ROME
------------------------
Name: Mark A. 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/ MARK A. ROME
------------------------
Name: Mark A. Rome
Title: Executive Vice President
<PAGE> 60
NETCO-RESIDUALS MANAGEMENT, LIMITED
PARTNERSHIP
By: Netco-Residuals Management Systems, Inc.,
its General Partner
By: /s/ MARK A. ROME
------------------------
Name: Mark A. Rome
Title: Executive Vice President
RESIDUAL TECHNOLOGIES, LIMITED PARTNERSHIP
By: Residual Technologies Systems, Inc.,
its General Partner
By: /s/ MARK A. ROME
------------------------
Name: Mark A. Rome
Title: Executive Vice President
FAIRHAVEN RESIDUALS, LIMITED PARTNERSHIP
By: Fairhaven Residual Systems, Inc.,
its General Partner
By: /s/ MARK A. ROME
------------------------
Name: Mark A. Rome
Title: Executive Vice President
PROVIDENCE SOILS, LLC
By: Synagro Technologies, Inc.
its Member
By: /s/ MARK A. ROME
------------------------
Name: Mark A. Rome
Title: Executive Vice President
<PAGE> 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
<PAGE> 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 Arthur
Andersen 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.
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"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
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<PAGE> 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 Moody's 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.
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"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
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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
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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:
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(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.
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"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,
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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.
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"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 Golder Rauner, 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).
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"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
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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
Golder Rauner, 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.
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"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.
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"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-
<PAGE> 1
EXHIBIT 2.3
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of January 27, 2000
among
SYNAGRO TECHNOLOGIES, INC.,
VARIOUS FINANCIAL INSTITUTIONS,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Syndication Agent,
and
BANK OF AMERICA, N.A.,
as Administrative Agent, Issuing Bank and Swing Line Lender
BANC OF AMERICA SECURITIES LLC
and
CIBC WORLD MARKETS CORP.
Lead Arrangers and Book Managers
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS.................................................... 1
1.1 Definitions............................................ 1
1.2 Other Interpretive Provisions.......................... 20
1.3 Reallocation of Percentages and Revolving Loans........ 21
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING AND CONVERSION
PROCEDURES; LETTER OF CREDIT PROCEDURES; SWING LINE
LOANS.................................................. 22
2.1 Commitments............................................ 22
2.1.1 Revolving Loans.............................. 22
2.1.2 L/C Commitment............................... 22
2.1.3 Term Loans............................................. 22
2.1.4 Acquisition Loans............................ 22
2.2 Loan Procedures........................................ 23
2.2.1 Various Types of Loans....................... 23
2.2.2 Borrowing Procedures................................... 23
2.2.3 Conversion and Continuation Procedures....... 23
2.3 Letter of Credit Procedures............................ 24
2.3.1 L/C Applications............................. 24
2.3.2 Participations in Letters of Credit.......... 25
2.3.3 Reimbursement Obligations.................... 25
2.3.4 Limitation on Obligations of Issuing Banks... 25
2.3.5 Funding by Banks to Issuing Banks............ 26
2.4 Swing Line Loans....................................... 26
2.4.1 Swing Line Loans............................. 26
2.4.2 Swing Line Loan Procedures................... 27
2.4.3 Refunding of, or Funding of Participations
in, Swing Line Loans......................... 27
2.4.4 Repayment of Participations.................. 28
2.4.5 Participation Obligations Unconditional...... 28
2.5 Commitments Several.................................... 28
2.6 Certain Conditions..................................... 28
SECTION 3 NOTES EVIDENCING LOANS......................................... 28
3.1 Notes.................................................. 28
3.2 Recordkeeping.......................................... 29
</TABLE>
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<TABLE>
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SECTION 4 INTEREST....................................................... 29
4.1 Interest Rates......................................... 29
4.2 Interest Payment Dates................................. 29
4.3 Setting and Notice of Eurodollar Rates................ 29
4.4 Computation of Interest............................... 30
SECTION 5 FEES........................................................... 30
5.1 Non-Use Fee............................................ 30
5.2 Letter of Credit Fees.................................. 30
5.3 Up-Front and Funding Fees.............................. 31
5.4 Administrative Agent's Fees............................ 31
SECTION 6 REPAYMENT OF LOANS; REDUCTION AND TERMINATION OF THE COMMITMENTS;
PREPAYMENTS.................................................... 31
6.1 Repayment of Loans..................................... 31
6.2 Reductions of the Commitment........................... 32
6.2.1 Voluntary Reduction or Termination of the
Revolving Commitments........................ 32
6.2.2 Mandatory Reductions of the Revolving
Commitment Amount............................ 32
6.2.3 Voluntary Reduction of the Term A
Commitments.................................. 32
6.2.4 Mandatory Termination of the Term A
Commitments.................................. 32
6.2.5 Voluntary Reduction of the Acquisition
Commitments.................................. 32
6.2.6 Mandatory Reductions of the Acquisition
Commitment Amount............................ 32
6.2.7 Mandatory Termination of the Acquisition
Commitments.................................. 33
6.3 Prepayments............................................ 33
6.3.1 Voluntary Prepayments........................ 33
6.3.2 Mandatory Prepayments........................ 33
6.3.3 Application of Prepayments of Term Loans and
Acquisition Loan............................. 34
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES................ 35
7.1 Making of Payments..................................... 35
7.2 Application of Certain Payments........................ 35
7.3 Due Date Extension..................................... 35
7.4 Setoff................................................. 35
7.5 Proration of Payments.................................. 35
7.6 Taxes.................................................. 36
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS....... 37
8.1 Increased Costs........................................ 37
8.2 Basis for Determining Interest Rate Inadequate or
Unfair................................................. 38
8.3 Changes in Law Rendering Eurodollar Loans Unlawful..... 39
</TABLE>
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<TABLE>
<S> <C>
8.4 Funding Losses......................................... 39
8.5 Right of Banks to Fund through Other Offices........... 40
8.6 Discretion of Banks as to Manner of Funding............ 40
8.7 Mitigation of Circumstances; Replacement of Affected
Bank................................................... 40
8.8 Conclusiveness of Statements; Survival of Provisions... 40
SECTION 9 WARRANTIES..................................................... 41
9.1 Organization, etc...................................... 41
9.2 Authorization; No Conflict............................. 41
9.3 Validity and Binding Nature............................ 41
9.4 Financial Condition.................................... 42
9.5 No Material Adverse Change............................. 42
9.6 Litigation and Contingent Liabilities.................. 42
9.7 Ownership of Properties; Liens......................... 42
9.8 Subsidiaries........................................... 42
9.9 Pension Plans.......................................... 42
9.10 Investment Company Act................................. 43
9.11 Public Utility Holding Company Act..................... 43
9.11.1 Regulation U................................. 43
9.12 Taxes.................................................. 43
9.13 Solvency, etc.......................................... 43
9.14 Environmental Matters.................................. 43
9.15 Information............................................ 45
SECTION 10 COVENANTS..................................................... 45
10.1 Reports, Certificates and Other Information............ 45
10.1.1 Audit Report................................. 45
10.1.2 Quarterly Reports............................ 46
10.1.3 Monthly Reports.............................. 46
10.1.4 Compliance Certificates...................... 46
10.1.5 Reports to SEC and to Shareholders........... 46
10.1.6 Notice of Default, Litigation and ERISA
Matters...................................... 47
10.1.7 Subsidiaries................................. 47
10.1.8 Management Reports........................... 48
10.1.9 Projections.................................. 48
10.1.10 Other Information............................. 48
10.2 Books, Records and Inspections......................... 48
10.3 Insurance.............................................. 48
10.4 Compliance with Laws, Material Contracts; Payment of
Taxes and Liabilities.................................. 48
10.5 Maintenance of Existence, etc.......................... 49
10.6 Financial Covenants.................................... 49
10.6.1 Fixed Charge Coverage Ratio.................. 49
10.6.2 Minimum Interest Coverage.................... 49
</TABLE>
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<TABLE>
<S> <C>
10.6.3 Funded Debt to Adjusted EBITDA Ratio......... 49
10.6.4 Senior Funded Debt to Adjusted EBITDA Ratio.. 50
10.6.5 Debt to Capitalization Ratio................. 50
10.6.6 Capital Expenditures......................... 50
10.7 Limitations on Debt.................................... 50
10.8 Liens.................................................. 51
10.9 Operating Leases....................................... 52
10.10 Restricted Payments.................................... 52
10.11 Mergers, Consolidations, Sales......................... 53
10.12 Use of Proceeds........................................ 53
10.13 Further Assurances..................................... 53
10.14 Transactions with Affiliates........................... 54
10.15 Employee Benefit Plans................................. 54
10.16 Environmental Laws..................................... 54
10.17 Unconditional Purchase Obligations..................... 55
10.18 Inconsistent Agreements................................ 55
10.19 Business Activities.................................... 55
10.20 Advances and Other Investments......................... 55
10.21 Foreign Subsidiaries................................... 56
10.22 Interest Rate Protection............................... 56
10.23 Business Plan and Financial Projections................ 56
10.24 Amendments to Certain Documents........................ 56
SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC..................... 57
11.1 Effectiveness.......................................... 57
11.1.1 Notes........................................ 57
11.1.2 Resolutions.................................. 57
11.1.3 Consents, etc................................ 57
11.1.4 Incumbency and Signature Certificates........ 58
11.1.5 Confirmation................................. 58
11.1.6 Opinions of Counsel for the Company and the
Guarantors................................... 58
11.1.7 Financial Information........................ 58
11.1.8 Acquisition Documents; GTCR Documents........ 58
11.1.9 Real Estate Documents........................ 58
11.1.10 Restated Security Agreement.................. 59
11.1.11 RESTEC Acquisition Opinions.................. 59
11.1.12 Other........................................ 59
11.2 Conditions to All Extensions of Credit................. 59
11.2.1 Compliance with Warranties, No Default, etc.. 59
11.2.2 Confirmatory Certificate..................... 60
11.3 Conditions to Certain Extensions of Credit under the
Term A Commitments..................................... 60
11.4 Additional Conditions to Term A Loans.................. 61
11.4.1 Term A Loans Prior to Certain Events................... 61
</TABLE>
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<TABLE>
<S> <C>
11.5 Acquisition Loans...................................... 61
11.5.1 Required Banks Approval...................... 61
11.5.2 Ratios....................................... 61
11.6 Loans for Secondary Acquisition........................ 61
11.7 Revolving Outstandings................................. 61
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT............................ 62
12.1 Events of Default...................................... 62
12.1.1 Non-Payment of the Loans, etc................ 62
12.1.2 Non-Payment of Other Debt.................... 62
12.1.3 Other Material Obligations................... 62
12.1.4 Bankruptcy, Insolvency, etc.................. 62
12.1.5 Non-Compliance with Provisions of This
Agreement.................................... 63
12.1.6 Warranties................................... 63
12.1.7 Pension Plans................................ 63
12.1.8 Judgments.................................... 63
12.1.9 Invalidity of Guaranty, etc.................. 63
12.1.10 Invalidity of Collateral Documents, etc...... 63
12.1.11 Change in Control............................ 64
12.1.12 Injunction................................... 64
12.2 Effect of Event of Default............................. 64
SECTION 13 THE ADMINISTRATIVE AGENT...................................... 65
13.1 Appointment and Authorization.......................... 65
13.2 Delegation of Duties................................... 65
13.3 Liability of Administrative Agent...................... 65
13.4 Reliance by Administrative Agent....................... 66
13.5 Notice of Default...................................... 66
13.6 Credit Decision........................................ 66
13.7 Indemnification........................................ 67
13.8 Administrative Agent in Individual Capacity............ 68
13.9 Successor Administrative Agent......................... 68
13.10 Withholding Tax........................................ 69
13.11 Collateral Matters..................................... 70
13.12 Syndication Agent...................................... 71
SECTION 14 GENERAL....................................................... 71
14.1 Waiver; Amendments..................................... 71
14.2 Confirmations.......................................... 71
14.3 Notices................................................ 72
14.4 Computations........................................... 72
14.5 Regulation U........................................... 72
14.6 Costs, Expenses and Taxes.............................. 72
</TABLE>
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<TABLE>
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14.7 Subsidiary References.................................. 73
14.8 Captions............................................... 73
14.9 Assignments; Participations............................ 73
14.9.1 Assignments.................................. 73
14.9.2 Participations............................... 74
14.10 Governing Law.......................................... 75
14.11 Counterparts........................................... 75
14.12 Successors and Assigns................................. 75
14.13 Indemnification by the Company......................... 75
14.14 Interest............................................... 76
14.15 Forum Selection and Consent to Jurisdiction............ 77
14.16 Waiver of Jury Trial................................... 78
</TABLE>
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<PAGE> 8
SCHEDULES
SCHEDULE 1.1 Pricing Schedule
SCHEDULE 2.1 Banks and Percentages
SCHEDULE 6.1(a) Amortization of Term A Loans
SCHEDULE 6.1(b) Amortization of Term B Loans
SCHEDULE 6.1(c)(EPIC) Amortization of EPIC Acquisition Loans
SCHEDULE 6.1(c)(Other) Amortization of Other Acquisition Loans
SCHEDULE 9.6 Litigation and Contingent Liabilities
SCHEDULE 9.8 Subsidiaries
SCHEDULE 9.14 Environmental Matters
SCHEDULE 10.7(b) Existing Unsecured Debt
SCHEDULE 10.7(c) Existing Secured Debt
SCHEDULE 10.7(g) Debt to be Repaid
SCHEDULE 10.8 Existing Liens
SCHEDULE 10.9 Existing Operating Leases
SCHEDULE 11.1.9 Mortgaged Property
SCHEDULE 14.3 Addresses for Notices
EXHIBITS
EXHIBIT A Form of Note (Section 3.1)
EXHIBIT B Form of Compliance Certificate (Section 10.1.3)
EXHIBIT C Copy of Guaranty (Section 1)
EXHIBIT D Form of Restated Security Agreement (Section 1)
EXHIBIT E Copy of Company Pledge Agreement (Section 1)
EXHIBIT F Form of Subsidiary Pledge Agreement (Section 1)
EXHIBIT G Form of Assignment Agreement (Section 14.9)
EXHIBIT H Form of Confirmation and Omnibus Amendment
(Section 11.1.5)
vii
<PAGE> 9
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 27,
2000 (this "Agreement"), is entered into among SYNAGRO TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), various financial institutions (together
with their respective successors and assigns, the "Banks"), CANADIAN IMPERIAL
BANK OF COMMERCE, as syndication agent for the Banks, and BANK OF AMERICA, N.A.
(in its individual capacity, "Bank of America"), as administrative agent for the
Banks.
WHEREAS, the Company, various financial institutions and the
Administrative Agent have entered into a Credit Agreement dated as of October 7,
1998 (the "Existing Agreement");
WHEREAS, the parties hereto have agreed to amend and restate the
Existing Agreement so as to, among other things, (a) decrease the amount of the
revolving facility to $10,000,000, (b) add a swingline facility, (c) add two
term loan facilities, (d) add an acquisition loan facility, (e) amend certain
covenants and various other provisions of the Existing Agreement and (f) add one
or more additional financial institutions to the bank group;
WHEREAS, the parties hereto intend that this Agreement and the
documents executed in connection herewith not effect a novation of the
obligations of the Company under the Existing Agreement, but merely a
restatement of and, where applicable, an amendment to the terms governing such
obligations;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Existing Agreement is amended and restated in its entirety, and the
parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms shall have the
following meanings:
Acquired Companies means the RESTEC Companies and the Secondary
Acquired Companies.
Acquisition Commitment means, as to any Bank, such Bank's commitment to
make Acquisition Loans under this Agreement.
Acquisition Commitment Amount means $30,000,000, as such amount may be
reduced from time to time pursuant to Section 6.2.
<PAGE> 10
Acquisition Documents means the purchase agreements (including all
schedules and exhibits thereto) and other material documents executed in
connection with the acquisition by the Company of the Acquired Companies.
Acquisition Loan - see Section 2.1.4.
Acquisition Percentage means, as to any Bank, the percentage which (a)
the Acquisition Commitment of such Bank (or, after termination of the
Acquisition Commitments, the principal amount of such Bank's Acquisition Loans)
is of (b) the aggregate amount of Acquisition Commitments (or after termination
of the Acquisition Commitments, the aggregate principal amount of all
Acquisition Loans). The initial Acquisition Percentage of each Bank is set forth
across from such Bank's name on Schedule 2.1.
Acquisition Termination Date means the earliest to occur of (a) January
27, 2001, or (b) such other date on which the Acquisition Commitments terminate
pursuant to Section 6 or 12.
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 Arthur
Andersen LLP dated January 27, 2000 (such as owner compensation) or otherwise
disclosed in connection with any acquired Person, in each case to the extent
disclosed to and reasonably approved by the Required Banks) 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 Required Banks;
and (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) any Special Charges (net of any Recoveries
received or taken), if applicable, shall be added to EBITDA.
2
<PAGE> 11
Adjusted Working Capital means the excess of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries less (ii) the amount of cash and cash equivalents included in such
consolidated current assets;
over
(b) (i) consolidated current liabilities of the Company and its
Subsidiaries less (ii) the amount of short-term Debt (including current
maturities of long-term Debt) of the Company and its Subsidiaries included in
such consolidated current liabilities.
Administrative Agent means Bank of America in its capacity as
administrative agent for the Banks hereunder and any successor thereto in such
capacity.
Affected Bank means any Bank that has given notice to the Company
(which has not been rescinded) of (i) any obligation by the Company to pay any
amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any
circumstances of the nature described in Section 8.2 or 8.3.
Affiliate of any Person means (i) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and (ii) any officer or director of such Person.
Agent-Related Persons means Bank of America and any successor agent
arising under Section 13.9, together with their respective Affiliates
(including, in the case of Bank of America, Banc of America Securities LLC), and
the officers, directors, employees, agents and attorneys-in-fact of such Persons
and Affiliates.
Agents means, collectively, the Administrative Agent and the
Syndication Agent.
Agreement - see the Preamble.
Applicable Acquisition Proceeds means, with respect to any Applicable
Asset Sale Proceeds prior to the Acquisition Termination Date, the product of
such Applicable Asset Sale Proceeds multiplied by a fraction, the numerator of
which is the Acquisition Commitment Amount on the date of receipt of such
Applicable Asset Sale Proceeds and the denominator of which is the sum of the
Revolving Commitment Amount plus the Acquisition Commitment Amount on such date.
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
3
<PAGE> 12
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.
Applicable Revolving Proceeds means, with respect to any Applicable
Asset Sale Proceeds, (i) prior to the Acquisition Termination Date, the product
of such Applicable Asset Sale Proceeds received after all Term Loans have been
paid in full multiplied by a fraction, the numerator of which is the Revolving
Commitment Amount on the date of receipt of such Applicable Asset Sale Proceeds
and the denominator of which is sum of the Revolving Commitment Amount plus the
Acquisition Commitment Amount on such date, and (ii) on and after the
Acquisition Termination Date, the amount of such Applicable Asset Sale Proceeds
received after all Term Loans and Acquisition Loans have been paid in full.
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).
Assignee - see Section 14.9.1.
Assignment Agreement - see Section 14.9.1.
Bank - see the Preamble. References to the "Banks" shall include the
Issuing Bank and the Swing Line Bank; for purposes of clarification only, to the
extent that Bank of America (or any successor Issuing Bank or Swing Line Bank)
may have rights or obligations in addition to those of the other Banks due to
its status as Issuing Bank or Swing Line Bank, its status as such will be
specifically referenced.
Bank of America - see the Preamble.
Base Rate means at any time the greater of (a) the Federal Funds Rate
plus 0.5% and (b) the Reference Rate.
Base Rate Loan means any Loan which bears interest at or by reference
to the Base Rate.
Base Rate Margin - see Schedule 1.1.
Business Day means any day on which Bank of America is open for
commercial banking business in Chicago, Charlotte, Houston, New York and San
Francisco and, in the case of a Business Day which relates to a Eurodollar Loan,
on which dealings are carried on in the interbank eurodollar market.
4
<PAGE> 13
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 Moody's 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 - see Section 9.14.
Code means the Internal Revenue Code of 1986.
Collateral Documents means the Company Pledge Agreement, each
Subsidiary Pledge Agreement, the Restated Security Agreement, each Mortgage and
any other agreement pursuant to which the Company or any Guarantor grants
collateral to the Administrative Agent for the benefit of the Banks.
Commitment means, as to any Bank, such Bank's commitment to make Loans,
and (if applicable) to issue or participate in Letters of Credit and to
participate in Swing Line Loans, under this Agreement.
5
<PAGE> 14
Company - see the Preamble.
Company Pledge Agreement means the pledge agreement between the Company
and the Administrative Agent, a copy of which is attached as Exhibit E.
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.
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 (including any such obligation
evidenced by a note or similar instrument) to pay the deferred purchase price of
property or services where such obligation 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 Required Banks, which shall not be unreasonably withheld).
Debt to be Repaid means the Debt listed on Schedule 10.7(g).
Disposal - see the definition of "Release".
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<PAGE> 15
Dollar and the sign "$" mean lawful money of the United States of
America.
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.
Effective Date - see Section 11.1.
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.
EPIC means Environmental Protection & Improvement Co., a New Jersey
corporation.
EPIC Acquisition Loan means an Acquisition Loan, the proceeds of which
are used to fund the acquisition of EPIC by the Company.
ERISA means the Employee Retirement Income Security Act of 1974.
Eurocurrency Reserve Percentage means, with respect to any Eurodollar
Loan for any Interest Period, a percentage (expressed as a decimal) equal to the
daily average during such Interest Period of the percentage in effect on each
day of such Interest Period, as prescribed by the FRB, for determining the
aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities"
pursuant to Regulation D or any other then applicable regulation of the FRB
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
Eurodollar Loan means any Loan which bears interest at a rate
determined by reference to the Eurodollar Rate (Reserve Adjusted).
Eurodollar Margin - see Schedule 1.1.
Eurodollar Office means with respect to any Bank the office or offices
of such Bank which shall be making or maintaining the Eurodollar Loans of such
Bank hereunder or, if applicable, such other office or offices through which
such Bank determines the Eurodollar Rate. A Eurodollar Office of any Bank may
be, at the option of such Bank, either a domestic or foreign office.
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<PAGE> 16
Eurodollar Rate means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum at which Dollar deposits in immediately
available funds are offered to the Eurodollar Office of Bank of America two
Business Days prior to the beginning of such Interest Period by major banks in
the interbank eurodollar market as at or about 10:00 A.M., Chicago time, for
delivery on the first day of such Interest Period, for the number of days
comprised therein and in an amount equal or comparable to the amount of the
Eurodollar Loan of Bank of America for such Interest Period.
Eurodollar Rate (Reserve Adjusted) means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) ---------------
1-Eurocurrency
Reserve Percentage
Event of Default means any of the events described in Section 12.1.
Excess Cash Flow means, for any period, the remainder of
(a) EBITDA for such period,
less
(b) the sum, without duplication of
(i) repayments of principal of Term Loans and the Acquisition
Loans pursuant to Section 6.1, regularly scheduled principal payments
arising with respect to any other long-term Debt of the Company and its
Subsidiaries, and the portion of any regularly scheduled payments with
respect to Capital Leases allocable to principal, in each case made
during such period,
plus
(ii) voluntary prepayments of the Term Loans and (after the
Acquisition Termination Date) Acquisition Loans pursuant to Section
6.3.1 during such period,
plus
(iii) cash payments made in such period with respect to
Capital Expenditures,
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<PAGE> 17
plus
(iv) all federal, state, local and foreign income taxes paid
by the Company and its Subsidiaries during such period,
plus
(v) cash Interest Expense of the Company and its Subsidiaries
during such period,
plus
(vi) any gains on Asset Sales during such period to the extent
that (A) such gains were included in calculating EBITDA for such period
and (B) the proceeds of such gains were applied to prepay Term Loans
and (after the Acquisition Termination Date) Acquisition Loans pursuant
to Subsection 6.3.2(c),
plus
(vii) any increase in Adjusted Working Capital during such
period (exclusive of increases in working capital associated with Asset
Sales),
minus
(viii) any decrease in Adjusted Working Capital during such
period.
Exemption Representation - see Section 7.6.
Existing Agreement - see the Recitals.
Federal Funds Rate means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor
publication, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
Financial Letter of Credit means any Letter of Credit determined by the
applicable Issuing Bank to be a "financial guaranty-type Standby Letter of
Credit" as defined in footnote 13 to Appendix A to the Risk Based Capital
Guidelines issued by the Comptroller of the Currency (or in any successor
regulation, guideline or ruling by any applicable banking regulatory authority).
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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:
(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.
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<PAGE> 19
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.
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.
Group - see Section 2.2.1.
GTCR means GTCR Capital Partners, L.P.
Guarantor means, on any day, each Subsidiary that has executed a
counterpart of the Guaranty on or prior to that day (or is required to execute a
counterpart of the Guaranty on that date).
Guaranty means the Guaranty issued by various Subsidiaries of the
Company, a copy of which is attached as Exhibit C.
Hazardous Substances - see Section 9.14.
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.
Highest Lawful Rate means, with respect to any indebtedness owed to any
Bank hereunder or under any Note, the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received by such Bank with respect to such indebtedness under
applicable law.
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
Administrative Agent has notified the Company that the Required Banks have
determined in good faith that such provision is material.
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<PAGE> 20
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 Period means, as to any Eurodollar Loan, the period commencing
on the date such Loan is borrowed or continued as, or converted into, a
Eurodollar Loan and ending on the date one, two, three or six months thereafter,
as selected by the Company pursuant to Section 2.2.3; provided that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period for a Eurodollar Loan that begins
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall end on the last
Business Day of the calendar month at the end of such Interest Period;
(iii) the Company may not select any Interest Period for any
Revolving Loan which would extend beyond the scheduled Revolving
Termination Date; and
(iv) (A) the Company may not select any Interest Period for
a Term A Loan if, after giving effect to such selection, the aggregate
principal amount of all Term A Loans having Interest Periods ending
after any date on which an installment of the Term A Loans is scheduled
to be repaid would exceed the aggregate principal amount of the Term A
Loans scheduled to be outstanding after giving effect to such
repayment; and (B) the Company may not select any Interest Period for a
Term B Loan if, after giving effect to such selection, the aggregate
principal amount of all Term B Loans having Interest Periods ending
after any date on which an installment of the Term B Loans is scheduled
to be repaid would exceed the aggregate principal amount of the Term B
Loans scheduled to be outstanding after giving effect to such
repayment; and (C) the Company may not select any Interest Period for
an Acquisition Loan if, after giving effect to such selection, the
aggregate principal amount of all Acquisition Loans having Interest
Periods ending after any date on which an installment of the
Acquisition Loans is scheduled to be repaid would exceed the aggregate
principal amount of the Acquisition Loans scheduled to be outstanding
after giving effect to such repayment.
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<PAGE> 21
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.
Issuing Bank means Bank of America in its capacity as an issuer of
Letters of Credit hereunder and any other Bank which, with the written consent
of the Company and the Administrative Agent, is the issuer of one or more
Letters of Credit.
L/C Application means, with respect to any request for the issuance of
a Letter of Credit, a letter of credit application in the form being used by the
applicable Issuing Bank at the time of such request for the type of letter of
credit requested; provided that to the extent any such letter of credit
application is inconsistent with any provision of this Agreement, the applicable
provision of this Agreement shall control.
LC Fee Rate - see Schedule 1.1.
Lead Arrangers means Banc of America Securities LLC and CIBC World
Markets Corp. in their capacity as arrangers of the facilities hereunder.
Letter of Credit - see Section 2.1.2.
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 means a Revolving Loan, a Swing Line Loan, an Acquisition Loan, a
Term A Loan or a Term B Loan.
Loan Documents means this Agreement, the Notes, the Guaranty, the L/C
Applications and the Collateral Documents.
Margin Stock means any "margin stock" as defined in Regulation U of the
FRB.
Material Adverse Effect means (a) a material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole, or (b) a material adverse effect upon any substantial portion of the
collateral under the Collateral Documents or upon the legality, validity,
binding effect or enforceability against the Company or any Guarantor of any
Loan Document.
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<PAGE> 22
Monitoring Agreement means the Monitoring Agreement dated January 27,
2000 between the Company and GTCR Golder Rauner, L.L.C.
Mortgage means a mortgage, deed of trust, leasehold mortgage or similar
instrument granting the Administrative Agent a Lien on real property owned or
leased by the Company or any Subsidiary.
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.
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 Series C and D 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 Term B 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 the Effective Date).
Non-Financial Letter of Credit means any Letter of Credit other than a
Financial Letter of Credit.
Non-Use Fee Rate - see Schedule 1.1.
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<PAGE> 23
Note - see Section 3.1.
Operating Lease means any lease of (or other agreement conveying the
right to use) any real or personal property by the Company or any Subsidiary, as
lessee, other than any Capital Lease.
Other Acquisition Loan means an Acquisition Loan the proceeds of which
are not used to fund the acquisition of EPIC by the Company.
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.
Percentage means an Acquisition Percentage, a Revolving Percentage, a
Term A Percentage or a Term B Percentage, as the context may require.
Person means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or other
entity, whether acting in an individual, fiduciary or other capacity.
Preferred Stock Purchase Agreement means the Purchase Agreement dated
as of January 27, 2000 between the Company and GTCR Fund VII, L.P.
Preferred Stock Registration Agreement means the Registration Agreement
dated as of January 27, 2000 among the Company, GTCR Fund VII, L.P. and GTCR
Capital Partners, L.P.
Professional Services Agreement means the Professional Services
Agreement dated January 27, 2000 between the Company and GTCR Golder Rauner,
L.L.C.
RCRA - see Section 9.14.
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.
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Release has the meaning specified in CERCLA and the term "Disposal" (or
"Disposed") has the meaning specified in RCRA; provided that in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply as of the effective date of such
amendment; and provided, further, that to the extent that the laws of a state
wherein any affected property lies establish a meaning for "Release" or
"Disposal" which is broader than is specified in either CERCLA or RCRA, such
broader meaning shall apply.
Reference Rate means, for any day, the rate of interest in effect for
such day as publicly announced from time to time by Bank of America in
Charlotte, North Carolina, as its "reference rate" or "prime rate" (The
"reference rate" or "prime rate" is a rate set by Bank of America based upon
various factors, including Bank of America's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced
rate.) Any change in the "reference rate" or "prime rate" announced by Bank of
America shall take effect at the opening of business on the day specified in the
public announcement of such change.
Required Acquisition Banks means (a) at any time when no Bank has an
Acquisition Percentage of more than 25%, Banks having an aggregate Acquisition
Percentage of more than 50%, and (b) at any time when any Bank has an
Acquisition Percentage of more than 25%, Banks having an aggregate Acquisition
Percentage of more than 66.6%.
Required Banks means (a) at any time when no Bank has a Total
Percentage of more than 25%, Banks having an aggregate Total Percentage of more
than 50%, and (b) at any time when any Bank has a Total Percentage of more than
25%, Banks having an aggregate Total Percentage of more than 66.6%.
Required Revolving Banks means (a) at any time when no Bank has a
Revolving Percentage of more than 25%, Banks having an aggregate Revolving
Percentage of more than 50%, and (b) at any time when any Bank has a Revolving
Percentage of more than 25%, Banks having an aggregate Revolving Percentage of
more than 66.6%.
Required Term A Banks means (a) at any time when no Bank has a Term A
Percentage of more than 25%, Banks having an aggregate Term A Percentage of more
than 50%, and (b) at any time when any Bank has a Term A Percentage of more than
25%, Banks having an aggregate Term A Percentage of more than 66.6%.
Required Term B Banks means (a) at any time when no Bank has a Term B
Percentage of more than 25%, Banks having an aggregate Term B Percentage of more
than 50%, and (b) at any time when any Bank has a Term B Percentage of more than
25%, Banks having an aggregate Term B Percentage of more than 66.6%.
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<PAGE> 25
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).
RESTEC Companies means Residual Technologies, Limited Partnership, New
England Treatment Company, Inc., New Haven Residuals, Limited Partnership.,
Netco - Waterbury, Limited Partnership, Netco - Residuals Management, Limited
Partnership, New Haven Residuals Systems Inc., Fairhaven Residuals Limited
Partnership, Residual Technologies Systems, Inc., Fairhaven Residual Systems,
Inc., Netco-Connecticut, Inc., Netco-Waterbury Systems, Inc. and Netco-Residuals
Management Systems, Inc.
Restated Security Agreement means the Restated Security Agreement among
the Company, various subsidiaries and the Administrative Agent, substantially in
the form of Exhibit D.
Revolving Commitment means, as to any Bank, such Bank's commitment to
make Revolving Loans, to participate in Swing Line Loans and to issue or
participate in Letters of Credit under this Agreement.
Revolving Commitment Amount means $10,000,000, as such amount may be
reduced from time to time pursuant to Section 6.2.
Revolving Loan - see Section 2.1.1.
Revolving Outstandings means, at any time, the aggregate outstanding
principal amount of all Revolving Loans and Swing Line Loans plus the aggregate
Stated Amount of all Letters of Credit.
Revolving Percentage means, as to any Bank, the percentage which (a)
the Revolving Commitment of such Bank (or, after termination of the Revolving
Commitments, the principal amount of such Bank's Revolving Loans) is of (b) the
aggregate amount of Revolving Commitments (or after termination of the Revolving
Commitments, the aggregate principal amount of all Revolving Loans); provided
that, if and so long as any Bank fails to fund its participation in any Letter
of Credit or Swing Line Loan when required by Section 2.3.5 or 2.4.3, such
Bank's Revolving Percentage shall be deemed for purposes of this definition to
be reduced to the extent of the defaulted amount and the Revolving Percentage of
the Issuing Bank or the Swing Line Bank, as applicable, shall be deemed for
purposes of this definition to be increased to such extent. The initial
Revolving Percentage of each Bank is set forth across from such Bank's name on
Schedule 2.1.
Revolving Termination Date means the earlier to occur of (a) July 27,
2006 or (b) such other date on which the Revolving Commitments terminate
pursuant to Section 6 or 12.
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SEC means the Securities and Exchange Commission.
Secondary Acquired Companies means Rehbein, Inc., Ecosystematics, Inc.,
AKH Water Management, Inc., Davis Water Analysis, Inc. and Whiteford
Environmental, Inc.
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.
Series C Preferred Stock means the Series C preferred stock, $.002 par
value per share, of the Company issued pursuant to the Certificate of
Designation dated January 27, 2000.
Series D Preferred Stock means the Series D preferred stock, $.002 par
value per share, of the Company issued pursuant to the Certificate of
Designation dated January 27, 2000.
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 and its
Affiliates.
Stated Amount means, with respect to any Letter of Credit at any date
of determination, the maximum aggregate amount available for drawing thereunder
at any time during the then ensuing term of such Letter of Credit under any and
all circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
Subordinated Debt means (a) the Subordinated Loans, and (b) any other
Debt of the Company which has maturities and other terms, and which is
subordinated to the obligations of the Company and its Subsidiaries hereunder
and under the other Loan Documents in a manner, approved in writing by the
Required Banks.
Subordinated Loan Agreement means the Senior Subordinated Loan
Agreement dated as of January 27, 2000 between the Company and GTCR.
Subordinated Loans means the loans, in maximum aggregate principal
amount of up to $125,000,000 made to the Company pursuant to the Subordinated
Loan Agreement.
Subordination Agreement means the Subordination and Intercreditor
Agreement dated as of January 27, 2000 between GTCR and the Administrative
Agent.
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
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<PAGE> 27
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.
Subsidiary Pledge Agreement means each pledge agreement substantially
in the form of Exhibit F issued by any Subsidiary.
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.
Swing Line Bank means Bank of America in its capacity as swing line
lender hereunder, together with any replacement swing line lender arising under
Section 13.9.
Swing Line Loan - see Section 2.4.1.
Syndication Agent means CIBC World Markets Corp. in its capacity as
syndication agent for the Banks hereunder.
Term A Commitment means, as to any Bank, such Bank's obligation to make
Term A Loans pursuant to Section 2.1.3(a).
Term A Commitment Amount means $40,000,000, as such amount may be
reduced from time to time pursuant to Section 6.2.
Term A Loan - see Section 2.1.3(a).
Term A Percentage means, as to any Bank, the percentage which (a) the
Term A Commitment of such Bank (or, after the Term A Termination Date, the
principal amount of such Bank's Term A Loans) is of (b) the aggregate amount of
Term A Commitments (or after the Termination Date, the aggregate principal
amount of all Term A Loans). The initial Term A Percentage of each Bank is set
forth across from such Bank's name on Schedule 2.1.
Term A Termination Date means the earliest to occur of (a) April 27,
2000, (b) the consummation of the acquisition by the Company of the Secondary
Acquired Companies, or (c) such other date on which the Term A Commitments
terminate pursuant to Section 6 or 12;
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provided that subject to the foregoing clause (c), if the RESTEC Bonds have not
been repaid or defeased, the Term A Termination Date shall be extended to the
date that is 150 days following the Effective Date (or such later date as the
Required Banks may from time to time approve, but not later than 360 days the
following Effective Date) and Term A Loans borrowed during such extended period
may be used only for the purpose of repaying or defeasing the RESTEC Bonds.
Term B Loan - see Section 2.1.3(b).
Term B Percentage means, as to any Bank, the percentage which (a) the
Term B Commitment of such Bank (or, after the making of the Term B Loans, the
principal amount of such Bank's Term B Loan) is of (b) the aggregate amount of
Term B Commitments (or after the making of the Term B Loans, the aggregate
principal amount of all Term B Loans). The initial Term B Percentage of each
Bank is set forth across from such Bank's name on Schedule 2.1.
Term Loans means, collectively, the Term A Loans and the Term B Loans.
Total Percentage means, as to any Bank, the percentage which (a) the
Revolving Commitment of such Bank plus the Acquisition Commitment of such Bank
plus the unpaid principal amount of the Term Loans of such Bank (plus, after the
termination of the Revolving Commitments, the sum of the unpaid principal amount
of the Revolving Loans and the Swing Line Loans of such Bank plus the
participations of such Bank in all Letters of Credit, plus, after the
termination of the Acquisition Commitments, the sum of the unpaid principal
amount of the Acquisition Loans of such Bank) is of (b) the sum of the
Commitments of all Banks plus the unpaid principal amount of all Term Loans
(plus, after the termination of the Revolving Commitments, the sum of the unpaid
principal amount of all Revolving Loans plus all Swing Line Loans plus the
Stated Amount of all Letters of Credit, plus, after the termination of the
Acquisition Commitments, the sum of the unpaid principal amount of all
Acquisition Loans); provided that if and so long as any Bank fails to fund its
participation in any Letter of Credit or Swing Line Loan when required by
Section 2.3.5 or 2.4.3, such Bank's Total Percentage shall be deemed for
purposes of this definition to be reduced to the extent of the defaulted amount
and the Total Percentage of the Issuing Bank or the Swing Line Bank, as
applicable, shall be deemed for purposes of this definition to be increased to
such extent.
Type of Loan or Borrowing - see Section 2.2.1. The types of Loans or
borrowings under this Agreement are as follows: Base Rate Loans or borrowings
and Eurodollar Loans or borrowings.
Unmatured Event of Default means any event that, if it continues
uncured, will, with lapse of time or notice or both, constitute an Event of
Default.
1.2 Other Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
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(b) Section, Schedule and Exhibit references are to this Agreement
unless otherwise specified.
(c) (i) The term "including" is not limiting and means "including
without limitation."
(ii) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words "to"
and "until" each mean "to but excluding", and the word "through" means "to and
including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such statute
or regulation.
(e) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(f) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company, the Banks and the other parties thereto and are the products
of all parties. Accordingly, they shall not be construed against the
Administrative Agent or the Banks merely because of the Administrative Agent's
or Banks' involvement in their preparation.
1.3 Reallocation of Percentages and Revolving Loans .
(a) The Company and each Bank agree that, effective on the Effective
Date, (i) this Agreement shall amend and restate in its entirety the Existing
Agreement and (ii) the Percentages of the Banks shall be reallocated in
accordance with the terms hereof.
(b) To facilitate the reallocation described in clause (a), on the
Effective Date, (i) all loans under the Existing Agreement shall be deemed to be
Term B Loans (and to the extent in excess of $30,000,000 in the aggregate, Term
A Loans), (ii) each Bank which is a party to the Existing Agreement (an
"Existing Bank") shall transfer to the Administrative Agent an amount equal to
the excess, if any, of such Bank's Percentage of all outstanding Term A Loans
and Term B Loans hereunder (including any Term A Loans and Term B
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Loans requested by the Company on the Effective Date) over the amount of all of
such Bank's loans under the Existing Agreement, (iii) each Bank which is not a
party to the Existing Agreement shall transfer to the Administrative Agent an
amount equal to such Bank's Percentage of all outstanding Term A Loans and Term
B Loans hereunder (including any Term A Loans and Term B Loans requested by the
Company on the Effective Date), (iv) the Administrative Agent shall apply the
funds received from the Banks pursuant to clauses (ii) and (iii), first, on
behalf of the Banks (pro rata according to the amount of the loans each is
required to purchase to achieve the reallocation described in clause (a)), to
purchase from each Existing Bank which has loans under the Existing Agreement in
excess of such Bank's Percentage of all then-outstanding Term A Loans and Term B
Loans hereunder (including any Term A Loans and Term B Loans requested by the
Company on the Effective Date), a portion of such loans equal to such excess,
second, to pay to each Existing Bank all interest, fees and other amounts
(including amounts payable pursuant to Section 8.4 of the Existing Agreement,
assuming for such purpose that the loans under the Existing Agreement were
prepaid rather than reallocated on the Effective Date) owed to such Existing
Bank under the Existing Agreement (whether or not otherwise then due) and,
third, as the Company shall direct, (v) the Company shall select new Interest
Periods to apply to all Term A Loans and Term B Loans hereunder (or, to the
extent the Company fails to do so, such Loans shall be Base Rate Loans).
SECTION 2 COMMITMENTS OF THE BANKS; BORROWING AND CONVERSION PROCEDURES;
LETTER OF CREDIT PROCEDURES; SWING LINE LOANS.
2.1 Commitments. On and subject to the terms and conditions of this
Agreement, each of the Banks, severally and for itself alone, agrees to make
loans to, and to issue or participate in the issuance of letters of credit for
the account of, the Company as follows:
2.1.1 Revolving Loans. Each Bank will make loans on a revolving basis
("Revolving Loans") from time to time before the Revolving Termination Date in
such Bank's Revolving Percentage of such aggregate amounts as the Company may
from time to time request from all Banks; provided that the Revolving
Outstandings shall not at any time exceed the Revolving Commitment Amount.
2.1.2 L/C Commitment. (a) The Issuing Banks will issue standby letters
of credit, in each case containing such terms and conditions as are permitted by
this Agreement and are reasonably satisfactory to the applicable Issuing Bank
and the Company (each a "Letter of Credit"), at the request of and for the
account of the Company (or jointly for the account of the Company and any
Subsidiary) from time to time before the date which is 30 days prior to the
scheduled Revolving Termination Date and (b) as more fully set forth in Section
2.3.5, each Bank agrees to purchase a participation in each such Letter of
Credit; provided that (i) the aggregate Stated Amount of all Letters of Credit
shall not at any time exceed $5,000,000 and (ii) the Revolving Outstandings
shall not at any time exceed the Revolving Commitment Amount.
2.1.3 Term Loans. (a) Each Bank will make term loans ("Term A Loans")
from time to time during the period from the Effective Date through the Term A
Termination Date in such
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Bank's Term A Percentage of such aggregate amounts as the Company may from time
to time request from all Banks; provided that the aggregate amount of all Term A
Loans made hereunder shall not exceed the Term A Commitment Amount.
(b) Each Bank will make a single term loan (each a "Term B Loan") on
the Effective Date in such Bank's Term B Percentage of $30,000,000.
(c) Amounts repaid with respect to Term A Loans or Term B Loans may not
be reborrowed.
2.1.4 Acquisition Loans. (a) Each Bank will make loans on a revolving
basis ("Acquisition Loans") from time to time before the Acquisition Termination
Date in such Bank's Acquisition Percentage of such aggregate amounts as the
Company may from time to time request from all Banks; provided that the
Acquisition Loans shall not at any time exceed the Acquisition Commitment
Amount.
(b) Amounts repaid with respect to EPIC Acquisition Loans may not be
reborrowed. Amounts repaid with respect to Acquisition Loans on and after the
Acquisition Termination Date may not be reborrowed.
2.2 Loan Procedures .
2.2.1 Various Types of Loans Each Revolving Loan, Acquisition Loan,
Term A Loan and Term B Loan shall be either a Base Rate Loan or a Eurodollar
Loan (each a "type" of Loan), as the Company shall specify in the related notice
of borrowing or conversion pursuant to Section 2.2.2 or 2.2.3. Eurodollar Loans
having the same Interest Period are sometimes called a "Group" or collectively
"Groups". Base Rate Loans and Eurodollar Loans may be outstanding at the same
time, provided that (i) not more than ten different Groups of Eurodollar Loans
shall be outstanding at any one time, (ii) the aggregate principal amount of
each Group of Eurodollar Loans shall at all times be at least $1,000,000 and an
integral multiple of $500,000 and (iii) unless the Administrative Agent
otherwise consents, during the 90 days immediately following the Effective Date,
the Company may not select any Interest Period longer than one month. All
borrowings, conversions and repayments of Loans shall be effected so that each
Bank will have a pro rata share (according to its Percentage) of all types and
Groups of Loans.
2.2.2 Borrowing Procedures. The Company shall give written notice or
telephonic notice (followed promptly by written confirmation thereof) to the
Administrative Agent of each proposed borrowing not later than (a) in the case
of a Base Rate borrowing, 10:00 A.M., Chicago time, on the proposed date of such
borrowing, and (b) in the case of a Eurodollar borrowing, 10:00 A.M., Chicago
time, at least three Business Days prior to the proposed date of such borrowing.
Each such notice shall be effective upon receipt by the Administrative Agent,
shall be irrevocable, and shall specify the date, amount and type of borrowing
and, in the case of a Eurodollar borrowing, the initial Interest Period
therefor. Promptly upon receipt of such notice,
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the Administrative Agent shall advise each Bank thereof. Not later than 1:00
p.m., Chicago time, on the date of a proposed borrowing, each Bank shall provide
the Administrative Agent at the office specified by the Administrative Agent
with immediately available funds covering such Bank's Percentage of such
borrowing and, so long as the Administrative Agent has not received written
notice that the conditions precedent set forth in Section 11 with respect to
such borrowing have not been satisfied, the Administrative Agent shall pay over
the requested amount to the Company on the requested borrowing date. Each
borrowing shall be on a Business Day. Each borrowing shall be in an aggregate
amount of at least $500,000 and an integral multiple of $100,000.
2.2.3 Conversion and Continuation Procedures. (a) Subject to the
provisions of Section 2.2.1, the Company may, upon irrevocable written notice to
the Administrative Agent in accordance with clause (b) below:
(i) elect, as of any Business Day, to convert any
outstanding Loan into a Loan of a different type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Group of Eurodollar Loans having
an Interest Period expiring on such day (or any part thereof in
an aggregate amount not less than $500,000 or a higher integral
multiple of $100,000) for a new Interest Period.
(b) The Company shall give written or telephonic (followed promptly by
written confirmation thereof) notice to the Administrative Agent of each
proposed conversion or continuation not later than (i) in the case of conversion
into Base Rate Loans, 10:00 a.m., Chicago time, on the proposed date of such
conversion; and (ii) in the case of a conversion into or continuation of
Eurodollar Loans, 10:00 a.m., Chicago time, at least three Business Days prior
to the proposed date of such conversion or continuation, specifying in each
case:
(1) the proposed date of conversion or continuation;
(2) the aggregate amount of Loans to be converted or continued;
(3) the type of Loans resulting from the proposed conversion or
continuation; and
(4) in the case of conversion into, or continuation of,
Eurodollar Loans, the duration of the requested Interest Period
therefor.
(c) If upon expiration of any Interest Period applicable to any
Eurodollar Loan, the Company has failed to select timely a new Interest Period
to be applicable to such Eurodollar Loan, the Company shall be deemed to have
elected to convert such Eurodollar Loan into a Base Rate Loan effective on the
last day of such Interest Period.
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(d) The Administrative Agent will promptly notify each Bank of its receipt
of a notice of conversion or continuation pursuant to this Section 2.4 or, if no
timely notice is provided by the Company, of the details of any automatic
conversion.
(e) Unless the Required Banks otherwise consent, during the existence of
any Event of Default or Unmatured Event of Default, the Company may not elect to
have a Base Rate Loan converted into or continued as a Eurodollar Loan.
2.3 Letter of Credit Procedures.
2.3.1 L/C Applications. The Company shall give notice to the Administrative
Agent and the applicable Issuing Bank of the proposed issuance of each Letter of
Credit on a Business Day which is at least three Business Days (or such lesser
number of days as the Administrative Agent and such Issuing Bank shall agree in
any particular instance) prior to the proposed date of issuance of such Letter
of Credit. Each such notice shall be accompanied by an L/C Application, duly
executed by the Company (together with any Subsidiary for the account of which
the related Letter of Credit is to be issued) and in all respects satisfactory
to the Administrative Agent and the applicable Issuing Bank, together with such
other documentation as the Administrative Agent or such Issuing Bank may
reasonably request in support thereof, it being understood that each L/C
Application shall specify, among other things, the date on which the proposed
Letter of Credit is to be issued, the expiration date of such Letter of Credit
(which shall not be later than seven days prior to the Revolving Termination
Date) and whether such Letter of Credit is to be transferable in whole or in
part. So long as the applicable Issuing Bank has not received written notice
that the conditions precedent set forth in Section 11 with respect to the
issuance of such Letter of Credit have not been satisfied, such Issuing Bank
shall issue such Letter of Credit on the requested issuance date. Each Issuing
Bank shall promptly advise the Administrative Agent of the issuance of each
Letter of Credit by such Issuing Bank and of any amendment thereto, extension
thereof or event or circumstance changing the amount available for drawing
thereunder.
2.3.2 Participations in Letters of Credit. Concurrently with the issuance
of each Letter of Credit, the applicable Issuing Bank shall be deemed to have
sold and transferred to each other Bank, and each other Bank shall be deemed
irrevocably and unconditionally to have purchased and received from such Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such other Bank's Revolving Percentage, in such Letter of Credit
and the Company's reimbursement obligations with respect thereto. For the
purposes of this Agreement, the unparticipated portion of each Letter of Credit
shall be deemed to be the applicable Issuing Bank's "participation" therein.
Each Issuing Bank hereby agrees, upon request of the Administrative Agent or any
Bank, to deliver to such Bank a list of all outstanding Letters of Credit issued
by such Issuing Bank, together with such information related thereto as such
Bank may reasonably request.
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2.3.3 Reimbursement Obligations. The Company hereby unconditionally and
irrevocably agrees to reimburse the applicable Issuing Bank for each payment or
disbursement made by such Issuing Bank under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made. Any amount not reimbursed on the date
of such payment or disbursement shall bear interest from the date of such
payment or disbursement to the date that such Issuing Bank is reimbursed by the
Company therefor, payable on demand, at a rate per annum equal to the Base Rate
from time to time in effect plus the Base Rate Margin from time to time in
effect plus, beginning on the third Business Day after receipt of notice from
the Issuing Bank of such payment or disbursement, 2%. The applicable Issuing
Bank shall notify the Company and the Administrative Agent whenever any demand
for payment is made under any Letter of Credit by the beneficiary thereunder;
provided that the failure of such Issuing Bank to so notify the Company shall
not affect the rights of such Issuing Bank or the Banks in any manner
whatsoever.
2.3.4 Limitation on Obligations of Issuing Banks. In determining whether to
pay under any Letter of Credit, no Issuing Bank shall have any obligation to the
Company or any Bank other than to confirm that any documents required to be
delivered under such Letter of Credit appear to have been delivered and appear
to comply on their face with the requirements of such Letter of Credit. Any
action taken or omitted to be taken by an Issuing Bank under or in connection
with any Letter of Credit, if taken or omitted in the absence of gross
negligence and willful misconduct, shall not impose upon such Issuing Bank any
liability to the Company or any Bank and shall not reduce or impair the
Company's reimbursement obligations set forth in Section 2.3.3 or the
obligations of the Banks pursuant to Section 2.3.5.
2.3.5 Funding by Banks to Issuing Banks. If an Issuing Bank makes any
payment or disbursement under any Letter of Credit and the Company has not
reimbursed such Issuing Bank in full for such payment or disbursement by 10:00
A.M., Chicago time, on the date of such payment or disbursement, or if any
reimbursement received by such Issuing Bank from the Company is or must be
returned or rescinded upon or during any bankruptcy or reorganization of the
Company or otherwise, each other Bank shall be obligated to pay to the
Administrative Agent for the account of such Issuing Bank, in full or partial
payment of the purchase price of its participation in such Letter of Credit, its
pro rata share (according to its Revolving Percentage) of such payment or
disbursement (but no such payment shall diminish the obligations of the Company
under Section 2.3.3), and upon notice from the applicable Issuing Bank, the
Administrative Agent shall promptly notify each other Bank thereof. Each other
Bank irrevocably and unconditionally agrees to so pay to the Administrative
Agent in immediately available funds for the applicable Issuing Bank's account
the amount of such other Bank's Revolving Percentage of such payment or
disbursement. If and to the extent any Bank shall not have made such amount
available to the Administrative Agent by 2:00 P.M., Chicago time, on the
Business Day on which such Bank receives notice from the Administrative Agent of
such payment or disbursement (it being understood that any such notice received
after noon, Chicago time, on any Business Day shall be deemed to have been
received on the next following Business Day), such Bank agrees to pay interest
on such amount to the Administrative Agent for the
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applicable Issuing Bank's account forthwith on demand for each day from the date
such amount was to have been delivered to the Administrative Agent to the date
such amount is paid, at a rate per annum equal to (a) for the first three days
after demand, the Federal Funds Rate from time to time in effect and (b)
thereafter, the Base Rate from time to time in effect. Any Bank's failure to
make available to the Administrative Agent its Revolving Percentage of any such
payment or disbursement shall not relieve any other Bank of its obligation
hereunder to make available to the Administrative Agent such other Bank's
Revolving Percentage of such payment, but no Bank shall be responsible for the
failure of any other Bank to make available to the Administrative Agent such
other Bank's Revolving Percentage of any such payment or disbursement.
2.4 Swing Line Loans.
2.4.1 Swing Line Loans. Subject to the terms and conditions of this
Agreement, the Swing Line Bank may from time to time, in its discretion, make
loans to the Company (collectively the "Swing Line Loans" and individually each
a "Swing Line Loan") in accordance with this Section 2.4 in an aggregate amount
not at any time exceeding $5,000,000; provided that the Revolving Outstandings
shall not at any time exceed the Revolving Commitment Amount. Amounts borrowed
under this Section 2.4 may be borrowed, repaid and (subject to the agreement of
the Swing Line Bank) reborrowed until the Revolving Termination Date.
2.4.2 Swing Line Loan Procedures. The Company shall give written or
telephonic notice to the Administrative Agent (which shall promptly inform the
Swing Line Bank) of each proposed Swing Line Loan not later than 12:00 noon,
Chicago time, on the proposed date of such Swing Line Loan. Each such notice
shall be effective upon receipt by the Administrative Agent and shall specify
the date and amount of such Swing Line Loan, which shall be not less than
$100,000 or a higher integral multiple thereof. So long as the Swing Line Bank
has not received written notice that the conditions precedent set forth in
Section 11 with respect to the making of such Swing Line Loan have not been
satisfied, the Swing Line Bank may make the requested Swing Line Loan. If the
Swing Line Bank agrees to make the requested Swing Line Loan, the Swing Line
Bank shall pay over the requested amount to the Company on the requested
borrowing date. Concurrently with the making of any Swing Line Loan, the Swing
Line Bank shall be deemed to have sold and transferred, and each other Bank
shall be deemed to have purchased and received from the Swing Line Bank, an
undivided interest and participation to the extent of such other Bank's
Revolving Percentage in such Swing Line Loan (but such participation shall
remain unfunded until required to be funded pursuant to Section 2.4.3).
2.4.3 Refunding of, or Funding of Participations in, Swing Line Loans.
The Swing Line Bank may at any time, in its sole discretion, on behalf of the
Company (which hereby irrevocably authorizes the Swing Line Bank to act on its
behalf) deliver a notice to the Administrative Agent requesting that each Bank
(including the Swing Line Bank in its individual capacity) make a Revolving Loan
(which shall be a Floating Rate Loan) in such Bank's Revolving Percentage of the
aggregate amount of Swing Line Loans outstanding on such date for the purpose of
repaying all Swing Line Loans (and, upon receipt of the proceeds of such
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Revolving Loans, the Administrative Agent shall apply such proceeds to repay
Swing Line Loans); provided that if the conditions precedent to a borrowing of
Revolving Loans are not then satisfied or for any other reason the Banks may not
then make Revolving Loans, then instead of making Revolving Loans each Bank
(other than the Swing Line Bank) shall become immediately obligated to fund its
participation in all outstanding Swing Line Loans and shall pay to the
Administrative Agent for the account of the Swing Line Bank an amount equal to
such Bank's Revolving Percentage of such Swing Line Loans. If and to the extent
any Bank shall not have made such amount available to the Administrative Agent
by 2:00 P.M., Chicago time, on the Business Day on which such Bank receives
notice from the Administrative Agent of its obligation to fund its participation
in Swing Line Loans (it being understood that any such notice received after
12:00 noon, Chicago time, on any Business Day shall be deemed to have been
received on the next following Business Day), such Bank agrees to pay interest
on such amount to the Administrative Agent for the Swing Line Bank's account
forthwith on demand for each day from the date such amount was to have been
delivered to the Administrative Agent to the date such amount is paid, at a rate
per annum equal to (a) for the first three days after demand, the Federal Funds
Rate from time to time in effect and (b) thereafter, the Base Rate from time to
time in effect. Any Bank's failure to make available to the Administrative Agent
its Revolving Percentage of the amount of all outstanding Swing Line Loans shall
not relieve any other Bank of its obligation hereunder to make available to the
Administrative Agent such other Bank's Revolving Percentage of such amount, but
no Bank shall be responsible for the failure of any other Bank to make available
to the Administrative Agent such other Bank's Revolving Percentage of any such
amount.
2.4.4 Repayment of Participations. Upon (and only upon) receipt by the
Administrative Agent for the account of the Swing Line Bank of immediately
available funds from or on behalf of the Company (a) in reimbursement of any
Swing Line Loan with respect to which a Bank has paid the Administrative Agent
for the account of the Swing Line Bank the amount of such Bank's participation
therein or (b) in payment of any interest on a Swing Line Loan, the
Administrative Agent will pay to such Bank its pro rata share (according to its
Revolving Percentage) thereof (and the Swing Line Bank shall receive the amount
otherwise payable to any Bank which did not so pay the Administrative Agent the
amount of such Bank's participation in such Swing Line Loan).
2.4.5 Participation Obligations Unconditional. (a) Each Bank's obligation
to make available to the Administrative Agent for the account of the Swing Line
Bank the amount of its participation interest in all Swing Line Loans as
provided in Section 2.4.3 shall be absolute and unconditional and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Swing
Line Bank or any other Person, (ii) the occurrence or continuance of an Event of
Default or Unmatured Event of Default, (iii) any adverse change in the condition
(financial or otherwise) of the Company or any Subsidiary thereof, (iv) any
termination of the Revolving Commitments or (v) any other circumstance,
happening or event whatsoever.
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(b) Notwithstanding the provisions of clause (a) above, no Bank shall be
required to purchase a participation interest in any Swing Line Loan if, prior
to the making by the Swing Line Bank of such Swing Line Loan, the Swing Line
Bank received written notice specifying that one or more of the conditions
precedent to the making of such Swing Line Loan were not satisfied and, in fact,
such conditions precedent were not satisfied at the time of the making of such
Swing Line Loan.
2.5 Commitments Several. The failure of any Bank to make a requested Loan
on any date shall not relieve any other Bank of its obligation (if any) to make
a Loan on such date, but no Bank shall be responsible for the failure of any
other Bank to make any Loan to be made by such other Bank.
2.6 Certain Conditions. Notwithstanding any other provision of this
Agreement, no Bank shall have an obligation to make any Loan, and no Issuing
Bank shall have any obligation to issue any Letter of Credit, if an Event of
Default or Unmatured Event of Default exists.
SECTION 3 NOTES EVIDENCING LOANS.
3.1 Notes. The Loans of each Bank shall be evidenced by a promissory note
substantially in the form set forth in Exhibit A-1, with appropriate insertions,
payable to the order of such Bank in the principal amount of all of such Bank's
Loans hereunder.
3.2 Recordkeeping. Each Bank shall record in its records, or at its option
on the schedule attached to its Note, the date and amount of each Loan made by
such Bank, each repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans
evidenced by such Note together with all interest accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company promises to pay interest on the unpaid
principal amount of each Loan for the period commencing on the date such Loan is
advanced until such Loan is paid in full as follows:
(a) in the case of Revolving Loans, Acquisition Loans and Term Loans,
(i) at all times such Loan is a Base Rate Loan, at a rate per annum equal
to the sum of the Base Rate from time to time in effect plus the applicable
Base Rate Margin from time to time in effect; and (ii) at all times such
Loan is a Eurodollar Loan, at a rate per annum equal to
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the sum of the Eurodollar Rate (Reserve Adjusted) applicable to each
Interest Period for such Loan plus the applicable Eurodollar Margin from
time to time in effect; and
(b) in the case of Swing Line Loans, at a rate per annum equal to the
sum of the Base Rate from time to time in effect plus the applicable Base
Rate Margin from time to time in effect;
provided that, unless the Required Banks otherwise agree in writing, at any time
an Event of Default exists the interest rate applicable to each Loan shall be
increased by 2%.
4.2 Interest Payment Dates. Accrued interest on each Base Rate Loan and
Swing Line Loan shall be payable in arrears on the last Business Day of each
calendar month and at maturity. Accrued interest on each Eurodollar Loan shall
be payable on the last day of each Interest Period relating to such Loan (and,
in the case of a Eurodollar Loan with a six-month Interest Period, on the
three-month anniversary of the first day of such Interest Period) and at
maturity. After maturity, accrued interest on all Loans shall be payable on
demand.
4.3 Setting and Notice of Eurodollar Rates. The applicable Eurodollar Rate
for each Interest Period shall be determined by the Administrative Agent, and
notice thereof shall be given by the Administrative Agent promptly to the
Company and each Bank. Each determination of the applicable Eurodollar Rate by
the Administrative Agent shall be conclusive and binding upon the parties
hereto, in the absence of demonstrable error. The Administrative Agent shall,
upon written request of the Company or any Bank, deliver to the Company or such
Bank a statement showing the computations used by the Administrative Agent in
determining any applicable Eurodollar Rate hereunder.
4.4 Computation of Interest. All determinations of interest for Base Rate
Loans and Swing Line Loans when the Base Rate is determined by the Reference
Rate shall be made on the basis of a year of 365 or 366 days, as the case may
be, and the actual number of days elapsed. All other computations of interest
shall be computed for the actual number of days elapsed on the basis of a year
of 360 days. The applicable interest rate for each Base Rate Loan shall change
simultaneously with each change in the Base Rate.
SECTION 5 FEES.
5.1 Non-Use Fee. The Company agrees to pay to the Administrative Agent for
the account of each Bank a non-use fee, for the period from the Effective Date
to the latest of the Revolving Termination Date, the Acquisition Termination
Date and the Term A Termination Date, at a rate per annum equal to the Non-Use
Fee Rate in effect from time to time of the daily average of such Bank's
Revolving Percentage of the unused amount of the Revolving Commitment Amount
and/or such Bank's Acquisition Percentage of the unused amount of the
Acquisition Commitment Amount and/or such Bank's Term A Percentage of the unused
amount of the Term A Commitment Amount. For purposes of calculating usage under
this Section, the
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Revolving Commitment Amount shall be deemed used to the extent of the sum of the
aggregate outstanding principal amount of all Revolving Loans and the Stated
Amount of Letters of Credit at such time, the Acquisition Commitment Amount
shall be deemed used to the extent of the aggregate outstanding principal amount
of all Acquisition Loans at such time, and the Term A Commitment Amount shall be
deemed used to the extent of the aggregate outstanding principal amount of all
Term A Loans at such time. Such non-use fee shall be payable in arrears on the
last Business Day of each calendar quarter and on the latest of the Revolving
Termination Date, the Acquisition Termination Date and the Term A Termination
Date for any period then ending for which such non-use fee shall not have
theretofore been paid. The non-use fee shall be computed for the actual number
of days elapsed on the basis of a year of 360 days.
5.2 Letter of Credit Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of the Banks pro rata according to their
respective Revolving Percentages a letter of credit fee for each Letter of
Credit in an amount equal to the applicable LC Fee Rate (based on the type of
Letter of Credit) per annum in effect from time to time of the undrawn amount of
such Letter of Credit (computed for the actual number of days elapsed on the
basis of a year of 360 days); provided that, unless the Required Banks otherwise
agree in writing, the rate applicable to each Letter of Credit shall be
increased by 2% at any time that an Event of Default exists. Such letter of
credit fee shall be payable in arrears on the last Business Day of each calendar
quarter and on the Revolving Termination Date (and, if any Letter of Credit
remains outstanding on the Revolving Termination Date, thereafter on demand) for
the period from the date of the issuance of each Letter of Credit to the date
such payment is due or, if earlier, the date on which such Letter of Credit
expired or was terminated.
(b) The Company agrees to pay each Issuing Bank a fronting fee for each
Letter of Credit issued by such Issuing Bank in the amount separately agreed to
between the Company and such Issuing Bank.
(c) In addition, with respect to each Letter of Credit, the Company agrees
to pay to the applicable Issuing Bank, for its own account, such fees and
expenses as such Issuing Bank customarily requires in connection with the
issuance, negotiation, processing and/or administration of letters of credit in
similar situations.
5.3 Up-Front and Funding Fees. The Company agrees to pay to the
Administrative Agent for the account of the Banks pro rata according to their
respective percentages such up-front and funding fees as are mutually agreed to
by the Company and the Banks.
5.4 Administrative Agents Fees. The Company agrees to pay to the
Administrative Agent such agent's fees as are mutually agreed to from time to
time by the Company and the Administrative Agent.
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SECTION 6 REPAYMENT OF LOANS; REDUCTION AND TERMINATION OF THE
COMMITMENTS; PREPAYMENTS.
6.1 Repayment of Loans. (a) The Term A Loan of each Bank shall be repaid in
installments on the dates set forth on Schedule 6.1(a) in an amount equal to the
percentage of the original principal amount of all Term A Loans set forth
opposite such dates, in each case in such Bank's Term A Percentage of the
aggregate principal amount of the Term A Loans to be repaid on the applicable
date.
(b) The Term B Loan of each Bank shall be repaid in installments in an
amount and on the dates set forth on Schedule 6.1(b), in each case in such
Bank's Term B Percentage of the aggregate principal amount of the Term B Loans
to be repaid on the applicable date.
(c) The EPIC Acquisition Loans of each Bank shall be repaid in installments
on the dates set forth on Schedule 6.1(c)(EPIC) in an amount equal to the
percentage of the aggregate principal amount of all EPIC Acquisition Loans
outstanding on the initial installment payment date, set forth opposite such
dates, in each case in such Bank's Acquisition Percentage of the aggregate
principal amount of the EPIC Acquisition Loans to be repaid on the applicable
date. Other Acquisition Loans of each Bank shall be repaid in installments on
the dates set forth on Schedule 6.1(c)(Other)in an amount equal to the
percentage of the original principal amount of all Acquisition Loans outstanding
on the Acquisition Termination Date set forth opposite such dates, in each case
in such Bank's Acquisition Percentage of the aggregate principal amount of the
Other Acquisition Loans to be repaid on the applicable date.
(d) All Revolving Loans and Swing Line Loans outstanding on the Revolving
Termination Date shall be repaid in full on the Revolving Termination Date.
6.2 Reductions of the Commitment.
6.2.1 Voluntary Reduction or Termination of the Revolving Commitments. The
Company may from time to time on at least five Business Days' prior written
notice received by the Administrative Agent (which shall promptly advise each
Bank thereof) permanently reduce the Revolving Commitment Amount to an amount
not less than the Revolving Outstandings. Any such reduction shall be in an
amount not less than $5,000,000 or a higher integral multiple of $1,000,000. The
Company may at any time on like notice terminate the Revolving Commitments upon
payment in full of all Revolving Loans and Swing Line Loans and all other
obligations of the Company hereunder in respect of such Loans and cash
collateralization in full, pursuant to documentation in form and substance
reasonably satisfactory to the Issuing Banks, of all obligations arising with
respect to the Letters of Credit. All reductions of the Revolving Commitment
Amount shall reduce the Revolving Commitments pro rata among the Banks according
to their respective Revolving Percentages.
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6.2.2 Mandatory Reductions of the Revolving Commitment Amount. Concurrently
with the receipt by the Company or any Subsidiary of any Applicable Revolving
Proceeds, the Revolving Commitment Amount shall be reduced by an amount equal to
100% of such Applicable Revolving Proceeds (rounded down, if necessary, to an
integral multiple of $100,000); provided that no such reduction shall be
required unless the aggregate amount of such Applicable Revolving Proceeds so
received together with all Applicable Revolving Proceeds previously received and
not previously applied to reduce the Revolving Commitment Amount pursuant to
this Section 6.2.1 exceeds $100,000.
6.2.3 Voluntary Reduction of the Term A Commitments. The Company may from
time to time on at least five Business Days' prior written notice received by
the Administrative Agent (which shall promptly advise each Bank thereof)
permanently reduce the Term A Commitment Amount. Any such reduction shall be in
the amount of $1,000,000 or an integral multiple thereof. All reductions of the
Term A Commitment Amount shall reduce the Term A Commitments pro rata among the
Banks according to their respective Term A Percentages.
6.2.4 Mandatory Termination of the Term A Commitments. The Term A
Commitments shall terminate on the Term A Termination Date.
6.2.5 Voluntary Reduction of the Acquisition Commitments. The Company may
from time to time on at least five Business Days' prior written notice received
by the Administrative Agent (which shall promptly advise each Bank thereof)
permanently reduce the Acquisition Commitment Amount. Any such reduction shall
be in the amount of $1,000,000 or an integral multiple thereof. All reductions
of the Acquisition Commitment Amount shall reduce the Acquisition Commitments
pro rata among the Banks according to their respective Acquisition Percentages.
6.2.6 Mandatory Reductions of the Acquisition Commitment Amount.
Concurrently with the receipt by the Company or any Subsidiary of any Applicable
Acquisition Proceeds prior to the Acquisition Termination Date, the Acquisition
Commitment Amount shall be reduced by an amount equal to 100% of such Applicable
Acquisition Proceeds (rounded down, if necessary, to an integral multiple of
$100,000); provided that no such reduction shall be required unless the
aggregate amount of such Applicable Acquisition Proceeds so received together
with all Applicable Acquisition Proceeds previously received and not previously
applied to reduce the Acquisition Commitment Amount pursuant to this Section
6.2.6 exceeds $100,000.
6.2.7 Mandatory Termination of the Acquisition Commitments . The
Acquisition Commitments shall terminate on the Acquisition Termination Date.
6.3 Prepayments.
6.3.1 Voluntary Prepayments. The Company may from time to time prepay Loans
in whole or in part, without premium or penalty, provided that the Company shall
give the
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Administrative Agent (which shall promptly advise each Bank) notice thereof not
later than 10:00 A.M. (or, in the case of prepayment of Swing Line Loans, 12:00
noon), Chicago time, on the date of such prepayment (which shall be a Business
Day), specifying the Loans to be prepaid (subject to Section 6.3.3) and the date
and amount of prepayment. Each partial prepayment of Revolving Loans shall be in
a principal amount of $100,000 or a higher integral multiple thereof. Each
partial prepayment of Term Loans shall be in a principal amount of $300,000 or a
higher integral multiple of $100,000. Each partial prepayment of Acquisition
Loans shall be in a principal amount of $300,000 or a higher integral multiple
of $100,000. Any prepayment of a Eurodollar Loan on a day other than the last
day of an Interest Period therefor shall include interest on the principal
amount being repaid and shall be subject to Section 8.4.
6.3.2 Mandatory Prepayments
(a) On each date on which the Revolving Commitment Amount is reduced
pursuant to Section 6.2.2, the Company shall prepay Revolving Loans in the
amount, if any, by which the Revolving Outstandings exceed the Revolving
Commitments after giving effect to such reduction. On each date on which the
Acquisition Commitment Amount is reduced pursuant to Section 6.2.6, the Company
shall prepay Acquisition Loans in the amount, if any, by which the Acquisition
Loans exceed the Acquisition Commitments after giving effect to such reduction.
(b) Within 95 days after the end of each Fiscal Year, the Company shall
make a prepayment of the Term Loans and (on and after the Acquisition
Termination Date) the Acquisition Loans in an amount equal to the Specified
Percentage (as defined below) of Excess Cash Flow for such Fiscal Year. The
"Specified Percentage" shall be (i) 75% until the date on which the Company has
delivered financial statements demonstrating that the Funded Debt to Adjusted
EBITDA Ratio has been less than 3.0 to 1.0 as of the last day of two consecutive
Fiscal Quarters and (ii) 50% thereafter.
(c) Concurrently with the receipt by the Company or any Subsidiary of any
Applicable Asset Sale Proceeds, the Company shall make a prepayment of the Term
Loans and (on and after the Acquisition Termination Date) the Acquisition 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 Term Loans and
Acquisition Loans pursuant to this clause (c) exceeds $100,000.
(d) 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 10.7), the Company shall make a prepayment of the Term Loans and (on and
after the Acquisition Termination Date) the Acquisition Loans in an amount equal
to 100% of such Net Cash Proceeds.
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(e) Concurrently with the receipt by the Company or any Subsidiary of any
Net Cash Proceeds from the issuance of any equity securities of the Company or
any Subsidiary (other than issuances to employees in aggregate amount not to
exceed $1,000,000, issuances to GTCR and its Affiliates, and issuances in
connection with acquisitions approved by the Required Banks), the Company shall
make a prepayment of the Term Loans and (on and after the Acquisition
Termination Date) the Acquisition Loans in an amount equal to 100% of such Net
Cash Proceeds.
(f) In the event a prepayment of Subordinated Loans would be required under
the Subordinated Loan Agreement by reason of excess cash flow, asset sale
proceeds, debt issuance proceeds or equity issuance proceeds, including under
Section 3.5 of the Subordinated Loan Agreement, but a prepayment of Loans
hereunder would not otherwise be required, the Company shall make a prepayment
of the Loans in the amount that would otherwise be required to be prepaid on the
Subordinated Loans, on the Business Day preceding the otherwise required date of
prepayment under the Subordinated Loan Agreement, such prepayment to be applied
among the Loans and/or to the reduction of the Revolving Commitment Amount and
the Acquisition Commitment Amount as provided for the source of prepayment in
the foregoing clauses (b) through (e) of this Section 6.3.2.
6.3.3 Application of Prepayments of Term Loans and Acquisition Loan. Each
prepayment of Term Loans and (on and after the Acquisition Termination Date)
Acquisition Loans shall be applied pro rata to the outstanding Term A Loans,
Term B Loans and Acquisition Loans, in each case to the remaining installments
thereof on a pro rata basis; provided that any Bank holding a Term B Loan may,
at its option by notice to the Administrative Agent on or before the date of the
applicable prepayment (but only if and to the extent that Term A Loans or
Acquisition Loans are outstanding), decline to accept the portion of any
prepayment required by Section 6.3.2, and in such event such portion shall be
applied to prepay Term A Loans and Acquisition Loans. Except as set forth in the
proviso to the preceding sentence, prepayments shall be applied pro rata to the
applicable Loans of all Banks in accordance with their Percentages.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal of or interest on the
Loans, and of all non-use fees and Letter of Credit fees, shall be made by the
Company to the Administrative Agent in immediately available funds at the office
specified by the Administrative Agent not later than noon, Chicago time, on the
date due; and funds received after that hour shall be deemed to have been
received by the Administrative Agent on the next following Business Day. The
Administrative Agent shall promptly remit to each Bank its share of all such
payments received in collected funds by the Administrative Agent for the account
of such Bank. All payments under Section 8.1 shall be made by the Company
directly to the Bank entitled thereto.
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7.2 Application of Certain Payments. Subject to the requirements of Section
6.3, each payment of principal shall be applied to such Loans as the Company
shall direct by notice to be received by the Administrative Agent on or before
the date of such payment or, in the absence of such notice, as the
Administrative Agent shall determine in its discretion. Concurrently with each
remittance to any Bank of its share of any such payment, the Administrative
Agent shall advise such Bank as to the application of such payment.
7.3 Due Date Extension. If any payment of principal or interest with
respect to any of the Loans, or of non-use fees or Letter of Credit fees, falls
due on a day which is not a Business Day, then such due date shall be extended
to the immediately following Business Day (unless, in the case of a Eurodollar
Loan, such immediately following Business Day is the first Business Day of a
calendar month, in which case such date shall be the immediately preceding
Business Day) and, in the case of principal, additional interest shall accrue
and be payable for the period of any such extension.
7.4 Setoff. The Company agrees that the Administrative Agent and each Bank
have all rights of set-off and bankers' lien provided by applicable law, and in
addition thereto, the Company agrees that at any time any Event of Default
exists, the Administrative Agent and each Bank may apply to the payment of any
obligations of the Company hereunder, whether or not then due, any and all
balances, credits, deposits, accounts or moneys of the Company then or
thereafter with the Administrative Agent or such Bank.
7.5 Proration of Payments. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise,
but excluding any payment pursuant to Section 8.7 or 14.9 or any payment to the
Swing Line Bank in respect of a Swing Line Loan) on account of principal of or
interest on any Loan (or on account of its participation in any Letter of Credit
or Swing Line Loan) in excess of its pro rata share of payments and other
recoveries obtained by all Banks on account of principal of and interest on
Loans (or such participations) then held by them, such Bank shall purchase from
the other Banks such participation in the Loans (or sub-participations in
Letters of Credit or Swing Line Loans) held by them as shall be necessary to
cause such purchasing Bank to share the excess payment or other recovery ratably
with each of them; provided that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Bank, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery.
7.6 Taxes. (a) All payments of principal of, and interest on, the Loans and
all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future income, excise, stamp or franchise taxes and
other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, but excluding franchise taxes and
taxes imposed on or measured by any Bank's net income or receipts (all
non-excluded items being called "Taxes"). If any withholding or deduction from
any payment to be made by the Company hereunder is required in respect of any
Taxes pursuant to any applicable law, rule or regulation, then the Company will:
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(i) pay directly to the relevant authority the full amount required to
be so withheld or deducted;
(ii) promptly forward to the Administrative Agent an official receipt
or other documentation satisfactory to the Administrative Agent evidencing
such payment to such authority; and
(iii) (except to the extent such withholding or deduction would not be
required if such Bank's Exemption Representation were true) pay to the
Administrative Agent for the account of the Banks such additional amount or
amounts as is necessary to ensure that the net amount actually received by
each Bank will equal the full amount such Bank would have received had no
such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Bank with respect to any payment received by the Administrative Agent or
such Bank hereunder, the Administrative Agent or such Bank may pay such Taxes
and the Company will (except to the extent such Taxes are payable by a Bank and
would not have been payable if such Bank's Exemption Representation were true)
promptly pay such additional amounts (including any penalty, interest and
expense) as is necessary in order that the net amount received by such Person
after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount such Person would have received had such Taxes not been
asserted.
(b) If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Banks, the required receipts or other required documentary
evidence, the Company shall indemnify the Banks for any incremental Taxes,
interest or penalties that may become payable by any Bank as a result of any
such failure. For purposes of this Section 7.6, a distribution hereunder by the
Administrative Agent or any Bank to or for the account of any Bank shall be
deemed a payment by the Company.
(c) Each Bank represents and warrants (such Bank's "Exemption
Representation") to the Company and the Administrative Agent that, as of the
date of this Agreement (or, in the case of an Assignee, the date it becomes a
party hereto), it is entitled to receive payments hereunder without any
deduction or withholding for or on account of any Taxes imposed by the United
States of America or any political subdivision or taxing authority thereof.
(d) Upon the request from time to time of the Company or the Administrative
Agent, each Bank that is organized under the laws of a jurisdiction other than
the United States of America shall execute and deliver to the Company and the
Administrative Agent one or more (as the Company or the Administrative Agent may
reasonably request) United States Internal Revenue Service Forms 4224 or Forms
1001 or such other forms or documents, appropriately completed, as may be
applicable to establish the extent, if any, to which a payment to such Bank is
exempt from withholding or deduction of Taxes.
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(e) If, and to the extent that, any Bank shall obtain a credit, relief or
remission for, or repayment of, any Taxes indemnified or paid by the Company
pursuant to this Section 7.6, such Bank agrees to promptly notify the Company
thereof and thereupon enter into negotiations in good faith with the Company to
determine the basis on which an equitable reimbursement of such Taxes can be
made to the Company.
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.
9.1 Increased Costs. (a) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Eurodollar Office of such Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
(A) shall subject any Bank (or any Eurodollar Office of such Bank) to
any tax, duty or other charge with respect to its Eurodollar Loans, its
Note or its obligation to make Eurodollar Loans, or shall change the basis
of taxation of payments to any Bank of the principal of or interest on its
Eurodollar Loans or any other amounts due under this Agreement in respect
of its Eurodollar Loans or its obligation to make Eurodollar Loans (except
for changes in the rate of tax on the overall net income of such Bank or
its Eurodollar Office imposed by the jurisdiction in which such Bank's
principal executive office or Eurodollar Office is located); or
(B) shall impose, modify or deem applicable any reserve (including any
reserve imposed by the FRB, but excluding any reserve included in the
determination of interest rates pursuant to Section 4), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by any Bank (or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D of the FRB, to impose a cost on) such Bank (or any
Eurodollar Office of such Bank) of making or maintaining any Eurodollar Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Eurodollar Office) under this Agreement or under its Note with respect thereto,
then within 10 Business Days after demand by such Bank (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to the Administrative Agent), the Company shall pay directly to such
Bank such additional amount as will compensate such Bank for such increased cost
or such reduction.
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(b) If any Bank shall reasonably determine that the adoption or phase-in of
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank or any
Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person's capital as a consequence of
such Bank's obligations hereunder or under any Letter of Credit to a level below
that which such Bank or such controlling Person could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's or such
controlling Person's policies with respect to capital adequacy) by an amount
deemed by such Bank or such controlling Person to be material, then from time to
time, within 10 Business Days after demand by such Bank (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall be
furnished to the Administrative Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such controlling
Person for such reduction.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to the Administrative Agent in the interbank eurodollar market for
such Interest Period, or the Administrative Agent otherwise reasonably
determines (which determination, if made in good faith, shall be binding
and conclusive on the Company) that by reason of circumstances affecting
the interbank eurodollar market adequate and reasonable means do not exist
for ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of 40% or more advise the
Administrative Agent that the Eurodollar Rate (Reserve Adjusted) as
determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Banks of maintaining or funding such Eurodollar
Loans for such Interest Period (taking into account any amount to which
such Banks may be entitled under Section 8.1) or that the making or funding
of Eurodollar Loans has become impracticable as a result of an event
occurring after the date of this Agreement which in the opinion of such
Banks materially affects such Loans;
then the Administrative Agent shall promptly notify the other parties thereof
and, so long as such circumstances shall continue, (i) no Bank shall be under
any obligation to make or convert into Eurodollar Loans and (ii) on the last day
of the current Interest Period for each Eurodollar Loan, such Loan shall, unless
then repaid in full, automatically convert to a Base Rate Loan.
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8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that
any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it (or in the good faith judgment of any
Bank cause a substantial question as to whether it is) unlawful for any Bank to
make, maintain or fund Eurodollar Loans, then such Bank shall promptly notify
each of the other parties hereto and, so long as such circumstances shall
continue, (a) such Bank shall have no obligation to make or convert into
Eurodollar Loans (but shall make Base Rate Loans concurrently with the making of
or conversion into Eurodollar Loans by the Banks which are not so affected, in
each case in an amount equal to such Bank's pro rata share of all Eurodollar
Loans which would be made or converted into at such time in the absence of such
circumstances) and (b) on the last day of the current Interest Period for each
Eurodollar Loan of such Bank (or, in any event, on such earlier date as may be
required by the relevant law, regulation or interpretation), such Eurodollar
Loan shall, unless then repaid in full, automatically convert to a Base Rate
Loan. Each Base Rate Loan made by a Bank which, but for the circumstances
described in the foregoing sentence, would be a Eurodollar Loan (an "Affected
Loan") shall remain outstanding for the same period as the Group of Eurodollar
Loans of which such Affected Loan would be a part absent such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by any Bank
(which demand shall be accompanied by a statement setting forth the basis for
the amount being claimed, a copy of which shall be furnished to the
Administrative Agent), the Company will indemnify such Bank against any net loss
or expense which such Bank may sustain or incur (including any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund or maintain any Eurodollar Loan), as
reasonably determined by such Bank, as a result of (a) any payment, prepayment
or conversion of any Eurodollar Loan of such Bank on a date other than the last
day of an Interest Period for such Loan (including any conversion pursuant to
Section 8.3) or (b) any failure of the Company to borrow or continue, or to
convert any Loan into, a Eurodollar Loan on a date specified therefor in a
notice of borrowing, continuation or conversion pursuant to this Agreement. For
this purpose, all notices to the Administrative Agent pursuant to this Agreement
shall be deemed to be irrevocable.
8.5 Right of Banks to Fund through Other Offices. Each Bank may, if it so
elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign
branch or affiliate of such Bank to make such Loan, provided that in such event
for the purposes of this Agreement such Loan shall be deemed to have been made
by such Bank and the obligation of the Company to repay such Loan shall
nevertheless be to such Bank and shall be deemed held by it, to the extent of
such Loan, for the account of such branch or affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had
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actually funded and maintained each Eurodollar Loan during each Interest Period
for such Loan through the purchase of deposits having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the Eurodollar
Rate for such Interest Period.
8.7 Mitigation of Circumstances; Replacement of Affected Bank. (a) Each
Bank shall promptly notify the Company and the Administrative Agent of any event
of which it has knowledge which will result in, and will use reasonable
commercial efforts available to it (and not, in such Bank's good faith judgment,
otherwise disadvantageous to such Bank) to mitigate or avoid, (i) any obligation
by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the
occurrence of any circumstance of the nature described in Section 8.2 or 8.3
(and, if any Bank has given notice of any such event described in clause (i) or
(ii) above and thereafter such event ceases to exist, such Bank shall promptly
so notify the Company and the Administrative Agent). Without limiting the
foregoing, each Bank will designate a different funding office if such
designation will avoid (or reduce the cost to the Company of) any event
described in clause (i) or (ii) of the preceding sentence and such designation
will not, in such Bank's sole good faith judgment, be otherwise disadvantageous
to such Bank.
(b) At any time any Bank is an Affected Bank, the Company may replace such
Affected Bank as a party to this Agreement with one or more other bank(s) or
financial institution(s) reasonably satisfactory to the Administrative Agent
(and upon notice from the Company such Affected Bank shall assign pursuant to an
Assignment Agreement, and without recourse or warranty, its Commitment, its
Loans, its Note, its participation in Letters of Credit, and all of its other
rights and obligations hereunder to such replacement bank(s) or other financial
institution(s) for a purchase price equal to the sum of the principal amount of
the Loans so assigned, all accrued and unpaid interest thereon, its ratable
share of all accrued and unpaid non-use fees and Letter of Credit fees, any
amounts payable under Section 8.4 as a result of such Bank receiving payment of
any Eurodollar Loan prior to the end of an Interest Period therefor and all
other obligations owed to such Affected Bank hereunder).
8.8 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be
conclusive absent demonstrable error. Banks may use reasonable averaging and
attribution methods in determining compensation under Sections 8.1 and 8.4, and
the provisions of such Sections shall survive repayment of the Loans,
cancellation of the Notes, cancellation or expiration of the Letters of Credit
and any termination of this Agreement.
SECTION 9 WARRANTIES.
To induce the Administrative Agent and the Banks to enter into this
Agreement and to induce the Banks to make Loans and issue or participate in
Letters of Credit hereunder, the Company warrants to the Administrative Agent
and the Banks that:
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<PAGE> 50
9.1 Organization, etc. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware; each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the state of its organization; and the Company and each Subsidiary is
duly qualified to do business 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) and has full power and authority to own its property and conduct its
business as presently conducted by it.
9.2 Authorization; No Conflict. The execution and delivery by the Company
of this Agreement and each other Loan Document to which it is a party, the
borrowings hereunder, the execution and delivery by each Guarantor of each Loan
Document to which it is a party and the performance by each of the Company and
each Guarantor of its obligations under each Loan Document to which it is a
party are within the organizational powers of the Company and each Guarantor,
have been duly authorized by all necessary organizational action on the part of
the Company and each Guarantor (including any necessary shareholder, partner or
member action), have received all necessary governmental approval (if any shall
be required), and do not and will not (a) violate any provision of law or any
order, decree or judgment of any court or other government agency which is
binding on the Company or any Guarantor, (b) contravene or conflict with, or
result in a breach of, any provision of the certificate of incorporation,
partnership agreement, by-laws or other organizational documents of the Company
or any Guarantor or of any agreement, indenture, instrument or other document
which is binding on the Company, any Guarantor or any other Subsidiary or (c)
result in, or require, the creation or imposition of any Lien on any property of
the Company, any Guarantor or any other Subsidiary (other than Liens arising
under the Loan Documents).
9.3 Validity and Binding Nature. Each of this Agreement and each other Loan
Document to which the Company is a party is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors' rights generally and to general principles of
equity; and each Loan Document to which any Guarantor is a party is, or upon the
execution and delivery thereof by such Guarantor will be, the legal, valid and
binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors' rights generally and to general
principles of equity.
9.4 Financial Condition. The audited consolidated financial statements of
the Company and its Subsidiaries as at December 31, 1998 and the unaudited
consolidated financial statements of the Company and its Subsidiaries as at
September 30, 1999, copies of each of which have been delivered to each Bank,
were prepared in accordance with GAAP (subject, in the case of such unaudited
statements, to the absence of footnotes and to normal year-end adjustments) and
present fairly the consolidated financial condition of the Company and its
Subsidiaries as at such dates and the results of their operations for the
periods then ended.
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<PAGE> 51
9.5 No Material Adverse Change. Since December 31, 1998, there has been no
material adverse change in the financial condition, operations, assets,
business, properties or prospects of the Company and its Subsidiaries taken as a
whole except for the Special Charges.
9.6 Litigation and Contingent Liabilities. No litigation (including
derivative actions), arbitration proceeding, labor controversy or governmental
investigation or proceeding is pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary which might reasonably be
expected to have a Material Adverse Effect, except as set forth in Schedule 9.6.
Other than any liability incident to such litigation or proceedings, neither the
Company nor any Subsidiary has any material contingent liabilities not listed in
such Schedule 9.6.
9.7 Ownership of Properties; Liens. Each of the Company and each Subsidiary
owns good and, in the case of real property, indefeasible title to all of its
properties and assets, real and personal, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and material claims (including
material infringement claims with respect to patents, trademarks, copyrights and
the like) except as permitted pursuant to Section 10.8.
9.8 Subsidiaries. The Company has no Subsidiaries except those listed in
Schedule 9.8.
9.9 Pension Plans. (a) During the twelve-consecutive-month period prior to
the date of the execution and delivery of this Agreement or the making of any
Loan hereunder, (i) no steps have been taken to terminate any Pension Plan and
(ii) no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a lien under Section 302(f) of ERISA. No condition
exists or event or transaction has occurred with respect to any Pension Plan
which could result in the incurrence by the Company of any material liability,
fine or penalty.
(b) All contributions (if any) have been made to any Multiemployer Pension
Plan that are required to be made by the Company or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither the Company nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any withdrawal liability with respect to any such plan,
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which, if
continued, might result in a withdrawal or partial withdrawal from any such
plan; and neither the Company nor any member of the Controlled Group has
received 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 any 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.
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<PAGE> 52
9.10 Investment Company Act. Neither the Company nor any Subsidiary is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940.
9.11 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.
9.11.1 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.
9.12 Taxes. Each of the Company and each Subsidiary has filed all Federal
tax returns and other material tax returns and reports required by law to have
been filed by it and has paid all taxes and governmental charges thereby shown
to be owing, except any such taxes or charges which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books.
9.13 Solvency, etc. On the Effective Date (or, in the case of any Person
which becomes a Guarantor after the Effective Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder 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.
9.14 Environmental Matters.
(a) No Violations. Except as set forth on Schedule 9.14, neither the
Company nor any Subsidiary, nor any operator of the Company's or any
Subsidiary's properties, is in violation of any judgment, decree, order, law,
permit, license, rule or regulation pertaining to environmental matters,
including those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
or any other Environmental Law which (i) in any single case, requires
expenditures in any three-year period of $250,000 or more by the Company and its
Subsidiaries in penalties and/or for investigative, removal or remedial actions
or (ii) individually or in the aggregate otherwise might reasonably be expected
to have a Material Adverse Effect.
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<PAGE> 53
(b) Notices. Except as set forth on Schedule 9.15, neither the Company
nor any Subsidiary has received written notice from any third party, including
any Federal, state or local governmental authority: (a) that any one of them has
been identified by the U.S. Environmental Protection Agency as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B; (b) that any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous substance as defined by 42 U.S.C.
ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) or
any toxic substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Law, excluding household hazardous waste (all of
the foregoing, "Hazardous Substances"), which any one of them has generated,
transported or disposed of has been found at any site at which a Federal, state
or local agency or other third party has conducted a remedial investigation,
removal or other response action pursuant to any Environmental Law; (c) that the
Company or any Subsidiary must conduct sampling, testing, a remedial
investigation, removal, or a response action pursuant to any Environmental Law;
or (d) of any Environmental Claim.
(c) Handling of Hazardous Substances. Except as set forth on Schedule
9.14, (i) no portion of the real property or other assets of the Company or any
Subsidiary has been used for the handling, processing, storage or disposal of
Hazardous Substances except in accordance in all material respects with
applicable Environmental Laws and no underground tank or other underground
storage receptacle for Hazardous Substances is located on such properties which
might reasonably be expected to have a material adverse effect on the value of
real property or assets with an aggregate net book value (prior to any writedown
resulting from any of the foregoing) exceeding $250,000 or which otherwise might
be reasonably expected to have a Material Adverse Effect; (ii) in the course of
any activities conducted by the Company, any Subsidiary or the operators of any
real property of the Company or any Subsidiary, no Hazardous Substances have
been generated or are being used on such properties which might reasonably be
expected to have a material adverse effect on the value of properties with an
aggregate net book value (prior to any writedown resulting from any of the
foregoing) exceeding $250,000 or which otherwise might be reasonably expected to
have a Material Adverse Effect; (iii) there have been no Releases of Hazardous
Substances on, upon, into or from any real property or other assets of the
Company or any Subsidiary, which Releases singly or in the aggregate might
reasonably be expected to have a material adverse effect on the value of real
property or assets with an aggregate net book value (prior to any writedown
resulting from any of the foregoing) exceeding $250,000 or which otherwise might
be reasonably expected to have a Material Adverse Effect; (iv) to the Company's
actual knowledge, there have been no Releases on, upon, from or into any real
property in the vicinity of the real property or other assets of the Company or
any Subsidiary which, through soil or groundwater contamination, may have come
to be located on, and which might reasonably be expected to have a material
adverse effect on the value of, real property or other assets of the Company or
any Subsidiary with an aggregate net book value (prior to any writedown
resulting from any of the foregoing) exceeding $250,000 or which otherwise might
be reasonably expected to have a Material Adverse Effect; and (v) any Hazardous
Substances generated by the Company and its Subsidiaries have been transported
offsite only by properly licensed carriers and, to the best of the Company's
knowledge, delivered only to treatment or
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<PAGE> 54
disposal facilities maintaining valid permits as required under applicable
Environmental Laws, which transporters and facilities have been and are, to the
best of the Company's knowledge, operating in compliance with such permits and
applicable Environmental Laws, except to the extent that failure to do so would
not, individually or in the aggregate, have a Material Adverse Effect.
(d) Investigations. Except as set forth on Schedule 9.14, the Company
and its Subsidiaries have taken reasonable steps to investigate the past and
present condition and usage of the real property of the Company and its
Subsidiaries with regard to environmental matters.
9.15 Information. All information heretofore or contemporaneously herewith
furnished in writing by the Company or any Subsidiary to any Bank 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 any Bank 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 Administrative Agent and the Banks 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).
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter until
all obligations of the Company hereunder and under the other Loan Documents are
paid in full and all Letters of Credit have been terminated, the Company agrees
that, unless at any time the Required Banks shall otherwise expressly consent in
writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to each Bank:
10.1.1 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 Arthur Andersen LLP or other independent auditors of recognized
standing selected by the Company and reasonably acceptable to the Required
Banks, together with a
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<PAGE> 55
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 Unmatured
Event of 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.
10.1.2 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.
10.1.3 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.
10.1.4 Compliance Certificates. Contemporaneously with the furnishing of a
copy of each annual audit report pursuant to Section 10.1.1 and of each set of
quarterly statements pursuant to Section 10.1.2, (a) a duly completed compliance
certificate in the form of Exhibit B, with appropriate insertions, dated the
date of such annual report or such quarterly statements and signed by the chief
financial officer of the Company, containing a computation of each of the
financial ratios and restrictions set forth in Section 10.6 and to the effect
that such officer has not become aware of any Event of Default or Unmatured
Event of 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.
10.1.5 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
Administrative Agent or any Bank 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 Subsidiary.
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10.1.6 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 an Unmatured Event of
Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Banks which has
been instituted or, to the knowledge of the Company, is threatened against
the Company or any Subsidiary 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;
(e) any event (including any violation of any Environmental Law or the
assertion of any Environmental Claim) which might reasonably be expected to
have a Material Adverse Effect; or
(f) any setoff, claim (including any Environmental Claim), withholding
or other defense to which any of the collateral granted under any
Collateral Document, or the Administrative Agent's or the Banks' rights
with respect to any such collateral, are subject.
10.1.7 Subsidiaries. Promptly upon any change in the list of its
Subsidiaries from that set forth on Schedule 9.8 (or in the most recent notice
pursuant to this Section), notification of such change.
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10.1.8 Management Reports. Promptly upon the request of the Administrative
Agent or any Bank, 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.
10.1.9 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 Administrative
Agent prior to the Effective Date.
10.1.10 Other Information. From time to time such other information
concerning the Company and its Subsidiaries as the Administrative Agent or any
Bank may reasonably request.
10.2 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, any Bank or the
Administrative Agent 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), any Bank or the Administrative Agent 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 any Bank or the Administrative Agent 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.
10.3 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
Administrative Agent or any Bank, furnish to the Administrative Agent or such
Bank a certificate setting forth in reasonable detail the nature and extent of
all insurance maintained by the Company and its Subsidiaries.
10.4 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
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faith by appropriate proceedings and shall set aside on its books adequate
reserves with respect thereto in accordance with GAAP.
10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject to
Section 10.11) 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).
10.6 Financial Covenants.
10.6.1 Fixed Charge Coverage Ratio . Not permit the Fixed Charge Coverage
Ratio at any time to be less than the applicable ratio set forth below:
<TABLE>
<CAPTION>
COMPUTATION FIXED CHARGE
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
<S> <C>
Effective Date through 12/31/00 1.15 to 1.0
1/01/01 through 12/31/01 1.20 to 1.0
1/01/02 through 12/31/02 1.25 to 1.0
1/01/03 and thereafter 1.30 to 1.0.
</TABLE>
10.6.2 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:
<TABLE>
<CAPTION>
COMPUTATION INTEREST
PERIOD ENDING: COVERAGE RATIO
-------------- --------------
<S> <C>
Effective Date through 12/31/00 1.75 to 1.0
1/01/01 through 12/31/01 2.00 to 1.0
1/01/02 and thereafter 2.25 to 1.0.
</TABLE>
10.6.3 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:
<TABLE>
<CAPTION>
COMPUTATION FUNDED DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
<S> <C>
Effective Date through 12/31/00 4.50 to 1.0
1/01/01 through 12/31/01 4.25 to 1.0
1/01/02 through 12/31/02 4.00 to 1.0
1/01/03 through 12/31/03 3.75 to 1.0
1/01/04 and thereafter 3.50 to 1.0.
</TABLE>
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10.6.4 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:
<TABLE>
<CAPTION>
SENIOR FUNDED
COMPUTATION DEBT TO
PERIOD ENDING: ADJUSTED EBITDA RATIO
-------------- ---------------------
<S> <C>
Effective Date through 12/31/00 3.50 to 1.0
1/01/01 through 12/31/01 3.25 to 1.0
1/01/02 through 12/31/02 3.00 to 1.0
1/01/03 through 12/31/03 2.75 to 1.0
1/01/04 and thereafter 2.50 to 1.0.
</TABLE>
10.6.5 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:
<TABLE>
<CAPTION>
DEBT TO
CAPITALIZATION
PERIOD: PERCENTAGE
------- ----------
<S> <C>
Effective Date through 12/31/00 70%
1/01/01 through 12/31/01 65%
1/01/02 and thereafter 60%
</TABLE>
10.6.6 Capital Expenditures. The Company will not permit the aggregate
amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate acquisitions permitted by Section 10.11(c) or (d) which constitute
Capital Expenditures) made by the Company and its Subsidiaries during any period
of 12 consecutive months to exceed (a) the product of (i) 1.25 (or, for any date
of determination during the period from the date of the acquisition of EPIC
through December 31, 2000, 1.50) 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) or (b) such
greater amount as the Required Banks may approve at the request of the Company
from time to time, such approval to be granted or withheld at the sole
respective discretion of each Bank.
10.7 Limitations on Debt. Not, and not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, except:
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(a) obligations in respect of the Loans, the L/C Applications and the
Letters of Credit;
(b) unsecured seller Debt which represents all or part of the purchase
price payable in connection with a transaction permitted by Section
10.11(d) and the existing Debt listed on Schedule 10.7(b); provided that
the aggregate principal amount of all such Debt (other than (i) the Debt
designated with an asterisk on Schedule 10.7(b), 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 $5,000,000;
(c) Debt arising under Capital Leases, Debt secured by Liens permitted
by subsection 10.8(c) or (d) and other Debt outstanding on the date hereof
and listed in Schedule 10.7(c), 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 $12,000,000;
(d) Debt of Subsidiaries owed to the Company;
(e) Hedging Obligations of the Company or any Subsidiary to any Bank
incurred in the ordinary course of business for bona fide hedging purposes
and not for speculation;
(f) unsecured Debt of the Company to Subsidiaries;
(g) Debt to be Repaid; provided that all such Debt to be Repaid shall
be repaid on or before the Effective Date;
(h) the RESTEC Bonds; provided that the RESTEC Bonds must be repaid or
defeased not later than 150 days after the Effective Date; and
(i) the Subordinated Loans and any Subordinated Debt issued in
replacement thereof, and any guaranty thereof.
10.8 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:
(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;
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(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 Schedule 10.8;
(d) subject to the limitation set forth in Section 10.7(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 $500,000 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 Administrative Agent for the benefit of the
Banks arising under the Loan Documents.
10.9 Operating Leases. Not permit the aggregate amount of all rental
payments made (or scheduled to be made) under Operating Leases (excluding any
lease of equipment for a period of less than six months which is not renewable
or extendible solely at the option of the lessee thereunder and the Operating
Leases listed on Schedule 10.9) by the Company and its Subsidiaries (on a
consolidated basis) in any Fiscal Year to exceed $300,000.
10.10 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, (d) pay any principal or interest on, or purchase,
redeem or defease, any Subordinated Debt, (e) pay any management fees,
monitoring fees or any similar fees to GTCR or any Affiliate thereof, or (f) set
aside funds for any of the foregoing; provided
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that (i) any Subsidiary may declare and pay dividends to the Company or to any
other wholly-owned Subsidiary; (ii) the Company may make regularly scheduled
payments of interest on any Subordinated Debt if the holder of the Subordinated
Debt is permitted to receive such payments at such time under the Subordination
Agreement; (iii) the Company may repurchase stock held by employees in the
aggregate not in excess of $250,000; and (iv) the Company may pay to GTCR and
its Affiliates fees as provided for in the Monitoring Agreement and the
Professional Services Agreement as in effect on the Effective Date.
10.11 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, 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; (c) the acquisition of the Acquired Companies; (d) 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 engaged in business activities permitted under Section 10.19; (2) immediately
before or after giving effect to such purchase or acquisition, no Event of
Default or Unmatured Event of Default shall have occurred and be continuing; (3)
either (i) (x) 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 (or any series of related acquisitions) is not
greater than $15,000,000 and (y) the aggregate consideration to be paid in cash
or by the assumption or issuance of Debt by the Company and its Subsidiaries in
connection with such purchase or acquisition (or any series of related
acquisitions) is not greater than $5,000,000 or (ii) the Required Banks have
consented to such purchase or acquisition; (4) the Company is in pro forma
compliance with all the financial ratios and restrictions set forth in Section
10.6; and (5) immediately after giving effect to such purchase or acquisition,
the Revolving Commitment is at least $2,000,000 greater than the Revolving
Outstandings and (e) sales and dispositions of assets (including the stock of
Subsidiaries) so long as the net book value of all assets sold or otherwise
disposed of in any Fiscal Year (other than sales of transportation and spreading
equipment) the proceeds of which do not exceed $500,000. 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 Effective Date without the prior written
consent of all Banks, other than the acquisition of any Acquired Company.
10.12 Use of Proceeds. Use the proceeds of the Loans solely to finance the
Company's working capital, to refinance existing Debt, for the acquisition of
the Acquired Companies and other acquisitions permitted by Section 10.11, for
capital expenditures and for other general
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corporate purposes; and not use or permit any proceeds of any Loan to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of "purchasing or carrying" any Margin Stock.
10.13 Further Assurances. Take, and cause each Subsidiary to take, such
actions as are necessary, or as the Administrative Agent (or the Required Banks
acting through the Administrative Agent) may reasonably request, from time to
time (including the execution and delivery of guaranties, security agreements,
pledge agreements, financing statements, mortgages, deeds of trust and other
documents, the filing or recording of any of the foregoing, the delivery of
stock certificates and other collateral with respect to which perfection is
obtained by possession, and the delivery of opinions of counsel with respect to
any of such documents) to ensure that (i) the obligations of the Company
hereunder and under the other Loan Documents and any Hedging Obligations of the
Company owing to any Bank or any Affiliate of any Bank are secured by
substantially all of the assets (other than, unless the Required Banks (acting
through the Administrative Agent) otherwise request in writing, any motor
vehicle transportation equipment with a net book value of less than $25,000
which is subject to a statute requiring notation on a certificate of title to
perfect a security interest in such vehicle or such equipment) of the Company
and guaranteed by all of the Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary acquired or created after the
date hereof) by execution of a counterpart of the Guaranty, provided that no
Foreign Subsidiary shall have an obligation to execute a counterpart of the
Guaranty, 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 of the Guaranty and the Company shall not have an obligation to
pledge the stock of Netco-Waterbury Systems, Inc.; and (ii) the obligations of
each Guarantor under the Guaranty and any Hedging Obligations of such Guarantor
owing to any Bank or any Affiliate of any Bank are secured by substantially all
of the assets (other than, unless the Required Banks (acting through the
Administrative Agent) otherwise request in writing, any motor vehicle
transportation equipment with a net book value of less than $25,000 which is
subject to a statute requiring notation on a certificate of title to perfect a
security interest in such vehicle or such equipment) of such Guarantor.
Notwithstanding the foregoing, (a) neither the Company nor any domestic
Subsidiary shall be required to pledge more than 65% of the stock of any Foreign
Subsidiary and (b) no Foreign Subsidiary shall be required to pledge the stock
of any other Foreign Subsidiary.
10.14 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 (other than the transactions
evidenced by the Subordinated Loan Agreement, the Preferred Stock Purchase
Agreement, the Preferred Stock Registration Agreement, the Monitoring Agreement
and the Professional Services Agreement as in effect on the Effective Date).
10.15 Employee Benefit Plans. Maintain, and cause each Subsidiary to
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
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10.16 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).
10.17 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.
10.18 Inconsistent Agreements. Not, and not permit any Subsidiary to, enter
into any agreement containing any provision which (a) would be violated or
breached by any borrowing, or the obtaining of any Letter of Credit, by the
Company hereunder or by the performance by the Company or any Subsidiary of any
of its obligations hereunder or under any other Loan Document or (b) would
prohibit the Company or any Subsidiary from granting to the Administrative
Agent, for the benefit of the Banks, a Lien on any of its assets.
10.19 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.
10.20 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 Effective Date in wholly-owned
Subsidiaries identified in Schedule 9.8;
(b) equity Investments in Subsidiaries acquired after the Effective
Date in transactions permitted as acquisitions of stock or assets pursuant
to Section 10.11;
(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 10.7;
(e) Suretyship Liabilities permitted by Section 10.7;
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(f) good faith deposits made in connection with prospective
acquisitions of stock or assets permitted by Section 10.11;
(g) loans to officers and employees not exceeding (i) $100,000 in the
aggregate to any single individual or (ii) $250,000 in the aggregate for
all such individuals;
(h) Cash Equivalent Investments; and
(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 Bank shall not
at any time exceed (x) in the case of such deposits with any single bank,
$100,000 for three consecutive Business Days and (y) in the case of all
such deposits, $1,000,000 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 Unmatured Event of Default shall have
occurred and be continuing.
10.21 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.
10.22 Interest Rate Protection. Within ninety days following the Effective
Date, enter into one or more interest rate protection agreements with
counterparties reasonably satisfactory to the Agents effectively fixing the
interest rates (at rates reasonably satisfactory to the Agents) on not less than
50% of the sum of the Commitments for a period of not less than three years.
10.23 Business Plan and Financial Projections. Not later than ten Business
Days after the Effective Date, deliver to the Agents a business plan and
financial projections of the Company and its Subsidiaries for Fiscal Years 1999
through 2006.
10.24 Amendments to Certain Documents. Not make or agree to any amendment
to or modification of, or waive any of its rights under, any of the terms of the
Subordinated Loan Agreement or any other agreement or instrument governing any
Subordinated Debt which would (a) have the effect of (i) increasing the
principal amount payable thereon or redemptions thereof, (ii) providing for
earlier payment in respect of principal or redemptions or otherwise, or (iii)
requiring additional collateral or guarantees to secure the Subordinated Debt or
(b) otherwise adversely affect the interest of the Banks in any material
respect.
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SECTION 11 EFFECTIVENESS; CONDITIONS OF LENDING, ETC.
11.1 Effectiveness. This Agreement shall become effective, and all loans
outstanding under the Existing Agreement shall be deemed to be loans hereunder
(as more fully set forth in Section 1.3) and all letters of credit outstanding
under the Existing Agreement shall be deemed to be Letters of Credit hereunder,
on the date (and the date on which all such conditions precedent have been
satisfied or waived in writing by the Banks, the "Effective Date") that the
Administrative Agent shall have received (a) all amounts which are then due and
payable pursuant to Section 5 and (to the extent billed) Section 14.6; (b)
evidence satisfactory to the Agents that (i) all Debt to be Repaid (other than
Debt of EPIC) has been (or concurrently with the initial credit extension
hereunder will be) paid in full and all Liens securing such Debt have been (or
concurrently with the initial credit extension hereunder will be) terminated;
(ii) all filings necessary to perfect the Administrative Agent's Lien on the
collateral under the Restated Security Agreement have been duly made and are in
full force and effect; (iii) all collateral required to be delivered to the
Administrative Agent under the Company Pledge Agreement and each Subsidiary
Pledge Agreement has been delivered; (iv) the Company has borrowed not less than
$20,000,000 of Subordinated Loans from GTCR, with net proceeds of at least
$18,700,000; (v) the Company has issued Series C and D Preferred Stock to GTCR
Golder Rauner, L.L.C. for a purchase price of not less than $20,000,000 with net
proceeds of at least $18,700,000; (vi) on a pro forma basis as of the Effective
Date (and after giving effect to the acquisition of the RESTEC Companies
occurring on the Effective Date), the Senior Funded Debt to Adjusted EBITDA
Ratio will not be greater than 3.20 to 1 and the Funded Debt to Adjusted EBITDA
Ratio will not be greater than 4.20 to 1; and (vii) after giving effect to the
borrowings on the Effective Date, the Revolving Outstandings shall not exceed
$2,000,000; and (c) all of the following, each duly executed and dated the
Effective Date (or such earlier date as shall be satisfactory to the
Administrative Agent), each in form and substance satisfactory to the
Administrative Agent, and each (except for the Notes, of which only the
originals shall be signed) in sufficient number of signed counterparts to
provide one for each Bank:
11.1.1 Notes. The Notes.
11.1.2 Resolutions. Certified copies of resolutions of the Board of
Directors of the Company authorizing or ratifying the execution, delivery and
performance by the Company of this Agreement, the Notes and the other Loan
Documents to which the Company is a party; and certified copies of resolutions
of the Board of Directors of each Subsidiary authorizing or ratifying the
execution, delivery and performance by such Subsidiary of each Loan Document to
which such Subsidiary is a party.
11.1.3 Consents, etc. Certified copies of all documents evidencing any
necessary corporate action, consents and governmental approvals (if any)
required for the execution, delivery and performance by the Company and each
Subsidiary of the documents referred to in this Section 11.
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11.1.4 Incumbency and Signature Certificates. A certificate of the
Secretary or an Assistant Secretary of the Company and each Subsidiary of the
Company as of the Effective Date certifying the names of the officer or officers
of such entity authorized to sign the Loan Documents to which such entity is a
party, together with a sample of the true signature of each such officer (it
being understood that the Administrative Agent and each Bank may conclusively
rely on each such certificate until formally advised by a like certificate of
any changes therein).
11.1.5 Confirmation. A Confirmation and Omnibus Amendment, substantially in
the form of Exhibit H, executed by the Company and each Subsidiary.
11.1.6 Opinions of Counsel for the Company and the Guarantors. The opinions
of (a) Locke Liddell & Sapp LLP, counsel to the Company and the Guarantors, and
(b) Kavanagh Maloney & Osnato LLP, New York counsel to the Company and the
Guarantors.
11.1.7 Financial Information. A certificate of the chief financial officer
of the Company as to (a) consolidated financial statements for each of the
RESTEC Companies and their respective 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 (provided that
unaudited financials may be supplied for AKH Water Management, Inc. and Davis
Water Analysis, Inc.), and (b) a pro forma balance sheet of the Company and its
Subsidiaries as of the Effective Date after giving effect to the acquisition of
the Acquired Companies and the transactions contemplated hereby and reflecting
estimated purchase price accounting adjustments, prepared by the chief financial
officer of the Company.
11.1.8 Acquisition Documents; GTCR Documents. Certified copies of all of
the Acquisition Documents, together with evidence that the aggregate amounts
paid or payable at the closings for the acquisition of all of the Acquired
Companies (including all Debt assumed and all fees and expenses) will not exceed
$121,500,000; and certified copies of the Monitoring Agreement, the Professional
Services Agreement, the Subordinated Loan Agreement, the Preferred Stock
Registration Agreement and the Preferred Stock Purchase Agreement.
11.1.9 Real Estate Documents. With respect to each parcel of real property
listed on Schedule 11.1.9, a duly executed Mortgage providing for a fully
perfected Lien, in favor of the Administrative Agent, in all right, title and
interest of the Company or such Subsidiary in such real property, together with:
(a) an ALTA Loan Title Insurance Policy, issued by an insurer
acceptable to the Administrative Agent, insuring the Administrative Agent's
Lien on such real property and containing such endorsements as the
Administrative Agent may reasonably require (it being understood that the
amount of coverage, exceptions to coverage and status of title set forth in
such policy shall be acceptable to the Administrative Agent);
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(b) copies of all documents of record concerning such real property as
shown on the commitment for the ALTA Loan Title Insurance Policy referred
to above;
(c) original or certified copies of all insurance policies required to
be maintained with respect to such real property by this Agreement, the
applicable Mortgage or any other Loan Document; and
(d) a flood insurance policy concerning such real property, reasonably
satisfactory to the Administrative Agent, if required by the Flood Disaster
Protection Act of 1973.
Additionally, in the case of any leased real property, a consent, in form
and substance satisfactory to the Administrative Agent, from the owner and each
mortgagee of such property (a) consenting to the Mortgage in favor of the
Administrative Agent with respect to such property and (b) waiving any
landlord's Lien in respect of personal property kept at the premises subject to
such lease.
11.1.10 Restated Security Agreement. The Restated Security Agreement
executed by the Company and each Subsidiary.
11.1.11 RESTEC Acquisition Opinions. An opinion (or permission to rely on
an opinion) from each of the special counsels to the sellers in the acquisition
of the RESTEC Companies, which shall be addressed to the Agents and the Banks,
relating to the transactions consummating the acquisition of the RESTEC
Companies, dated the Effective Date and in form and substance reasonably
satisfactory to the Administrative Agent.
11.1.12 Other. Such other documents as the Administrative Agent or any Bank
may reasonably request.
11.2 Conditions to All Extensions of Credit. The obligation (a) of each
Bank to make each Loan or to participate in Swing Line Loans and (b) of each
Issuing Bank to issue each Letter of Credit is subject to the condition that the
Effective Date shall have occurred and to the following further conditions
precedent:
11.2.1 Compliance with Warranties, No Default, etc. Both before and after
giving effect to any borrowing and the issuance of any Letter of Credit (but, if
any Event of Default of the nature referred to in Section 12.1.2 shall have
occurred with respect to any other Debt, without giving effect to the
application, directly or indirectly, of the proceeds thereof) the following
statements shall be true and correct:
(a) the representations and warranties of the Company and the
Guarantors set forth in this Agreement (excluding Sections 9.6, 9.8 and
9.15) and the other Loan Documents shall be true and correct in all
material respects with the same effect as if then made (except to the
extent stated to relate to an earlier date, in which case such
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representations and warranties shall be true and correct in all material
respects as of such earlier date);
(b) except as disclosed by the Company to the Administrative Agent and
the Banks pursuant to Section 9.6,
(i) no litigation (including derivative actions), arbitration
proceeding, labor controversy or governmental investigation or
proceeding shall be pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries which might
reasonably be expected to have a Material Adverse Effect or which
purports to affect the legality, validity or enforceability of this
Agreement, the Notes or any other Loan Document; and
(ii) no development shall have occurred in any litigation
(including derivative actions), arbitration proceeding, labor
controversy or governmental investigation or proceeding disclosed
pursuant to Section 9.6 which might reasonably be expected to have a
Material Adverse Effect; and
(c) no Event of Default or Unmatured Event of Default shall have then
occurred and be continuing, and neither the Company nor any of its
Subsidiaries shall be in violation of any law or governmental regulation or
court order or decree where such violation or violations singly or in the
aggregate might reasonably be expected to have a Material Adverse Effect.
11.2.2 Confirmatory Certificate. If requested by the Administrative Agent
or any Bank (acting through the Administrative Agent), the Administrative Agent
shall have received (in sufficient counterparts to provide one to each Bank) a
certificate dated the date of such requested Loan or Letter of Credit and signed
by a duly authorized representative of the Company as to the matters set out in
Section 11.2.1 (it being understood that each request by the Company for the
making of a Loan or the issuance of a Letter of Credit shall be deemed to
constitute a warranty by the Company that the conditions precedent set forth in
Section 11.2.1 will be satisfied at the time of the making of such Loan or the
issuance of such Letter of Credit), together with such other documents as the
Administrative Agent or any Bank (acting through the Administrative Agent) may
reasonably request in support thereof.
11.3 Conditions to Certain Extensions of Credit under the Term A
Commitments. The obligation of each Bank to make any Term A Loan, which would
cause the remaining unused available amount of the Term A Commitments, after
giving effect to such requested Term A Loans, to be less than $13,500,000, is
subject (in addition to the conditions precedent specified in Sections 11.2 and
11.4) to the condition precedent that the Administrative Agent shall have
received evidence that the RESTEC Bonds have been (or, concurrently with the
making of the applicable Loans, will be) paid in full or defeased.
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11.4 Additional Conditions to Term A Loans. The obligation of each Bank to
make each Term A Loan is subject (in addition to the conditions precedent
specified in Sections 11.1, 11.2 and 11.3) to the following further conditions
precedent:
11.4.1 Term A Loans Prior to Certain Events. In the case of any borrowing
of Term A Loans prior to the consummation of the acquisition of any Secondary
Acquired Company, the outstanding principal amount of all Term A Loans shall not
exceed $25,000,000. In the case of any borrowing of Term A Loans prior to the
consummation of the acquisition of any Secondary Acquired Company and the
repayment or defeasance of the RESTEC Bonds, the outstanding principal amount of
all Term A Loans shall not exceed $11,500,000.
11.5 Acquisition Loans. The obligation of each Bank to make any Acquisition
Loan is subject (in addition to the conditions precedent set forth in Sections
11.2, 11.3 and 11.4, as applicable) to the conditions precedent that:
11.5.1 Required Banks Approval. The Required Banks shall have approved the
funding of the proposed acquisition.
11.5.2 Ratios. The Administrative Agent shall have received evidence
satisfactory to the Agents that on a pro forma basis as of the date of such Loan
(and after giving effect to the proposed acquisition), the Senior Funded Debt to
Adjusted EBITDA Ratio will not be greater than 3.25 to 1 and the Funded Debt to
Adjusted EBITDA Ratio will not be greater than 4.25 to 1.
11.6 Loans for Secondary Acquisition. The obligation of each Bank to make
any Loan the proceeds of which will be used to finance the acquisition of a
Secondary Acquired Company is subject (in addition to the conditions precedent
set forth in Sections 11.2, 11.3 and 11.4, as applicable) to the conditions
precedent that the Administrative Agent shall have received evidence,
satisfactory to the Agents, that (i) the Company has borrowed not less than 15%
of the total amounts funded with respect to such acquisition and any previous
acquisition by the Company of Secondary Acquired Companies as Subordinated Loans
from GTCR (in addition to the Subordinated Loans referred to in Sections 11.1
and 11.5), (ii) the Company has issued Series C and D Preferred Stock to GTCR
Golder Rauner, L.L.C. (in addition to the Series C and D Preferred Stock
referred to in Sections 11.1 and 11.5) for a purchase price of not less than 15%
of the total amounts funded with respect to such acquisition and any previous
acquisitions by the Company of Secondary Acquired Companies, and (iii) on a pro
forma basis as of the date of such Loan (and after giving effect to the proposed
acquisition), the Senior Funded Debt to Adjusted EBITDA Ratio will not be
greater than 3.20 to 1 and the Funded Debt to Adjusted EBITDA Ratio will not be
greater than 4.20 to 1.
11.7 Revolving Outstandings. The obligation of each Bank to make any
Revolving Loan prior to the acquisition of any Secondary Acquired Company by the
Company is subject (in addition to the conditions precedent specified in
Sections 11.1 and 11.2) to the condition precedent that after giving effect to
such borrowing, the Revolving Commitment Amount shall be at least $5,000,000
greater than the Revolving Outstandings.
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SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an Event of
Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of
the principal of any Loan or any reimbursement obligation with respect to any
Letter of Credit; or default, and continuance thereof for five days, in the
payment when due of any interest, fee or other amount payable by the Company
hereunder or under any other Loan Document.
12.1.2 Non-Payment of Other Debt. Any default shall occur under the terms
applicable to any Debt of the Company or any Subsidiary in an aggregate
principal amount (for all such Debt so affected) exceeding $500,000 and such
default shall (a) consist of the failure to pay such Debt when due (subject to
any applicable grace period), whether by acceleration or otherwise, or (b)
accelerate the maturity of such Debt or permit the holder or holders thereof, or
any trustee or agent for such holder or holders, to cause such Debt to become
due and payable prior to its expressed 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.
12.1.3 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).
12.1.4 Bankruptcy, Insolvency, etc. The Company or any Subsidiary becomes
insolvent or generally fails to pay, or admits in writing its general inability
or refusal to pay, debts as they become due; or the Company or any Subsidiary
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for the Company or such Subsidiary or any
substantial part of the property thereof, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for the
Company or any Subsidiary or for any substantial part of the property thereof
and is not discharged within 60 days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding (except the voluntary dissolution,
not under any bankruptcy or insolvency law, of a Subsidiary), is commenced in
respect of the Company or any Subsidiary, and if such case or proceeding is not
commenced by the Company or such Subsidiary, it is consented to or acquiesced in
by the Company or such Subsidiary, or remains for 60 days undismissed; or the
Company or any Subsidiary takes any corporate action to authorize, or in
furtherance of, any of the foregoing.
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12.1.5 Non-Compliance with Provisions of This Agreement. (a) Failure by the
Company to comply with or to perform any covenant set forth in Sections 10.5
through 10.14; or (b) failure by the Company 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 12) and continuance of such
failure for 30 days after notice thereof to the Company from the Administrative
Agent or any Bank.
12.1.6 Warranties. Any representation or warranty made by the Company
herein or in any statement or certificate at any time given by the Company 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) or 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.
12.1.7 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 $500,000;
(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 withdrawal liability
that the Company and the Controlled Group have incurred on the date of such
withdrawal) exceeds $500,000.
12.1.8 Judgments. Final judgments which exceed an aggregate of $500,000
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.
12.1.9 Invalidity of Guaranty, etc. The Guaranty shall cease to be in full
force and effect with respect to any Guarantor, any Guarantor shall fail
(subject to any applicable grace period) to comply with or to perform any
applicable provision of the Guaranty, or any Guarantor (or any Person by,
through or on behalf of such Guarantor) shall contest in any manner the
validity, binding nature or enforceability of the Guaranty with respect to such
Guarantor.
12.1.10 Invalidity of Collateral Documents, etc. Any Collateral Document
shall cease to be in full force and effect with respect to the Company or any
Guarantor, the Company or any Guarantor shall fail (subject to any applicable
grace period) to comply with or to perform any applicable provision of any
Collateral Document to which such entity is a party, or the Company or any
Guarantor (or any Person by, through or on behalf of the Company or such
Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
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12.1.11 Change in Control. (a) Any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934, but
excluding (i) the executive managers of the Company as of the Effective Date and
(ii) GTCR and its Affiliates) shall acquire beneficial ownership (within the
meaning of Rule 13d-3 promulgated under such 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 and its
Affiliates; or (b) during any 12-month period, individuals who at the beginning
of such period constituted the Company's Board of Directors (together with any
directors designated by GTCR and its Affiliates and new directors whose election
by the Company's Board of Directors or whose nomination for election by the
Company's shareholders was approved by a vote of at least a 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 of Directors of the Company.
12.1.12 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 30 days.
12.2 Effect of Event of Default. If any Event of Default described in
Section 12.1.4 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Loans and all other obligations
hereunder shall become immediately due and payable and the Company shall become
immediately obligated to deliver to the Administrative Agent cash collateral in
an amount equal to the outstanding face amount of all Letters of Credit, all
without presentment, demand, protest or notice of any kind; and, if any other
Event of Default shall occur and be continuing, the Administrative Agent (upon
written request of the Required Banks) shall declare the Commitments (if they
have not theretofore terminated) to be terminated and/or declare all Loans and
all other obligations hereunder to be due and payable and/or demand that the
Company immediately deliver to the Administrative Agent cash collateral in
amount equal to the outstanding face amount of all Letters of Credit, whereupon
the Commitments (if they have not theretofore terminated) shall immediately
terminate and/or all Loans and all other obligations hereunder shall become
immediately due and payable and/or the Company shall immediately become
obligated to deliver to the Administrative Agent cash collateral in an amount
equal to the face amount of all Letters of Credit, all without presentment,
demand, protest or notice of any kind. The Administrative Agent shall promptly
advise the Company of any such declaration, but failure to do so shall not
impair the effect of such declaration. Notwithstanding the foregoing, the effect
as an Event of Default of any event described in Section 12.1.1 or Section
12.1.4 may be waived by the written concurrence of all of the Banks, and the
effect as an Event of Default of any other event described in this Section 12
may be waived by the written concurrence of the Required Banks. Any cash
collateral delivered hereunder shall be held by the Administrative Agent
(without liability for interest thereon) and applied to obligations arising in
connection with any drawing under a Letter of Credit. After the expiration or
termination of all Letters of Credit, such cash collateral shall be applied by
the
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Administrative Agent to any remaining obligations hereunder and any excess shall
be delivered to the Company or as a court of competent jurisdiction may elect.
SECTION 13 THE ADMINISTRATIVE AGENT.
13.1 Appointment and Authorization. (a) Each Bank hereby irrevocably
(subject to Section 13.9) appoints, designates and authorizes the Administrative
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
(b) Each Issuing Bank shall act on behalf of the Banks with respect to any
Letters of Credit issued by it and the documents associated therewith. Each
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Administrative Agent in this Section 13 with respect to any acts taken or
omissions suffered by such Issuing Bank in connection with Letters of Credit
issued by it or proposed to be issued by it and the applications and agreements
for letters of credit pertaining to such Letters of Credit as fully as if the
term "Administrative Agent", as used in this Section 13, included such Issuing
Bank with respect to such acts or omissions and (ii) as additionally provided in
this Agreement with respect to the Issuing Banks.
(c) The Swing Line Bank shall have all of the benefits and immunities (i)
provided to the Administrative Agent in this Section 13 with respect to any acts
taken or omissions suffered by the Swing Line Bank in connection with Swing Line
Loans made or proposed to be made by it as fully as if the term "Administrative
Agent", as used in this Section 13, included the Swing Line Bank with respect to
such acts or omissions and (ii) as additionally provided in this Agreement with
respect to the Swing Line Bank.
13.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
13.3 Liability of Administrative Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the Company or any
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Subsidiary or Affiliate of the Company, or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
the Company or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of the
Company or any of the Company's Subsidiaries or Affiliates.
13.4 Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to the Company), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Banks as it deems appropriate and, if it so
requests, confirmation from the Banks of their obligation to indemnify the
Administrative Agent against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
13.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Event of Default except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Banks, unless the Administrative Agent shall have received
written notice from a Bank or the Company referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a "notice of default". The Administrative Agent will notify the
Banks of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be requested by the Required Banks in accordance with Section 12;
provided that unless and until the Administrative Agent has received any such
request, the Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of
Default or Unmatured Event of Default as it shall deem advisable or in the best
interest of the Banks.
13.6 Credit Decision. Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries,
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shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Bank. Each Bank represents to the Administrative
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Administrative Agent, the Administrative Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial or other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
13.7 Indemnification. Whether or not the transactions contemplated hereby
are consummated, the Banks shall indemnify upon demand the Agent-Related Persons
(to the extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from and against any
and all Indemnified Liabilities; provided that no Bank shall be liable for any
payment to the Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including reasonable fees of attorneys for the
Administrative Agent (including the allocable costs of internal legal services
and all disbursements of internal counsel)) incurred by the Administrative Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive repayment of the Loans, cancellation
of the Notes, any foreclosure under, or any modification, release or discharge
of, any or all of the Collateral Documents, any termination of this Agreement
and the resignation or replacement of the Administrative Agent.
For the purposes of this Section 13.7, "Indemnified Liabilities" shall
mean: any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
reasonable fees of attorneys for the Administrative Agent (including the
allocable costs of internal legal services and all disbursements of internal
counsel)) of any kind or nature whatsoever which may at any time (including at
any time following
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repayment of the Loans and the termination, resignation or replacement of the
Administrative Agent or the replacement of any Bank) be imposed on, incurred by
or asserted against any Agent-Related Person in any way relating to or arising
out of this Agreement or any document contemplated by or referred to herein, or
the transactions contemplated hereby, or any action taken or omitted by any such
Person under or in connection with any of the foregoing, including with respect
to any investigation, litigation or proceeding (including (a) any case, action
or proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code, and including any appellate proceeding) related to or
arising out of this Agreement or the Commitments or the use of the proceeds
thereof, whether or not any Administrative Agent-Related Person, any Bank or any
of their respective officers, directors, employees, counsel, agents or
attorneys-in-fact is a party thereto.
13.8 Administrative Agent in Individual Capacity. Bank of America and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Company and its Subsidiaries and Affiliates as though Bank of America were
not the Administrative Agent, the Issuing Bank or the Swing Line Bank hereunder
and without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, Bank of America or its Affiliates may receive
information regarding the Company or its Affiliates (including information that
may be subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to their Loans,
Bank of America and its Affiliates shall have the same rights and powers under
this Agreement as any other Bank and may exercise the same as though Bank of
America were not the Administrative Agent and the Issuing Bank and the Swing
Line Bank, and the terms "Bank" and "Banks" include Bank of America and its
Affiliates, to the extent applicable, in their individual capacities.
13.9 Successor Administrative Agent. The Administrative Agent may, and
at the request of the Required Banks shall, resign as Administrative Agent upon
30 days' notice to the Banks. If the Administrative Agent resigns under this
Agreement, the Required Banks shall, with (so long as no Event of Default
exists) the consent of the Company (which shall not be unreasonably withheld or
delayed), appoint from among the Banks a successor agent for the Banks. If no
successor agent is appointed prior to the effective date of the resignation of
the Administrative Agent, the Administrative Agent may appoint, after consulting
with the Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent, and the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 13 and
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Sections 14.6 and 14.13 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor agent has accepted appointment as Administrative
Agent by the date which is 30 days following a retiring Administrative Agent's
notice of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above. Notwithstanding
the foregoing, however, Bank of America may not be removed as the Administrative
Agent at the request of the Required Banks unless Bank of America shall also
simultaneously be replaced as an "Issuing Bank" and the "Swing Line Bank"
hereunder pursuant to documentation in form and substance reasonably
satisfactory to Bank of America.
13.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or trust" within
the meaning of the Code and such Bank claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees
to deliver to the Administrative Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed
Internal Revenue Service ("IRS") Forms 1001 and W-8 before the payment
of any interest in the first calendar year and before the payment of
any interest in each third succeeding calendar year during which
interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent
of any change in circumstances which would modify or render
invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax
under a United States tax treaty by providing IRS Form 1001 and such Bank sells,
assigns, grants a participation in, or otherwise transfers all or part of the
obligations of the Company to such Bank, such Bank agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of such obligations of the Company hereunder. To the extent of
such
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percentage amount, the Administrative Agent will treat such Bank's IRS Form 1001
as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Administrative Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the obligations of the
Company to such Bank hereunder, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other governmental authority of the United States
or any other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed, or
because such Bank failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the
Administrative Agent fully for all amounts paid, directly or indirectly, by the
Administrative Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all costs and expenses
(including reasonable fees of attorneys for the Administrative Agent (including
the allocable costs of internal legal services and all disbursements of internal
counsel)). The obligation of the Banks under this subsection shall survive the
repayment of the Loans, cancellation of the Notes, any termination of this
Agreement and the resignation or replacement of the Administrative Agent.
13.11 Collateral Matters. The Banks irrevocably authorize the
Administrative Agent, at its option and in its discretion, (a) to release any
Lien on any property granted to or held by the Administrative Agent under any
Collateral Document (i) upon termination of the Commitments and payment in full
of all Loans and all other obligations of the Company hereunder and the
expiration or termination of all Letters of Credit; (ii) which is sold or to be
sold or disposed of as part of or in connection with any disposition permitted
hereunder or (iii) subject to Section 14.1, if approved, authorized or ratified
in writing by the Required Banks; (b) to subordinate any Lien on any property
granted to or held by the Administrative Agent under any Collateral Document to
the holder of any Lien on such property which is permitted by subsection 10.8(c)
or (d) hereof; and (c) to release any Subsidiary from its obligations under the
Guaranty if such entity ceases to be a Subsidiary as a result of a transaction
permitted hereunder. Upon request by the Administrative Agent at any time, the
Required Banks will confirm in writing the Administrative
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Agent's authority to release or subordinate its interest in particular types or
items of property, or to release any Subsidiary from its obligations under the
Guaranty, pursuant to this Section 13.11.
13.12 Syndication Agent. No Lender identified on the facing page of
this Agreement or otherwise herein, or in any amendment hereof or other document
related hereto, as being the "Syndication Agent" shall have any right, power,
obligation, liability, responsibility or duty under this Agreement in such
capacity. Each Lender acknowledges that it has not relied, and will not rely, on
any Person so identified in deciding to enter into this Agreement or in taking
or refraining from taking any action hereunder or pursuant hereto.
SECTION 14 GENERAL.
14.1 Waiver; Amendments. No delay on the part of the Administrative
Agent or any Bank in the exercise of any right, power or remedy shall operate as
a waiver thereof, nor shall any single or partial exercise by any of them of any
right, power or remedy preclude other or further exercise thereof, or the
exercise of any other right, power or remedy. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement or the
Notes shall in any event be effective unless the same shall be in writing and
signed and delivered by Banks having an aggregate Total Percentage of not less
than the aggregate Total Percentage expressly designated herein with respect
thereto or, in the absence of such designation as to any provision of this
Agreement or the Notes, by the Required Banks, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, modification, waiver
or consent shall change or extend the Commitment of any Bank without the consent
of such Bank. No amendment, modification, waiver or consent shall modify the
allocation of any payment between the Term Loans without the consent of such
Banks holding at least 66.6% of the aggregate outstanding principal amount of
each of the Term A Loans and the Term B Loans. No amendment, modification,
waiver or consent shall (i) extend the date for payment of any principal of or
interest on any Loan or any fees payable hereunder, (ii) reduce the principal
amount of any Loan, the rate of interest thereon or any fees payable hereunder,
(iii) release the Guaranty (other than with respect to a Guarantor which ceases
to be a Subsidiary as a result of a transaction permitted hereunder) or all or
substantially all of the collateral granted under the Collateral Documents or
(iv) reduce the aggregate Total Percentage required to effect an amendment,
modification, waiver or consent without, in each case, the consent of all Banks.
No provisions of Section 13 or other provision of this Agreement affecting the
Administrative Agent in its capacity as such shall be amended, modified or
waived without the consent of the Administrative Agent. No provision of this
Agreement relating to the rights or duties of an Issuing Bank in its capacity as
such shall be amended, modified or waived without the consent of such Issuing
Bank. No provision of this Agreement affecting the Swing Line Bank in its
capacity as such shall be amended, modified or waived without the written
consent of the Swing Line Bank.
14.2 Confirmations. The Company and each holder of a Note agree from
time to time, upon written request received by it from the other, to confirm to
the other in writing (with a copy
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of each such confirmation to the Administrative Agent) the aggregate unpaid
principal amount of the Loans then outstanding under such Note.
14.3 Notices. Except as otherwise provided in Sections 2.2 and 2.3, all
notices hereunder shall be in writing (including facsimile transmission) and
shall be sent to the applicable party at its address shown on Schedule 14.3 or
at such other address as such party may, by written notice received by the other
parties, have designated as its address for such purpose. Notices sent by
facsimile transmission shall be deemed to have been given when sent and receipt
of such facsimile is confirmed; notices sent by mail shall be deemed to have
been given three Business Days after the date when sent by registered or
certified mail, postage prepaid; and notices sent by hand delivery or overnight
courier service shall be deemed to have been given when received. For purposes
of Sections 2.2 and 2.3, the Administrative Agent and the Swing Line Bank shall
be entitled to rely on telephonic instructions from any person that the
Administrative Agent or the Swing Line Bank in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Administrative Agent, the Swing Line Bank and each other Bank harmless from any
loss, cost or expense resulting from any such reliance.
14.4 Computations. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with GAAP, consistently applied; provided that if the Company
notifies the Administrative Agent that the Company wishes to amend any covenant
in Section 10 to eliminate or to take into account the effect of any change in
GAAP on the operation of such covenant (or if the Administrative Agent notifies
the Company that the Required Banks wish to amend Section 10 for such purpose),
then the Company's compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Company and the Required Banks.
14.5 Regulation U. Each Bank represents that it in good faith is not
relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Agents and the Lead Arrangers
(including the reasonable fees and charges of counsel for the Agents and the
Lead Arrangers and of local counsel, if any, who may be retained by said
counsel) in connection with the preparation, execution, delivery and
administration of this Agreement, the other Loan Documents and all other
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith (including any amendments, supplements or waivers to any
Loan Documents), and all reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees, court costs and other legal expenses and allocated
costs of staff counsel) incurred by the Agents and each
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Bank after an Event of Default in connection with the enforcement of this
Agreement, the other Loan Documents or any such other documents. Each Bank
agrees to reimburse the Agents for such Bank's pro rata share (based on its
respective Total Percentage) of any such costs and expenses of the Agents not
paid by the Company. In addition, the Company agrees to pay, and to save the
Agents, the Lead Arrangers and the Banks harmless from all liability for, (a)
any stamp or other taxes (excluding income taxes and franchise taxes based on
net income) which may be payable in connection with the execution and delivery
of this Agreement, the borrowings hereunder, the issuance of the Notes or the
execution and delivery of any other Loan Document or any other document provided
for herein or delivered or to be delivered hereunder or in connection herewith
and (b) any fees of the Company's auditors in connection with any reasonable
exercise by the Agents and the Banks of their rights pursuant to Section 10.2.
All obligations provided for in this Section 14.6 shall survive repayment of the
Loans, cancellation of the Notes and any termination of this Agreement.
14.7 Subsidiary References. The provisions of this Agreement relating
to Subsidiaries shall apply only during such times as the Company has one or
more Subsidiaries.
14.8 Captions. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
14.9 Assignments; Participations.
14.9.1 Assignments. Any Bank may, with the prior written consent of the
Administrative Agent and, so long as no Unmatured Event of Default or Event of
Default has occurred and is continuing, the Company (which consents shall not be
unreasonably delayed or withheld), at any time assign and delegate to one or
more commercial banks or other Persons (any Person to whom such an assignment
and delegation is to be made being herein called an "Assignee"), all or any
fraction of such Bank's Loans and Commitment (which assignment and delegation
shall be of a constant, and not a varying, percentage of all the assigning
Bank's Loans and Commitment) in a minimum aggregate amount equal to the lesser
of (i) the amount of the assigning Bank's remaining Commitment and (ii)
$5,000,000; provided that (a) no assignment and delegation may be made to any
Person if, at the time of such assignment and delegation, the Company would be
obligated to pay any greater amount under Section 7.6 or Section 8 to the
Assignee than the Company is then obligated to pay to the assigning Bank under
such Sections (and if any assignment is made in violation of the foregoing, the
Company will not be required to pay the incremental amounts) and (b) the Company
and the Administrative Agent shall be entitled to continue to deal solely and
directly with such Bank in connection with the interests so assigned and
delegated to an Assignee until the date when all of the following conditions
shall have been met:
(x) five Business Days (or such lesser period of time as the
Administrative Agent and the assigning Bank shall agree) shall have
passed after written notice of such assignment and delegation, together
with payment instructions, addresses and related
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information with respect to such Assignee, shall have been given to the
Company and the Administrative Agent by such assigning Bank and the
Assignee,
(y) the assigning Bank and the Assignee shall have executed
and delivered to the Company and the Administrative Agent an assignment
agreement substantially in the form of Exhibit G (an "Assignment
Agreement"), together with any documents required to be delivered
thereunder, which Assignment Agreement shall have been accepted by the
Administrative Agent, and
(z) the assigning Bank or the Assignee shall have paid the
Administrative Agent a processing fee of $3,500.
From and after the date on which the conditions described above have been met,
(x) such Assignee shall be deemed automatically to have become a party hereto
and, to the extent that rights and obligations hereunder have been assigned and
delegated to such Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within five Business Days after the effectiveness of any assignment
and delegation to a Person that is not currently a Bank hereunder, the Company
shall execute and deliver to the Administrative Agent (for delivery to the
Assignee) a new Note dated the effective date of such assignment. Any attempted
assignment and delegation not made in accordance with this Section 14.9.1 shall
be null and void.
Notwithstanding the foregoing provisions of this Section 14.9.1 or any
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.9.2 Participations. Any Bank may at any time sell to one or more
commercial banks or other Persons participating interests in any Loan owing to
such Bank, the Note held by such Bank, the Commitment of such Bank, the direct
or participation interest of such Bank in any Letter of Credit or any other
interest of such Bank hereunder (any Person purchasing any such participating
interest being herein called a "Participant"); provided that any Bank selling
any such participating interest shall give notice thereof to the Company. In the
event of a sale by a Bank of a participating interest to a Participant, (x) such
Bank shall remain the holder of its Note for all purposes of this Agreement, (y)
the Company and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
hereunder and (z) all amounts payable by the Company shall be determined as if
such Bank had not sold such participation and shall be paid directly to such
Bank. No Participant shall have any direct or indirect voting rights hereunder
except with respect to any of the events (excluding the events described in
clauses (i) through (iv) thereof) described in the fourth sentence of Section
14.1. Each Bank agrees to incorporate the requirements of the preceding sentence
into each participation agreement which such Bank enters into with any
Participant. The Company
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agrees that if amounts outstanding under this Agreement and the Notes are due
and payable (as a result of acceleration or otherwise), each Participant shall
be deemed to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement, any Note and with respect to any Letter
of Credit to the same extent as if the amount of its participating interest were
owing directly to it as a Bank under this Agreement or such Note; provided that
such right of setoff shall be subject to the obligation of each Participant to
share with the Banks, and the Banks agree to share with each Participant, as
provided in Section 7.5. The Company also agrees that each Participant shall be
entitled to the benefits of Section 7.6 and Section 8 as if it were a Bank
(provided that no Participant shall receive any greater compensation pursuant to
Section 7.6 or Section 8 than would have been paid to the participating Bank if
no participation had been sold).
14.10 Governing Law. This Agreement and each Note shall be a contract
made under and governed by and construed and interpreted in accordance with, the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State. Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All obligations of the
Company and rights of the Agents and the Banks expressed herein or in any other
Loan Document shall be in addition to and not in limitation of those provided by
applicable law.
14.11 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
14.12 Successors and Assigns. This Agreement shall be binding upon the
Company, the Banks and their respective successors and assigns, and shall inure
to the benefit of the Company, the Banks and the Agents and the successors and
assigns of the Banks and the Agents.
14.13 Indemnification by the Company.
(a) In consideration of the execution and delivery of this Agreement by
the Agents and the Banks and the agreement to extend the Commitments provided
hereunder, the Company hereby agrees to indemnify, exonerate and hold the
Agents, the Lead Arrangers, each Bank and each of the officers, directors,
employees, Affiliates and agents of the Agents and each Bank (each a "Bank
Party") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses, including reasonable
attorneys' fees and charges and, without duplication, allocated costs of staff
counsel (collectively, for purposes of this Section 14.13, called the
"Indemnified Liabilities"), incurred by the Bank Parties or any of them as a
result of, or arising out of, or relating to (i) any tender offer, merger,
purchase of stock, purchase of assets or other similar transaction financed or
proposed to be financed in whole or in
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part, directly or indirectly, with the proceeds of any of the Loans, (ii) the
use, handling, release, emission, discharge, transportation, storage, treatment
or disposal of any Hazardous Substance at any property owned or leased by the
Company or any Subsidiary, (iii) any violation of any Environmental Laws with
respect to conditions at any property owned or leased by the Company or any
Subsidiary or the operations conducted thereon, (iv) the investigation, cleanup
or remediation of offsite locations at which the Company or any Subsidiary or
their respective predecessors are alleged to have directly or indirectly
disposed of hazardous substances or (v) the execution, delivery, performance or
enforcement of this Agreement or any other Loan Document by any of the Bank
Parties, except for any such Indemnified Liabilities arising on account of any
such Bank Party's gross negligence or willful misconduct. THIS INDEMNITY
INDEMNIFIES THE BANK PARTIES AGAINST THEIR OWN NEGLIGENCE. If and to the extent
that the foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Nothing set forth above shall be construed to relieve any Bank Party from
any obligation it may have under this Agreement.
(b) All obligations provided for in this Section 14.13 shall survive
repayment of the Loans, cancellation of the Notes, any foreclosure under, or any
modification, release or discharge of any or all of the Collateral Documents and
any termination of this Agreement.
14.14 Interest. (a) It is the intention of the parties hereto that each
Bank shall conform strictly to usury laws applicable to it. Accordingly, the
parties hereto stipulate and agree that none of the terms and provisions
contained in this Agreement or any Note shall ever be construed to create a
contract to pay any Bank for the use, forbearance or detention of money a rate
in excess of the Highest Lawful Rate applicable to such Bank, and that for
purposes hereof, "interest" shall include the aggregate of all charges or other
consideration which constitute interest under applicable laws and are contracted
for, taken, reserved, charged or received under this Agreement, the applicable
Note or otherwise in connection with the transactions contemplated by this
Agreement. Further, if the transactions contemplated hereby would be usurious as
to any Bank under the laws applicable to it, then notwithstanding anything to
the contrary in this Agreement or the applicable Note, or any agreement or
document entered into in connection herewith or therewith, it is agreed as
follows: the aggregate of all consideration which constitutes interest under the
laws applicable to such Bank that is contracted for, taken, reserved, charged or
received by such Bank under this Agreement or the applicable Note, or otherwise
in connection herewith or therewith, shall under no circumstances exceed the
maximum amount allowed by the laws applicable to such Bank, and any excess shall
be credited by such Bank on the principal amount of the indebtedness of the
Company owed to such Bank (or, if the principal amount of all such indebtedness
shall have been paid in full, to the extent such interest has been received by
such Bank it shall be refunded by such Bank to the Company). The provisions of
this Section 14.14(a) shall control over all other provisions of this Agreement,
the Notes and any other agreement or document which may be in apparent conflict
herewith. The parties further stipulate and agree that, without limitation of
the foregoing, all calculations of the rate or amount of interest contracted
for, taken, reserved, charged or received under this Agreement, each Note and
any other applicable agreement or document which are made for the
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purpose of determining whether such rate or amount exceeds the Highest Lawful
Rate shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading during the period of the full stated term of
the indebtedness of the Company to the applicable Bank, and if longer and if
permitted by applicable law, until payment in full, all interest at any time so
contracted for, taken, reserved, charged or received.
(b) If at any time the effective rate of interest which would otherwise
apply to any indebtedness evidenced by any Note issued to any Bank would exceed
the Highest Lawful Rate applicable to such Bank (taking into account the
interest rate applicable to such indebtedness pursuant to the other provisions
of this Agreement, plus all additional charges and consideration which have been
contracted for, taken, reserved, charged or received under this Agreement or
such Note (the "Additional Charges") which constitute interest with respect to
such indebtedness), the effective interest rate to apply to such indebtedness
shall be limited to the Highest Lawful Rate, but any subsequent reductions in
the interest rate applicable to such indebtedness shall not reduce the effective
interest rate to apply to such indebtedness below the Highest Lawful Rate
applicable to such Bank until the total amount of interest accrued on such
indebtedness equals the amount of interest which would have accrued if the
interest rate from time to time applicable to such indebtedness had at all times
been in effect with respect to such indebtedness pursuant to the other
provisions of this Agreement and if such Bank had collected all Additional
Charges called for under this Agreement and its Note. If at maturity or final
payment of any Note issued to any Bank the total amount of interest accrued on
such Note (including amounts designated as "interest" plus any Additional
Charges which constitute interest, and taking into account the limitations of
the first sentence of this Section 14.14(b)) is less than the total amount of
interest which would have accrued if the interest rate or interest rates
applicable to the indebtedness from time to time outstanding under such Note had
at all times been in effect pursuant to the other provisions of this Agreement,
then the Company agrees, to the fullest extent permitted by the laws applicable
to such Bank, to pay to such Bank an amount equal to the difference between (i)
the lesser of (1) the amount of interest which would have accrued on such Note
if the Highest Lawful Rate had at all times been in effect (but excluding, for
purposes of calculating such amount of interest, any Additional Charges which
constitute interest with respect to such Note), or (2) the amount of interest
which would have accrued on such Note if the interest rate or interest rates
applicable to the indebtedness from time to time outstanding under such Note had
at all times been in effect pursuant to the other provisions of this Agreement
(including amounts designated as "interest" plus any Additional Charges which
constitute interest with respect to such Note) less (ii) the amount of interest
actually accrued on such Note (including amounts designated as "interest" plus
any Additional Charges which constitute interest with respect to such Note).
14.15 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
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ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID TO SUCH ADDRESS AS
DETERMINED PURSUANT TO SECTION 14.3, BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.16 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENTS AND EACH
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
SYNAGRO TECHNOLOGIES, INC.
By /s/ Ross M. Patten
--------------------------------------
Title Chairman/CEO
-----------------------------------
BANK OF AMERICA, N.A., as Administrative
Agent
By /s/ Kristine D. Hyde
--------------------------------------
Title Assistant Vice President
-----------------------------------
BANK OF AMERICA, N.A., as Issuing Bank
and Swing Line Bank
By /s/ Steven R. Arentsen
--------------------------------------
Title Vice President
-----------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE, as
Syndication Agent
By /s/ Louise Bell
--------------------------------------
Title Managing Director
-----------------------------------
CIBC INC., as a Bank
By /s/ Louise Bell
--------------------------------------
Title Managing Director
-----------------------------------
S-1
<PAGE> 1
EXHIBIT 2.4
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES C CONVERTIBLE PREFERRED STOCK
OF SYNAGRO TECHNOLOGIES, INC.
Synagro Technologies, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation, as amended, of the
Corporation, and pursuant to Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of the Corporation adopted resolutions
(i) authorizing a series of the Corporation's previously authorized preferred
stock, par value $0.002 per share, and (ii) providing for the designation,
rights, preferences and privileges of thirty thousand (30,000) shares of Series
C Convertible Preferred Stock of the Corporation, as follows:
Resolved, that the Corporation is authorized to issue thirty thousand
(30,000) shares of Series C Convertible Preferred Stock of the Corporation (the
"Series C Preferred"), par value $0.002 per share, which shall have the
following powers, rights, preferences and privileges:
Section 1. Dividends.
1A. General Obligation. When and as declared by the Board and
to the extent permitted under the General Corporation Law of Delaware, the
Corporation shall pay preferential dividends in cash to the holders of the
Series C Preferred as provided in this Section 1. Dividends on each share of the
Series C Preferred (a "Share") shall accrue on a daily basis at the rate of 8%
per annum of the sum of the Liquidation Value thereof plus all accumulated and
unpaid dividends thereon from and including the date of issuance of such Share
to and including the first to occur of (i) the date on which the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon) is paid to
the holder thereof in connection with the liquidation of the Corporation or the
redemption of such Share by the Corporation, (ii) the date on which such Share
is converted into shares of Conversion Stock hereunder or (iii) the date on
which such share is otherwise acquired by the Corporation. Such dividends shall
accrue whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends, and such dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to any Junior Securities.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
1B. Dividend Reference Dates. To the extent not paid on March
31, June 30, September 30 and December 31 of each year, beginning March 31, 2000
(the "Dividend Reference Dates"), all dividends which have accrued on each Share
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend
<PAGE> 2
Reference Date shall be accumulated and shall remain accumulated dividends with
respect to such Share until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series C Preferred,
such payment shall be distributed pro rata among the holders thereof based upon
the aggregate accrued but unpaid dividends on the Shares held by each such
holder.
Section 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series C
Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the aggregate
Liquidation Value of all Shares held by such holder (plus all accrued and unpaid
dividends thereon), and the holders of Series C Preferred shall not be entitled
to any further payment. If upon any such liquidation, dissolution or winding up
of the Corporation the Corporation's assets to be distributed among the holders
of the Series C Preferred are insufficient to permit payment to such holders of
the aggregate amount which they are entitled to be paid under this Section 2,
then the entire assets available to be distributed to the Corporation's
stockholders shall be distributed pro rata among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends) of the
Series C Preferred held by each such holder. Not less than 15 days prior to the
payment date stated therein, the Corporation shall mail written notice of any
such liquidation, dissolution or winding up to each record holder of Series C
Preferred, setting forth in reasonable detail the amount of proceeds to be paid
with respect to each Share and each share of Common Stock in connection with
such liquidation, dissolution or winding up.
Section 3. Priority of Series C Preferred on Dividends and
Redemptions.
3A. So long as any Series C Preferred remains outstanding,
without the prior written consent of the holders of a majority of the
outstanding shares of Series C Preferred, the Corporation shall not, nor shall
it permit any Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation directly or
indirectly pay or declare any dividend or make any distribution upon any Junior
Securities.
3B. In the event the Corporation liquidates or redeems any
shares of Preferred Stock, if the funds of the Corporation legally available for
such liquidation or redemption are insufficient to redeem the total number of
such shares to be redeemed on such date, those funds that are legally available
shall be used for such liquidation or redemption pro rata among the holders of
the shares of Preferred Stock based upon the aggregate Liquidation Value of such
shares held by each such holder (plus all accrued and unpaid dividends thereon).
In the event the Corporation pays dividends upon any shares of Preferred Stock,
such dividends shall be allocated pro rata among all outstanding shares of
Preferred stock based upon the accrued and unpaid dividends thereon.
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Section 4. Redemptions.
4A. Scheduled Redemption. On January 26, 2010 (the "Scheduled
Redemption Date"), the Corporation shall redeem all outstanding Shares of Series
C Preferred at a price per Share equal to the Liquidation Value thereof (plus
accrued and unpaid dividends thereon).
4B. Optional Redemptions. The Corporation may at any time and
from time to time, with the consent of the holders of a majority of the Series C
Preferred, redeem all or any portion of the Shares of Series C Preferred then
outstanding. Upon any such redemption, the Corporation shall pay a price per
Share equal to the Liquidation Value thereof (plus all accrued and unpaid
dividends thereon). No redemption pursuant to this Section may be made for less
than 1,000 Shares (or such lesser number of Shares then outstanding), and
redemptions made pursuant to this paragraph shall not relieve the Corporation of
its obligation to redeem any remaining Shares on the Scheduled Redemption Date.
4C. Redemption After Equity Offering. The Corporation shall,
at the request (by written notice given to the Corporation) of the holders of a
majority of the Series C Preferred, apply the net cash proceeds to the Company
(and not to any selling stockholders) from any Equity Offering remaining after
deduction of all discounts, underwriters' commissions and other reasonable
expenses to redeem Shares of Series C Preferred at a price per Share equal to
the Liquidation Value thereof (plus all accrued and unpaid dividends thereon).
Such redemption shall take place on a date fixed by the Corporation, which date
shall be not more than five days after the Corporation's receipt of such
proceeds. Redemptions of Shares pursuant to this paragraph shall not relieve the
Corporation of its obligation to redeem any remaining Shares on the Scheduled
Redemption Date.
4D. Redemption Payments. For each Share which is to be
redeemed hereunder, the Corporation shall be obligated on the Redemption Date to
pay to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Share) an amount in
immediately available funds equal to the Liquidation Value of such Share (plus
all accrued and unpaid dividends thereon). If the funds of the Corporation
legally available for redemption of Shares on any Redemption Date are
insufficient to redeem the total number of Shares to be redeemed on such date,
those funds which are legally available shall be used to redeem the maximum
possible number of Shares pro rata among the holders of the Shares to be
redeemed based upon the aggregate Liquidation Value of such Shares held by each
such holder (plus all accrued and unpaid dividends thereon). At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of Shares, such funds shall immediately be used to redeem the
balance of the Shares which the Corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed.
4E. Notice of Redemption. Except as otherwise provided herein,
the Corporation shall mail written notice of each redemption of any shares of
Series C Preferred to each record holder thereof not more than 60 nor less than
15 days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
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<PAGE> 4
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
4F. Determination of the Number of Each Holder's Shares to be
Redeemed. The number of Shares of Series C Preferred to be redeemed from each
holder thereof in redemptions hereunder shall be the number of Shares determined
by multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.
4G. Dividends After Redemption Date. No Share shall be
entitled to any dividends accruing after the date on which the Liquidation Value
of such Share (plus all accrued and unpaid dividends thereon) is paid to the
holder of such Share. On such date, all rights of the holder of such Share shall
cease, and such Share shall no longer be deemed to be issued and outstanding.
4H. Redeemed or Otherwise Acquired Shares. Any Shares which
are redeemed or otherwise acquired by the Corporation shall be canceled and
retired to authorized but unissued shares and shall not be reissued, sold or
transferred.
4I. Other Redemptions or Acquisitions. The Corporation shall
not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any
Shares of Series C Preferred, except as expressly authorized herein.
4J. Special Redemptions.
(i) If a Change in Ownership has occurred, the Corporation has
entered into a written agreement with respect to a Change in Ownership or the
Corporation obtains a written proposal for a Change in Ownership, the
Corporation shall give prompt written notice of such Change in Ownership
describing in reasonable detail the material terms and date of consummation
thereof to each holder of Series C Preferred, but in any event such notice shall
not be given later than five days after the occurrence of such Change in
Ownership, and the Corporation shall give each holder of Series C Preferred
prompt written notice of any subsequent material change in the terms or timing
of such transaction. The holder or holders of a majority of the Series C
Preferred then outstanding may require the Corporation to redeem all or any
portion of the Series C Preferred owned by such holders at a price per Share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) by giving written notice to the Corporation of such election prior to
the later of (a) 10 days after receipt of the Corporation's notice and (b) 10
days prior to the consummation of the Change in Ownership (the "Expiration
Date"). The Corporation shall give prompt written notice of any such election to
all other holders of Series C Preferred within five days after the receipt
thereof, and each such holder shall have until the later of (a) the Expiration
Date or (b) 5 days after receipt of such second notice to request redemption
hereunder (by giving written notice to the Corporation) of all or any portion of
the Series C Preferred owned by such holder.
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Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein on the
later of (a) the occurrence of the Change in Ownership or (b) five days after
the Corporation's receipt of such election(s). If any proposed Change in
Ownership does not occur, all requests for redemption in connection therewith
shall be automatically rescinded and the Corporation shall have no liability to
the holders of Series C Preferred in connection therewith. If there has been a
material change in the terms or the timing of the transaction, any holder of
Series C Preferred may rescind such holder's request for redemption by
delivering written notice thereof to the Corporation prior to the consummation
of the transaction.
The term "Change in Ownership" means any sale, transfer or
issuance or series of sales, transfers and/or issuances of Common Stock by the
Corporation or any holders thereof which results in any Person or group of
Persons (as the term "group" is used under the Securities Exchange Act of 1934),
other than the holders of Common Stock, Series C Preferred and Series D
Preferred as of the date of the Purchase Agreement, owning more than 50% of the
Common Stock outstanding at the time of such sale, transfer or issuance or
series of sales, transfers and/or issuances.
(ii) If the Corporation enters into a written agreement
providing for a Fundamental Change, the Corporation shall give written notice of
such Fundamental Change describing in reasonable detail the material terms and
date of consummation thereof to each holder of Series C Preferred not more than
45 days nor less than 20 days prior to the consummation of such Fundamental
Change, and the Corporation shall give each holder of Series C Preferred prompt
written notice of any material change in the terms or timing of such
transaction. The holder or holders of a majority of the Shares then outstanding
may require the Corporation to redeem all or any portion of the Series C
Preferred owned by such holders at a price per Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon) by giving written
notice to the Corporation of such election prior to the later of (a) ten days
prior to the consummation of the Fundamental Change or (b) ten days after
receipt of notice from the Corporation. The Corporation shall give prompt
written notice of such election to all other holders of Series C Preferred (but
in any event within five days prior to the consummation of the Fundamental
Change), and each such holder shall have until two days after the receipt of
such notice to request redemption (by written notice given to the Corporation)
of all or any portion of the Series C Preferred owned by such holder.
Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein upon the
consummation of such Fundamental Change. If any proposed Fundamental Change does
not occur, all requests for redemption in connection therewith shall be
automatically rescinded and the Corporation shall have no liability to the
holders of Series C Preferred in connection therewith. If there has been a
material change in the terms or the timing of the transaction, any holder of
Series C Preferred may rescind such holder's request for redemption by
delivering written notice thereof to the Corporation prior to the consummation
of the transaction.
The term "Fundamental Change" means (a) any sale or transfer
of more than 50% of the assets of the Corporation and its Subsidiaries on a
consolidated basis (measured either by book
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value in accordance with generally accepted accounting principles consistently
applied or by fair market value determined in the reasonable good faith judgment
of the Board) in any transaction or series of transactions (other than sales in
the ordinary course of business) consistent with past practices and (b) any
merger or consolidation to which the Corporation is a party, except for a merger
in which the Corporation is the surviving corporation, the terms of the Series C
Preferred are not changed and the Series C Preferred is not exchanged for cash,
securities or other property, and after giving effect to such merger, the
holders of the Corporation's outstanding capital stock possessing a majority of
the voting power (under ordinary circumstances) to elect a majority of the Board
immediately prior to the merger shall continue to own the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Board.
(iii) Redemptions made pursuant to this paragraph 4J shall not
relieve the Corporation of its obligation to redeem Series C Preferred on the
Scheduled Redemption Dates pursuant to paragraph 4A above.
Section 5. Voting Rights.
Except as otherwise provided herein and as otherwise required
by applicable law, the Series C Preferred shall have no voting rights; provided
that each holder of Series C Preferred shall be entitled to notice of all
stockholders meetings at the same time and in the same manner as notice is given
to all stockholders entitled to vote at such meetings.
Section 6. Conversion.
6A. Conversion Procedure.
i. At any time after the Effective Date, any holder of Series
C Preferred may convert all or any portion of the Series C Preferred (including
any fraction of a Share) held by such holder into an identical number of shares
of Series D Preferred.
ii. Each conversion of Series C Preferred shall be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Series C Preferred to be converted
have been surrendered for conversion at the principal office of the Corporation.
At the time any such conversion has been effected, the rights of the holder of
the Shares converted as a holder of Series C Preferred shall cease and the
Person or Persons in whose name or names any certificate or certificates for
shares of Series D Preferred are to be issued upon such conversion shall be
deemed to have become the holder or holders of record of the shares of Series D
Preferred represented thereby.
iii. The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon).
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iv. Notwithstanding any other provision hereof, if a
conversion of Series C Preferred is to be made in connection with a Equity
Offering, a Change in Ownership, a Fundamental Change or other transaction
affecting the Corporation, the conversion of any Shares of Series C Preferred
may, at the election of the holder thereof, be conditioned upon the consummation
of such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
v. As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number
of shares of Series D Preferred issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified; and
(b) a certificate representing any Shares of Series C
Preferred which were represented by the certificate or certificates delivered
to the Corporation in connection with such conversion but which were not
converted.
vi. All accrued dividends with respect to each Share converted
which have not been paid prior thereto shall continue to accrue and shall be
obligations with respect to the converted shares of Series D Preferred.
vii. The issuance of certificates for shares of Conversion
Stock upon conversion of Series C Preferred shall be made without charge to the
holders of such Series C Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock. Upon conversion of each
Share of Series C Preferred, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
viii. The Corporation shall not close its books against the
transfer of Series C Preferred or of Series D issued or issuable upon conversion
of Series C Preferred in any manner which interferes with the timely conversion
of Series C Preferred. The Corporation shall assist and cooperate with any
holder of Shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Shares
hereunder (including, without limitation, making any filings required to be made
by the Corporation).
ix. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Series D Preferred,
solely for the purpose of issuance upon the conversion of the Series C
Preferred, such number of shares of Series D Preferred issuable upon the
conversion of all outstanding Series C Preferred. All shares of Series D
Preferred which are so
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<PAGE> 8
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Series D Preferred may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Series D Preferred may be listed (except for official
notice of issuance which shall be immediately delivered by the Corporation upon
each such issuance). The Corporation shall not take any action which would cause
the number of authorized but unissued shares of Series D Preferred to be less
than the number of such shares required to be reserved hereunder for issuance
upon conversion of the Series C Preferred.
x. If the shares of Series D Preferred issuable by reason of
conversion of Series C Preferred are convertible into or exchangeable for any
other stock or securities of the Corporation, the Corporation shall, at the
converting holder's option, upon surrender of the Shares to be converted by such
holder as provided herein together with any notice, statement or payment
required to effect such conversion or exchange of Series D Preferred, deliver to
such holder or as otherwise specified by such holder a certificate or
certificates representing the stock or securities into which the shares of
Series D Preferred issuable by reason of such conversion are so convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such holder has specified.
6B. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Series C Preferred then outstanding) to insure that each of the holders of
Series C Preferred shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Series D Preferred
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series C Preferred, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted its Series C Preferred immediately prior to such Organic Change.
In each such case, the Corporation shall also make appropriate provisions (in
form and substance satisfactory to the holders of a majority of the Series C
Preferred then outstanding) to insure that the provisions of this Section 6 and
Sections 7 and 8 hereof shall thereafter be applicable to the Series C
Preferred. The Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor entity (if other
than the Corporation) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and substance
satisfactory to the holders of a majority of the Series C Preferred then
outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.
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6C. Notices.
(i) The Corporation shall give written notice to all holders
of Series C Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(ii) The Corporation shall also give written notice to the
holders of Series C Preferred at least 20 days prior to the date on which any
Organic Change shall take place.
Section 7. Liquidating Dividends.
If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Corporation shall pay to the holders
of Series C Preferred at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Series D Preferred had such Series C
Preferred been converted immediately prior to the date on which a record is
taken for such Liquidating Dividend, or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends are to be
determined.
Section 8. Purchase Rights.
(i) If at any time the Corporation grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series C Preferred
shall be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon conversion
of the Series D Preferred acquirable upon conversion of such holder's Series C
Preferred immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
(ii) If the Distribution Date (as defined in the Rights
Agreement) occurs, the Corporation shall issue to each holder of Series C
Preferred a number of rights ("New Rights") equal to the number of Rights (as
defined in the Rights Agreement) such holder would have held if such holder had
held the number of shares of Common Stock acquirable upon conversion of the
Series D Preferred acquirable upon conversion of such holder's Series C
Preferred immediately prior to the Distribution Date.
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Section 9. Events of Noncompliance.
9A. Definition. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to make any redemption payment with
respect to the Preferred Stock which it is required to make hereunder, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or
observe (a) any other covenant or agreement set forth herein or in Sections 4E ,
4F (other than subsection 4F(d)), 4L, 4M, 4N and 4O of the Purchase Agreement or
(b) any other covenant or agreement set forth in the Purchase Agreement and
such failure continues for 30 days after notice thereof to the Corporation from
the Purchaser;
(iii) any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Preferred Stock pursuant
to the Purchase Agreement, or any information contained in writing required to
be furnished by the Corporation or any Subsidiary to any holder of Preferred
Stock, 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 Corporation 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;
(iv) the Corporation or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Federal Bankruptcy Code; or the Corporation or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or any Subsidiary or of any
substantial part of the assets of the Corporation or any Subsidiary, or
commences any proceeding (other than a proceeding for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Corporation or any Subsidiary
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such petition
or application is filed, or any such proceeding is commenced, against the
Corporation or any Subsidiary and either (a) the Corporation or any such
Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or proceeding is not
dismissed within 60 days;
(v) a judgment in excess of $1,000,000 is rendered against the
Corporation or any Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or within
60 days after the expiration of any such stay, such judgment is not discharged;
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(vi) there is (a) an acceleration of the maturity of any debt
for borrowed money of the Company or any Subsidiary (whether by having become
due and payable by its terms or by having been declared due and payable prior to
its stated maturity) or (b) any payment default or defaults aggregating more
than $2,000,000 under the terms applicable to any debt of the Company or any
Subsidiary (subject to any applicable grace period), whether by acceleration or
otherwise; or
(vii) 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 fifteen (15) days.
9B. Consequences of Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and is
continuing and has not been cured within 45 days after the Company has received
written notice thereof from a majority of the holders of Series C Preferred, the
dividend rate on the Series C Preferred shall increase immediately by an
increment of two percentage point(s). Any increase of the dividend rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Noncompliance exists, subject
to subsequent increases pursuant to this paragraph.
(ii) If an Event of Noncompliance other than an Event of
Noncompliance of the type described in subparagraph 9A(iv) has occurred and is
continuing and has not been cured within 45 days after the Company has received
written notice thereof from a majority of the holders of Series C Preferred, the
holder or holders of a majority of the Series C Preferred then outstanding may
demand (by written notice delivered to the Corporation) immediate redemption of
all or any portion of the Series C Preferred owned by such holder or holders at
a price per Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon). The Corporation shall give prompt written notice of
such election to the other holders of Series C Preferred (but in any event
within five days after receipt of the initial demand for redemption), and each
such other holder may demand immediate redemption of all or any portion of such
holder's Series C Preferred by giving written notice thereof to the Corporation
within seven days after receipt of the Corporation's notice. The Corporation
shall redeem all Series C Preferred as to which rights under this paragraph have
been exercised within 15 days after receipt of the initial demand for
redemption.
(iii) If an Event of Noncompliance of the type described in
subparagraph 9A(iv) has occurred, all of the Series C Preferred then outstanding
shall be subject to immediate redemption by the Corporation (without any action
on the part of the holders of the Series C Preferred) at a price per Share equal
to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). The Corporation shall immediately redeem all Series C Preferred upon
the occurrence of such Event of Noncompliance.
(iv) If any Event of Noncompliance of the type referred to in
subparagraph 9A(i) has occurred and is continuing and has not been cured within
45 days after the Company has received written notice thereof from a majority of
the holders of Series C Preferred, the number of
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directors constituting the Board shall, at the request of a majority of the
Preferred Stock then outstanding, be increased by one member, and the holders of
Preferred Stock shall have the special right, voting together as a single class
(with each Share being entitled to one vote) and to the exclusion of all other
classes of the Corporation's stock, to elect an individual to fill such newly
created directorship, to fill any vacancy of such directorship and to remove any
individual elected to such directorship. The newly created directorship shall
constitute a separate class of directors, and the director elected by the
holders of the Preferred Stock shall be entitled to cast a number of votes on
each matter considered by the Board (including for purposes of determining the
existence of a quorum) equal to the sum of the number of votes entitled to be
cast by all of the other directors plus one. The special right of the holders of
Preferred Stock to elect a member of the Board may be exercised at the special
meeting called pursuant to this subparagraph (iv), at any annual or other
special meeting of stockholders and, to the extent and in the manner permitted
by applicable law, pursuant to a written consent in lieu of a stockholders
meeting. Such special right shall continue until such time as there is no longer
any Event of Noncompliance in existence, at which time such special right shall
terminate subject to revesting upon the occurrence and continuation of any Event
of Noncompliance which gives rise to such special right hereunder.
At any time when such special right has vested in the holders
of Preferred Stock, a proper officer of the Corporation shall, upon the written
request of the holders of at least 10% of the Preferred Stock then outstanding,
addressed to the secretary of the Corporation, call a special meeting of the
holders of Preferred Stock for the purpose of electing a director pursuant to
this subparagraph. Such meeting shall be held at the earliest legally
permissible date at the principal office of the Corporation, or at such other
place designated by the holders of at least 10% of the Preferred Stock then
outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Preferred Stock then outstanding may designate in writing one
of their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Preferred Stock then outstanding. Any holder of Preferred Stock so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
subparagraph.
At any meeting or at any adjournment thereof at which the
holders of Preferred Stock have the special right to elect a director, the
presence, in person or by proxy, of the holders of a majority of the Preferred
Stock then outstanding shall be required to constitute a quorum for the election
or removal of such director by the holders of the Preferred Stock exercising
such special right. The vote of a majority of such quorum shall be required to
elect or remove any such director.
The director so elected by the holders of Preferred Stock
shall continue to serve as a director until the date on which the Event of
Noncompliance under subparagraph 9A(i) has been cured, and on such date the
number of directors constituting the Board shall decrease to such number
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as constituted the whole Board immediately prior to the occurrence of the Event
or Events of Noncompliance giving rise to the special right to elect a director.
9C. If any Event of Noncompliance exists, each holder of
Series C Preferred 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 10. Registration of Transfer.
The Corporation shall keep at its principal office a register
for the registration of Series C Preferred. Upon the surrender of any
certificate representing Series C Preferred at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares represented
by the surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Shares as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Series C
Preferred represented by such new certificate from the date to which dividends
have been fully paid on such Series C Preferred represented by the surrendered
certificate.
Section 11. Replacement.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Shares of Series C Preferred, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series C Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 12. Definitions.
"Board" means the Board of Directors of the Corporation.
"Change in Ownership" has the meaning set forth in paragraph
4J hereof.
"Common Stock" means, collectively, the Corporation's Common
Stock, and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
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dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Convertible Preferred Stock" means the Series D Preferred
(including that acquired upon conversion of the Series C Preferred) and all
subsequent series of convertible preferred stock issued or to be issued in
connection with the Purchase Agreement.
"Convertible Securities" means any stock or securities
directly or indirectly convertible into or exchangeable for Common Stock.
"Effective Date" means the later of (a) the date that is 21
calender days after the date that the Company send or gives its shareholders the
Information Statement pursuant to Section 14(c) and Regulation 14C of the
Securities Exchange Act of 1934 relating to the shareholders' approval of the
issuance of the Common Stock issuable upon conversion of the Preferred Stock and
the exercise (and subsequent conversion) of the Warrants and (b) the date upon
which the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, in connection with the conversion of the Series C Preferred
into Series D Preferred expires or is terminated.
"Equity Offering" means any offering by the Corporation of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect, or
any comparable statement under any similar federal statute then in force;
provided that for purposes of paragraph 4C hereof, an Equity Offering shall not
include an offering made in connection with a business acquisition or
combination or an employee benefit plan.
"Fundamental Change" has the meaning set forth in paragraph 4J
hereof.
"Junior Securities" means any capital stock or other equity
securities of the Corporation, except for the Preferred Stock.
"Liquidation Value" of any Share as of any particular date
shall be equal to $1,000.00.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a corporation, a
limited liability company, a limited liability, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
"Preferred Stock" means, collectively, the Series C Preferred
and the Convertible Preferred Stock.
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"Purchase Agreement" means the Purchase Agreement, dated on or
about January 26, 2000, by and among the Corporation and certain investors, as
such agreement may from time to time be amended in accordance with its terms.
"Redemption Date" as to any Share means the date specified in
the notice of any redemption at the Corporation's option or the applicable date
specified herein in the case of any other redemption; provided that no such date
shall be a Redemption Date unless the Liquidation Value of such Share (plus all
accrued and unpaid dividends thereon and any required premium with respect
thereto) is actually paid in full on such date, and if not so paid in full, the
Redemption Date shall be the date on which such amount is fully paid.
"Rights Agreement" means the Rights Agreement, dated as of
December 20, 1996, between the Corporation and Intercontinental Registrar &
Transfer Agency, Inc., as Rights Agent.
"Series D Preferred" means the Corporation's Series D
Convertible Preferred Stock, par value $.002 per share.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.
Section 13. Amendment and Waiver.
No amendment, modification or waiver shall be binding or
effective with respect to any provision hereof without the prior written consent
of the holders of a majority of the Series C Preferred outstanding at the time
such action is taken.
Section 14. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, and shall be deemed to have been
given when so mailed or sent (i) to the Corporation, at its principal executive
offices and
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(ii) to any stockholder, at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).
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IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be signed by Mark A. Rome, its Executive Vice
President, this 26th day of January, 2000.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ MARK A. ROME
Name: Mark A. Rome
Its: Executive Vice President
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EXHIBIT 2.5
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES D CONVERTIBLE PREFERRED STOCK
OF SYNAGRO TECHNOLOGIES, INC.
Synagro Technologies, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the Board of Directors
of the Corporation by the Certificate of Incorporation, as amended, of the
Corporation, and pursuant to Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of the Corporation adopted resolutions
(i) authorizing a series of the Corporation's previously authorized preferred
stock, par value $0.002 per share, and (ii) providing for the designation,
rights, preferences and privileges of thirty-two thousand (32,000) shares of
Series D Convertible Preferred Stock of the Corporation, as follows:
Resolved, that the Corporation is authorized to issue thirty-two
thousand (32,000) shares of Series D Convertible Preferred Stock of the
Corporation (the "Series D Preferred"), par value $0.002 per share, which shall
have the following powers, rights, preferences and privileges:
Section 1. Dividends.
1A. General Obligation. When and as declared by the Board and
to the extent permitted under the General Corporation Law of Delaware, the
Corporation shall pay preferential dividends in cash to the holders of the
Series D Preferred as provided in this Section 1. Dividends on each share of the
Series D Preferred (a "Share") shall accrue on a daily basis at the rate of 8%
per annum of the sum of the Liquidation Value thereof plus all accumulated and
unpaid dividends thereon from and including the date of issuance of such Share
to and including the first to occur of (i) the date on which the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon) is paid to
the holder thereof in connection with the liquidation of the Corporation or the
redemption of such Share by the Corporation, (ii) the date on which such Share
is converted into shares of Conversion Stock hereunder or (iii) the date on
which such share is otherwise acquired by the Corporation. Such dividends shall
accrue whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends, and such dividends shall be cumulative such that all
accrued and unpaid dividends shall be fully paid or declared with funds
irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to any Junior Securities.
The date on which the Corporation initially issues any Share shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
1B. Dividend Reference Dates. To the extent not paid on March
31, June 30, September 30 and December 31 of each year, beginning March 31, 2000
(the "Dividend Reference Dates"), all dividends which have accrued on each Share
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend
<PAGE> 2
Reference Date shall be accumulated and shall remain accumulated dividends with
respect to such Share until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Series D Preferred,
such payment shall be distributed pro rata among the holders thereof based upon
the aggregate accrued but unpaid dividends on the Shares held by each such
holder.
Section 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series D
Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the greater of (a)
the aggregate Liquidation Value of all Shares held by such holder (plus all
accrued and unpaid dividends thereon) and (b) the amount that such holder would
be entitled to receive if such holder had converted such Shares into Conversion
Stock immediately prior to such event, and the holders of Series D Preferred
shall not be entitled to any further payment. If upon any such liquidation,
dissolution or winding up of the Corporation the Corporation's assets to be
distributed among the holders of the Series D Preferred are insufficient to
permit payment to such holders of the aggregate amount which they are entitled
to be paid under this Section 2, then the entire assets available to be
distributed to the Corporation's stockholders shall be distributed pro rata
among such holders based upon the aggregate Liquidation Value (plus all accrued
and unpaid dividends) of the Series D Preferred held by each such holder. Not
less than 15 days prior to the payment date stated therein, the Corporation
shall mail written notice of any such liquidation, dissolution or winding up to
each record holder of Series D Preferred, setting forth in reasonable detail the
amount of proceeds to be paid with respect to each Share and each share of
Common Stock in connection with such liquidation, dissolution or winding up.
Section 3. Priority of Series D Preferred on Dividends and
Redemptions.
3A. So long as any Series D Preferred remains outstanding,
without the prior written consent of the holders of a majority of the
outstanding shares of Series D Preferred, the Corporation shall not, nor shall
it permit any Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation directly or
indirectly pay or declare any dividend or make any distribution upon any Junior
Securities.
3B. In the event the Corporation liquidates or redeems any
shares of Preferred Stock, if the funds of the Corporation legally available for
such liquidation or redemption are insufficient to redeem the total number of
such shares to be redeemed on such date, those funds that are legally available
shall be used for such liquidation or redemption pro rata among the holders of
the shares of Preferred Stock based upon the aggregate Liquidation Value of such
shares held by
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each such holder (plus all accrued and unpaid dividends thereon). In the event
the Corporation pays dividends upon any shares of Preferred Stock, such
dividends shall be allocated pro rata among all outstanding shares of Preferred
stock based upon the accrued and unpaid dividends thereon.
Section 4. Redemptions.
4A. Scheduled Redemption. On January 26, 2010 (the "Scheduled
Redemption Date"), the Corporation shall redeem all outstanding Shares of Series
D Preferred at a price per Share equal to the Liquidation Value thereof (plus
accrued and unpaid dividends thereon).
4B. Optional Redemptions. The Corporation may at any time and
from time to time, with the consent of the holders of a majority of the Series D
Preferred, redeem all or any portion of the Shares of Series D Preferred then
outstanding. Upon any such redemption, the Corporation shall pay a price per
Share equal to the Liquidation Value thereof (plus all accrued and unpaid
dividends thereon). No redemption pursuant to this Section may be made for less
than 1,000 Shares (or such lesser number of Shares then outstanding), and
redemptions made pursuant to this paragraph shall not relieve the Corporation of
its obligation to redeem any remaining Shares on the Scheduled Redemption Date.
4C. Redemption After Equity Offering. The Corporation shall,
at the request (by written notice given to the Corporation) of the holders of a
majority of the Series D Preferred, apply the net cash proceeds to the Company
(and not to the selling stockholders) from any Equity Offering remaining after
deduction of all discounts, underwriters' commissions and other reasonable
expenses to redeem Shares of Series D Preferred at a price per Share equal to
the Liquidation Value thereof (plus all accrued and unpaid dividends thereon).
Such redemption shall take place on a date fixed by the Corporation, which date
shall be not more than five days after the Corporation's receipt of such
proceeds. Redemptions of Shares pursuant to this paragraph shall not relieve the
Corporation of its obligation to redeem any remaining Shares on the Scheduled
Redemption Date.
4D. Redemption Payments. For each Share which is to be
redeemed hereunder, the Corporation shall be obligated on the Redemption Date to
pay to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Share) an amount in
immediately available funds equal to the Liquidation Value of such Share (plus
all accrued and unpaid dividends thereon). If the funds of the Corporation
legally available for redemption of Shares on any Redemption Date are
insufficient to redeem the total number of Shares to be redeemed on such date,
those funds which are legally available shall be used to redeem the maximum
possible number of Shares pro rata among the holders of the Shares to be
redeemed based upon the aggregate Liquidation Value of such Shares held by each
such holder (plus all accrued and unpaid dividends thereon). At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of Shares, such funds shall immediately be used to redeem the
balance of the Shares which the Corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed.
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4E. Notice of Redemption. Except as otherwise provided herein,
the Corporation shall mail written notice of each redemption of any shares of
Series D Preferred to each record holder thereof not more than 60 nor less than
15 days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
4F. Determination of the Number of Each Holder's Shares to be
Redeemed. The number of Shares of Series D Preferred to be redeemed from each
holder thereof in redemptions hereunder shall be the number of Shares determined
by multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.
4G. Dividends After Redemption Date. No Share shall be
entitled to any dividends accruing after the date on which the Liquidation Value
of such Share (plus all accrued and unpaid dividends thereon) is paid to the
holder of such Share. On such date, all rights of the holder of such Share shall
cease, and such Share shall no longer be deemed to be issued and outstanding.
4H. Redeemed or Otherwise Acquired Shares. Any Shares which
are redeemed or otherwise acquired by the Corporation shall be canceled and
retired to authorized but unissued shares and shall not be reissued, sold or
transferred.
4I. Other Redemptions or Acquisitions. The Corporation shall
not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any
Shares of Series D Preferred, except as expressly authorized herein.
4J. Special Redemptions.
(i) If a Change in Ownership has occurred, the Corporation
has entered into a written agreement with respect to a Change in Ownership or
the Corporation obtains a written proposal for a Change in Ownership, the
Corporation shall give prompt written notice of such Change in Ownership
describing in reasonable detail the material terms and date of consummation
thereof to each holder of Series D Preferred, but in any event such notice shall
not be given later than five days after the occurrence of such Change in
Ownership, and the Corporation shall give each holder of Series D Preferred
prompt written notice of any subsequent material change in the terms or timing
of such transaction. The holder or holders of a majority of the Series D
Preferred then outstanding may require the Corporation to redeem all or any
portion of the Series D Preferred owned by such holders at a price per Share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) by giving written notice to the Corporation of such election prior to
the later of (a) 10 days after receipt of the Corporation's notice and (b) 10
days prior to the consummation of the Change in Ownership (the "Expiration
Date"). The Corporation shall give
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prompt written notice of any such election to all other holders of Series D
Preferred within five days after the receipt thereof, and each such holder shall
have until the later of (a) the Expiration Date or (b) five days after receipt
of such second notice to request redemption hereunder (by giving written notice
to the Corporation) of all or any portion of the Series D Preferred owned by
such holder.
Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein on the
later of (a) the occurrence of the Change in Ownership or (b) five days after
the Corporation's receipt of such election(s). If any proposed Change in
Ownership does not occur, all requests for redemption in connection therewith
shall be automatically rescinded and the Corporation shall have no liability to
the holders of Series D Preferred in connection therewith. If there has been a
material change in the terms or the timing of the transaction, any holder of
Series D Preferred may rescind such holder's request for redemption by
delivering written notice thereof to the Corporation prior to the consummation
of the transaction.
The term "Change in Ownership" means any sale, transfer or
issuance or series of sales, transfers and/or issuances of Common Stock by the
Corporation or any holders thereof which results in any Person or group of
Persons (as the term "group" is used under the Securities Exchange Act of 1934),
other than the holders of Common Stock, Series C Preferred and Series D
Preferred as of the date of the Purchase Agreement, owning more than 50% of the
Common Stock outstanding at the time of such sale, transfer or issuance or
series of sales, transfers and/or issuances.
(ii) If the Corporation enters into a written agreement
providing for a Fundamental Change, the Corporation shall give written notice of
such Fundamental Change describing in reasonable detail the material terms and
date of consummation thereof to each holder of Series D Preferred not more than
45 days nor less than 20 days prior to the consummation of such Fundamental
Change, and the Corporation shall give each holder of Series D Preferred prompt
written notice of any material change in the terms or timing of such
transaction. The holder or holders of a majority of the Shares then outstanding
may require the Corporation to redeem all or any portion of the Series D
Preferred owned by such holders at a price per Share equal to the Liquidation
Value thereof (plus all accrued and unpaid dividends thereon) by giving written
notice to the Corporation of such election prior to the later of (a) ten days
prior to the consummation of the Fundamental Change or (b) ten days after
receipt of notice from the Corporation. The Corporation shall give prompt
written notice of such election to all other holders of Series D Preferred (but
in any event within five days prior to the consummation of the Fundamental
Change), and each such holder shall have until two days after the receipt of
such notice to request redemption (by written notice given to the Corporation)
of all or any portion of the Series D Preferred owned by such holder.
Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein upon the
consummation of such Fundamental Change. If any proposed Fundamental Change does
not occur, all requests for redemption in connection therewith shall be
automatically rescinded and the Corporation shall have no liability to the
holders of Series D Preferred in connection therewith. If there has been a
material change in the terms or
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<PAGE> 6
the timing of the transaction, any holder of Series D Preferred may rescind such
holder's request for redemption by delivering written notice thereof to the
Corporation prior to the consummation of the transaction.
The term "Fundamental Change" means (a) any sale or transfer
of more than 50% of the assets of the Corporation and its Subsidiaries on a
consolidated basis (measured either by book value in accordance with generally
accepted accounting principles consistently applied or by fair market value
determined in the reasonable good faith judgment of the Board) in any
transaction or series of transactions (other than sales in the ordinary course
of business consistent with past practice) and (b) any merger or consolidation
to which the Corporation is a party, except for a merger in which the
Corporation is the surviving corporation, the terms of the Series D Preferred
are not changed and the Series D Preferred is not exchanged for cash, securities
or other property, and after giving effect to such merger, the holders of the
Corporation's outstanding capital stock possessing a majority of the voting
power (under ordinary circumstances) to elect a majority of the Board
immediately prior to the merger shall continue to own the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Board.
(iii) Redemptions made pursuant to this paragraph 4J shall not
relieve the Corporation of its obligation to redeem Series D Preferred on the
Scheduled Redemption Dates pursuant to paragraph 4A above.
Section 5. Voting Rights.
5A. Less than Majority Ownership. At any time that the
holders of the Convertible Preferred Stock hold less than a majority of the
outstanding Common Stock (assuming conversion of the Convertible Preferred
Stock), or, if such holders own a majority of such shares, until the first
meeting following the attainment of majority ownership, such holders shall have
the following voting rights:
i. Election of Directors. Such holders shall be entitled to
vote separately as a single class to the exclusion of all other classes of the
Corporation's capital stock, with each Share of Convertible Preferred Stock
entitled to one vote, to elect a pro rata share of the Board based on such
holders' ownership percentage of outstanding Common Stock (including Common
Stock issuable upon conversion of the Convertible Preferred Stock, but excluding
Common Stock actually held by such holders), to serve on the Board until their
successors are duly elected by the holders of the Convertible Preferred Stock or
they are removed from office (with or without cause) by the holders of the
Convertible Preferred Stock. In determining such pro rata share, fractional
numbers of directors less than 0.5 shall be rounded down and fractional numbers
of directors equal to or greater than 0.5 shall be rounded up to the next whole
director; provided that if such holders have the right to elect in excess of two
directors but less than three directors, fractional numbers of directors less
than 0.64 shall be rounded down and fractional numbers of directors equal to or
greater than 0.64 shall be rounded up to the next whole director. Such right can
be exercised at a special
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meeting of the holders of Preferred Stock, at any annual or other special
meeting of stockholders and, to the extent and in the manner permitted by
applicable law, pursuant to a written consent in lieu of a stockholders meeting.
If the holders of the Convertible Preferred Stock for any reason fail to elect
anyone to fill any such directorship, such position shall remain vacant until
such time as the holders of the Convertible Preferred Stock elect a director to
fill such position and shall not be filled by resolution or vote of the Board or
the Corporation's other stockholders.
ii. Other Voting Rights. The holders of the Convertible
Preferred Stock shall be entitled to notice of all stockholders meetings in
accordance with the Corporation's bylaws, and except in the election of
directors and as otherwise required by applicable law, the holders of the
Convertible Preferred Stock shall be entitled to vote together with the holders
of the Common Stock voting together as a single class on all matters (a)
submitted to the stockholders for a vote and (b) to the extent and in the manner
permitted by applicable law, pursuant to a written consent in lieu of a
stockholders meeting, in each case with each share of Common Stock entitled to
one vote per share and each Share of Convertible Preferred Stock entitled to one
vote for each share of Common Stock issuable upon conversion of the Convertible
Preferred Stock as of the record date for such vote or, if no record date is
specified, as of the date of such vote.
5B. Greater Than Majority Ownership. In all circumstances
other than those described in Section 5A, the holders of Convertible Preferred
Stock shall be entitled to notice of all stockholders meetings in accordance
with the Corporation's bylaws, and except as otherwise required by applicable
law, the holders of the Convertible Preferred Stock shall be entitled to vote
together with the holders of the Common Stock voting together as a single class
on all matters (including the election of directors) (a) submitted to the
stockholders for a vote and (b) to the extent and in the manner permitted by
applicable law, pursuant to a written consent in lieu of a stockholders meeting,
in each case with each share of Common Stock entitled to one vote per share and
each Share of Convertible Preferred Stock entitled to one vote for each share of
Common Stock issuable upon conversion of the Convertible Preferred Stock as of
the record date for such vote or, if no record date is specified, as of the date
of such vote.
Section 6. Conversion.
6A. Conversion Procedure.
i. At any time and from time to time, any holder of Series D
Preferred may convert all or any portion of the Series D Preferred (including
any fraction of a Share) held by such holder, and to the extent elected by such
holder, any accrued and unpaid dividends thereon, into a number of shares of
Conversion Stock computed by dividing (1) the sum of (a) the number of Shares to
be converted multiplied by the Liquidation Value and (b) the amount of such
accrued and unpaid dividends by (2) the Conversion Price then in effect.
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ii. Except as otherwise provided herein, each conversion of
Series D Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Series D Preferred to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such conversion has been
effected, the rights of the holder of the Shares converted as a holder of Series
D Preferred shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to be issued upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Conversion Stock represented thereby.
iii. The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon).
iv. Notwithstanding any other provision hereof, if a
conversion of Series D Preferred is to be made in connection with a Equity
Offering, a Change in Ownership, a Fundamental Change or other transaction
affecting the Corporation, the conversion of any Shares of Series D Preferred
may, at the election of the holder thereof, be conditioned upon the consummation
of such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
v. As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Conversion Stock issuable by reason of such conversion in such name or
names and such denomina tion or denominations as the converting holder has
specified;
(b) to the extent not converted, payment in an amount equal
to all accrued dividends with respect to each Share converted which have not
been paid prior thereto, plus the amount payable under subparagraph (x) below
with respect to such conversion; and
(c) a certificate representing any Shares of Series D
Preferred which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not converted.
vi. The Corporation shall declare the payment of all dividends
payable under subparagraph (v)(b) above. If the Corporation is not permitted
under applicable law to pay any portion of the accrued and unpaid dividends on
the Series D Preferred being converted, the Corporation shall pay such dividends
to the converting holder as soon thereafter as funds of the Corporation are
legally available for such payment. At the request of any such converting
holder, the Corporation shall provide such holder with written evidence of its
obligation to such holder.
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vii. The issuance of certificates for shares of Conversion
Stock upon conversion of Series D Preferred shall be made without charge to the
holders of such Series D Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock. Upon conversion of each
Share of Series D Preferred, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof.
viii. The Corporation shall not close its books against the
transfer of Series D Preferred or of Conversion Stock issued or issuable upon
conversion of Series D Preferred in any manner which interferes with the timely
conversion of Series D Preferred. The Corporation shall assist and cooperate
with any holder of Shares required to make any governmental filings or obtain
any governmental approval prior to or in connection with any conversion of
Shares hereunder (including, without limitation, making any filings required to
be made by the Corporation).
ix. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion Stock, solely
for the purpose of issuance upon the conversion of the Series D Preferred, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Series D Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Series D Preferred.
x. If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon any
conversion of the Series D Preferred, the Corporation, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal to
the Market Price of such fractional interest as of the date of conversion.
xi. If the shares of Conversion Stock issuable by reason of
conversion of Series D Preferred are convertible into or exchangeable for any
other stock or securities of the Corporation, the Corporation shall, at the
converting holder's option, upon surrender of the Shares to be converted by such
holder as provided herein together with any notice, statement or payment
required to effect such conversion or exchange of Conversion Stock, deliver to
such holder or as otherwise specified by such holder a certificate or
certificates representing the stock or securities into which the shares of
Conversion Stock issuable by reason of such conversion are so convertible or
exchangeable,
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registered in such name or names and in such denomination or denominations as
such holder has specified.
6B. Conversion Price.
(i) The initial Conversion Price shall be $2.50. In order to
prevent dilution of the conversion rights granted under this Section 6, the
Conversion Price shall be subject to adjustment from time to time pursuant to
this paragraph 6B.
(ii) If and whenever on or after the original date of
issuance of the Series D Preferred the Corporation issues or sells, or in
accordance with paragraph 6C is deemed to have issued or sold (except that this
paragraph 6B(ii) shall not apply to any issuance of Convertible Preferred Stock
(or conversion thereof into Common Stock) or Warrants (or the exercise and
conversion thereof into Common Stock)), any shares of its Common Stock for a
consideration per share less than the Market Price of the Common Stock
determined as of the date of such issue or sale, then immediately upon such
issue or sale the Conversion Price shall be reduced to whichever of the
following Conversion Prices is lower:
(a) the Conversion Price determined by dividing (1) the sum
of (x) the product derived by multiplying the Conversion Price in effect
immediately prior to such issue or sale by the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received by the Corporation upon such issue or sale, by
(2) the number of shares of Common Stock Deemed Outstanding immediately after
such issue or sale; or
(b) the Conversion Price determined by multiplying the
Conversion Price in effect immediately prior to such issue or sale by a
fraction, the numerator of which shall be the sum of (1) the number of shares of
Common Stock Deemed Outstanding immediately prior to such issue or sale
multiplied by the Market Price of the Common Stock determined as of the date of
such issuance or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, and the denominator of which shall be the
product derived by multiplying the Market Price of the Common Stock by the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale.
(iii) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price as a result of any issue or sale (or deemed
issue or sale) of shares of Common Stock (or options to acquire Common Stock) to
employees and directors of the Corporation and its Subsidiaries substantially
concurrently with issuances of Convertible Preferred Stock pursuant to the
Purchase Agreement, with an exercise or purchase price equal to the conversion
price of such Convertible Preferred Stock.
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6C. Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under paragraph 6B, the
following shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Market Price of the Common Stock determined as of such grant
date, then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold by the
Corporation at the time of the granting or sale of such Options for such price
per share. For purposes of this paragraph, the "price per share for which Common
Stock is issuable" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon exercise of all such Options, plus
in the case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options. No
further adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation
in any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the Market Price of the Common Stock determined as of such time, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 6, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
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(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of paragraph 6C, if the
terms of any Option or Convertible Security which was outstanding as of the date
of issuance of the Series D Preferred are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security and the
Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder to be
increased.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued. For purposes of paragraph 6C, the expiration or termination
of any Option or Convertible Security which was outstanding as of the date of
issuance of the Series D Preferred shall not cause the conversion Price
hereunder to be adjusted unless, and only to the extent that, a change in the
terms of such Option or Convertible Security caused it to be deemed to have been
issued after the date of issuance of the Series D Preferred.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor. If any Common Stock, Option
or Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Corporation
shall be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Corporation shall be the Market Price thereof as of the date of receipt. If
any Common Stock, Option or Convertible Security is issued to the owners of the
non-surviving entity in connection with any merger in which the Corporation is
the surviving corporation, the amount of consideration therefor shall be deemed
to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be. The fair value of any consideration
other than cash and securities shall be determined jointly by the Corporation
and the holders of a majority of the outstanding Series D Preferred. If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
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Corporation and the holders of a majority of the outstanding Series D Preferred.
The determination of such appraiser shall be final and binding upon the parties,
and the fees and expenses of such appraiser shall be borne by the Corporation.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6B. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
6C. Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Series D Preferred then outstanding) to insure that each of the holders of
Series D Preferred shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series D Preferred, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted
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its Series D Preferred immediately prior to such Organic Change. In each such
case, the Corporation shall also make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the Series D Preferred
then outstanding) to insure that the provisions of this Section 6 and Sections 7
and 8 hereof shall thereafter be applicable to the Series D Preferred
(including, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Corporation, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Conversion Stock
acquirable and receivable upon conversion of Series D Preferred, if the value so
reflected is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation shall not effect any such
consolidation,merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Corporation) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance satisfactory to the holders of a majority of the Series D
Preferred then outstanding), the obligation to deliver to each such holder such
shares of stock, securi ties or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
6D. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Board shall make an appropriate adjustment in the Conversion Price so
as to protect the rights of the holders of Series D Preferred; provided that no
such adjustment shall increase the Conversion Price as otherwise determined
pursuant to this Section 6 or decrease the number of shares of Conversion Stock
issuable upon conversion of each Share of Series D Preferred.
6E. Notices.
(i) Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to all holders of Series D
Preferred, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(ii) The Corporation shall give written notice to all holders
of Series D Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the
holders of Series D Preferred at least 20 days prior to the date on which any
Organic Change shall take place.
Section 7. Liquidating Dividends.
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If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Corporation shall pay to the holders
of Series D Preferred at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Conversion Stock had such Series D
Preferred been converted immediately prior to the date on which a record is
taken for such Liquidating Dividend, or, if no record is taken, the date as of
which the record holders of Common Stock entitled to such dividends are to be
determined.
Section 8. Purchase Rights.
(i) If at any time the Corporation grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series D Preferred
shall be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Conversion Stock acquirable upon
conversion of such holder's Series D Preferred immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or if no such record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(ii) If the Distribution Date (as defined in the Rights
Agreement) occurs, the Corporation shall issue to each holder of Series D
Preferred a number of rights ("New Rights") equal to the number of Rights (as
defined in the Rights Agreement) such holder would have held if such holder had
held the number of shares of Conversion Stock acquirable upon conversion of such
holder's Series D Preferred immediately prior to the Distribution Date.
Section 9. Events of Noncompliance.
9A. Definition. An Event of Noncompliance shall have occurred if:
(i) the Corporation fails to make any redemption payment with
respect to the Preferred Stock which it is required to make hereunder, whether
or not such payment is legally permissible or is prohibited by any agreement to
which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or
observe (a) any other covenant or agreement set forth herein or in Sections 4E,
4F (other than subsection 4F(d)), 4L, 4M, 4N or 4O of the Purchase Agreement or
(b) any other covenant or agreement set forth in the Pur chase Agreement and
such failure continues for 30 days after notice thereof to the Corporation from
the Purchaser;
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<PAGE> 16
(iii) any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Preferred Stock pursuant
to the Purchase Agreement, or any information contained in writing required to
be furnished by the Corporation or any Subsidiary to any holder of Preferred
Stock, 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 Corporation 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;
(iv) the Corporation or any Subsidiary makes an assignment
for the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Federal Bankruptcy Code; or the Corporation or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or any Subsidiary or of any
substantial part of the assets of the Corporation or any Subsidiary, or
commences any proceeding (other than a proceeding for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Corporation or any Subsidiary
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such petition
or application is filed, or any such proceeding is commenced, against the
Corporation or any Subsidiary and either (a) the Corporation or any such
Subsidiary by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or proceeding is not
dismissed within 60 days;
(v) a judgment in excess of $1,000,000 is rendered against the
Corporation or any Subsidiary and, within 60 days after entry thereof, such
judgment is not discharged or execution thereof stayed pending appeal, or within
60 days after the expiration of any such stay, such judgment is not discharged;
(vi) there is (a) an acceleration of the maturity of any debt
for borrowed money of the Company or any Subsidiary (whether by having become
due and payable by its terms or by having been declared due and payable prior to
its stated maturity) or (b) any payment default or defaults aggregating more
than $2,000,000 under the terms applicable to any debt of the Company or any
Subsidiary (subject to any applicable grace period), whether by acceleration or
otherwise; or
(vii) 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 fifteen (15) days.
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<PAGE> 17
9B. Consequences of Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and is
continuing and has not been cured within 45 days after the Company has received
written notice thereof from a majority of the holders of Series D Preferred, the
dividend rate on the Series D Preferred shall increase immediately by an
increment of two percentage point(s). Any increase of the dividend rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Noncompliance exists, subject
to subsequent increases pursuant to this paragraph.
(ii) If an Event of Noncompliance other than an Event of
Noncompliance of the type described in subparagraph 9A(iv) has occurred and is
continuing and has not been cured within 45 days after the Company has received
written notice thereof from a majority of the holders of Series D Preferred, the
holder or holders of a majority of the Series D Preferred then outstanding may
demand (by written notice delivered to the Corporation) immediate redemption of
all or any portion of the Series D Preferred owned by such holder or holders at
a price per Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon). The Corporation shall give prompt written notice of
such election to the other holders of Series D Preferred (but in any event
within five days after receipt of the initial demand for redemption), and each
such other holder may demand immediate redemption of all or any portion of such
holder's Series D Preferred by giving written notice thereof to the Corporation
within seven days after receipt of the Corporation's notice. The Corporation
shall redeem all Series D Preferred as to which rights under this paragraph have
been exercised within 15 days after receipt of the initial demand for
redemption.
(iii) If an Event of Noncompliance of the type described in
described in subparagraph 9A(iv) has occurred, all of the Series D Preferred
then outstanding shall be subject to immediate redemption by the Corporation
(without any action on the part of the holders of the Series D Preferred) at a
price per Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon). The Corporation shall immediately redeem all Series D
Preferred upon the occurrence of such Event of Noncompliance.
(iv) If any Event of Noncompliance of the type referred to in
subparagraph 9A(i) has occurred and is continuing and has not been cured within
45 days after the Company has received written notice thereof from a majority of
the holders of Series D Preferred, the number of directors constituting the
Board shall, at the request of a majority of the Preferred Stock then
outstanding, be increased by one member, and the holders of Preferred Stock
shall have the special right, voting together as a single class (with each Share
being entitled to one vote) and to the exclusion of all other classes of the
Corporation's stock, to elect an individual to fill such newly created
directorship, to fill any vacancy of such directorship and to remove any
individual elected to such directorship. The newly created directorship shall
constitute a separate class of directors, and the director elected by the
holders of the Preferred Stock shall be entitled to cast a number of votes on
each matter considered by the Board (including for purposes of determining the
existence of a quorum) equal to the sum of the number of votes entitled to be
cast by all of the other directors plus
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one. The special right of the holders of Preferred Stock to elect a member of
the Board may be exercised at the special meeting called pursuant to this
subparagraph (iv), at any annual or other special meeting of stockholders and,
to the extent and in the manner permitted by applicable law, pursuant to a
written consent in lieu of a stockholders meeting. Such special right shall
continue until such time as there is no longer any Event of Noncompliance in
existence, at which time such special right shall terminate subject to revesting
upon the occurrence and continuation of any Event of Noncompliance which gives
rise to such special right hereunder.
At any time when such special right has vested in the
holders of Preferred Stock, a proper officer of the Corporation shall, upon the
written request of the holders of at least 10% of the Preferred Stock then
outstanding, addressed to the secretary of the Corporation, call a special
meeting of the holders of Preferred Stock for the purpose of electing a director
pursuant to this subparagraph. Such meeting shall be held at the earliest
legally permissible date at the principal office of the Corporation, or at such
other place designated by the holders of at least 10% of the Preferred Stock
then outstanding. If such meeting has not been called by a proper officer of the
Corporation within 10 days after personal service of such written request upon
the secretary of the Corporation or within 20 days after mailing the same to the
secretary of the Corporation at its principal office, then the holders of at
least 10% of the Preferred Stock then outstanding may designate in writing one
of their number to call such meeting at the expense of the Corporation, and such
meeting may be called by such Person so designated upon the notice required for
annual meetings of stockholders and shall be held at the Corporation's principal
office, or at such other place designated by the holders of at least 10% of the
Preferred Stock then outstanding. Any holder of Preferred Stock so designated
shall be given access to the stock record books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to this
subparagraph.
At any meeting or at any adjournment thereof at which the
holders of Preferred Stock have the special right to elect a director, the
presence, in person or by proxy, of the holders of a majority of the Preferred
Stock then outstanding shall be required to constitute a quorum for the election
or removal of such director by the holders of the Preferred Stock exercising
such special right. The vote of a majority of such quorum shall be required to
elect or remove any such director.
Any director so elected by the holders of the Preferred Stock
shall continue to serve as a director until the date on which the Event of
Noncompliance under subparagraph 9A(i) has been cured, and on such date the
number of directors constituting the Board shall decrease to such number as
constituted the whole Board immediately prior to the occurrence of the Event or
Events of Noncompliance giving rise to the special right to elect a director.
9C. If any Event of Noncompliance exists, each holder of Series D
Preferred 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.
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Section 10. Registration of Transfer.
The Corporation shall keep at its principal office a register
for the registration of Series D Preferred. Upon the surrender of any
certificate representing Series D Preferred at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares represented
by the surrendered certificate. Each such new certificate shall be registered in
such name and shall represent such number of Shares as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Series D
Preferred represented by such new certificate from the date to which dividends
have been fully paid on such Series D Preferred represented by the surrendered
certificate.
Section 11. Replacement.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Shares of Series D Preferred, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series D Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 12. Definitions.
"Board" means the Board of Directors of the Corporation.
"Change in Ownership" has the meaning set forth in paragraph
4J hereof.
"Common Stock" means, collectively, the Corporation's Common
Stock, and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common
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Stock deemed to be outstanding pursuant to subparagraphs 6C(i) and 6C(ii) hereof
whether or not the Options or Convertible Securities are actually exercisable at
such time.
"Conversion Stock" means shares of the Corporation's Common
Stock, par value $.002 per share; provided that if there is a change such that
the securities issuable upon conversion of the Series D Preferred are issued by
an entity other than the Corporation or there is a change in the type or class
of securities so issuable, then the term "Conversion Stock" shall mean one share
of the security issuable upon conversion of the Series D Preferred if such
security is issuable in shares, or shall mean the smallest unit in which such
security is issuable if such security is not issuable in shares.
"Convertible Preferred Stock" means the Series D Preferred
(including that acquired upon conversion of the Series C Preferred) and all
subsequent series of convertible preferred stock issued or to be issued in
connection with the Purchase Agreement.
"Convertible Securities" means any stock or securities
directly or indirectly convertible into or exchangeable for Common Stock.
"Equity Offering" means any offering by the Corporation of
its capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect, or
any comparable statement under any similar federal statute then in force;
provided that for purposes of paragraph 4C hereof, an Equity Offering shall not
include an offering made in connection with a business acquisition or
combination or an employee benefit plan.
"Fundamental Change" has the meaning set forth in paragraph 4J
hereof.
"Junior Securities" means any capital stock or other equity
securities of the Corporation, except for the Preferred Stock.
"Liquidation Value" of any Share as of any particular date
shall be equal to $1,000.00.
"Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges on which
such security may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
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over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Series D Preferred. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of a majority of the Series D Preferred. The
determination of such appraiser shall be final and binding upon the parties, and
the Corporation shall pay the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a corporation, a
limited liability company, a limited liability, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.
"Preferred Stock" means, collectively, the Series C Preferred
and the Convertible Preferred Stock.
"Purchase Agreement" means the Purchase Agreement, dated on or
about January 26, 2000, by and among the Corporation and certain investors, as
such agreement may from time to time be amended in accordance with its terms.
"Redemption Date" as to any Share means the date specified in
the notice of any redemption at the Corporation's option or the applicable date
specified herein in the case of any other redemption; provided that no such date
shall be a Redemption Date unless the Liquidation Value of such Share (plus all
accrued and unpaid dividends thereon and any required premium with respect
thereto) is actually paid in full on such date, and if not so paid in full, the
Redemption Date shall be the date on which such amount is fully paid.
"Rights Agreement" means the Rights Agreement, dated as of
December 20, 1996, between the Corporation and Intercontinental Registrar &
Transfer Agency, Inc., as Rights Agent.
"Series C Preferred" means the Corporation's Series C
Convertible Preferred Stock, par value $.002 per share.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at
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the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing general partner of such limited liability
company, partnership, association or other business entity.
"Warrants" means the warrants to purchase shares of the
Company's Convertible Preferred Stock pursuant to a Warrant Agreement, dated on
or about January 26, 2000, by and between the Company and GTCR Capital Partners,
L.P.
Section 13. Amendment and Waiver.
No amendment, modification or waiver shall be binding or
effective with respect to any provision hereof without the prior written consent
of the holders of a majority of the Series D Preferred outstanding at the time
such action is taken.
Section 14. Notices.
Except as otherwise expressly provided hereunder, all
notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
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IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be signed by Mark A. Rome, its Executive Vice
President, this 26th day of January, 2000.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ MARK A. ROME
-----------------------------
Name: Mark A. Rome
Its: Executive Vice President
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<PAGE> 1
EXHIBIT 2.6
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of
January 27, 2000, by and among (i) Synagro Technologies, Inc., a Delaware
corporation (together with its successors and permitted assigns, the "Company")
and (ii) GTCR Fund VII, L.P., a Delaware limited partnership ("GTCR Fund VII")
and GTCR Capital Partners, L.P., a Delaware limited partnership ("GTCR Capital")
(each of GTCR Fund VII and GTCR Capital, an "Investor," and collectively, the
"Investors").
The Company and GTCR Fund VII are parties to a Purchase
Agreement of even date herewith (the "Purchase Agreement"). The Company and GTCR
Capital are parties to a Senior Subordinated Loan Agreement of even date
herewith (the "Loan Agreement"). In connection with the transaction contemplated
by the Loan Agreement, the Company will issue to GTCR Capital warrants (the
"Warrants") to purchase shares of the Company's Convertible Preferred Stock. In
order to induce GTCR Fund VII to enter into the Purchase Agreement and GTCR
Capital to enter into the Loan Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closings under the Purchase Agreement and
the Loan Agreement. Unless otherwise provided in this Agreement, capitalized
terms used herein shall have the meanings set forth in Section 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. Subject to the restrictions set
forth below, the holders of a majority of the Registrable Securities may request
registration under the Securities Act of all or any portion of their Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations"), or on Form S-2 or S-3 (including pursuant to Rule 415 under the
Securities Act) or any similar short-form registration ("Short-Form
Registrations"), if available. All registrations requested pursuant to this
Section 1(a) are referred to herein as "Demand Registrations." Each request for
a Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered and the anticipated per share price range
for such offering. Within ten days after receipt of any such request, the
Company shall give written notice of such requested registration to all other
holders of Registrable Securities and shall include in such registration all
Registrable Securities with respect to which the Company has received written re
quests for inclusion therein within 15 days after the receipt of the Company's
notice.
(b) Long-Form Registrations. The holders of Registrable
Securities shall be entitled to request two (2) Long-Form Registrations plus one
(1) additional Long-Form Registration for each additional $25 million invested
in the Company (either on one or multiple occasions) through the purchase of
Convertible Preferred Stock pursuant to the Purchase Agreement, in which the
Company shall pay all Registration Expenses (as defined in Section 5). All
Long-Form
<PAGE> 2
Registrations shall be underwritten registrations. A registration shall not
count as one of the permitted Long-Form Registrations until it has become
effective, and the last Long-Form Registration shall not count as one of the
permitted Long-Form Registrations unless the holders of Registrable Securities
are able to register and sell at least 90% of the Registrable Securities
requested to be included in such registration; provided that in any event the
Company shall pay all Registration Expenses in connection with any Long-Form
Registration whether or not it has become effective and whether or not such
registration has counted as one of the permitted Long-Form Registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 1(b), the holders of Registrable
Securities shall be entitled to request an unlimited number of Short-Form
Registrations in which the Company shall pay all Registration Expenses;
provided, however, that all Short-Form Registrations shall be for a minimum of
$10 million of Registrable Securities, based on the anticipated per share price
range for such offering. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. The Company
shall use its best efforts to make Short-Form Registrations on Form S-3
available for the sale of Registrable Securities. If the Company, pursuant to
the request of the holder(s) of a majority of Registrable Securities, is
qualified to and has filed with the Securities Exchange Commission a
registration statement under the Securities Act on Form S-3 pursuant to Rule 415
under the Securities Act (the "Required Registration"), then the Company shall
use its best efforts to cause the Required Registration to be declared effective
under the Securities Act as soon as practicable after filing, and, once
effective, the Company shall cause such Required Registration to remain
effective for a period ending on the earlier of (i) the date on which all
Registrable Securities have been sold pursuant to the Required Registration, or
(ii) the date as of which the holder(s) of Registrable Securities (assuming such
holder(s) are affiliates of the Company) are able to sell all of the Registrable
Securities then held be them within a ninety-day period in compliance with Rule
144 under the Securities Act.
(d) Priority on Demand Registrations. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that, in their opinion, the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities to be
included in such registration, then the Company shall include in such
registration, prior to the inclusion of any securities which are not Registrable
Securities, the number of Registrable Securities requested to be included which,
in the opinion of such underwriters, can be sold in an orderly manner within the
price range of such offering, pro rata among the respective holders thereof on
the basis of the amount of Registrable Securities owned by each such holder.
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<PAGE> 3
(e) Restrictions on Long-Form Registrations.
(i) The Company shall not be obligated to effect any Long-Form
Registration within 90 days after the effective date of a previous
Long-Form Registration or a previous registration in which the holders
of Registrable Securities were given piggyback rights pursuant to
Section 2 and in which there was no reduction in the number of
Registrable Securities requested to be included.
(ii) The Company may postpone for up to 120 days the filing or
the effectiveness of a registration statement for a Demand Registration
if the Company's Board of Directors determines that such Demand
Registration would reasonably be expected to have a material adverse
effect on any proposal or plan by the Company or any of its
Subsidiaries to acquire financing, engage in any acquisition of assets
(other than in the ordinary course of business), or engage in any
merger, consolidation, tender offer, reorganization, or similar
transaction; provided that, in such event, the holders of Registrable
Securities initially requesting such Demand Registration shall be
entitled to withdraw such request and the Company shall pay all
Registration Expenses in connection with such registration. The Company
may delay a Demand Registration under this Section 1(e)(ii) only once
in any twelve-month period and two times in the aggregate.
(f) Selection of Underwriters. In the case of an underwritten
offering, the Company shall have the right to select the investment banker(s)
and manager(s) to administer the offering, subject to the approval of the
holders of a majority of the Registrable Securities included in such Demand
Registration, which approval shall not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities,
options, or rights convertible or exchangeable into or exercisable for such
securities, without the prior written consent of the holders of a majority of
the Registrable Securities.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than (i) pursuant
to a Demand Registration, to which Section 1 is applicable or (ii) in connection
with registrations on Form S-4, S-8 or any successor or similar forms) and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company shall give prompt written
notice (and in any event within three business days after its receipt of notice
of any exercise of demand registration rights other than under this Agreement)
to all holders of Registrable Securities of its intention to effect such a
registration and shall include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within 20 days after the receipt of the Company's notice.
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<PAGE> 4
(b) Piggyback Expenses. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that, in their
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, then the Company shall include
in such registration (i) first, the securities the Company proposes to sell and
(ii) second, all other securities (including the Registrable Securities)
requested to be included in such registration, pro rata among the holders of
such securities on the basis of the number of shares owned by each such holder.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than holders of Registrable Securities (it being
understood that secondary registrations on behalf of holders of Registrable
Securities are addressed in Section 1 above rather than this Section 2(d)), and
the managing underwriters advise the Company in writing that, in their opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in an orderly manner in such offering within a
price range acceptable to the holders of a majority of the Registrable
Securities to be included in such registration, then the Company shall include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration and (ii) second, all other
securities (including Registrable Securities) requested to be included in such
registration, pro rata among the holders of such securities on the basis of the
number of shares owned by each such holder.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 1 or pursuant to this Section 2, and if such previous registration has
not been withdrawn or abandoned, then, unless such previous registration is a
Required Registration, the Company shall not file or cause to be effected any
other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of at
least 180 days has elapsed from the effective date of such previous
registration.
3. Other Sales.
The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities, options, or rights
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and during the 180-day period beginning on the effective
date of any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to the extent
not inconsistent with applicable law, shall cause each holder of its equity
securities, or any securities convertible into or exchangeable or exercisable
for equity securities, in an amount of more
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<PAGE> 5
than 5% of the then-outstanding shares of Common Stock (as adjusted for stock
splits, stock dividends, recapitalizations, and similar transactions), purchased
from the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use commercially
reasonable efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and, within 60 days after the end of the period
within which requests for registration may be given to the Company, file with
the Securities and Exchange Commission a registration statement with respect to
such Registrable Securities and use commercially reasonable efforts to cause
such registration statement to become effective (provided that, before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to the counsel selected by the holders of a majority
of the Registrable Securities covered by such registration statement copies of
all such documents proposed to be filed, which documents shall be subject to the
review and comment of such counsel);
(b) notify in writing each holder of Registrable Securities of
the effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 180 days (or, if such registration statement relates to an
underwritten offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in connection with
sales of Registrable Securities by an underwriter or dealer) and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus and any supplemental prospectus), and such other
documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(d) use commercially reasonable efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
of Registrable Securities to consummate the disposition in such jurisdictions of
the Registrable Securities owned by such seller of Registrable Securities
(provided that the
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<PAGE> 6
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 4(d), (ii) subject itself to taxation in any such jurisdiction, or (iii)
consent to general service of process in any such jurisdiction);
(e) promptly notify in writing each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading in light of the circumstances under which they were made,
and, at the request of the holders of a majority of the Registrable Securities
covered by such registration statement, the Company shall promptly prepare and
furnish to each such seller a reasonable number of copies of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of Registrable Securities (including effecting a stock split or a
combination of shares);
(i) make available for inspection by any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant, or other agent retained by any such underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees, and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant, or agent in connection with such registration
statement and assist and, at the request of any participating underwriter, use
commercially reasonable efforts to cause such officers or directors to
participate in presentations to prospective purchasers;
(j) otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the Securities and Exchange
Commission, and make available to its security
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<PAGE> 7
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the Company's
first full calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder,
in its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any equity securities included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use commercially reasonable efforts to cause such
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Registrable Securities;
(n) obtain one or more cold comfort letters, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing under
the underwriting agreement), from the Company's independent public accountants
in customary form and covering such matters of the type customarily covered by
cold comfort letters as the holders of a majority of the Registrable Securities
being sold in such registered offering reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement), which letter or letters shall be addressed to the
underwriters; and
(o) provide a legal opinion of the Company's outside counsel,
dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), with respect to the registration
statement, each amendment and supplement thereto, the prospectus included
therein (including the preliminary prospectus) and such other documents relating
thereto in customary form and covering such matters of the type customarily
covered by legal opinions of such nature, which opinion and other documents
shall be addressed to the underwriters and the holders of such Registrable
Securities.
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<PAGE> 8
5. Registration Expenses.
(a) Subject to Section 5(b) below, all expenses incident to
the Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, travel expenses, filing expenses, messenger
and delivery expenses, fees and disbursements of custodians, and fees and
disbursements of counsel for the Company, and fees and disbursements of all
independent certified public accountants, underwriters including, if necessary,
a "qualified independent underwriter" within the meaning of the rules of the
National Association of Securities Dealers, Inc. (in each case, excluding
discounts and commissions), and other Persons retained by the Company or by
holders of Registrable Securities or their affiliates on behalf of the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance, and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
the NASD automated quotation system (or any successor or similar system).
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration.
(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the registration of
such holder's securities so included, and any Registration Expenses not so
allocable shall be borne by all sellers of securities included in such
registration in proportion to the aggregate selling price of the securities to
be so registered.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the
fullest extent permitted by law, each holder of Registrable Securities, its
officers, directors, agents, and employees, and each Person who controls such
holder (within the meaning of the Securities Act) against all losses, claims,
damages, liabilities, and expenses (or actions or proceedings, whether commenced
or threatened, in respect thereof), whether joint and several or several,
together with reasonable costs and expenses (including reasonable attorney's
fees) to which any such indemnified party may become subject under the
Securities Act or otherwise (collectively, "Losses") caused by, resulting from,
arising out of, based upon, or relating to (i) any untrue or alleged untrue
statement of material fact contained in (A) any registration statement,
prospectus or preliminary prospectus, or any amendment thereof or supplement
thereto covering the sale of Registrable Securities or (B) any application or
other document or communication (in this Section 6, collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the
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<PAGE> 9
Company filed in any jurisdiction in order to qualify any securities covered by
such registration under the "blue sky" or securities laws thereof or (ii) any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, and controlling Person
for any legal or any other expenses incurred by them in connection with
investigating or defending any such Losses; provided that the Company shall not
be liable in any such case to the extent that any suchLosses result from, arise
out of, are based upon, or relate to an untrue statement or alleged untrue
statement, or omission or alleged omission, made in such registration statement,
any such prospectus, or preliminary prospectus or any amendment or supplement
thereto, or in any application, in reliance upon, and in conformity with,
written information prepared and furnished in writing to the Company by such
holder expressly for use therein or by such holder's failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with a sufficient number of
copies of the same. In connection with an underwritten offering, the Company
shall indemnify such underwriters, their officers and directors, and each Person
who controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement
or prospectus and, to the fullest extent permitted by law, shall indemnify and
hold harmless the other holders of Registrable Securities and the Company, and
their respective officers, directors, agents, and employees, and each other
Person who controls the Company (within the meaning of the Securities Act)
against any Losses caused by, resulting from, arising out of, based upon, or
relating to (i) any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus,
or any amendment thereof or supplement thereto or in any application, or (ii)
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is made in such registration
statement, any such prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application in reliance upon and in conformity
with written information prepared and furnished to the Company by such holder
expressly for use therein, and such holder will reimburse the Company and each
such other indemnified party for any legal or any other expenses incurred by
them in connection with investigating or defending any such Losses; provided
that the obligation to indemnify will be individual, not joint and several, for
each holder and shall be limited to the net amount of proceeds received by such
holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder will (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and
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<PAGE> 10
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, then the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its written consent (but such consent will not
be unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement
shall be in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract, and will
remain in full force and effect regardless of any investigation made or omitted
by or on behalf of the indemnified party or any officer, director, or
controlling Person of such indemnified party and shall survive the transfer of
securities.
(e) If the indemnification provided for in this Section 6 is
unavailable to or is insufficient to hold harmless an indemnified party under
the provisions above in respect to any Losses referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
sellers of Registrable Securities and any other sellers participating in the
registration statement on the other hand or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, then in such proportion as
is appropriate to reflect not only the relative fault referred to in clause (i)
above but also the relative benefit of the Company on the one hand and of the
sellers of Registrable Securities and any other sellers participating in the
registration statement on the other in connection with the registration
statement on the other in connection with the statement or omissions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the sellers of
Registrable Securities and any other sellers participating in the registration
statement on the other shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) to the Company bear
to the total net proceeds from the offering (before deducting expenses) to the
sellers of Registrable Securities and any other sellers participating in the
registration statement. The relative fault of the Company on the one hand and of
the sellers of Registrable Securities and any other sellers participating in the
registration statement on the other shall be determined by reference to, among
other things, whether the untrue or alleged omission to state a material fact
relates to information supplied by the Company or by the sellers of Registrable
Securities or other sellers participating in the registration statement and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
(f) The Company and the sellers of Registrable Securities
agree that it would not be just and equitable if contribution pursuant to this
Section 6 were determined by pro rata allocation (even if the sellers of
Registrable Securities were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to
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<PAGE> 11
in Section 6(e) above. The amount paid or payable by an indemnified party as a
result of the Losses referred to in Section 6(e) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no seller of Registrable Securities shall be required to contribute
pursuant to this Section 6 any amount in excess of the result of (i) the net
proceeds received by such seller from the sale of Registrable Securities covered
by the registration statement filed pursuant hereto minus (ii) any amounts paid
pursuant to Section 6(b) above. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
7. Participation in Underwritten Registrations.
(a) No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including pursuant to
the terms of any over-allotment or "green shoe" option requested by the managing
underwriter(s), provided that no holder of Registrable Securities will be
required to sell more than the number of Registrable Securities that such holder
has requested the Company to include in any registration) and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements; provided that no holder of Registrable Securities
included in any underwritten registration shall be required to make any
representations or warranties to the Company or the underwriters (other than
representations and warranties regarding such holder and such holder's intended
method of distribution) or to undertake any indemnification obligations to the
Company or the underwriters with respect thereto, except as otherwise provided
in Section 6 hereof.
(b) Each Person that is participating in any registration
hereunder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(e) above, such Person
will immediately discontinue the disposition of its Registrable Securities
pursuant to the registration statement until such Person's receipt of the copies
of a supplemented or amended prospectus as contemplated by Section 4(e). In the
event the Company shall give any such notice, the applicable time period
mentioned in Section 4(b) during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this Section 7(b) to
and including the date when each seller of a Registrable Security covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by Section 4(e).
- 11 -
<PAGE> 12
8. Definitions.
"Common Stock" means any class of the Company's common stock.
"Convertible Preferred Stock" means the Series D Preferred
(including that acquired upon conversion of the Series C Preferred) and all
subsequent series of convertible preferred stock issued or to be issued in
connection with the Purchase Agreement.
"Registrable Securities" means (i) any Common Stock issued or
issuable upon conversion of the Preferred Stock (x) issued pursuant to the
Purchase Agreement or (y) issued or issuable upon exercise of the Warrants
(whether issued before, on, or after the Closing Date) and (ii) any other shares
of Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) above by way of a stock dividend or stock
split or in connection with an exchange or combination of shares,
recapitalization, merger, consolidation, or other reorganization. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when they (i) have been distributed to the public pursuant to an
offering registered under the Securities Act or sold to the public through a
broker, dealer, or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force), (ii) unless the respective Investor
otherwise elects, have been distributed to the limited partners of any of the
Investors, (iii) have been effectively registered under a registration statement
including, without limitation, a registration statement on Form S-8 (or any
successor form), or (iv) have been repurchased by the Company. For purposes of
this Agreement, a Person shall be deemed to be a holder of Registrable
Securities whenever such Person has the right to acquire such Registrable
Securities (upon conversion or exercise in connection with a transfer of
securities or otherwise, but disregarding any restrictions or limitations upon
the exercise of such right), whether or not such acquisition has actually been
effected; provided that this sentence shall not apply to shares of the common
equity securities of the Company issuable upon the exercise of unvested options
originally issued to employees or former employees of the Company.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal law then in force, together with all rules and
regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor federal law then in force, together with all
rules and regulations promulgated thereunder.
"Series C Preferred" means the Corporation's Series C
Convertible Preferred Stock, par value $.002 per share.
"Series D Preferred" means the Corporation's Series D
Convertible Preferred Stock, par value $.002 per share.
- 12 -
<PAGE> 13
Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
shall not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration (including
effecting a stock split or a combination of shares).
(c) Remedies. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement. Nothing contained in this Agreement shall be construed to confer upon
any Person who is not a signatory hereto any rights or benefits, whether as a
third-party beneficiary or otherwise.
(d) Amendments and Waivers. Except as otherwise provided
herein, no modification, amendment, or waiver of any provision of this Agreement
shall be effective against the Company or the holders of Registrable Securities
unless such modification, amendment, or waiver is approved in writing by the
Company and the holders of at least a majority of the Registrable Securities
then in existence; provided that no such amendment or modification that would
materially and adversely affect holders of one class or group of Registrable
Securities in a manner different than holders of any other class or group of
Registrable Securities, shall be effective against the holders of such class or
group of Registrable Securities without the prior written consent of holders of
at least a majority of Registrable Securities of such class or group materially
and adversely affected thereby. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement, or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute a waiver of any such breach or any other covenant, duty,
agreement, or condition.
(e) Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective
- 13 -
<PAGE> 14
successors and assigns of the parties hereto whether so expressed or not. In
addition, whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities. Notwithstanding the foregoing, in order to
obtain the benefit of this Agreement, any subsequent holder of Registrable
Securities must execute a counterpart to this Agreement, thereby agreeing to be
bound the terms hereof.
(f) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a substantive
part of this Agreement. Whenever required by the context, any pronoun used in
this Agreement shall include the corresponding masculine, feminine, or neuter
forms, and the singular form of nouns, pronouns, and verbs shall include the
plural and vice versa. The use of the word "including" in this Agreement shall
be, in each case, by way of example and without limitation. The use of the words
"or," "either," and "any" shall not be exclusive. Reference to any agreement,
document, or instrument means such agreement, document, or instrument as amended
or otherwise modified from time to time in accordance with the terms thereof,
and if applicable hereof.
(i) Governing Law. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning the
construction, validity, interpretation, and enforcement of this Agreement and
the exhibits and schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
(j) 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 shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands, and other communications shall be sent to each Investor at the
addresses indicated on the Schedule of Holders
- 14 -
<PAGE> 15
and to the Company at the address of its corporate headquarters or to such other
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party.
(k) Entire Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(l) No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting to this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
* * * * *
- 15 -
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Registration Agreement as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
----------------------------------------
Name: Ross M. Patten
----------------------------------------
Its: Chairman/CEO
----------------------------------------
GTCR FUND VII, L.P.
By: GTCR Partners VII, L.P.
Its: General Partner
By: GTCR Golder Rauner, L.L.C.
Its: General Partner
By: /s/ DAVID A. DONNINI
----------------------------------------
Name: David A. Donnini
Its: Principal
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 Golder Rauner, L.L.C.
Its: General Partner
By: /s/ DAVID A. DONNINI
----------------------------------------
Name: David A. Donnini
Its: Principal
SIGNATURE PAGE TO THE REGISTRATION AGREEMENT
<PAGE> 17
SCHEDULE OF HOLDERS
GTCR FUND VII, L.P.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: David A. Donnini
GTCR CAPITAL PARTNERS, L.P.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: David A. Donnini
<PAGE> 1
EXHIBIT 2.7
EXECUTION
PROFESSIONAL SERVICES AGREEMENT
THIS PROFESSIONAL SERVICES AGREEMENT (this "Agreement"), dated
as of January 27, 2000, between GTCR Golder Rauner, L.L.C., a Delaware limited
liability company ("GTCR"), and Synagro Technologies, Inc., a Delaware
corporation (the "Company").
WHEREAS, GTCR Fund VII, L.P., a Delaware limited partnership
(the "Investor"), will purchase (the "Investment"), pursuant to that certain
Purchase Agreement (the "Purchase Agreement") of even date herewith between the
Company and the Investor, the Company's Series C Convertible Preferred Stock,
par value $0.002 per share and the Company's Series D Convertible Preferred
Stock, par value $.002 per share (collectively, the "Closing Preferred") and
may, from time to time in accordance with the Purchase Agreement, purchase
Future Convertible Preferred Stock (as defined in the Purchase Agreement) from
the Company (the Closing Preferred and the Future Convertible Preferred Stock
are collectively referred to herein as the "Preferred Stock");
WHEREAS, the Company desires to receive financial and
management consulting services from GTCR, and obtain the benefit of the
experience of GTCR in business and financial management generally and its
knowledge of the Company and the Company's financial affairs in particular; and
WHEREAS, in connection with the Investment, GTCR is willing to
provide financial and management consulting services to the Company and the
compensation arrangements set forth in this Agreement are designed to compensate
GTCR for such services.
NOW, THEREFORE, in consideration of the foregoing premises and
the respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, GTCR and the Company hereby agree as follows:
1. Engagement. The Company hereby engages GTCR as a financial
and management consultant, and GTCR hereby agrees to provide financial and
management consulting services to the Company, all on the terms and subject to
the conditions set forth below.
2. Services of GTCR. GTCR hereby agrees during the term of
this engagement to consult with the Company's board of directors (the "Board")
and management of the Company and its subsidiaries in such manner and on such
business and financial matters as may be reasonably requested from time to time
by the Board, including but not limited to:
(i) corporate strategy;
(ii) budgeting of future corporate investments;
(iii) acquisition and divestiture strategies; and
(iv) debt and equity financings.
<PAGE> 2
3. Personnel. GTCR shall provide and devote to the performance
of this Agreement such partners, employees and agents of GTCR as GTCR shall deem
appropriate for the furnishing of the services required thereby.
4. Placement Fees. At the time of any purchase of Preferred
Stock by the Investor pursuant to Section 1B of the Purchase Agreement, the
Company shall pay to GTCR a placement fee in immediately available funds equal
to 0.5% of the amount paid to the Company in connection with such purchase. If
any individual payment to GTCR pursuant to this Section 4 would be less than
$10,000, then such payment shall be held by the Company until such time as the
aggregate of such payments equals or exceeds $10,000.
5. Expenses. The Company shall promptly reimburse GTCR for
such reasonable travel expenses, legal fees and other out-of-pocket fees and
expenses as have been or may be incurred by GTCR, its directors, officers and
employees in connection with the Closing (as defined in the Purchase Agreement),
in connection with any financing, and in connection with the rendering of any
other services hereunder (including, but not limited to, fees and expenses
incurred in attending Company-related meetings).
6. Term. This Agreement will continue from the date hereof
until the Investor ceases to own at least 25% of the Investor Preferred (as
defined in the Purchase Agreement). No termination of this Agreement, whether
pursuant to this paragraph or otherwise, shall affect the Company's obligations
with respect to the fees, costs and expenses incurred by GTCR in rendering
services hereunder and not reimbursed by the Company as of the effective date of
such termination.
7. Liability. Neither GTCR nor any of its affiliates,
partners, employees or agents shall be liable to the Company or its subsidiaries
or affiliates for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from the gross negligence or willful misconduct of GTCR.
8. Indemnification. The Company agrees to indemnify and hold
harmless GTCR, its partners, affiliates, officers, agents and employees against
and from any and all loss, liability, suits, claims, costs, damages and expenses
(including attorneys' fees) arising from their performance hereunder, except as
a result of their gross negligence or intentional wrongdoing.
9. GTCR an Independent Contractor. GTCR and the Company agree
that GTCR shall perform services hereunder as an independent contractor,
retaining control over and responsibility for its own operations and personnel.
Neither GTCR nor its directors, officers, or employees shall be considered
employees or agents of the Company as a result of this Agreement nor shall any
of them have authority to contract in the name of or bind the Company, except as
expressly agreed to in writing by the Company.
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<PAGE> 3
10. Notices. Any notice, report or payment required or
permitted to be given or made under this Agreement by one party to the other
shall be deemed to have been duly given or made if personally delivered or, if
mailed, when mailed by registered or certified mail, postage prepaid, to the
other party at the following addresses (or at such other address as shall be
given in writing by one party to the other):
If to GTCR:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Vincent J. Hemmer
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
If to the Company:
Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, TX 77057
Attention: Chief Financial Officer
Telecopier No.: (713) 369-1760
with a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis Street
Houston, TX 77002-3095
Attention: Michael T. Peters
Telecopier No.: (713) 223-3717
11. Entire Agreement; Modification. Those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
The provisions of this Agreement may be amended, modified and waived only with
the prior written consent of the Company and GTCR.
3
<PAGE> 4
12. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach of that provision or any other
provision hereof.
13. Assignment. Neither GTCR nor the Company may assign its
rights or obligations under this Agreement without the express written consent
of the other, except that GTCR may assign its rights and obligations to an
affiliate of GTCR.
14. Successors. This Agreement and all the obligations and
benefits hereunder shall inure to the successors and permitted assigns of the
parties.
15. Counterparts. This Agreement may be executed and delivered
by each party hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original and both of which taken together shall
constitute one and the same agreement.
16. Choice of Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
* * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, GTCR and the Company have caused this
Professional Services Agreement to be duly executed and delivered on the date
and year first above written.
GTCR GOLDER RAUNER, L.L.C.
By: /s/ DAVID A. DONNINI
---------------------------------
Name: David A. Donnini
Its: Principal
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
---------------------------------
Name: Ross M. Patten
---------------------------------
Its: Chairman/CEO
---------------------------------
<PAGE> 1
EXHIBIT 2.8
AGREEMENT CONCERNING EMPLOYMENT RIGHTS
THIS AGREEMENT (this "Agreement"), is made and entered into, to be
effective this 27th day of January, 2000, by and between: Ross M. Patten, an
individual, hereinafter referred to as "Executive", and Synagro Technologies,
Inc, a Delaware Corporation, hereinafter referred to as "Synagro" or the
"Company."
R E C I T A L S
WHEREAS, Synagro desires to raise capital to continue its business plan
including the acquisition of biosolids treatment, processing, disposal and
beneficial reuse companies;
WHEREAS, GTCR Capital Partners, L.P., a Delaware limited partnership
("Capital Partners"), the Company and certain subsidiaries of the Company are
entering into a Senior Subordinated Loan Agreement on the date hereof (the "Loan
Agreement") pursuant to which, among other things, Capital Partners will make a
loan to the Company on the date hereof and may make additional loans hereafter
from time to time in accordance with the terms thereof;
WHEREAS, GTCR FUND VII, L.P., a Delaware limited partnership ("Fund
VII" and together with Capital Partners, "GTCR") and the Company are entering
into a Purchase Agreement on the date hereof (the "Purchase Agreement") pursuant
to which, among other things, Fund VII will purchase the Company's convertible
preferred stock on the date hereof and may make additional purchases of
convertible preferred stock from time to time hereafter in accordance with the
terms thereof;
WHEREAS, the execution of this Agreement by the Company and the
Executive is a condition to the initial closings under the Loan Agreement and
the Purchase Agreement;
WHEREAS, Executive is employed by Synagro under an employment contract
dated February 19, 1999 (as amended by this Agreement, the "Employment
Contract");
WHEREAS, the Company values Executive's contribution to Synagro's
business plan and whereas the Company and Executive desire that the transactions
contemplated by the Loan Agreement and the Purchase Agreement be consummated;
WHEREAS, GTCR, the Company and the Executive desire that any change of
control resulting from the consummation of the Loan Agreement and the Purchase
Agreement and the carrying out of their terms and the ownership and control
granted to GTCR and its affiliates thereunder shall not constitute a "change of
control" for purposes of (1) any and all stock options for the purchase of the
Company's stock held by Executive and (2) for purposes of Executive's Employment
Contract and any other agreement to which the Executive is party which makes
reference to a change of control
<PAGE> 2
of the Company or its subsidiaries (including for purposes of the definition of
"Good Reason" in the Employment Contract); and
WHEREAS, the Company desires to make Executive whole with respect to
the waiver of his rights with respect to a change of control of his options as
though the Executive currently holds in the aggregate options to purchase
950,000 shares of the Company's Common Stock at an exercise price of $2.50 on
the date hereof (except that the number of options not actually held by
Executive on the date hereof would be subject to, among other provisions, five
year time based vesting); and
WHEREAS, Synagro desires to amend the Employment Contract to compensate
him for waiving certain rights under the Employment Contract.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants set forth herein, agree as follows:
Executive, being an employee of Synagro, hereby agrees:
1. Executive hereby irrevocably waives any and all rights
(whether granted in the Employment Contract, by action of the
Board of Directors of Synagro or otherwise) to the
acceleration of vesting of Synagro stock options held by
Executive as a result of the investment in and loans to the
Company (including, without limitation, the ownership of the
Company's capital stock resulting thereby, changes to the
composition of the Company's Board of Directors resulting
thereby, and the enforcement of the terms of the Purchase
Agreement, the Loan Agreement and the Warrant Agreement),
whether on the date hereof or in the future, by GTCR and/or
their affiliates pursuant to the terms of the Purchase
Agreement, the Loan Agreement, and the Warrant Agreement
between Synagro and Capital Partners ("Warrant Agreement"),
and hereby agrees that any such investments and loans
(including, without limitation, the ownership of the Company's
capital stock resulting therefrom, changes to the composition
of the Company's Board of Directors resulting therefrom or
pursuant to the terms thereof, and the enforcement of the
terms of the Purchase Agreement, the Loan Agreement and the
Warrant Agreement) by GTCR and/or their affiliates will not
constitute a "Change in Control" for purposes of any such
stock option agreement; and
2. Executive hereby irrevocably waives any and all rights
resulting from a change of control, including for the purposes
of the definition of "good reason" in Section 6 of the
Employment Contract, (whether granted in the Employment
Contract or a separate severance agreement or otherwise) as a
result of the investment in and loans to the Company
(including, without limitation, the ownership of the Company's
capital stock resulting thereby, changes to the composition of
the Company's Board of Directors resulting
2
<PAGE> 3
thereby or pursuant to the terms thereof, and the enforcement
of the terms of the Purchase Agreement, the Loan Agreement and
the Warrant Agreement), whether on the date hereof or in the
future, by Fund VII, Capital Partners and/or their affiliates
pursuant to the terms of the Purchase Agreement, the Loan
Agreement, and the Warrant Agreement, and hereby agrees that
any such investments and loans (including, without limitation,
the ownership of the Company's capital stock resulting
therefrom, changes to the composition of the Company's Board
of Directors resulting therefrom, and the enforcement of the
terms of the Purchase Agreement, the Loan Agreement and the
Warrant Agreement) by GTCR and/or their affiliates will not
constitute a "Change in Control" for purposes of any such
agreement.
This Waiver is limited to the matters expressly set forth above, and
Executive does not waive any other rights that he may have under the Employment
Contract, any stock option agreement or otherwise.
ARTICLE 2.0 - AMENDMENTS TO EMPLOYMENT CONTRACT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive desire to amend the Employment Contract as follows:
The first sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"2. COMPENSATION. The Company shall pay or cause to be paid to
Executive during the Employment Period an annual base salary for his
services under this Agreement of not less than $225,000, payable in
equal monthly or semi-monthly installments in accordance with the
Company's normal payroll procedures."
The third sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"Executive shall be entitled to participate in an annual bonus "pool"
or other structure established for the Company's top level of
management which shall provide for a bonus up to fifty-percent of base
salary if the goals set by the Board of Directors are satisfied."
The definition of "CHANGE IN CONTROL" in paragraph 6 of the Employment
Contract, shall be deleted and replaced with the following language:
"A `Change of Control' of the Company shall be deemed to have
occurred if any of the following shall have taken place: (a)
Any Person or group of Persons (within the meaning of Section
13 or 14 of the Securities and Exchange Act of 1934 (the
"Exchange Act"), but excluding (i) the executive managers of
the Company as of January 27, 2000, and (ii) GTCR Capital
Partners, L.P., GTCR Fund VII, L.P. and their respective
Affiliates) shall acquire beneficial ownership
3
<PAGE> 4
(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, L.P. 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. For purposes
of this provision, "Person", "Affiliates", "Board",
"Convertible Preferred Stock" and "Lender" shall have the
meanings ascribed to such terms in the Loan Agreement."
The above amendments to the Employment Contract are limited to the
matters expressly set forth above, and Executive and Synagro do not waive, amend
or modify any other rights or duties that he or it may have under the Employment
Contract.
ARTICLE 3.0 - OTHER AGREEMENT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive agree that for so long as Executive remains employed by
Synagro and for thirty-days thereafter, in the event that:
(i) Executive's employment hereunder is terminated by the
Company at any time for any reason except (A) for
Cause or (B) Executive's death or Disability;
(ii) Executive terminates his own employment hereunder at
any time for Good Reason; or
(iii) a Change of Control (not otherwise waived pursuant to
this Agreement) occurs
Executive shall be entitled to receive, and the Company shall
be obligated to elect at its option to either (a) issue
options to purchase 950,000 registered shares of the Company's
common stock at an exercise price of $2.50 per share which
shall be fully vested but non-transferable and which shall
expire, notwithstanding any agreement or arrangement to the
contrary, 90 days from the date of issue; (b) a number of
registered shares (if the Company is publicly traded at such
time) of the Company's common stock equal to the result of (A)
the product of (x) 950,000 and (y) the Fair Market Value per
share of the
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<PAGE> 5
Company's common stock less $2.50 divided by (B) the Fair
Market Value per share of the Company's common stock; or (c) a
cash payment equal to (x) the Fair Market Value of the
Company's common stock per share less $2.50 multiplied by (y)
950,000 (alternatives (a), (b) and (c) collectively, the
"Option Payment"). As a condition to receiving the Option
Payment, Executive must surrender all other options to
purchase Synagro common stock that he has been granted.
However, the Option Payment shall not be required to be made
if Executive has, at any time, whether before or after the
date of this agreement, been granted (for purposes hereof,
existing options which are repriced to an exercise price of
$2.50 shall be deemed to be re-granted) options to purchase an
aggregate amount of 950,000 shares of common stock of Synagro
with an average strike price of $2.50 or less. For purposes
hereof, "Fair Market Value" shall mean, with respect to any
date on which any determination of Fair Market Value is to be
made, the average closing price of shares of the Company's
common stock sold on the NASDAQ National Market System during
the previous 21 trading days.
For purposes of this Article 3.0, "Cause", "Change in Control", "Disability" and
"Good Reason" shall have the meanings ascribed to such terms in the Employment
Contract.
ARTICLE 4.0 - SUCCESSORS AND ASSIGNS
This Agreement shall be assignable as provided in Section 29 of the
Employment Contract.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written:
Ross M. Patten, an Individual.
By: /s/ ROSS M. PATTEN
-------------------------------------
Synagro Technologies, Inc, a Delaware Corporation.
By: /s/ ALVIN L. THOMAS II
-------------------------------------
Alvin L. Thomas II
6
<PAGE> 1
EXHIBIT 2.9
AGREEMENT CONCERNING EMPLOYMENT RIGHTS
THIS AGREEMENT (this "Agreement"), is made and entered into, to be
effective this 27th day of January, 2000, by and between: Mark A. Rome, an
individual, hereinafter referred to as "Executive", and Synagro Technologies,
Inc, a Delaware Corporation, hereinafter referred to as "Synagro" or the
"Company."
R E C I T A L S
WHEREAS, Synagro desires to raise capital to continue its business plan
including the acquisition of biosolids treatment, processing, disposal and
beneficial reuse companies;
WHEREAS, GTCR Capital Partners, L.P., a Delaware limited partnership
("Capital Partners"), the Company and certain subsidiaries of the Company are
entering into a Senior Subordinated Loan Agreement on the date hereof (the "Loan
Agreement") pursuant to which, among other things, Capital Partners will make a
loan to the Company on the date hereof and may make additional loans hereafter
from time to time in accordance with the terms thereof;
WHEREAS, GTCR FUND VII, L.P., a Delaware limited partnership ("Fund
VII" and together with Capital Partners, "GTCR") and the Company are entering
into a Purchase Agreement on the date hereof (the "Purchase Agreement") pursuant
to which, among other things, Fund VII will purchase the Company's convertible
preferred stock on the date hereof and may make additional purchases of
convertible preferred stock from time to time hereafter in accordance with the
terms thereof;
WHEREAS, the execution of this Agreement by the Company and the
Executive is a condition to the initial closings under the Loan Agreement and
the Purchase Agreement;
WHEREAS, Executive is employed by Synagro under an employment contract
dated February 19, 1999 (as amended by this Agreement, the "Employment
Contract");
WHEREAS, the Company values Executive's contribution to Synagro's
business plan and whereas the Company and Executive desire that the transactions
contemplated by the Loan Agreement and the Purchase Agreement be consummated;
WHEREAS, GTCR, the Company and the Executive desire that any change of
control resulting from the consummation of the Loan Agreement and the Purchase
Agreement and the carrying out of their terms and the ownership and control
granted to GTCR and its affiliates thereunder shall not constitute a "change of
control" for purposes of (1) any and all stock options for the purchase of the
Company's stock held by Executive and (2) for purposes of Executive's Employment
Contract and any other agreement to which the Executive is party which makes
reference to a change of control
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of the Company or its subsidiaries (including for purposes of the definition of
"Good Reason" in the Employment Contract); and
WHEREAS, the Company desires to make Executive whole with respect to
the waiver of his rights with respect to a change of control of his options as
though the Executive currently holds in the aggregate options to purchase
450,000 shares of the Company's Common Stock at an exercise price of $2.50 on
the date hereof (except that the number of options not actually held by
Executive on the date hereof would be subject to, among other provisions, five
year time based vesting); and
WHEREAS, Synagro desires to amend the Employment Contract to entice
Executive to commit to a longer term of employment and to compensate him for
waiving certain rights under the Employment Contract.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants set forth herein, agree as follows:
Executive, being an employee of Synagro, hereby agrees:
1. Executive hereby irrevocably waives any and all rights
(whether granted in the Employment Contract, by action of the
Board of Directors of Synagro or otherwise) to the
acceleration of vesting of Synagro stock options held by
Executive as a result of the investment in and loans to the
Company (including, without limitation, the ownership of the
Company's capital stock resulting thereby, changes to the
composition of the Company's Board of Directors resulting
thereby, and the enforcement of the terms of the Purchase
Agreement, the Loan Agreement and the Warrant Agreement),
whether on the date hereof or in the future, by GTCR and/or
their affiliates pursuant to the terms of the Purchase
Agreement, the Loan Agreement, and the Warrant Agreement
between Synagro and Capital Partners ("Warrant Agreement"),
and hereby agrees that any such investments and loans
(including, without limitation, the ownership of the Company's
capital stock resulting therefrom, changes to the composition
of the Company's Board of Directors resulting therefrom or
pursuant to the terms thereof, and the enforcement of the
terms of the Purchase Agreement, the Loan Agreement and the
Warrant Agreement) by GTCR and/or their affiliates will not
constitute a "Change in Control" for purposes of any such
stock option agreement; and
2. Executive hereby irrevocably waives any and all rights
resulting from a change of control, including for the purposes
of the definition of "good reason" in Section 6 of the
Employment Contract, (whether granted in the Employment
Contract or a separate severance agreement or otherwise) as a
result of the investment in and loans to the Company
(including, without limitation, the ownership of the Company's
capital stock resulting thereby,
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<PAGE> 3
changes to the composition of the Company's Board of Directors
resulting thereby or pursuant to the terms thereof, and the
enforcement of the terms of the Purchase Agreement, the Loan
Agreement and the Warrant Agreement), whether on the date
hereof or in the future, by Fund VII, Capital Partners and/or
their affiliates pursuant to the terms of the Purchase
Agreement, the Loan Agreement, and the Warrant Agreement, and
hereby agrees that any such investments and loans (including,
without limitation, the ownership of the Company's capital
stock resulting therefrom, changes to the composition of the
Company's Board of Directors resulting therefrom, and the
enforcement of the terms of the Purchase Agreement, the Loan
Agreement and the Warrant Agreement) by GTCR and/or their
affiliates will not constitute a "Change in Control" for
purposes of any such agreement.
This Waiver is limited to the matters expressly set forth above, and
Executive does not waive any other rights that he may have under the Employment
Contract, any stock option agreement or otherwise.
ARTICLE 2.0 - AMENDMENTS TO EMPLOYMENT CONTRACT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive desire to amend the Employment Contract as follows:
The first sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"2. COMPENSATION. The Company shall pay or cause to be paid to
Executive during the Employment Period an annual base salary for his
services under this Agreement of not less than $175,000, payable in
equal monthly or semi-monthly installments in accordance with the
Company's normal payroll procedures."
The third sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"Executive shall be entitled to participate in an annual bonus "pool"
or other structure established for the Company's top level of
management which shall provide for a bonus up to fifty-percent of base
salary if the goals set by the Board of Directors are satisfied."
Paragraph "4. TERM OF EMPLOYMENT" in the Employment Contract, shall be
deleted and replaced with the following language:
"4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on
the Effective Date and continuing thereafter so that the remaining term
of employment hereunder is always 24 months, unless Notice of
Termination pursuant to Section 7 is given by either the Company or
Executive to the other party. The Company
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<PAGE> 4
and Executive shall each have the right to give a Notice of
Termination at will, with or without cause, at any time,
subject to the terms of this Agreement regarding rights and
duties of the parties upon termination of employment. This
"evergreen" 24-month employment period hereunder shall be
referred to herein as the "TERM OF Employment." The period
from the Effective Date through the date of Executive's
termination of employment for whatever reason shall be
referred to herein as the "EMPLOYMENT PERIOD."
The definition of "CHANGE IN CONTROL" in paragraph 6 of the Employment
Contract, shall be deleted and replaced with the following language:
"A `Change of Control' of the Company shall be deemed to have
occurred if any of the following shall have taken place: (a)
Any Person or group of Persons (within the meaning of Section
13 or 14 of the Securities and Exchange Act of 1934 (the
"Exchange Act"), but excluding (i) the executive managers of
the Company as of January 27, 2000, and (ii) GTCR Capital
Partners, L.P., GTCR Fund VII, L.P. 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, L.P. 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. For purposes
of this provision, "Person", "Affiliates", "Board",
"Convertible Preferred Stock" and "Lender" shall have the
meanings ascribed to such terms in the Loan Agreement."
The above amendments to the Employment Contract are limited to the
matters expressly set forth above, and Executive and Synagro do not waive, amend
or modify any other rights or duties that he or it may have under the Employment
Contract.
ARTICLE 3.0 - OTHER AGREEMENT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive agree that for so long as Executive remains employed by
Synagro and for thirty-days thereafter, in the event that:
(i) Executive's employment hereunder is terminated by the
Company at any time for any reason except (A) for
Cause or (B) Executive's death or Disability;
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<PAGE> 5
(ii) Executive terminates his own employment hereunder at
any time for Good Reason; or
(iii) a Change of Control (not otherwise waived pursuant to
this Agreement) occurs
Executive shall be entitled to receive, and the Company shall
be obligated to elect at its option to either (a) issue
options to purchase 450,000 registered shares of the Company's
common stock at an exercise price of $2.50 per share which
shall be fully vested but non-transferable and which shall
expire, notwithstanding any agreement or arrangement to the
contrary, 90 days from the date of issue; (b) a number of
registered shares (if the Company is publicly traded at such
time) of the Company's common stock equal to the result of (A)
the product of (x) 450,000 and (y) the Fair Market Value per
share of the Company's common stock less $2.50 divided by (B)
the Fair Market Value per share of the Company's common stock;
or (c) a cash payment equal to (x) the Fair Market Value of
the Company's common stock per share less $2.50 multiplied by
(y) 450,000 (alternatives (a), (b) and (c) collectively, the
"Option Payment"). As a condition to receiving the Option
Payment, Executive must surrender all other options to
purchase Synagro common stock that he has been granted.
However, the Option Payment shall not be required to be made
if Executive has, at any time, whether before or after the
date of this agreement, been granted (for purposes hereof,
existing options which are repriced to an exercise price of
$2.50 shall be deemed to be re-granted) options to purchase an
aggregate amount of 450,000 shares of common stock of Synagro
with an average strike price of $2.50 or less. For purposes
hereof, "Fair Market Value" shall mean, with respect to any
date on which any determination of Fair Market Value is to be
made, the average closing price of shares of the Company's
common stock sold on the NASDAQ National Market System during
the previous 21 trading days.
For purposes of this Article 3.0, "Cause", "Change in Control", "Disability" and
"Good Reason" shall have the meanings ascribed to such terms in the Employment
Contract.
ARTICLE 4.0 - SUCCESSORS AND ASSIGNS
This Agreement shall be assignable as provided in Section 29 of the
Employment Contract.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written:
Mark A. Rome, an Individual.
By: /s/ MARK A. ROME
-------------------------------------
Synagro Technologies, Inc, a Delaware Corporation.
By: /s/ ROSS M. PATTEN
-------------------------------------
Ross M. Patten
6
<PAGE> 1
EXHIBIT 2.10
AGREEMENT CONCERNING EMPLOYMENT RIGHTS
THIS AGREEMENT, is made and entered into, to be effective this 27th day
of January, 2000, by and between: Alvin L. Thomas II, an individual, hereinafter
referred to as "Executive", and Synagro Technologies, Inc, a Delaware
Corporation, hereinafter referred to as "Synagro" or the "Company."
R E C I T A L S
WHEREAS, Synagro desires to raise capital to continue its business plan
including the acquisition of biosolids treatment, processing, disposal and
beneficial reuse companies;
WHEREAS, GTCR Capital Partners, L.P., a Delaware limited partnership
("Capital Partners"), the Company and certain subsidiaries of the Company are
entering into a Senior Subordinated Loan Agreement on the date hereof (the "Loan
Agreement") pursuant to which, among other things, Capital Partners will make a
loan to the Company on the date hereof and may make additional loans hereafter
from time to time in accordance with the terms thereof;
WHEREAS, GTCR FUND VII, L.P., a Delaware limited partnership ("Fund
VII" and together with Capital Partners, "GTCR") and the Company are entering
into a Purchase Agreement on the date hereof (the "Purchase Agreement") pursuant
to which, among other things, Fund VII will purchase the Company's convertible
preferred stock on the date hereof and may make additional purchases of
convertible preferred stock from time to time hereafter in accordance with the
terms thereof;
WHEREAS, the execution of this Agreement by the Company and the
Executive is a condition to the initial closings under the Loan Agreement and
the Purchase Agreement;
WHEREAS, Executive is employed by Synagro under an employment contract
dated February 19, 1999 (the "Employment Contract");
WHEREAS, the Company values Executive's contribution to Synagro's
business plan and whereas the Company and Executive desire that the transactions
contemplated by the Loan Agreement and the Purchase Agreement be consummated;
WHEREAS, GTCR, the Company and the Executive desire that any change of
control resulting from the consummation of the Loan Agreement and the Purchase
Agreement and the carrying out of their terms and the ownership and control
granted to GTCR and its affiliates thereunder shall not constitute a "change of
control" for purposes of (1) any and all stock options for the purchase of the
Company's stock held by Executive and (2) for purposes of Executive's Employment
Contract and any other agreement to which the Executive is party which makes
reference to a change of control
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of the Company or its subsidiaries (including for purposes of the definition of
"Good Reason" in the Employment Contract); and
WHEREAS, the Company desires to make Executive whole with respect to
the waiver of his rights with respect to a change of control of his options as
though the Executive currently holds in the aggregate options to purchase
450,000 shares of the Company's Common Stock at an exercise price of $2.50 on
the date hereof (except that the number of options not actually held by
Executive on the date hereof would be subject to, among other provisions, five
year time based vesting); and
WHEREAS, Synagro desires to amend the Employment Contract to entice
Executive to commit to a longer term of employment and to compensate him for
waiving certain rights under the Employment Contract.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants set forth herein, agree as follows:
Executive, being an employee of Synagro, hereby agrees:
1. Executive hereby irrevocably waives any and all rights (whether
granted in the Employment Contract, by action of the Board of
Directors of Synagro or otherwise) to the acceleration of vesting
of Synagro stock options held by Executive as a result of the
investment in and loans to the Company (including, without
limitation, the ownership of the Company's capital stock resulting
thereby, changes to the composition of the Company's Board of
Directors resulting thereby, and the enforcement of the terms of
the Purchase Agreement, the Loan Agreement and the Warrant
Agreement), whether on the date hereof or in the future, by GTCR
and/or their affiliates pursuant to the terms of the Purchase
Agreement, the Loan Agreement, and the Warrant Agreement between
Synagro and Capital Partners ("Warrant Agreement"), and hereby
agrees that any such investments and loans (including, without
limitation, the ownership of the Company's capital stock resulting
therefrom, changes to the composition of the Company's Board of
Directors resulting therefrom or pursuant to the terms thereof,
and the enforcement of the terms of the Purchase Agreement, the
Loan Agreement and the Warrant Agreement) by GTCR and/or their
affiliates will not constitute a "Change in Control" for purposes
of any such stock option agreement; and
2. Executive hereby irrevocably waives any and all rights resulting
from a change of control, including for the purposes of the
definition of "good reason" in Section 6 of the Employment
Contract, (whether granted in the Employment Contract or a
separate severance agreement or otherwise) as a result of the
investment in and loans to the Company (including, without
limitation, the ownership of the Company's capital stock resulting
thereby,
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changes to the composition of the Company's Board of Directors
resulting thereby or pursuant to the terms thereof, and the
enforcement of the terms of the Purchase Agreement, the Loan
Agreement and the Warrant Agreement), whether on the date hereof
or in the future, by Fund VII, Capital Partners and/or their
affiliates pursuant to the terms of the Purchase Agreement, the
Loan Agreement, and the Warrant Agreement, and hereby agrees that
any such investments and loans (including, without limitation, the
ownership of the Company's capital stock resulting therefrom,
changes to the composition of the Company's Board of Directors
resulting therefrom, and the enforcement of the terms of the
Purchase Agreement, the Loan Agreement and the Warrant Agreement)
by GTCR and/or their affiliates will not constitute a "Change in
Control" for purposes of any such agreement.
This Waiver is limited to the matters expressly set forth above, and
Executive does not waive any other rights that he may have under the Employment
Contract, any stock option agreement or otherwise.
ARTICLE 2.0 - AMENDMENTS TO EMPLOYMENT CONTRACT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive desire to amend the Employment Contract as follows:
The first sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"2. COMPENSATION. The Company shall pay or cause to be paid to
Executive during the Employment Period an annual base salary for his
services under this Agreement of not less than $175,000, payable in
equal monthly or semi-monthly installments in accordance with the
Company's normal payroll procedures."
The third sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"Executive shall be entitled to participate in an annual bonus "pool"
or other structure established for the Company's top level of
management which shall provide for a bonus up to fifty-percent of base
salary if the goals set by the Board of Directors are satisfied."
Paragraph "4. TERM OF EMPLOYMENT" in the Employment Contract, shall be
deleted and replaced with the following language:
"4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on
the Effective Date and continuing thereafter so that the remaining term
of employment hereunder is always 24 months, unless Notice of
Termination pursuant to Section 7 is given by either the Company or
Executive to the other party. The Company
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and Executive shall each have the right to give a Notice of
Termination at will, with or without cause, at any time, subject
to the terms of this Agreement regarding rights and duties of the
parties upon termination of employment. This "evergreen" 24-month
employment period hereunder shall be referred to herein as the
"TERM OF EMPLOYMENT." The period from the Effective Date through
the date of Executive's termination of employment for whatever
reason shall be referred to herein as the "EMPLOYMENT PERIOD."
The definition of "CHANGE IN CONTROL" in paragraph 6 of the Employment
Contract, shall be deleted and replaced with the following language:
"A `Change of Control' of the Company shall be deemed to have
occurred if any of the following shall have taken place: (a) Any
Person or group of Persons (within the meaning of Section 13 or 14
of the Securities and Exchange Act of 1934 (the "Exchange Act"),
but excluding (i) the executive managers of the Company as of
January 27, 2000, and (ii) GTCR Capital Partners, L.P., GTCR Fund
VII, L.P. 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, L.P. 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. For purposes of this provision, "Person",
"Affiliates", "Board", "Convertible Preferred Stock" and "Lender"
shall have the meanings ascribed to such terms in the Loan
Agreement."
The above amendments to the Employment Contract are limited to the
matters expressly set forth above, and Executive and Synagro do not waive, amend
or modify any other rights or duties that he or it may have under the Employment
Contract.
ARTICLE 3.0 - OTHER AGREEMENT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive agree that for so long as Executive remains employed by
Synagro and for thirty-days thereafter, in the event that:
(i) Executive's employment hereunder is terminated by the Company at
any time for any reason except (A) for Cause or (B) Executive's
death or Disability;
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(ii) Executive terminates his own employment hereunder at any time
for Good Reason; or
(iii) a Change of Control (not otherwise waived pursuant to this
Agreement) occurs
Executive shall be entitled to receive, and the Company shall be
obligated to elect at its option to either (a) issue options to
purchase 450,000 registered shares of the Company's common stock at an
exercise price of $2.50 per share which shall be fully vested but
non-transferable and which shall expire, notwithstanding any agreement
or arrangement to the contrary, 90 days from the date of issue; (b) a
number of registered shares (if the Company is publicly traded at such
time) of the Company's common stock equal to the result of (A) the
product of (x) 450,000 and (y) the Fair Market Value per share of the
Company's common stock less $2.50 divided by (B) the Fair Market Value
per share of the Company's common stock; or (c) a cash payment equal to
(x) the Fair Market Value of the Company's common stock per share less
$2.50 multiplied by (y) 450,000 (alternatives (a), (b) and (c)
collectively, the "Option Payment"). As a condition to receiving the
Option Payment, Executive must surrender all other options to purchase
Synagro common stock that he has been granted. However, the Option
Payment shall not be required to be made if Executive has, at any time,
whether before or after the date of this agreement, been granted (for
purposes hereof, existing options which are repriced to an exercise
price of $2.50 shall be deemed to be re-granted) options to purchase an
aggregate amount of 450,000 shares of common stock of Synagro with an
average strike price of $2.50 or less. For purposes hereof, "Fair
Market Value" shall mean, with respect to any date on which any
determination of Fair Market Value is to be made, the average closing
price of shares of the Company's common stock sold on the NASDAQ
National Market System during the previous 21 trading days.
For purposes of this Article 3.0, "Cause", "Disability" and "Good Reason" shall
have the meanings ascribed to such terms in the Employment Contract.
ARTICLE 4.0 - SUCCESSORS AND ASSIGNS
This Agreement shall be assignable as provided in Section 29 of the
Employment Contract.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written:
Alvin L. Thomas II, an Individual.
By: /s/ ALVIN L. THOMAS II
--------------------------------
Synagro Technologies, Inc, a Delaware Corporation.
By: /s/ ROSS M. PATTEN
--------------------------------
Ross M. Patten
6
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EXHIBIT 2.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the 10th day of
May 1999 (the "EFFECTIVE DATE"), by and between Synagro Technologies, Inc., a
Delaware corporation (hereafter "COMPANY") and J. Paul Withrow (hereafter
"EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive subject
to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in Section 4
hereof), the Company shall employ Executive, and Executive shall serve, as
Executive Vice President and Chief Financial Officer of the Company. Executive's
principal place of employment shall be at the Company's principal corporate
offices in Houston, Texas during the Employment Period.
2. COMPENSATION. The Company shall pay or cause to be paid to Executive
during the Employment Period an annual base salary for his services under this
Agreement of not less than $120,000, payable in equal monthly or semi-monthly
installments in accordance with the Company's normal payroll procedures.
Executive's base salary shall be subject to annual review and may be increased,
depending upon the performance of the Company and Executive, upon the
recommendation of the Chairman or the Board of Directors of the Company
(hereafter "BOARD OF DIRECTORS"). Executive shall be entitled to participate in
the bonus "pool" or other structure established for the Company's top level of
management. Nothing contained herein shall preclude the payment of a bonus,
supplemental or incentive compensation to Executive provided that the Board of
Directors authorizes any such compensation payment. As additional compensation
to Executive for the services previously rendered by him, the services to be
rendered by him pursuant to, and Executive's other duties and obligations
arising under this Agreement, including, without limitation, his obligations
under Sections 12 and 14 hereof, the Company has granted to Executive options to
purchase 200,000 shares of common stock of the Company, par value $.002 per
share, between the Company and Executive.
<PAGE> 2
3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the Employment
Period, Executive shall devote his services full time to the business of the
Company and perform the duties and responsibilities assigned to him by Ross M.
Patten or the Board of Directors to the best of his ability and with reasonable
diligence. In determining Executive's duties and responsibilities, Ross M.
Patten and the Board of Directors shall act in good faith and shall not assign
duties and responsibilities to Executive that are not appropriate or customary
with respect to the position of Executive hereunder. This Section 3 shall not be
construed as preventing Executive from engaging in reasonable volunteer services
for charitable, educational or civic organizations, or from investing his assets
in such form or manner as will not require a material amount of his services in
the operations of the companies or businesses in which such investments are
made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on the
Effective Date, unless Notice of Termination pursuant to Section 7 is given by
either the Company or Executive to the other party. The Company and Executive
shall each have the right to give Notice of Termination at will, with or without
cause, at any time, subject to the terms of this Agreement regarding rights and
duties of the parties upon termination of employment. This 24-month employment
period hereunder shall be referred to herein as the "TERM OF EMPLOYMENT." The
period from the Effective Date through the date of Executive's termination of
employment for whatever reason shall be referred to herein as the "EMPLOYMENT
PERIOD."
5. BENEFITS. Subject to the terms and conditions of this Agreement,
during the Employment Period, Executive shall be entitled to the following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or
reimburse Executive for all reasonable travel, entertainment and other
reasonable expenses paid or incurred by Executive in performing his
business obligations hereunder. The Company shall also provide
Executive with suitable office space and secretarial help. Executive
shall provide substantiating documentation for expense reimbursement
requests as reasonably required by the Company for its tax and other
business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to: (i) a
car allowance of $500 per month, and (ii) family medical and dental
insurance coverage paid for 100% by Company and which allows Executive
to choose among all options for medical and dental insurance provided
to other Company employees in the same area.
(c) OTHER BENEFITS. Executive shall be entitled to participate
in any pension, profit-sharing, stock option, deferred compensation, or
similar plan or program of the Company established by the Company, to
the extent that he is eligible under the provisions thereof. Executive
shall also be entitled to participate in any group insurance,
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hospitalization, medical, health and accident, disability or similar
plan or program established by the Company, to the extent that he is
eligible under the provisions thereof.
(d) PAID VACATION. Executive shall initially be entitled to
three (3) weeks of paid vacation during each 12-month period of
employment with the Company (which shall accrue monthly on a pro rata
basis). Executive shall thereafter be entitled to the number of days of
paid vacation each year that is accorded under the Company's vacation
policy as in effect from time to time or three (3) weeks, whichever is
greater. Unused vacation days up to a maximum of two (2) weeks in one
year shall be carried forward for a period not to exceed 12 months in
accordance with Company's vacation policy as in effect from time to
time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right to
compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this Section 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the
following payments, in addition to any payments or benefits to which
the Executive is entitled under the terms of any employee benefit plan
or the following provisions of this Section 6:
(1) his unpaid salary for the full month in which his
Termination Date occurred; provided, however, if Executive is
terminated for Cause pursuant to Section 6(b) below, he shall
only be entitled to receive his accrued but unpaid salary
through his Termination Date; and
(2) his accrued but unpaid vacation pay for the
period ending on his Termination Date in accordance with the
Company's vacation pay policy as in effect at such time.
(b) SEVERANCE PAYMENT. Notwithstanding any other provision of
this Agreement to the contrary, in the event that: (i) Executive's
employment hereunder is terminated by the Company at any time for any
reason except (A) for Cause (as defined below) or (B) Executive's death
or Disability (as defined below) or (ii) Executive terminates his own
employment hereunder at any time for Good Reason (as defined below),
then, in either such event, Executive shall be entitled to receive, and
the Company shall be obligated to pay, a lump sum cash payment equal to
one hundred percent (100%) the present value of Executive's annual
salary pursuant to Section 2 or the annual salary then being paid to
him, whichever is greater. For purposes of the immediately preceding
sentence, the "present value" of such annual salary shall be
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determined in accordance with the regulations under Section 280G of the
Code (as defined below). Also, except as otherwise specifically
provided in this Section 6(b), such severance payment shall be in
addition to, and shall not reduce or offset, any other payments that
are due to Executive from the Company or any other source or under any
other agreements, except any severance pay plan or program maintained
by the Company that covers employees generally. The provisions of this
Section 6(b) shall supersede any conflicting provisions of this
Agreement but shall not be construed to curtail, offset or limit
Executive's rights to any other payments, whether contingent upon a
Change in Control (as defined below) or otherwise, under the Agreement
or any other agreement, contract, plan or other source of payment
except as specifically provided herein. In addition, in the event of a
Change in Control, Executive shall be entitled to receive the bonus
payment described in Section 9 hereof, if applicable.
Notwithstanding any provision of this Section 6(b) to the
contrary, the Executive must first execute an appropriate release and
waiver agreement whereby Executive agrees to release and waive, in
return for the severance payment described in this Section 6(b), any
claims that he may have against the Company for (1) unlawful
discrimination (including, without limitation, age discrimination) and
(2) severance pay under any other severance pay plan or program
maintained by the Company that covers Executive; provided, however,
such agreement shall not release or waive any claims that may be
brought by Executive for payments that may be due under this Agreement,
without Executive's express written consent. Any severance payment
required under this Section 6(b) shall be paid to Executive within
twenty (20) days after Executive executes such release and waiver
agreement, unless the parties agree in writing before then to another
payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this
Section 6(b) or any other provision of this Agreement.
A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change
in control is reported by the Company in response to either Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form 8-K
promulgated under the Exchange Act, or any successor provisions
thereto; (2) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), or any successor
provisions thereto, directly or indirectly, of securities of the
Company representing twenty-five (25%) or more of the combined voting
power of the Company's then-outstanding securities; (3) the approval by
the stockholders of the Company of a reorganization, merger, or
consolidation, in each case with respect to which persons who were
stockholders of the Company immediately prior to such reorganization,
merger, or consolidation do not, immediately thereafter, own or control
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more than fifty percent (50%) of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged
or consolidated Company's then outstanding securities, or a liquidation
or dissolution of the Company or of the sale of all or substantially
all of the Company's assets; (4) in the event any person shall be
elected by the stockholders of the Company to the Board of Directors
who shall have not been nominated for election by a majority of the
Board of Directors or any duly appointed committee thereof; or (5)
following the election or removal of directors, a majority of the Board
of Directors consists of individuals who were not members of the Board
of Directors two (2) years before such election or removal, unless the
election of each director who is not a director at the beginning of
such two-year period has been approved in advance by directors
representing at least a majority of the directors then in office who
were directors at the beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as
defined in Section 22(e)(3) of the Code and the Treasury regulations
thereunder. Evidence of such Disability shall be certified by a
physician acceptable to both the Company and Executive. In the event
that the parties are not able to agree on the choice of a physician,
each shall select a physician who, in turn, shall select a third
physician to render such certification. All costs relating to the
determination of whether Executive has incurred a Disability shall be
paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include
any "Successor Provisions" as defined in Section 9(e).
"CAUSE" means a termination of employment directly resulting
from: (1) the Executive having engaged in intentional misconduct that
caused or would have caused, if the Company did not intervene, a
serious violation by the Company of any state or federal laws, (2) the
Executive having engaged in a theft of corporate funds or corporate
assets or in a material act of fraud upon the Company, (3) an
intentional act of personal dishonesty taken by the Executive that was
intended to result in personal enrichment of the Executive at the
expense of the Company, (4) repeated violations by the Executive of
Executive's primary or regular obligations under this Agreement or
under written policies of the Company which are demonstrably willful on
the Executive's part, and for which Executive has received more than
two written warnings that specify each area of Executive's violations,
(5) Executive's use of illegal drugs as evidenced by a drug test
authorized by Company, (6) Executive's final conviction (or the entry
of a plea of nolo contendere or equivalent plea) in a court of
competent jurisdiction of a felony or other crime involving dishonesty,
and (7) a breach by the Executive during the Employment Period of the
provisions of Sections 11, 12, 13 or 14 below, if such breach results
in a material injury to the Company.
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"GOOD REASON" means the occurrence of any of the following
events without Executive's express written consent:
(1) A ten percent (10%) or greater reduction in
Executive's annual base salary; or
(2) Any breach by the Company or its successors of
any material provision of this Agreement; or
(3) A substantial and adverse change in the
Executive's duties, control, authority, status or position, or
the assignment to the Executive of any duties or
responsibilities which are materially inconsistent with such
status or position, or a material reduction in the duties and
responsibilities previously exercised by the Executive, or a
loss of title, loss of office, loss of significant authority,
power or control, or any removal of Executive from, or any
failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for
Cause, Disability or death; or
(4) Following a Change in Control (as defined in
Section 6(b)) any of the following events:
(A) the failure by the Company or its
successor to expressly assume and agree to continue
and perform this Agreement in the same manner and to
the same extent that the Company would be required to
perform if such Change in Control had not occurred;
(B) a relocation of more than twenty-five
(25) miles of Executive's principal office from the
location of such office immediately prior to the
Change in Control date;
(C) a substantial increase in the business
travel required of Executive by the Company or its
successor; or
(D) the Company or its successor fails to
continue in effect any pension plan,
health-and-accident plan, or disability income plan
in which Executive was participating at the time of
the Change in Control (or plans providing Executive
with substantially equal and similar benefits), or
the taking of any action by the Company or its
successor which would adversely affect Executive's
participation in or materially reduce his
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benefits under any such plan that was enjoyed by him
immediately prior to the Change in Control.
(c) STOCK OPTIONS. In the event of a Change in Control, Executive's
resignation for Good Reason or Executive's termination without Cause, all
unvested stock options previously granted to Executive shall immediately vest
and be exercisable as set forth below. In the event that there is a termination
of Executive's employment hereunder for any reason, Executive shall be entitled
to exercise any and all stock options that were previously granted to him by the
Company, and are outstanding, vested and unexercised as of his Termination Date,
during the exercise period ending on the shorter of (i) two (2) years from his
Termination Date or (ii) the expiration date of the stock option as specified in
the stock option plan or stock option agreement, as applicable, notwithstanding
any provision in such plan or agreement that provides for a more limited time
period to exercise stock options following termination of employment; provided
however, if said stock option plan or stock option agreement provides therein
for a longer period of time to exercise such outstanding, vested and unexercised
stock options following his Termination Date, then such stock option plan or
agreement shall control and the remaining provisions of this Section 6(c) shall
be inapplicable and without further force or effect. In the event that there is
a termination of Executive's employment hereunder for Cause or Executive
voluntarily resigns without Good Reason within two years for the date of this
Agreement, Executive shall forfeit any and all stock options that were
previously granted to him by the Company, and are unvested and unexercised as of
his Termination Date.
During the extension period specified in the previous paragraph, if
applicable, the Executive shall be considered an employee of the Company who
shall make himself available to provide consulting services to the Company in
consideration for such extension of the option exercise period and any
post-termination payments provided to Executive under Section 6(a) or (b) of
this Agreement. In this regard, Executive agrees to be classified as an employee
of the Company solely for the limited purpose of making himself available to
provide consulting services on an as-needed basis; provided, however, Executive
hereby specifically waives any right, entitlement, claim or demand to (i) any
additional compensation for such consulting services and (ii) coverage or
benefits under any of the Company's employee benefit plans or programs, or other
perquisites, terms and conditions of employment, except as expressly specified
in other provisions of this Agreement. Except as expressly provided in this
Section 6(c), the provision of consulting services by Executive shall not expand
his rights or duties under this Agreement. Executive hereby agrees to provide,
upon request of the Company, consulting services to the Company on the following
terms and conditions:
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(1) Executive will make himself available, on an as-needed basis,
to provide consulting services to the Company for up to three
(3) days per month during the period beginning on the day
after his Termination Date and ending on the last day of the
extension period for exercising stock options as provided in
the first paragraph of Section 6(c) above, subject to the
following conditions:
(A) At least five (5) days written advance notice to
Executive is provided by the Company;
(B) There is no concurrent illness of Executive or his
spouse;
(C) There is no prior commitment of Executive including,
without limitation, vacation or attention to personal
affairs; and
(D) No travel is required of Executive in excess of 200
miles round-trip.
Executive, in any particular instance, may waive any or all of
the conditions set forth in clauses (A), (B), (C) or (D) above
in his complete discretion. Any such waiver shall not be a
continuing waiver and shall not release Executive of any of
his rights hereunder.
(2) Executive agrees to provide such information, services, advice
and recollection of events as may from time to time be
reasonably requested by, or on behalf of, the Company
regarding corporate, regulatory or business matters of which
Executive may have knowledge, information or understanding,
including testifying truthfully in any litigation or other
proceedings involving the Employer, provided that (i)
Executive first determines that his interests are not adverse,
or potentially adverse, to those of the Company, and (ii) the
Company has indemnified Executive to his satisfaction
including, without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the quality,
and not the quantity, of the consulting services to be
provided by Executive that is important to the Company.
(3) The Company will reimburse Executive for all reasonable
out-of-pocket expenses incurred by Executive in the course of
his performance of consulting services, including, without
limitation, supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or liability on
behalf of the Company without its prior written consent.
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(4) The provision of consulting services by Executive for the
Company is non-exclusive and shall not, in any way, limit the
rights of Executive to seek and maintain other employment or
to perform compensatory services on behalf of any other person
or entity.
(5) The consulting services contemplated under this Section 6(c)
shall not be considered part of Executive's Employment Period
pursuant to Section 4, nor affect his Termination Date.
7. NOTICE OF TERMINATION. Any termination by the Company or the
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, the term "NOTICE OF TERMINATION" means a
written notice which indicates the specific termination provision of this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to mitigate
the amount of any payment provided for under this Agreement by seeking other
employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have received an
"excess parachute payment" (as such term is defined in Section 280G(b)
of the Code) which is subject to the excise taxes (the "EXCISE TAXES")
imposed by Section 4999 of the Code in respect of any payment pursuant
to this Agreement, or any other agreement, plan, instrument or
obligation, in whatever form, the Company shall make the Bonus Payment
(defined below) to Executive promptly after the date on which Executive
received or is deemed to have received any excess parachute payment
notwithstanding any contrary provision herein.
(b) The term "BONUS PAYMENT" means a cash payment in an amount
equal to the sum of (i) all Excise Taxes payable by Executive, plus
(ii) all additional Excise Taxes and federal or state income taxes to
the extent such taxes are imposed in respect of the Bonus Payment, such
that Executive shall be in the same after-tax position and shall have
received the same benefits that he would have received if the Excise
Taxes had not been imposed. For purposes of calculating any income
taxes attributable to the Bonus Payment, Executive shall be deemed for
all purposes to be paying income taxes at the highest marginal federal
income tax rate, taking into account any applicable surtaxes and
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other generally applicable taxes which have the effect of increasing
the marginal federal income tax rate and, if applicable, at the highest
marginal state income tax rate, to which the Bonus Payment and
Executive are subject. An example of the calculation of the Bonus
Payment is set forth below: Assume that the Excise Tax rate is 20%, the
highest federal marginal income tax rate is 40% and Executive is not
subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on
which $40,000 in Excise Taxes are payable. The amount of the required
Bonus Payment is thus $100,000. The Bonus Payment of $100,000, less
additional Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x
$100,000) and income taxes of $40,000 (i.e., 40% x $100,000), yields
$40,000, the amount of the Excise Taxes payable in respect of the
original excess parachute payment.
(c) Executive agrees to reasonably cooperate with the Company
to minimize the amount of the excess parachute payments, including,
without limitation, assisting the Company in establishing that some or
all of the payments received by Executive that are "contingent on a
change", as described in Section 280G(b)(2)(A)(i) of the Code, are
reasonable compensation for personal services actually rendered by
Executive before the date of such change or to be rendered by Executive
on or after the date of such change. In the event that the Company is
able to establish that the amount of the excess parachute payments is
less than originally anticipated by Executive, Executive shall refund
to the Company any excess Bonus Payment to the extent not required to
pay Excise Taxes or income taxes (including those incurred in respect
of receipt of the Bonus Payment). Notwithstanding the foregoing,
Executive shall not be required to take any action which his attorney
or tax advisor advises him in writing (i) is improper or (ii) exposes
Executive to material personal liability. Executive may require the
Company to deliver to Executive an indemnification agreement in form
and substance satisfactory to Executive as a condition to taking any
action required by this subsection (c).
(d) The Company shall make any payment required to be made
under this Section 9 in cash and on demand. Any payment required to be
paid by the Company under this Section 9 which is not paid within 30
days of receipt by the Company of Executive's written demand therefor
shall thereafter be deemed delinquent, and the Company shall pay to
Executive immediately upon demand interest at the highest nonusurious
rate per annum allowed by applicable law from the date such payment
becomes delinquent to the date of payment of such delinquent sum with
interest.
(e) In the event that there is any change to the Code which
results in the recodification of Section 280G or Section 4999 of the
Code, or in the event that either such section of the Code is amended,
replaced or supplemented by other provisions of the Code of similar
import ("SUCCESSOR PROVISIONS"), then this Agreement shall be applied
and enforced with respect to such new Code provisions in a manner
consistent with the
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intent of the parties as expressed herein, which is to assure that
Employee is in the same after-tax position and has received the same
benefits that he would have been in and received if any taxes imposed
by Section 4999 or any Successor Provisions had not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of Executive
is terminated for any reason except for Cause (as defined in Section 6(b)),
death or voluntary resignation without Good Reason, then the Company shall
provide post-employment medical coverage in accordance with the terms and
conditions of this Section 10. The Company shall continue to cover Executive and
his spouse (hereinafter referred to as "SPOUSE") and his eligible dependent
children, if any, from the Termination Date until two (2) years following the
Termination Date, under the group health care plan maintained by the Company to
provide major medical insurance coverage for employees and their dependents
(such group medical plan or its successor shall be hereinafter referred to as
the "HEALTH CARE PLAN").
Executive, on behalf of himself and his Spouse and other dependents, if
any, shall be required to pay premiums for their coverage under the Health Care
Plan at the rates, if any, charged by the Company to active employees who are
senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this Section
10 shall run concurrently with COBRA continuation coverage under the Health Care
Plan and, therefore, Executive and the other qualifying beneficiaries shall
elect any COBRA continuation coverage offered to them under the Health Care Plan
following the Termination Date. The Company shall not be responsible for the
payment of any income or other taxes which may be imposed on Executive, or on
his Spouse or dependents, as the result of receiving coverage under the Health
Care Plan pursuant to this Section 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
Section 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties to
Company, Executive hereby agrees that he shall not become involved in a conflict
of interest, or upon discovery thereof, allow such a conflict to continue at any
time during the Employment Period. Moreover, Executive agrees that he shall
immediately disclose to the Board of Directors any
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facts that might involve a conflict of interest that has not been approved by
the Board of Directors.
Executive and Company recognize and acknowledge that it is not possible
to provide an exhaustive list of actions or interests that may constitute a
"conflict of interest." Moreover, Company and Executive recognize there are many
borderline situations. In some instances, full disclosure of facts by the
Executive to the Board of Directors may be all that is necessary to enable
Company to protect its interests. In others, if no improper motivation appears
to exist and Company's interests have not demonstrably suffered, prompt
elimination of the outside interest may suffice. In other egregious instances,
it may be necessary for Company to terminate Executive's employment for Cause
pursuant to Section 6(b) hereof. The Board of Directors reserves the right to
take such action as, in its good faith judgment, will resolve the conflict of
interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly commercial
activities, which interest might adversely affect the Company or any of its
affiliated entities, involves a possible conflict of interest. Circumstances in
which a conflict of interest on the part of Executive would or might arise, and
which should be reported immediately to the Board of Directors, include, but are
not limited to, any of the following:
(a) Ownership of more than a de minimis interest in any
lender, supplier, contractor, customer or other entity with which
Company or any of its affiliated entities does business;
(b) Misuse of information, property or facilities to which
Executive has access in a manner which is demonstrably injurious to the
interests of Company or any of its affiliated entities, including its
business, reputation or goodwill; or
(c) Materially trading in products or services connected with
products or services designed or marketed by or for the Company or any
of its affiliated entities.
For purposes of this Agreement, "AFFILIATED ENTITY" means any entity
which owns or controls, is owned or controlled by, or is under common ownership
or control with, the Company.
12. CONFIDENTIAL INFORMATION.
(a) CONFIDENTIAL INFORMATION DEFINED. Executive hereby
acknowledges that in his senior management position, he will create,
acquire and have access to confidential information and trade secrets
pertaining to the business of Company (hereafter "Confidential
Information" as defined below). Executive hereby acknowledges that such
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Confidential Information is unique and valuable to Company's business
and that Company would suffer irreparable injury if Confidential
Information was divulged to the public or to persons or entities in
competition with Company. Therefore, Executive hereby covenants and
agrees to keep in strict secrecy and confidence, both during and after
the Employment Period, any Confidential Information. Executive
specifically agrees that he will not at any time disclose to others,
use, copy or permit to be copied, except in pursuance of his duties on
behalf of Company or with the prior consent of Company, Confidential
Information relating to the Company or any of its affiliated entities.
For purposes of this Agreement, "CONFIDENTIAL INFORMATION" shall mean
and include, without limitation, information related to the business
affairs, property, methods of operation, future plans, financial
information, customer or client information, or other data which
relates to the business or operations of Company or any of its
affiliated entities, and all other information obtained by Executive
from and during the Employment Period which concerns the affairs of
Company or any of its affiliated entities and which Company has
requested be held in confidence or could reasonably be expected to
desire be held in confidence, or the disclosure of which would likely
be embarrassing, detrimental or disadvantageous to the Company or any
of its affiliated entities, or its and their directors, officers,
employees or shareholders. Confidential Information, however, shall not
include information that is at the time of receipt by Executive in the
public domain or is otherwise generally known in the industry or
subsequently enters the public domain or becomes generally known in the
industry through no fault of Executive or breach of his duty under this
Section 12.
(b) REQUIRED DISCLOSURE. In the event that Executive is
required by law which cannot be waived to disclose any Confidential
Information, Executive agrees that he will provide prompt notice of
such potential disclosure to Company so that an appropriate protective
order may be sought and/or a waiver of compliance with the provisions
of this Agreement may be granted. In the event that (i) such protection
or other remedy is not obtained or (ii) Company waives in writing the
compliance by Executive with this provision, Executive agrees that he
may furnish only that portion of the Confidential Information which
Executive is advised by written opinion of counsel is legally required
to be disclosed, and Executive shall exercise his best efforts to
obtain assurances that confidential treatment will be accorded such
Confidential Information.
(c) DELIVERY OF DOCUMENTS. Executive further agrees to deliver
to Company at the termination of his employment, all correspondence,
memoranda, notes, records, drawings, plans, customer lists or other
documents, and all copies thereof made, composed or received by
Executive, solely or jointly with others, and which are in Executive's
possession, custody or control at such date and which relate in any
manner to the past, present or anticipated business of Company or any
of its affiliated entities.
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(d) REMEDIES. In the event of a breach or threatened breach of
any of the provisions of this Section 12, Company shall be entitled to
an injunction ordering the return of all such documents, and any and
all copies thereof, and restraining Executive from using or disclosing,
for his benefit or the benefit of others, in whole or in part, any
Confidential Information, including, but not limited to, the
Confidential Information which such documents contain, constitute or
embody. Executive further agrees that any breach or threatened breach
of any of the provisions of this Section 12 would cause irreparable
injury to Company, for which it would have no adequate remedy at law.
Nothing herein shall be construed as prohibiting Company from pursuing
any other remedies available to it for any such breach or threatened
breach, including the recovery of damages.
13. PROPERTY RIGHTS. In keeping with his fiduciary duties to Company,
Executive hereby covenants and agrees that during his Employment Period, and for
a period of one (1) year following his Termination Date, Executive shall
promptly disclose in writing to Company any and all information, ideas,
concepts, improvements, discoveries, inventions and other intellectual
properties, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by Executive, either
individually or jointly with others, and which relate to the business, products
or services of Company or any of its affiliated entities. In consideration for
his employment hereunder, Executive hereby specifically sells, assigns and
transfers to Company all of his worldwide right, title and interest in and to
all such information, ideas, concepts, improvements, discoveries, inventions and
other intellectual properties.
If during the Employment Period, Executive creates any original work of
authorship or other property fixed in any tangible medium of expression which
(a) is the subject matter of copyright (including computer programs) and (b)
relates to Company's present or planned business, products, or services, whether
such property is created solely by Executive or jointly with others, such
property shall be deemed a work for hire, with the copyright automatically
vesting in Company. To the extent that any such writing or other property is
determined not to be a work for hire for whatever reason, Executive hereby
consents and agrees to the unconditional waiver of "moral rights" in such
writing or other property, and to assign to Company all of his right, title and
interest, including copyright, in such writing or other property.
Executive hereby agrees to (a) assist Company or its nominee at all
times in the protection of any and all property subject to this Section 13, (b)
not to disclose any such property to others without the written consent of
Company or its nominee, except as required by his employment hereunder, and (c)
at the request of Company, to execute such assignments, certificates or other
interests as Company or its nominee may from time to time deem desirable to
evidence, establish, maintain, perfect, protect or enforce its rights, title or
interests in or to any such property.
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14. AGREEMENT NOT TO COMPETE. Executive hereby recognizes and
acknowledges that: (a) in his executive capacity with Company he will be given
knowledge of, and access to, the Confidential Information (as described in
Section 12); (b) in the event that Executive was to enter into competition with
Company, Executive's knowledge of such Confidential Information would be of
invaluable benefit to a competitor of Company, and could cause irreparable harm
to Company's business interests; and (c) Executive's consent and agreement to
enter into the noncompetition provisions and covenants set forth herein is an
integral condition of this Agreement, without which Company would not have
agreed to provide Confidential Information to Executive, nor to his
compensation, benefits, and other terms of this Agreement. Accordingly, in
consideration for his employment, compensation, benefits, access to and
entrustment of Confidential Information, the goodwill, training and experience
provided to Executive during his Employment Period, Executive hereby covenants,
consents and agrees (regardless of whether or not there has been a Change of
Control) that during the Employment Period, and for a period two (2) years after
his employment is terminated for any reason, Executive shall not, directly or
indirectly, acting alone or in conjunction with others, for his own account or
for the account of others, including, without limitation, as an officer,
director, stockholder, owner, partner, member, manager, joint venturer,
employee, promoter, consultant, agent, lender, guarantor, representative, or
otherwise:
(a) Solicit, canvass, or accept any fees or business from any
customer of Company for himself or any other person or entity engaged
in a "Similar Business to Company" (as defined below);
(b) Engage or participate in any Similar Business to Company
within any states of the United States in which the Company transacts
business on Executive's termination of employment date, or in which, as
of such termination date, the Company has made any plans or proposals
to transact business within one year from such termination date
(referred to herein as the "RESTRICTED AREA");
(c) Request or advise any service provider, supplier, or
customer to reduce or cancel any business that it may transact with
Company or any of its affiliated entities;
(d) Solicit, induce, or otherwise attempt to influence any
employee of the Company or any of its affiliated entities, to terminate
his or her relationship with the Company or any of its affiliated
entities; or
(e) Make any statement or perform any act intended to advance
an interest of an existing or prospective competitor of the Company or
any of its affiliated entities in any way that demonstrably injures the
reputation, goodwill or any other business interest of Company or any
of its affiliated entities.
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For purposes of this Agreement, "SIMILAR BUSINESS TO COMPANY" means any
business or other enterprise that is competitive with the current or planned
businesses, products, services or operations of the Company or any of its
affiliated entities at the time of termination of Executive's employment
including, without limitation, municipal biosolids.
Executive hereby agrees that the limitations set forth above on his
rights to compete with Company after his termination of employment are
reasonable and necessary for the protection of Company. In this regard,
Executive specifically agrees that such limitations as to the period of time,
geographic area and types and scopes of restriction on his activities, as
specified above, are reasonable and necessary to protect the goodwill and other
business interests of Company. However, should the time period, the geographic
area or any other non-competition provision set forth herein be deemed invalid
or unenforceable in any respect, then Executive acknowledges and agrees that, as
set forth in Section 15 hereof, reformation may be made with respect to such
time period, geographic area or other non-competition provision in order to
protect Company's reasonable business interests to the maximum permissible
extent.
15. REMEDIES. In the event of any pending, threatened or actual breach
of any of the covenants or provisions of Section 11, 12, 13 or 14, it is
understood and agreed by Executive that the remedy at law for a breach of any of
the covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and in
equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required to
post any bond in connection therewith. Should a court of competent jurisdiction
or an arbitrator (pursuant to Section 24) declare any provision of Section 11,
12, 13 or 14 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any other reason, such court or arbitrator is
hereby granted the consent of each of Executive and the Company to reform such
provision and/or to grant the Company any relief, at law or in equity,
reasonably necessary to protect the reasonable business interests of Company or
any of its affiliated entities. Executive hereby acknowledges and agrees that
all of the covenants and other provisions of Sections 11, 12, 13 and 14 are
reasonable and necessary for the protection of the Company's reasonable business
interests. Executive hereby agrees that if the Company prevails in any action,
suit or proceeding with respect to any matter arising out of or in connection
with Section 11, 12, 13 or 14, Company shall be entitled to all equitable and
legal remedies, including, but not limited to, injunctive relief and
compensatory damages.
16. DEFENSE OF CLAIMS. Executive agrees that, during the Employment
Period and for a period of two (2) years after his Termination Date, upon
reasonable request from the Company, he will cooperate with the Company and its
affiliated entities in the defense of any claims or actions that may be made by
or against the Company or any of its affiliated entities that affect his prior
areas of responsibility, except if Executive's reasonable interests are adverse
to the
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Company (or affiliated entity) in such claim or action. To the extent travel is
required to comply with the requirements of this Section 16, the Company shall,
to the extent possible, provide Executive with notice at least 10 days prior to
the date on which such travel would be required. The Company agrees to promptly
pay or reimburse Executive upon demand for all of his reasonable travel and
other direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this Section 16.
17. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in Control
(as defined in Section 6(b)), any question as to whether and when there
has been a termination of Executive's employment, and the cause of such
termination, shall be determined by the Board of Directors in its
discretion.
(b) COMPENSATION. Prior to a Change in Control (as defined in
Section 6(b)), any question regarding salary, bonus and other
compensation payable to Executive pursuant to this Agreement shall be
determined by the Board of Directors in its discretion.
18. WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and deduct from
any benefits and payments made or to be made pursuant to this Agreement (a) all
federal, state, local and other taxes as may be required pursuant to any law or
governmental regulation or ruling, (b) all other normal employee deductions made
with respect to Company's employees generally, and (c) any advances made to
Executive and owed to Company.
19. NONALIENATION. The right to receive payments under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by Executive, his dependents or beneficiaries,
or to any other person who is or may become entitled to receive such payments
hereunder. The right to receive payments hereunder shall not be subject to or
liable for the debts, contracts, liabilities, engagements or torts of any person
who is or may become entitled to receive such payments, nor may the same be
subject to attachment or seizure by any creditor of such person under any
circumstances, and any such attempted attachment or seizure shall be void and of
no force and effect.
20. INCOMPETENT OR MINOR PAYEES. Should the Board of Directors
determine that any person to whom any payment is payable under this Agreement
has been determined to be legally incompetent or is a minor, any payment due
hereunder may, notwithstanding any other provision of this Agreement to the
contrary, be made in any one or more of the following ways: (a) directly to such
minor or person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to such
adult or adults as have, in the good faith knowledge of the Board of Directors,
assumed custody and support of
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such minor or person; and any payment so made shall constitute full and complete
discharge of any liability under this Agreement in respect to the amount paid.
21. SEVERABILITY. It is the desire of the parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to Section 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however,
if such provision cannot be reformed, it shall be deemed ineffective and deleted
here from without affecting any other provision of this Agreement.
22. TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to Sections
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part
hereof for all purposes. The words "herein", "hereof", "hereunder" and other
compounds of the word "here" shall refer to the entire Agreement and not to any
particular provision hereof.
23. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICTS OF LAW.
24. ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy arises
between Executive and the Company as to their respective rights or
obligations under this Agreement, then either party may submit the
dispute or controversy to arbitration under the then-current National
Employment Dispute Resolution Rules of the American Arbitration
Association (AAA) (the "RULES"); provided, however, the Company shall
retain its rights to seek a restraining order or injunctive relief
pursuant to Section 15. Any arbitration hereunder shall be conducted
before a single arbitrator unless the parties mutually agree to a panel
of three arbitrators. The site for any arbitration hereunder shall be
in Montgomery County or Harris County, Texas, unless otherwise mutually
agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any matter
to arbitration shall do so in accordance with the Rules. Notice to the
other party shall state the question or questions to be submitted for
decision or award by arbitration. Notwithstanding any provision in this
Section 24, Executive shall be entitled to seek specific performance of
the Executive's right to be paid during the pendency of any dispute or
controversy arising under this Agreement. In order to prevent
irreparable harm, the arbitrator may grant
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temporary or permanent injunctive or other equitable relief for the
protection of property rights.
(c) ARBITRATION PROCEDURES. The arbitrator shall set the date,
time and place for each hearing, and shall give the parties advance
written notice in accordance with the Rules. Any party may be
represented by counsel or other authorized representative at any
hearing. The arbitration shall be governed by the Federal Arbitration
Act, 9 U.S.C. Section 1 et. seq. (or its successor). The arbitrator
shall apply the substantive law (and the law of remedies, if
applicable) of the State of Texas to the claims asserted to the extent
that the arbitrator determines that federal law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and
binding upon the parties to such arbitration, and each party
shall immediately make such changes in its conduct or provide
such monetary payment or other relief as such award requires.
The parties agree that the award of the arbitrator shall be
final and binding and shall be subject only to the judicial
review permitted by the Federal Arbitration Act.
(2) The parties hereto agree that the arbitration
award may be entered with any court having jurisdiction and
the award may then be enforced as between the parties, without
further evidentiary proceedings, the same as if entered by the
court at the conclusion of a judicial proceeding in which no
appeal was taken. The Company and the Executive hereby agree
that a judgment upon any award rendered by an arbitrator may
be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any monetary
amount required by the arbitrator's award, and the fees, costs and
expenses for its own counsel, witnesses and exhibits, unless otherwise
determined by the arbitrator in the award. The compensation and costs
and expenses assessed by the arbitrator and AAA shall be paid by the
losing party unless otherwise determined by the arbitrator in the
award. If court proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes such proceedings
shall pay all associated costs, expenses, and attorney's fees which are
reasonably incurred by the other party as determined by the arbitrator.
25. BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and to their
respective heirs, executors,
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personal representatives, successors and permitted assigns hereunder, but
otherwise this Agreement shall not be for the benefit of any third parties.
26. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the entire
agreement of the parties with respect to Executive's employment and the other
matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
27. SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the
intention of the parties hereto, the respective rights and obligations of said
parties, including, but not limited to, the rights and obligations set forth in
Sections 6 through 17 and 24 hereof, shall survive any termination or expiration
of this Agreement.
28. WAIVER OF BREACH. No waiver by either party hereto of a breach of
any provision of this Agreement by any other party, or of compliance with any
condition or provision of this Agreement to be performed by such other party,
will operate or be construed as a waiver of any subsequent breach by such other
party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either party hereto to take any action by reason
of any breach will not deprive such party of the right to take action at any
time while such breach continues.
29. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Company and its affiliated entities, and its and their
successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean the
Company as first written above, as well as any successor or successors thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior written
consent of the Board of Directors shall be deemed void and of no force and
effect. Subject to the preceding provisions of this paragraph, this Agreement
shall be binding upon and inure to the benefit of Executive and his heirs and
assigns.
30. NOTICES. Notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly received (a) when delivered in person or
sent by facsimile transmission, (b) on the first business day after it is sent
by air express overnight courier service, or (c) on the third business day
following deposit in the United States mail, registered or certified
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mail, return receipt requested, postage prepaid and addressed, to the following
address, as applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
1800 Bering, Suite 1000
Houston, Texas 77057
Attention: CEO
(2) If to Executive, addressed to the address set
forth below his name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this Section 30.
31. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.
Each counterpart may consist of a copy hereof containing multiple signature
pages, each signed by one party hereto, but together signed by both of the
parties hereto.
32. EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The Executive
represents to Company that he is knowledgeable and sophisticated as to business
matters, including the subject matter of this Agreement, that he has read the
Agreement and that he understands its terms and conditions. The parties hereto
agree that the language used in this Agreement shall be deemed to be the
language chosen by them to express their mutual intent, and no rule of strict
construction shall be applied against either party hereto. Executive also
represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel, regarding
the terms and conditions of this Agreement and has done so to the extent that
he, in his unfettered discretion, deemed to be appropriate.
33. SUPERSEDING AGREEMENT. This Employment Agreement shall supersede
any prior employment agreement entered into between the Company and Executive.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand, and
Company has caused these presents to be executed in its name and on its behalf,
to be effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: /s/ ALVIN L. THOMAS II Signature: /s/ J. PAUL WITHROW
------------------------- -------------------
Printed Name: ALVIN L. THOMAS II Printed Name: J. PAUL WITHROW
Date: May 10, 1999 Date: May 10, 1999
Address for Notices:
3523 Autumn Bend Drive
Sugar Land, Texas 77479
ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: /s/ DONNA FRALEY By: /s/ ROSS M. PATTEN
-------------------------- ------------------------
Title: HUMAN RESOURCE MANAGER Its: CHAIRMAN & CEO
Printed Name: DONNA FRALEY Printed Name: ROSS M. PATTEN
Date: May 10, 1999 Date: May 10, 1999
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EXHIBIT 2.12
AGREEMENT CONCERNING EMPLOYMENT RIGHTS
THIS AGREEMENT (this "Agreement"), is made and entered into, to be
effective this 27th day of January, 2000, by and between: J. Paul Withrow, an
individual, hereinafter referred to as "Executive", and Synagro Technologies,
Inc, a Delaware Corporation, hereinafter referred to as "Synagro" or the
"Company."
R E C I T A L S
WHEREAS, Synagro desires to raise capital to continue its business plan
including the acquisition of biosolids treatment, processing, disposal and
beneficial reuse companies;
WHEREAS, GTCR Capital Partners, L.P., a Delaware limited partnership
("Capital Partners"), the Company and certain subsidiaries of the Company are
entering into a Senior Subordinated Loan Agreement on the date hereof (the "Loan
Agreement") pursuant to which, among other things, Capital Partners will make a
loan to the Company on the date hereof and may make additional loans hereafter
from time to time in accordance with the terms thereof;
WHEREAS, GTCR FUND VII, L.P., a Delaware limited partnership ("Fund
VII" and together with Capital Partners, "GTCR") and the Company are entering
into a Purchase Agreement on the date hereof (the "Purchase Agreement") pursuant
to which, among other things, Fund VII will purchase the Company's convertible
preferred stock on the date hereof and may make additional purchases of
convertible preferred stock from time to time hereafter in accordance with the
terms thereof;
WHEREAS, the execution of this Agreement by the Company and the
Executive is a condition to the initial closings under the Loan Agreement and
the Purchase Agreement;
WHEREAS, Executive is employed by Synagro under an employment contract
dated May 10, 1999 (as amended by this Agreement, the "Employment Contract");
WHEREAS, the Company values Executive's contribution to Synagro's
business plan and whereas the Company and Executive desire that the transactions
contemplated by the Loan Agreement and the Purchase Agreement be consummated;
WHEREAS, GTCR, the Company and the Executive desire that any change of
control resulting from the consummation of the Loan Agreement and the Purchase
Agreement and the carrying out of their terms and the ownership and control
granted to GTCR and its affiliates thereunder shall not constitute a "change of
control" for purposes of (1) any and all stock options for the purchase of the
Company's stock held by Executive and (2) for purposes of Executive's Employment
Contract and any other agreement to which the Executive is party which makes
reference to a change of control
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of the Company or its subsidiaries (including for purposes of the definition of
"Good Reason" in the Employment Contract); and
WHEREAS, the Company desires to make Executive whole with respect to
the waiver of his rights with respect to a change of control of his options as
though the Executive currently holds in the aggregate options to purchase
450,000 shares of the Company's Common Stock at an exercise price of $2.50 on
the date hereof (except that the number of options not actually held by
Executive on the date hereof would be subject to, among other provisions, five
year time based vesting); and
WHEREAS, Synagro desires to amend the Employment Contract to entice
Executive to commit to a longer term of employment and to compensate him for
waiving certain rights under the Employment Contract.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and covenants set forth herein, agree as follows:
Executive, being an employee of Synagro, hereby agrees:
1. Executive hereby irrevocably waives any and all rights (whether
granted in the Employment Contract, by action of the Board of
Directors of Synagro or otherwise) to the acceleration of vesting
of Synagro stock options held by Executive as a result of the
investment in and loans to the Company (including, without
limitation, the ownership of the Company's capital stock resulting
thereby, changes to the composition of the Company's Board of
Directors resulting thereby, and the enforcement of the terms of
the Purchase Agreement, the Loan Agreement and the Warrant
Agreement), whether on the date hereof or in the future, by GTCR
and/or their affiliates pursuant to the terms of the Purchase
Agreement, the Loan Agreement, and the Warrant Agreement between
Synagro and Capital Partners ("Warrant Agreement"), and hereby
agrees that any such investments and loans (including, without
limitation, the ownership of the Company's capital stock resulting
therefrom, changes to the composition of the Company's Board of
Directors resulting therefrom or pursuant to the terms thereof,
and the enforcement of the terms of the Purchase Agreement, the
Loan Agreement and the Warrant Agreement) by GTCR and/or their
affiliates will not constitute a "Change in Control" for purposes
of any such stock option agreement; and
2. Executive hereby irrevocably waives any and all rights resulting
from a change of control, including for the purposes of the
definition of "good reason" in Section 6 of the Employment
Contract, (whether granted in the Employment Contract or a
separate severance agreement or otherwise) as a result of the
investment in and loans to the Company (including, without
limitation, the ownership of the Company's capital stock resulting
thereby,
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changes to the composition of the Company's Board of
Directors resulting thereby or pursuant to the terms thereof, and
the enforcement of the terms of the Purchase Agreement, the Loan
Agreement and the Warrant Agreement), whether on the date hereof
or in the future, by Fund VII, Capital Partners and/or their
affiliates pursuant to the terms of the Purchase Agreement, the
Loan Agreement, and the Warrant Agreement, and hereby agrees that
any such investments and loans (including, without limitation, the
ownership of the Company's capital stock resulting therefrom,
changes to the composition of the Company's Board of Directors
resulting therefrom, and the enforcement of the terms of the
Purchase Agreement, the Loan Agreement and the Warrant Agreement)
by GTCR and/or their affiliates will not constitute a "Change in
Control" for purposes of any such agreement.
This Waiver is limited to the matters expressly set forth above, and
Executive does not waive any other rights that he may have under the Employment
Contract, any stock option agreement or otherwise.
ARTICLE 2.0 - AMENDMENTS TO EMPLOYMENT CONTRACT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive desire to amend the Employment Contract as follows:
The first sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"2. COMPENSATION. The Company shall pay or cause to be paid to
Executive during the Employment Period an annual base salary for his
services under this Agreement of not less than $175,000, payable in
equal monthly or semi-monthly installments in accordance with the
Company's normal payroll procedures."
The third sentence of Paragraph "2. COMPENSATION" in the Employment
Contract, shall be deleted and replaced with the following language:
"Executive shall be entitled to participate in an annual bonus "pool"
or other structure established for the Company's top level of
management which shall provide for a bonus up to fifty-percent of base
salary if the goals set by the Board of Directors are satisfied."
Paragraph "4. TERM OF EMPLOYMENT" in the Employment Contract, shall be
deleted and replaced with the following language:
"4. TERM OF EMPLOYMENT. Executive's term of employment with the Company
under this Agreement shall be for 24 consecutive months beginning on
the Effective Date and continuing thereafter so that the remaining term
of employment hereunder is always 24 months, unless Notice of
Termination pursuant to Section 7 is given by either the Company or
Executive to the other party. The Company
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and Executive shall each have the right to give a Notice of
Termination at will, with or without cause, at any time, subject
to the terms of this Agreement regarding rights and duties of the
parties upon termination of employment. This "evergreen" 24-month
employment period hereunder shall be referred to herein as the
"TERM OF Employment." The period from the Effective Date through
the date of Executive's termination of employment for whatever
reason shall be referred to herein as the "EMPLOYMENT PERIOD."
The definition of "CHANGE IN CONTROL" in paragraph 6 of the Employment
Contract, shall be deleted and replaced with the following language:
"A `Change of Control' of the Company shall be deemed to have
occurred if any of the following shall have taken place: (a) Any
Person or group of Persons (within the meaning of Section 13 or 14
of the Securities and Exchange Act of 1934 (the "Exchange Act"),
but excluding (i) the executive managers of the Company as of
January 27, 2000, and (ii) GTCR Capital Partners, L.P., GTCR Fund
VII, L.P. 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, L.P. 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. For purposes of this provision, "Person",
"Affiliates", "Board", "Convertible Preferred Stock" and "Lender"
shall have the meanings ascribed to such terms in the Loan
Agreement."
The above amendments to the Employment Contract are limited to the
matters expressly set forth above, and Executive and Synagro do not waive, amend
or modify any other rights or duties that he or it may have under the Employment
Contract.
ARTICLE 3.0 - OTHER AGREEMENT
To achieve the goals and objectives set out in the Recitals, which are
incorporated into this Agreement as though more fully set forth in this Article,
Synagro and Executive agree that for so long as Executive remains employed by
Synagro and for thirty-days thereafter, in the event that:
(i) Executive's employment hereunder is terminated by the Company at
any time for any reason except (A) for Cause or (B) Executive's
death or Disability;
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(ii) Executive terminates his own employment hereunder at any time for
Good Reason; or
(iii) a Change of Control (not otherwise waived pursuant to this
Agreement) occurs
Executive shall be entitled to receive, and the Company shall be
obligated to elect at its option to either (a) issue options to
purchase 450,000 registered shares of the Company's common stock at an
exercise price of $2.50 per share which shall be fully vested but
non-transferable and which shall expire, notwithstanding any agreement
or arrangement to the contrary, 90 days from the date of issue; (b) a
number of registered shares (if the Company is publicly traded at such
time) of the Company's common stock equal to the result of (A) the
product of (x) 450,000 and (y) the Fair Market Value per share of the
Company's common stock less $2.50 divided by (B) the Fair Market Value
per share of the Company's common stock; or (c) a cash payment equal to
(x) the Fair Market Value of the Company's common stock per share less
$2.50 multiplied by (y) 450,000 (alternatives (a), (b) and (c)
collectively, the "Option Payment"). As a condition to receiving the
Option Payment, Executive must surrender all other options to purchase
Synagro common stock that he has been granted. However, the Option
Payment shall not be required to be made if Executive has, at any time,
whether before or after the date of this agreement, been granted (for
purposes hereof, existing options which are repriced to an exercise
price of $2.50 shall be deemed to be re-granted) options to purchase an
aggregate amount of 450,000 shares of common stock of Synagro with an
average strike price of $2.50 or less. For purposes hereof, "Fair
Market Value" shall mean, with respect to any date on which any
determination of Fair Market Value is to be made, the average closing
price of shares of the Company's common stock sold on the NASDAQ
National Market System during the previous 21 trading days.
For purposes of this Article 3.0, "Cause", "Change in Control", "Disability",
and "Good Reason" shall have the meanings ascribed to such terms in the
Employment Contract.
ARTICLE 4.0 - SUCCESSORS AND ASSIGNS
This Agreement shall be assignable as provided in Section 29 of the
Employment Contract.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written:
J. Paul Withrow, an Individual.
By: /s/ J. PAUL WITHROW
--------------------------------
Synagro Technologies, Inc, a Delaware Corporation.
By: /s/ ROSS M. PATTEN
--------------------------------
Ross M. Patten
6
<PAGE> 1
EXHIBIT 2.13
WARRANT AGREEMENT
This WARRANT AGREEMENT (this "Agreement") is made as of
January 27, 2000, by and among GTCR Capital Partners, L.P., a Delaware limited
partnership (the "Lender"), and Synagro Technologies, Inc., a Delaware
corporation (the "Company"). Capitalized terms used herein and not otherwise
defined shall have the meanings given to such terms in Section 5A hereof.
WHEREAS, the Company and the Lender have entered into a Senior
Subordinated Loan Agreement, dated as of the date hereof (as the same shall be
modified, amended and supplemented from time to time, the "Loan Agreement");
WHEREAS, pursuant to the Loan Agreement, the Lender will make
a loan to the Company on the date hereof in the principal amount of $20,000,000
(the "Initial Loan") and, subject to the terms and conditions of the Loan
Agreement, may make or arrange for loans to the Company from time to time after
the date hereof (each a "Subsequent Loan", and together with the Initial Loan,
the "Loans") up to an aggregate principal amount (excluding the Initial Loan) of
$105,000,000 (the "Aggregate Subsequent Loan Amount");
WHEREAS, as an inducement and partial consideration to the
Lender to enter into the Loan Agreement and to make the Loans, the Company has
agreed to (i) issue to the Lender on the date hereof a warrant (the "Initial
Warrant") representing the right to purchase the Initial Warrant Shares from the
Company and (ii) issue to the Lender on the date of each Subsequent Loan a
warrant (each a "Subsequent Warrant", and together with the Initial Warrant, the
"Warrants") representing the right to purchase Subsequent Warrant Shares from
the Company, in each case pursuant to the terms and conditions of this Agreement
and in the form of Exhibit A attached hereto; and
WHEREAS, the Company has authorized the issuance of the
Warrants to the Lender pursuant to the terms and conditions of this Agreement
and each such Warrant.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Issuance of Warrants; Closings.
1.1. Initial Closing. The issuance of the Initial Warrant to
the Lender (the "Initial Closing") shall take place simultaneously with the
closing of the Initial Loan pursuant to the Loan Agreement. The date of the
Initial Closing is hereinafter referred to as the "Initial Closing Date."
SECTION 2. Issuance of Initial Warrant. At the Initial Closing, the
Company shall issue to the Lender the Initial Warrant representing the right to
purchase the Initial Warrant Shares. The Initial Warrant shall be exercisable
immediately upon issuance thereof, and the Lender may exercise all or any
portion of the Initial Warrant at any time and from to time thereafter.
<PAGE> 2
SECTION 3. Subsequent Closings. The issuance of each Subsequent Warrant
to the Lender (each a "Subsequent Closing") shall take place simultaneously with
the closing of each Subsequent Loan. The date of each Subsequent Closing is
hereinafter referred to as a "Subsequent Closing Date").
SECTION 4. Issuances of Subsequent Warrants. At each Subsequent
Closing, the Company shall issue to the Lender a Subsequent Warrant representing
the right to purchase a number of Subsequent Warrant Shares equal to the product
of (A) the result of a fraction, the numerator of which is the dollar amount of
the subsequent Loans being made at such Subsequent Closing, and the denominator
of which is the dollar amount of the Convertible Preferred Stock being purchased
pursuant to the Preferred Stock Purchase Agreement at such Subsequent Closing,
and (B) the result of (1) the result of (x) the number of shares of Convertible
Preferred Stock being purchased pursuant to the Preferred Stock Purchase
Agreement, divided by (y) 0.875, minus (2) the number of shares of Convertible
Preferred Stock being purchased pursuant to the Preferred Stock Purchase
Agreement at such Subsequent Closing.
SECTION 5. Representations and Warranties of the Company. As of the
Initial Closing, and as of each Subsequent Closing, the Company represents and
warrants to the Lender as follows:
5.1 Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
SECTION 6. Authority Relative to this Agreement. The Company has all
requisite corporate power and authority to enter into and perform this Agreement
and to issue and deliver the Warrants to the Lender. The execution, delivery and
performance by the Company of this Agreement, including the issuance and
delivery of the Warrants to the Lender, have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement has been
duly executed and delivered by the Company and is a legal, valid and binding
obligation of the Company and is enforceable against the Company in accordance
with its terms (except as may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights).
SECTION 7. No Conflict or Violation. The execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the issuance and delivery of the Warrants to the Lender does not
and will not conflict with or result in a violation of (i) the charter or bylaws
of the Company or (ii) any agreement, instrument, law, rule, regulation, order,
writ, judgment or decree to which the Company is a party or is subject, except
for such conflicts and violations which will not, individually or in the
aggregate, have a material adverse effect on the business, operations, assets or
condition (financial or otherwise) or business of the Company and will not
deprive the Lender of any material benefit under this Agreement.
SECTION 8. Validity of Issuance. The Warrants to be issued to the
Lender pursuant to this Agreement and the Warrant Shares issued upon exercise of
the Warrants will, when issued,
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<PAGE> 3
be duly and validly issued, fully paid and non-assessable, and free and clear of
all liens, claims and encumbrances.
SECTION 9. Capital Structure (Initial Closing). The authorized and
issued capital stock of the Company as of the Initial Closing and immediately
thereafter is as set forth on the Capitalization Schedule dated as of the
Initial Closing Date and attached hereto.
SECTION 10. Capital Structure (Subsequent Closings). The authorized and
issued capital stock of the Company as of any Subsequent Closing and immediately
thereafter will be as set forth on the Capitalization Schedule dated as of such
Subsequent Closing Date and provided to the Lender prior to such Subsequent
Closing.
SECTION 11. Investment Representations; Legends.
11.1 Investment Representations. The Lender hereby represents
and warrants to the Company that the Lender is acquiring the Warrants, and to
the extent any such Warrant has been exercised, the Warrant Shares, for its own
account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof. The Lender agrees and acknowledges
that it will not, directly or indirectly, offer, transfer or sell any Warrant or
any Warrant Shares, or solicit any offers to purchase or acquire any Warrant or
any Warrant Shares, unless the transfer or sale is (i) pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and the
rules and regulations thereunder (the "Securities Act") and has been registered
under any applicable state securities or "blue sky" laws or (ii) pursuant to an
exemption from registration under the Securities Act and all applicable state
securities or "blue sky" laws.
SECTION 12. Additional Investment Representations. The Lender hereby
represents and warrants to the Company that (i) it has such knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment hereunder, (ii) it is able to incur a
complete loss of such investment, (iii) it is able to bear the economic risk of
such investment for an indefinite period of time and (iv) it is an "accredited
investor" as that term is defined in Regulation D under the Securities Act.
SECTION 13. Legend. The Lender hereby acknowledges that the Company
will stamp or otherwise imprint each Warrant with a legend in substantially the
following form:
THIS WARRANT AND ANY SHARES OF STOCK OBTAINABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE'S
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION THEREFROM.
- 3 -
<PAGE> 4
In connection with the transfer of any Warrant or any Warrant
Shares (other than a transfer pursuant to a public offering registered under the
Securities Act, pursuant to Rule 144 or Rule 144A promulgated under the
Securities Act (or any similar rules then in effect) or to an affiliate of the
Lender), the Lender shall deliver, upon the reasonable request of the Company,
an opinion of counsel, which counsel shall be knowledgeable in securities laws
and which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer may be effected without registration under the Securities
Act. Upon receipt of an opinion of counsel reasonably satisfactory to the
Company to the effect that such legend no longer applies to any particular
Warrant and/or Warrant Shares, the Company shall promptly issue a replacement
Warrant and/or replacement certificate evidencing such Warrant Shares (as
applicable), which does not contain such legend.
SECTION 14. Inspection Rights. The Company shall permit any
representatives designated by the Lender (so long as the Lender or any affiliate
of the Lender holds any Warrant Shares), any holder of at least 50% of the
Warrant Shares that are Common Stock or any holder of at least 50% of the
Warrant Shares that are Convertible Preferred Stock, upon reasonable notice and
during normal business hours and at such other times as any such holder may
reasonably request, to (i) visit and inspect any of the properties of the
Company and its subsidiaries, (ii) examine the corporate and financial records
of the Company and its subsidiaries and make copies thereof or extracts
therefrom and (iii) discuss the affairs, finances and accounts of the Company
and/or any of its subsidiaries with their respective directors, officers, key
employees and independent accountants (it being understood that such
representatives will keep all non-public information confidential to the full
extent permitted by applicable law).
SECTION 15. Miscellaneous
15.1 Definitions. For the purposes of this Agreement, the
following terms shall have the following meanings:
"Convertible Preferred Stock" means the Company's Series D
Convertible Preferred Stock, par value $.002 per share, and each series of the
Company's Convertible Preferred Stock issued, or from time to time issuable,
pursuant to the Preferred Stock Purchase Agreement with substantially the same
rights and preferences as the Company's Series D Convertible Preferred Stock,
par value $.002 per share (except that the number of shares of the Company's
Common Stock into which such securities are convertible shall be determined as
set forth in the Preferred Stock Purchase Agreement).
"Initial Warrant Shares" means 2,857.143 shares of the
Company's Series D Convertible Preferred Stock, par value $.002 per share,
obtained or obtainable upon exercise of the Initial Warrant, as such number of
shares shall be adjusted from time to time in accordance with Section 2 of the
Initial Warrant.
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<PAGE> 5
"Preferred Stock Purchase Agreement" means that certain
Purchase Agreement by and between the Company and GTCR Fund VII, L.P., a
Delaware limited partnership, dated as of the date hereof.
"Subsequent Warrant Shares" means, with respect to a
Subsequent Warrant, the shares issuable upon exercise of such Subsequent Warrant
which shares shall be Convertible Preferred Stock of the same series as the
Convertible Preferred Stock being issued pursuant to the Preferred Stock
Purchase Agreement at such Subsequent Closing.
"Warrant Shares" means, collectively, the Initial Warrant
Shares and any Subsequent Warrant Shares then outstanding.
SECTION 16. Notices. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
(i) when delivered, if delivered personally, sent by registered or certified
mail, return receipt requested and postage prepaid, or sent via nationally
recognized overnight courier or via facsimile with confirmation of receipt and
(ii) when received if delivered otherwise, to the party to whom it is directed:
If to the Company:
Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, TX 77057
Attention: Chief Financial Officer
Telecopier No.: (713) 369-1760
With a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis Street
Houston, TX 77002-3095
Attention: Michael T. Peters
Telecopier No.: (713) 223-3717
If to the Lender:
GTCR Capital Partners, L.P.
6100 Sears Tower
Chicago, IL 60606
Attention: David A. Donnini
Telecopier No.: (312) 382-2201
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<PAGE> 6
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
Telecopier No.: (312) 861-2200
or to such other address as any party hereto shall have provided in a written
notice to the others.
SECTION 17. Assignment. This Agreement and all the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns, except that neither this
Agreement nor any rights or obligations hereunder shall be assigned by the
Company without the prior written consent of the Lender.
SECTION 18. Amendment. This Agreement may be amended only by a written
instrument signed by the Company, the holders of a majority of the Warrant
Shares.
SECTION 19. Waiver. Any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions herein. Any agreement on the part of a
party hereto to any such extension or waiver shall only be valid as to such
party if set forth in an instrument in writing signed by such party.
SECTION 20. Severability. In the event that any one or more of the
provisions hereof, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired; it being
intended that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
SECTION 21. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, without giving
effect to any choice of law or other conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
SECTION 22. Counterparts. This Agreement may be executed in two or more
counterparts (including by means of facsimile), each of which when so executed
and delivered shall be deemed to be an original and all of which together shall
be deemed to be one and the same agreement.
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<PAGE> 7
SECTION 23. Descriptive Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of the terms contained herein.
SECTION 24. Survival of Representations and Warranties. All
representations and warranties made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (including each Subsequent
Closing), regardless of any investigation made by the Lender or on its behalf.
SECTION 25. Purchase Prices for Initial Warrant. The Company and the
Lender hereby agree that for purposes of Sections 1271 through 1275 of the
Internal Revenue Code of 1986, as amended (or any successor statute), the
aggregate original purchase price of the Initial Warrant is $2,857,143, which
purchase prices will be used by the Company and the Lender, as appropriate, for
financial reporting and income tax purposes.
SECTION 26. Entire Agreement. Except as otherwise expressly set forth
herein, this Agreement, the Loan Agreement and the Warrants embody the complete
agreement and understanding among the parties hereto with respect to the subject
matter hereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
* * * *
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Warrant Agreement to be signed by its duly authorized officers as of the date
first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
---------------------
Name: Ross M. Patten
Its: 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 Golder Rauner, L.L.C.
Its: General Partner
By: /s/ DAVID A. DONNINI
---------------------
Name: David A. Donnini
Its: Principal
<PAGE> 1
EXHIBIT 2.14
EXHIBIT A
THIS WARRANT AND ANY SHARES OF STOCK OBTAINABLE UPON ITS EXERCISE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE'S SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN
EXEMPTION THEREFROM.
SYNAGRO TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
Date of Issuance:____________ Certificate No. W-____
FOR VALUE RECEIVED, Synagro Technologies, Inc., a Delaware corporation (the
"Company"), hereby grants to GTCR Capital Partners, L.P., a Delaware limited
partnership, or its registered assigns (the "Registered Holder") the right to
purchase from the Company, at any time or from time to time during the Exercise
Period (as defined in Section 1A below), up to ____________ shares (as such
number of shares shall be adjusted from time to time in accordance with Section
2 hereof) of the Company's [name of series of Convertible Preferred Stock], par
value $.002 per share (the "Convertible Preferred"), at a per share purchase
price equal to the "Exercise Price" (as defined in Section 5 below). This
Warrant is issued pursuant to the terms of that certain Warrant Agreement, dated
as of January 27, 2000 (as amended and modified from time to time), between the
Company and GTCR Capital Partners, L.P. (the "Warrant Agreement") and is one of
the "Warrants" described therein. Certain capitalized terms used herein and not
otherwise defined are defined in Section 5 hereof. Any capitalized terms used in
this Warrant but not defined herein shall have the meaning ascribed to such term
in the Warrant Agreement. The amount and kind of securities obtainable pursuant
to the rights granted hereunder and the purchase price to be paid for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.
For income tax purposes, the value of this Warrant on the date hereof is
$_________________.
<PAGE> 2
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1.A. Exercise Period. The Registered Holder may exercise, in whole or part,
the purchase rights represented by this Warrant at any time and from time to
time after the Date of Issuance hereof and prior to the tenth anniversary
thereof (the "Exercise Period"). The Company shall give the Registered Holder
written notice of the expiration of the Exercise Period at least 30 days but not
more than 90 days prior to the end of the Exercise Period.
Section 2. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in Section 1C
below, executed by the Person exercising all or any portion of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant; and
(c) if this Warrant is not registered in the name of the Purchaser,
an Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser, in which case the
Registered Holder shall have complied with the provisions set forth in Section 7
hereof.
(ii) Certificates evidencing the Warrant Shares purchased upon exercise
of all or any portion of this Warrant shall be delivered by the Company to the
Purchaser within five business days after date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have been
exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall, within such five-day period, deliver
such new Warrant to the Person designated for delivery in the Exercise
Agreement.
(iii) The Warrant Shares issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time, and
the Purchaser shall be deemed for all purposes to have become the record holder
of such Warrant Shares at the Exercise Time.
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<PAGE> 3
(iv) The issuance of certificates evidencing Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares. Each Warrant Share issuable upon exercise of this Warrant shall
be fully paid and nonassessable and free from all liens and charges with respect
to the issuance thereof.
(v) The Company shall not close its books against the transfer of this
Warrant or of any Warrant Share issued or issuable upon the exercise of this
Warrant in any manner which interferes with the timely exercise of this Warrant.
The Company shall from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Warrant Shares obtainable
upon exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect.
(vi) The Company shall assist and cooperate with any Registered Holder
or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including, without limitation, making any filings required to be made
by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a registered public
offering or the sale of the Company (whether by merger, sale of stock or
otherwise), the exercise of any portion of this Warrant may, at the election of
the holder hereof, be conditioned upon the consummation of the public offering
or the sale of the Company in which case such exercise shall not be deemed to be
effective until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available out of
its authorized capital stock the number of shares of its Convertible Preferred
issuable upon the exercise of this Warrant solely for the purpose of issuance
upon the exercise of this Warrant. The Company shall take all such actions as
may be necessary to assure that all such Warrant Shares may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which the Warrant Shares may be listed
(except for official notice of issuance which shall be immediately delivered by
the Company upon each such issuance). The Company shall not take any action
which would cause the number of authorized but unissued shares of its
Convertible Preferred to be less than the number of such shares required to be
reserved hereunder for issuance upon exercise of this Warrant.
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<PAGE> 4
Section 3. Exercise Agreement. Upon any exercise of this Warrant, a
completed Exercise Agreement substantially in the form of Exhibit I attached
hereto, executed by the Person exercising all or any portion of the purchase
rights represented by this Warrant, shall be delivered to the Company; provided
that, if the Warrant Shares are to be issued to a Person other than the Person
whose name this Warrant is registered, the Exercise Agreement shall also state
the name of the Person to whom the certificates evidencing the Warrant Shares
are to be issued; provided further, if the number of Warrant Shares to be issued
does not include all the Warrant Shares obtainable hereunder, the Exercise
Agreement shall also state the name of the Person to whom a new Warrant for the
unexercised portion of the rights hereunder is to be delivered. Such Exercise
Agreement shall be dated the actual date of execution thereof.
Section 4. Adjustment of Exercise Price and Number of Shares. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
each be subject to adjustment from time to time as provided in this Section 2.
4.A. Subdivision or Combination of Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Convertible Preferred, then the Exercise Price in
effect immediately prior to such subdivision shall be proportionately reduced
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be proportionately increased. If the Company at any time combines (by reverse
stock split or otherwise) its outstanding shares of Convertible Preferred, then
the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares obtainable upon
exercise of this Warrant shall be proportionately decreased.
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<PAGE> 5
Section 5. Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets or other transaction,
which in each case is effected in such a way that the holders of its outstanding
shares of Convertible Preferred are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for such Convertible Preferred, is referred to herein as an "Organic
Change." Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance reasonably satisfactory to the
Registered Holder of this Warrant) to insure that the Registered Holder of this
Warrant shall thereafter have the right to obtain and receive, in lieu of or in
addition to (as the case may be) the Warrant Shares immediately theretofore
obtainable and receivable upon the exercise of this Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of Warrant Shares immediately theretofore acquirable and
receivable upon exercise of this Warrant had this Warrant been exercised
immediately prior to the Organic Change taking place. In any such case, the
Company shall make appropriate provision (in form and substance satisfactory to
the Registered Holder of this Warrant) with respect to the Registered Holder's
rights and interests to insure that the provisions of this Section 2 and
Sections 3 and 4 hereof shall thereafter be applicable to this Warrant
(including, without limitation, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is other than the
Company and in which the value of the Warrant Shares as reflected by the terms
of such transaction is less than the Exercise Price in effect immediately prior
to such transaction, an immediate adjustment of the Exercise Price and a
corresponding immediate adjustment in the number of Warrant Shares obtainable
and receivable upon exercise of this Warrant). The Company shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance satisfactory to the Registered Holder of this Warrant), the
obligation to deliver to the Registered Holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
Section 6. Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 2 but not expressly provided for by such
provisions, then the Company's board of directors shall make an appropriate
adjustment in the Exercise Price and an appropriate adjustment in the number of
Warrant Shares obtainable upon exercise of this Warrant so as to protect the
rights of the holders of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares obtainable
as otherwise determined pursuant to this Section 2.
Section 7. Notices.
(i) immediately upon any adjustment of the Exercise Price, the Company
shall give written notice thereof to the Registered Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
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<PAGE> 6
(ii) The Company shall give written notice to the Registered Holder at
least 20 days prior to the date on which the Company closes its books or takes a
record (A) with respect to any dividend or distribution upon the Convertible
Preferred, (B) with respect to any pro rata subscription offer to holders of the
Convertible Preferred or (C) for determining rights to vote with respect to any
Organic Change, dissolution or liquidation. The Company shall also give written
notice to the Registered Holder at least 20 days prior to the date on which any
Organic Change, dissolution or liquidation shall take place.
Section 8. Liquidating Dividends. If the Company declares or pays a
dividend upon the Convertible Preferred payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally accepted
accounting principles, consistently applied) except for a stock dividend payable
in shares of Convertible Preferred (a "Liquidating Dividend"), then the Company
shall pay to the Registered Holder of this Warrant at the time of payment
thereof the Liquidating Dividend which would have been paid to the Registered
Holder on the Warrant Shares had this Warrant been fully exercised immediately
prior to the date on which the record was taken for such Liquidating Dividend
or, if no record was taken, the date as of which the record holders of
Convertible Preferred entitled to such dividends are to be determined.
Section 9. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of its shares of
Convertible Preferred (the "Purchase Rights"), then the Registered Holder of
this Warrant shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of Warrant Shares obtainable upon
complete exercise of this Warrant immediately before the date on which the
record is taken for the grant, issuance or sale of such Purchase Rights or, if
no such record is taken, the date as of which the record holders of its shares
of Convertible Preferred are to be determined for the grant, issue or sale of
such Purchase Rights.
Section 10. Definitions. The following terms have meanings set forth below:
"Exercise Price" means $.01 per share, which is deemed paid upon the
issuance of this Warrant by virtue of the making of the Loan on the date hereof.
"Convertible Securities" means any stock or securities (directly or
indirectly) convertible into or exchangeable for shares of Convertible
Preferred.
"Options" means any rights or options to subscribe for or purchase shares
of Convertible Preferred and/or Convertible Securities.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
-6-
<PAGE> 7
"Warrant Share" means any share of Convertible Preferred obtained or
obtainable upon the exercise of this Warrant; provided that, if there is a
change such that the securities issuable upon exercise of this Warrant are
issued by an entity other than the Company or there is a change in the type or
class of securities so issuable, then the term "Warrant Share" shall mean one
share of the security issuable upon exercise of the Warrants if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
"Warrant Shares" means, collectively, each Warrant Share obtained or
obtainable upon the exercise of this Warrant.
Section 11. No Voting Rights; Limitations of Liability. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of the Registered Holder shall give rise to
any liability of the Registered holder for any further payment in respect of the
Warrant Shares or as a stockholder of the Company.
Section 12. Warrant Transferable. Subject to the transfer conditions
referred to in the legend imprinted hereon and in the Stockholders Agreement,
this Warrant and all rights hereunder are transferable, in whole or in part,
without charge to the Registered Holder, upon surrender of this Warrant with a
properly executed Assignment (in the form of Exhibit II attached hereto) at the
principal office of the Company.
Section 13. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each such new Warrant shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein
collectively as the "Warrant."
Section 14. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of this Warrant
and/or any certificate evidencing Warrant Shares, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Company (provided that, if the holder is a financial institution or other
institutional investor, its own agreement shall be satisfactory) or, in the case
of any such mutilation, upon surrender of this Warrant and/or such certificate
(as applicable), the Company shall (at its expense) execute and deliver, in lieu
of this Warrant and/or such certificate, a new Warrant and/or certificate of
like kind representing the same rights represented by, and dated the date of,
such lost, stolen, destroyed or mutilated Warrant and/or certificate (as
applicable).
-7-
<PAGE> 8
Section 15. Notices. Except as otherwise expressly provided herein,
all notices referred to in this Warrant shall be in writing and shall be
delivered personally, sent by reputable overnight courier service (charges
prepaid) or sent by registered or certified mail, return receipt requested,
postage prepaid and shall be deemed to have been given when so delivered, sent
certified or registered mail (i) to the Company at its principal executive
offices and (ii) to the Registered Holder of this Warrant, at such holder's
address as it appears in the records of the Company (unless otherwise indicated
by any such holder).
Section 16. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the holder(s) of a majority of the purchase rights represented by this Warrant.
Section 17. Descriptive Headings. The descriptive headings of the
several Sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.
Section 18. Governing Law. This Warrant shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of
Illinois without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Illinois.
* * * *
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<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers and dated as of the Date of Issuance.
SYNAGRO TECHNOLOGIES, INC.
By:
---------------------------
Its:
--------------------------
Attest:
By:
---------------------------
Its: Secretary
<PAGE> 10
EXHIBIT I
EXERCISE AGREEMENT
To: Synagro Technologies, Inc. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-____), hereby elects to purchase ________ shares of
[name of series of Convertible Preferred Stock] obtainable under such Warrant,
the purchase price of $.01 per share having previously been paid.
Signature:
---------------------
Name:
---------------------
On behalf of:
---------------------
Its:
---------------------
Address:
<PAGE> 11
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. W-________) with respect to the number of Warrant
Shares set forth below and covered thereby, unto:
<TABLE>
<CAPTION>
Name of Assignee Address Class of Shares No. of Shares
- ---------------- ------- --------------- -------------
<S> <C> <C> <C>
</TABLE>
Dated: Signature
-------------------------------
-------------------------------
Witness
-------------------------------
<PAGE> 1
EXHIBIT 2.15
EXECUTION
MONITORING AGREEMENT
This MONITORING AGREEMENT ("Agreement"), dated as of January 27,
2000, is made by and between GTCR Golder Rauner, L.L.C., a Delaware limited
liability company ("GTCR"), and Synagro Technologies, Inc., a Delaware
corporation (the "Company").
WHEREAS, GTCR Capital Partners, L.P., a Delaware limited
partnership ("Capital Partners"), of which GTCR is the indirect general partner,
will make available to the Company loans in the aggregate amount of up to
$125,000,000 pursuant to that certain Senior Subordinated Loan Agreement of even
date herewith between the Company and Capital Partners (the "Subordinated Loan
Agreement"), including $20,000,000 that Capital Partners will lend to the
Company on the Closing Date (as defined in the Subordinated Loan Agreement);
WHEREAS, GTCR will devote significant time and effort in
monitoring, on behalf of Capital Partners, the financial performance of the
Company and its subsidiaries and the Company's compliance with the terms and
provisions of the Subordinated Loan Agreement (such activities, the "Monitoring
Activities"); and
WHEREAS, Capital Partners has made it a condition to the closing
of the transactions contemplated by the Subordinated Loan Agreement and the
performance of its obligations thereunder that the Company enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the respective agreements hereinafter set forth and the mutual benefits to be
derived herefrom, GTCR and the Company hereby agree as follows:
1. Monitoring Fee. At the time of any financing of the Company
pursuant to the Subordinated Loan Agreement, the Company shall pay to GTCR a
monitoring fee in immediately available funds equal to one-half of one percent
(0.5%) of the aggregate amount of such financing.
2. Expenses. The Company shall promptly reimburse GTCR for such
reasonable travel expenses and other out-of-pocket fees and expenses as may be
incurred by GTCR, its directors, officers and employees in connection with the
Closing (as defined in the Subordinated Loan Agreement) and in connection with
the Monitoring Activities.
3. Term. This Agreement will continue from the date hereof
until the first to occur of (i) a Sale of the Company (as defined in Section 7)
or (ii) the Note (as defined in the Subordinated Loan Agreement) and all Loan
Obligations (as defined in the Subordinated Loan Agreement) are paid in full. No
termination of this Agreement, whether pursuant to this paragraph or otherwise,
shall affect the Company's obligations with respect to the fees, costs and
expenses
-1-
<PAGE> 2
incurred by GTCR in rendering services hereunder and not reimbursed by the
Company as of the effective date of such termination.
4. Liability. Neither GTCR nor any of its affiliates, partners,
employees or agents shall be liable to the Company or its subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in
connection with the Monitoring Activities, unless such loss, liability, damage
or expense shall be proven to result directly from the gross negligence or
willful misconduct of GTCR.
5. Indemnification. The Company agrees to indemnify and hold
harmless GTCR, its partners, affiliates, officers, agents and employees against
and from any and all loss, liability, suits, claims, costs, damages and expenses
(including attorneys' fees) arising from the Monitoring Activities, except as a
result of their gross negligence or intentional wrongdoing.
6. GTCR an Independent Contractor. GTCR and the Company agree
that GTCR shall perform the Monitoring Activities hereunder as an independent
contractor, retaining control over and responsibility for its own operations and
personnel. Neither GTCR nor its directors, officers, or employees shall be
considered employees or agents of the Company as a result of this Agreement nor
shall any of them have authority to contract in the name of or bind the Company,
except as expressly agreed to in writing by the Company.
7. Definitions.
(a) "Independent Third Party" shall mean any Person who,
immediately prior to the contemplated transaction, does not own in excess of 5%
of the Company's Common Stock on a fully diluted basis, who is not an affiliate
of such 5% owner of the Company's Common Stock and who is not the spouse or
descendant (by birth or adoption) of any such 5% owner of the Company's Common
Stock.
(b) "Sale of the Company" shall mean the sale of the Company to
an Independent Third Party or group of Independent Third Parties in a
transaction pursuant to which such party or parties acquire (i) capital stock of
the Company possessing the voting power under normal circumstances to elect a
majority of the Company's board of directors (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (ii) all or substantially
all of the Company's assets determined on a consolidated basis.
8. Notices. Any notice, report or payment required or permitted
to be given or made under this Agreement by one party to the other shall be
deemed to have been duly given or made if personally delivered or, if mailed,
when mailed by registered or certified mail, postage prepaid, to the other party
at the following addresses (or at such other address as shall be given in
writing by one party to the other):
-2-
<PAGE> 3
If to GTCR:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: David A. Donnini
Telecopier No.: (312) 382-2201
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: Stephen L. Ritchie
Telecopier No.: (312) 861-2200
If to the Company:
Synagro Technologies, Inc.
1800 Bering, Suite 1000
Houston, TX 77057
Attention: Chief Financial Officer
Telecopier No.: (713) 369-1760
9. Entire Agreement; Modification. This Agreement: (a) contains
the complete and entire understanding and agreement of GTCR and the Company with
respect to the subject matter hereof; and (b) supersedes all prior and
contemporaneous understandings, conditions and agreements, oral or written,
express or implied, respecting the engagement of GTCR in connection with the
subject matter hereof. This Agreement may not be amended or modified without the
prior written consent of the Company and GTCR.
10. Waiver of Breach. The waiver by either party of a breach of
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach of that provision or any other
provision hereof.
11. Assignment. Neither GTCR nor the Company may assign its
rights or obligations under this Agreement without the express written consent
of the other; provided that GTCR, without the consent of the Company, may assign
its rights and obligations hereunder to any successor entity to GTCR.
12. Successors. This Agreement and all the obligations and
benefits hereunder shall inure to the successors and permitted assigns of the
parties.
-3-
<PAGE> 4
13. Counterparts. This Agreement may be executed and delivered
by each party hereto in separate counterparts, each of which when so executed
and delivered shall be deemed an original and both of which taken together shall
constitute one and the same agreement.
14. Choice of Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Illinois or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Illinois.
* * * * *
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<PAGE> 5
IN WITNESS WHEREOF, GTCR and the Company have caused this
Monitoring Agreement to be duly executed and delivered on the date and year
first above written.
GTCR GOLDER RAUNER, L.L.C.
By: /s/ DAVID A. DONNINI
----------------------------
Name: David A. Donnini
Its: Principal
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
----------------------------
Name: Ross M. Patten
----------------------------
Its: Chairman/CEO
----------------------------
<PAGE> 1
EXHIBIT 99.1
[SYNAGRO LOGO]
CONTACT: Ross M. Patten
CEO, Chairman
(713) 369-1700
FOR IMMEDIATE RELEASE: JANUARY 27, 2000
SYNAGRO ANNOUNCES NEW FINANCIAL PARTNERS, CLOSING OF
RESIDUAL TECHNOLOGIES, L.P., APPOINTMENT OF NEW PRESIDENT, AND
4TH QUARTER NON-RECURRING CHARGES
HOUSTON, TEXAS, JANUARY 27, 2000 --- SYNAGRO TECHNOLOGIES, INC. (NASDAQ
SMALLCAP: SYGR), the leading growth company in the residuals management
business, announced today that it has closed a new financing transaction with
GTCR Golder Rauner, LLC, entered into a new senior credit facility co-led by
Bank of America and CIBC World Markets, closed the acquisition of Residual
Technologies, L.P. and its affiliates, appointed Randall S. Tuttle as its new
President and Chief Operating Officer, and provided information on expected 4th
quarter 1999 non-recurring charges.
FINANCING
The GTCR transaction, which has been approved by a majority of Synagro
shareholders by written consent, is in the form of a commitment to fund up to
$125 million of convertible preferred stock with an annual dividend rate of 8%,
which accumulates and is not required to be paid in cash, and a $125 million
senior subordinated credit facility with an annual fixed interest rate of 12%,
which is payable quarterly (the "GTCR Financing"). The initial investment from
the GTCR Financing, which closed yesterday, consists of $20 million in voting
convertible preferred stock (the "Preferred Stock") and $20 million in senior
subordinated debt (the "Subordinated Debt"). The Preferred Stock is convertible
into 8,000,000 shares of Synagro common stock at a $2.50 per share conversion
price. Warrants issued with the Subordinated Debt are exercisable for Preferred
Stock at $.01 per share, which is convertible into 1,142,857 shares of Synagro
common stock. The new senior credit facility provides for term and revolving
loans on a senior secured basis with an aggregate principal of up to $110
million with an annual floating interest rate which currently approximates 9%
(the "Senior Credit Facility"). The GTCR Financing and the Senior Credit
Facility will enable the Company to implement its business plan by providing
capital necessary to fund acquisitions and the Company's on-going working
capital needs.
"My management team and I are delighted to be partnering with GTCR," said Ross
Patten, Synagro's Chairman and CEO. "GTCR offers a valuable and proven
perspective that will be helpful as we execute our growth strategies, including
making and integrating additional acquisitions."
"Synagro is a leader in the fragmented and growing residuals management
industry," noted David A. Donnini, principal of GTCR. "With Ross Patten's vision
and proven leadership, Synagro has the potential to grow exponentially and
represents an exciting investment opportunity for our investors." Mr. Donnini
and Vincent J. Hemmer, also of GTCR, will join Synagro's Board of Directors in
connection with the GTCR Financing.
Founded in 1980, GTCR is a leading private equity investment firm and long-term
strategic partner for companies similar to Synagro. GTCR has pioneered the
investment strategy of identifying and partnering with companies in fragmented
and growing industries. GTCR currently manages more than $4.5 billion in equity
capital. More information about GTCR can be found at www.gtcr.com.
1
<PAGE> 2
RESIDUAL TECHNOLOGIES, L.P.
Synagro also announced today that it has closed the acquisition of Residual
Technologies, Limited Partnership and its affiliates ("RESTEC"). The initial
tranche of the GTCR Financing will be used primarily to finance the RESTEC
purchase price which consists of $44,600,000 in cash and assumed indebtedness
and 1,325,000 shares of Synagro common stock. Additional purchase price of up to
$12 million will be payable to the RESTEC shareholders and key employees if
certain performance targets are met. RESTEC engages in the contract management
of municipal residuals in New England handling, an average of 165 dry tons per
day of residuals from more than 75 customers. RESTEC operates three residuals
thermal processing facilities located in Woonsocket, Rhode Island, and New Haven
and Waterbury, Connecticut. RESTEC has annual revenues of approximately $22
million, a substantial portion of which are generated from multi-year contracts.
Paul Toretta, co-owner and President, and other key RESTEC employees will
continue to work with Synagro after the acquisition. Mr. Patten noted that "the
RESTEC acquisition provides Synagro with a leading position in the New England
market. Moreover, RESTEC brings unique technical skills in the thermal
processing of biosolids that we hope to leverage throughout the country."
MANAGEMENT CHANGES
Effective January 1, 2000, Randall S. Tuttle has been appointed Synagro's new
President and Chief Operating Officer. Randall joined Synagro as a result of the
acquisition of AMSCO, Inc. on April 30, 1999. He was co-owner and President of
AMSCO. Prior to this appointment, Randall served as a Regional Vice President
responsible for all of the Company's operations in the Southeast--Synagro's
largest region. Randall stated, "I am excited to be moving to Synagro's
corporate office in Houston and joining the team that will guide the Company's
future. Over the past thirteen years, I have developed successful methods for
managing and growing residuals management operations, resulting in strong top
line and bottom line results. I look forward to implementing these concepts in
our operations around the country and to assisting our operations teams in
building a company focused on satisfying our clients, our shareholders, and our
employees." Paul Sellew, Synagro's former President and COO, will continue with
the Company by focusing on emerging technologies.
Synagro also announced the promotions of Brent McManigal, Kim Nicholson, and Roy
Whitaker. Brent has moved from Synagro's Mid-Atlantic office to become the
Regional Vice President for the Western Region. Kim, formerly of National
Resource Recovery, has been appointed as Regional Vice President for the
Mid-West Region. Roy, formerly with AMSCO, has been appointed to Regional Vice
President for the Southeast Region. "We are very excited to make these
promotions and proud that such talent resides within the Synagro companies,"
noted Mr. Patten.
4TH QUARTER NON-RECURRING CHARGES
Synagro also announced that it expects to report non-recurring special charges
for the 4th quarter of 1999 totaling approximately $1.5 million. These charges
include legal, accounting, and financing fees primarily related to the proposed
preferred stock investment and the merger discussions with Azurix, both of which
were terminated by Azurix in October 1999. Consequently, the Company expects to
report a loss for the 4th quarter of 1999. Synagro is continuing to pursue its
litigation against Azurix.
2
<PAGE> 3
Synagro is the fastest growing company focused exclusively on organic residuals
management services, and has operations located throughout the country. In
addition to pursuing acquisitions in key markets, the company is positioning
itself as the national provider of biosolids services to municipalities and
wastewater privatization projects throughout North America.
This press release contains certain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, which involve
known and unknown risks, uncertainties or other factors not under the Company's
control which may cause the actual results, performance or achievement of the
Company to be materially different from the results, performance or other
expectations implied by these forward-looking statements. These factors include,
but are not limited to, (1) the ability to find, timely close, and integrate
acquisitions, (2) changes in accounting practices and treatment for
acquisitions, (3) unseasonable weather, (4) changes in government regulations,
and (5) the ability to access debt and equity financing when needed. Other
factors are discussed in the Company's periodic filings with the Securities and
Exchange Commission.
3
<PAGE> 1
EXHIBIT 99.2
[SYAGRO LOGO]
CONTACT: Ross M. Patten
CEO, Chairman
(713) 369-1700
FOR IMMEDIATE RELEASE: FEBRUARY 7, 2000
SYNAGRO ANNOUNCES CLOSING OF THREE ACQUISITIONS
HOUSTON, TEXAS, FEBRUARY 7, 2000 --- SYNAGRO TECHNOLOGIES, INC. (NASDAQ
SMALLCAP: SYGR), the leading growth company in the residuals management
business, announced today that it has closed the acquisitions of AKH Water
Management, Inc., Davis Water Analysis, Inc., and Ecosystematics, Inc.
All three companies operate and maintain small volume wastewater treatment
facilities located in the Florida Keys: AKH operates in a 20-mile radius of
Marathon, Florida; Davis Water operates in a 50-mile radius of Key West,
Florida; and Ecosystematics operates in a 50-mile radius of Key Largo, Florida.
These operations will be fully integrated into Synagro's existing Florida
business.
Ross M. Patten, Synagro's Chief Executive Officer, stated that "these
acquisitions complement our current Florida business and provide a strong
platform to grow our South Florida business. We are excited to have such quality
businesses and people joining Synagro."
AKH was structured as an asset purchase, while both Davis Water and
Ecosystematics were stock purchases. These acquisitions add approximately $2.6
million in annual revenue. The total purchase price for these companies was
approximately $2.8 million and was funded through a combination of equity and
subordinated debt provided by GTCR Golder Rauner, LLC and senior debt provided
by Bank of America and CIBC World Markets. Further details of the transactions
were not disclosed.
J. Paul Withrow, Synagro's Chief Financial Officer, noted that "with these
acquisitions and those announced last week, Synagro's pro forma annual revenue
is approximately $86 million with corresponding pro forma annual earnings before
interest, taxes, depreciation, and amortization of approximately $20 million."
Synagro is the fastest growing company focused exclusively on organic residuals
management services, and has operations located throughout the country. In
addition to pursuing acquisitions in key markets, the company is positioning
itself as the national provider of biosolids services to municipalities and
wastewater privatization projects throughout North America.
This press release contains certain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, which involve
known and unknown risks, uncertainties or other factors not under the Company's
control which may cause the actual results, performance or achievement of the
Company to be materially different from the results, performance or other
expectations implied by these forward-looking statements. These factors include,
but are not limited to, (1) the ability to find, timely close, and integrate
acquisitions, (2) changes in accounting practices and treatment for
acquisitions, (3) unseasonable weather, (4) changes in government regulations,
and (5) the ability to access debt and equity financing when needed. Other
factors are discussed in the Company's periodic filings with the Securities and
Exchange Commission.
