<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. __________)*
Synagro Technologies, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
871562203
------------------------------------
(CUSIP Number)
David A. Donnini
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
(312) 382-2200
- ------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
January 27, 2000
------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of (S)(S)240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See (S)240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
13D
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CUSIP NO. 871562203 Page 2 OF 14 Pages
- ----------------------- ---------------------
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NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR FUND VII, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) or 2(E)
5 [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
8,167,760 (See Item 5)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 0 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
8,167,760 (See Item 5)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
8,167,760 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
30.0% (See Item 5)
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
PN
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<PAGE>
13D
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CUSIP NO.871562203 Page 3 of 14 Pages
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR Partners VII, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [x]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) or 2(E) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
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SOLE VOTING POWER
7
NUMBER OF 0 (See Item 5)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 8,167,760 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0 (See Item 5)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
8,167,760 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
8,167,760 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
30.0% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
PN
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<PAGE>
13D
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CUSIP NO.871562203 Page 4 of 14 Pages
- ----------------------- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR Golder Rauner, L.L.C.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [x]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
Not Applicable
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) or 2(E) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0 (See Item 5)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 9,334,584 (See Item 5)
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0 (See Item 5)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
9,334,584 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
9,334,584 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
32.9% (See Item 5)
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
00
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<PAGE>
13D
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CUSIP NO.871562203 Page 5 of 14 Pages
- ----------------------- ---------------------
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NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR Capital Partners, L.P.
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [x]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
WC
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) or 2(E) [_]
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 1,166,824 (See Item 5)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0 (See Item 5)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,166,824 (See Item 5)
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0 (See Item 5)
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,166,824 (See Item 5)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.8% (See Item 5)
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
PN
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<PAGE>
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CUSIP NO. 871562203 13D PAGE 6 OF 14 PAGES
- ------------------- ------------------
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NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR Mezzanine Partners, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [x]
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SEC USE ONLY
3
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SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
Not applicable
- --------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) or 2(E) [_]
5
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- --------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0 (See Item 5)
SHARES -------------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,166,824 (See Item 5)
-------------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0 (See Item 5)
PERSON -------------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
1,166,824 (See Item 5)
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,166,824 (See Item 5)
- --------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.8% (See Item 5)
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
PN
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<PAGE>
13D
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CUSIP NO. 871562203 PAGE 7 OF 14 PAGES
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NAME OF REPORTING PERSON
1 I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
GTCR Partners VI, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
2 (a) [_]
(b) [x]
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SEC USE ONLY
3
- --------------------------------------------------------------------------------
SOURCE OF FUNDS (SEE INSTRUCTIONS)
4
Not applicable
- --------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) or 2(E)
5 [_]
- --------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
- --------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF
0 (See Item 5)
SHARES -------------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,166,824 (See Item 5)
-------------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING
0 (See Item 5)
PERSON -------------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
1,166,824 (See Item 5)
- --------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,166,824 (See Item 5)
- --------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12 (SEE INSTRUCTIONS)
[_]
- --------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
5.8% (See Item 5)
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
14
PN
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<PAGE>
Item 1. Security and Issuer
This statement relates to the common stock, par value $.002 per share (the
"Common Stock") of Synagro Technologies, Inc. (the "Issuer") with its principal
executive offices at 1800 Bering Drive, Suite 1000, Houston, TX 77057.
Item 2. Identify and Background
(a) This statement is filed jointly by each of the following persons pursuant
to Rule 13d-1(a) promulgated by the Securities and Exchange Commission (the
"SEC") under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Act"): (i) GTCR Fund VII, L.P., a Delaware limited partnership (the "Fund
VII"), by virtue of its direct beneficial ownership of Common Stock; (ii) GTCR
Partners VII, L.P., a Delaware limited partnership ("GTCR Partners VII"), by
virtue of it being the general partner of Fund VII; (iii) GTCR Capital Partners,
L.P., a Delaware limited partnership ("GTCR Capital"), by virtue of its direct
beneficial ownership of Common Stock; (iv) GTCR Mezzanine Partners, L.P., a
Delaware limited partnership ("GTCR Mezzanine Partners"), by virtue of it being
the general partner of GTCR Capital; (v) GTCR Partners VI, L.P., a Delaware
limited partnership ("GTCR Partners VI"), by virtue of it being the general
partner of GTCR Mezzanine Partners; and (vi) GTCR Golder Rauner, L.L.C., a
Delaware limited liability company ("GTCR LLC"), by virtue of it being the
general partner of GTCR Partners VII and GTCR Partners VI. Fund VII, GTCR
Partners VII, GTCR Capital, GTCR Mezzanine Partners, GTCR Partners VI and GTCR
LLC are sometimes referred to herein individually as a "Reporting Person" and
collectively as the "Reporting Persons."
Information with respect to each of the Reporting Persons is given solely by
such Reporting Person, and no Reporting Person assumes responsibility for the
accuracy or completeness of information by another Reporting Person.
The Reporting Persons may be deemed to constitute a "group" for purposes of
Section 13(d)(3) of the Act. The Reporting Persons expressly disclaim that they
have agreed to act as a group other than as described in this statement.
Certain information required by this Item 2 concerning the executive officers
and members of GTCR LLC is set forth on Schedule A attached hereto, which is
incorporated herein by reference. GTCR LLC is managed by its members.
(b) The address of the principal business and principal office of each of
the Reporting Persons is 233 S. Wacker Drive, Suite 6100, Chicago, Illinois
60606.
(c) The principal business of GTCR Capital, GTCR Mezzanine Partners, GTCR
Partners VI (as general partner of GTCR Mezzanine Partners) and GTCR LLC (as
general partner of GTCR Partners VI) is to lend money on a subordinated basis to
business organizations, with the principal objective being interest income and
the return of capital. The principal business of each of the other Reporting
Persons, including GTCR LLC as general partner of GTCR Partners VII, is to make
investments in common and preferred stock and other interests in business
organizations, domestic or foreign, with the principal objective of appreciation
of capital invested.
(d) During the past five years, none of the Reporting Persons nor, to the
best knowledge of such persons, any of the persons named in Schedule A to this
statement, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the past five years, none of the Reporting Persons nor, to the
best knowledge of such persons, any of the persons named in Schedule A to this
statement, was a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction as a result of which such person was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Page 8 of 14
<PAGE>
(f) All individuals named in Schedule A to this statement are citizens of
the United States.
Item 3. Source and Amount of Funds or Other Consideration
On January 27, 2000, Fund VII acquired 17,358.824 shares of the Company's
Series C Convertible Preferred Stock (the "Series C Preferred") and 2,641.176
shares of the Company's Series D Convertible Preferred Stock (the "Series D
Preferred") in connection with a Purchase Agreement among Fund VII and the
Issuer, dated as of January 27, 2000 (the "Purchase Agreement"). On February 4,
2000, Fund VII purchased an additional 419.4 shares of Series C Preferred
pursuant to the Purchase Agreement. The purchase price for each of such shares
was $1,000.00. The source of the funds used to acquire such shares was internal
capital of Fund VII.
Each share of Series C Preferred is nonvoting and is convertible into a share
of Series D Preferred after the occurrence of certain events set forth in the
certificate of designation establishing the Series C Preferred (the "Series C
Preferred Certificate of Designation"). Each share of Series D Preferred is
convertible into the number of shares of Common Stock obtained by dividing (1)
the sum of (a) $1,000 and (b) any accrued and unpaid dividends by (2) $2.50 (the
"Conversion Price"). The Conversion Price is subject to adjustment pursuant to
the terms of the Series D Preferred.
On January 27, 2000, GTCR Capital and the Issuer entered into a senior
subordinated loan agreement (the "Subordinated Loan Agreement") pursuant to
which GTCR Capital loaned $20,000,000 to the Issuer. In connection with the
Subordinated Loan Agreement, the Issuer and GTCR Capital entered into a Warrant
Agreement dated as of January 27, 2000 (the "Warrant Agreement") pursuant to
which the Issuer issued GTCR Capital a warrant to purchase 2,857.143 shares of
Series D Preferred, which GTCR Capital exercised on January 27, 2000. On
February 4, 2000, GTCR Capital loaned $419,400 to the Issuer pursuant to the
Subordinated Loan Agreement and received a warrant to purchase 59.914 shares of
Series C Preferred.
The Series C Preferred and Series D Preferred acquired by Fund VII and GTCR
Capital are collectively referred to herein as the "Shares".
A copy of the Purchase Agreement, the Subordinated Loan Agreement, the
Warrant Agreement, the Series C Preferred Certificate of Designation and the
certificate of designation establishing the Series D Preferred are filed as
exhibits hereto and are incorporated herein by reference. The summary of these
agreements and documents and the agreements referred to elsewhere in this
statement and incorporated herein by reference are not intended to be complete
and are qualified in their entirety by reference to the detailed provisions of
such agreements and documents.
Item 4. Purpose of Transaction
Fund VII and GTCR Capital hold the Shares for investment purposes. Depending
on market conditions and other factors (including evaluation of the Issuer's
businesses and prospects, availability of funds, alternative uses of funds and
general economic conditions), Fund VII and GTCR Capital may from time to time
acquire additional securities of the Issuer or dispose of all or a portion of
their investment in the Issuer. Any acquisition of additional securities by
Fund VII or GTCR Capital will be pursuant to the terms of the Purchase Agreement
and the Subordinated Loan Agreement, respectively.
The holders of the Series D Preferred and future series of convertible
preferred stock issued pursuant to the Purchase Agreement ("Future Convertible
Preferred" and, together with the Series D Preferred, the "Preferred Stock")
have the right to appoint members to the Issuer's Board of Directors (the
"Board") based on their pro rata ownership of the Common Stock (assuming
conversion of the Preferred Stock). This right terminates once the holders of
the Preferred Stock own a majority of the Common Stock (assuming conversion of
the Preferred Stock), at which time the holders of the Preferred Stock vote as
if they were holders of Common Stock. The Subordinated Loan Agreement limits
the size of the Board to
Page 9 of 14
<PAGE>
six members, subject to increase by two directors who may be appointed in the
event of certain defaults under the Subordinated Loan Agreement and under the
Preferred Stock.
The Issuer, Fund VII and GTCR Capital have entered into a registration
agreement, dated as of January 27, 2000 (the "Registration Agreement") pursuant
to which Fund VII and GTCR Capital have the right in certain circumstances to
require the Issuer to register their shares of Common Stock for resale under the
Securities Act. Except in limited circumstances, the Issuer is obligated to pay
all expenses in connection with such registration. A copy of the Registration
Agreement is filed as an exhibit hereto and is incorporated herein by reference.
Except as described in this statement, none of the Reporting Persons or, to
the best knowledge of such persons, the persons named in Schedule A to this
statement, presently has any plans or proposals which relate to or would result
in any of the transactions described in paragraphs (a) through (j) of Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) Fund VII is the direct beneficial owner of 17,778.224 shares of Series C
Preferred and 2,641.176 shares of Series D Preferred, convertible in the
aggregate (assuming conversion of Series C Preferred to Series D Preferred) into
8,167,760 shares Common Stock, or approximately 30.0% of the Common Stock as of
the date of this statement (assuming there are 19,035,189 shares of Common Stock
outstanding). GTCR Capital is the direct beneficial owner of 2,857.143 shares
of Series D Preferred and 59.914 shares of Series C Preferred, convertible in
the aggregate (assuming conversion of Series C Preferred to Series D Preferred)
into approximately 1,166,824 shares of Common Stock, or approximately 5.8% of
the Common Stock as of the date of this statement.
By virtue of the relationship between Fund VII and GTCR Partners VII
described in Item 2, GTCR Partners VII may be deemed to possess indirect
beneficial ownership of the shares of Common Stock beneficially owned by Fund
VII. By virtue of the relationship among GTCR Capital, GTCR Mezzanine Partners
and GTCR Partners VI described in Item 2, GTCR Mezzanine Partners and GTCR
Partners VI may be deemed to possess indirect beneficial ownership of the shares
of Common Stock beneficially owned by GTCR Capital. Due to GTCR LLC's
relationship with (a) Fund VII and GTCR Partners VII as described in Item 2 and
(b) GTCR Capital, GTCR Mezzanine Partners and GTCR Partners VI as described in
Item 2, GTCR LLC may be deemed to possess indirect beneficial ownership of the
Common Stock owned by both Fund VII and GTCR Capital.
The filing of this statement by GTCR Partners VII, GTCR Mezzanine Partners,
GTCR Partners VI and GTCR LLC shall not be construed as an admission that any of
such parties is, for the purposes of Section 13(d) or 13(g) of the Act, the
beneficial owner of any securities covered by this statement.
(b) Fund VII has the sole power to vote or direct the vote and the sole
power to dispose of or direct the disposition of 8,167,760 shares of Common
Stock, or approximately 30.0% of the Common Stock as of the date of this
statement. GTCR Capital has the sole power to vote or direct the vote and the
sole power to dispose of or direct the disposition of 1,166,824 shares of Common
Stock, or approximately 5.8% of the Common Stock as of the date of this
statement.
By virtue of the relationship between Fund VII and GTCR Partners VII
described in Item 2, GTCR Partners VII may be deemed to indirectly share the
power to vote or direct the vote and indirectly share the power to dispose of or
direct the disposition of the shares of Common Stock beneficially owned by Fund
VII. By virtue of the relationship among GTCR Capital, GTCR Mezzanine Partners
and GTCR Partners VI described in Item 2, GTCR Mezzanine Partners and GTCR
Partners VI may be deemed to indirectly share the power to vote or direct the
vote and indirectly share the power to dispose of or direct the disposition of
the shares of Common Stock beneficially owned by GTCR Capital. Due to GTCR
LLC's relationship with (a) Fund VII and GTCR Partners VII as described in Item
2 and (b) GTCR Capital, GTCR Mezzanine Partners and GTCR Partners VI as
described in Item 2, GTCR LLC may be deemed to indirectly share the power to
vote or direct the vote and indirectly share the power to dispose of or direct
the disposition of the shares of Common Stock beneficially owned by Fund VII and
GTCR Capital.
Page 10 of 14
<PAGE>
The filing of this statement by GTCR Partners VII, GTCR Mezzanine Partners,
GTCR Partners VI and GTCR LLC shall not be construed as an admission that any of
such parties is, for the purposes of Section 13(d) or 13(g) of the Act, the
beneficial owner of any securities covered by this statement.
(c) Except as otherwise set forth in this statement, none of the Reporting
Persons or, to the best knowledge of such persons, the persons named in Schedule
A to this statement, has effected any transactions in the Common Stock during
the past 60 days.
(d) No person other than the Reporting Persons has the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, the Common Stock reported as being beneficially owned by such Reporting
Persons.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
As described in Item 4, the Reporting Persons are parties to a Registration
Agreement with respect to the Common Stock. A copy of the Registration
Agreement has been filed by the Issuer and is incorporated herein by reference.
Except as set forth in this statement, to the best knowledge of the Reporting
Persons, no contracts, arrangements, understandings or relationships (legal or
otherwise) exist among the persons named in Item 2 or between such persons and
any other person with respect to any securities of the Issuer.
Item 7. Material to Be Filed as Exhibits
Exhibit 1 Joint Filing Agreement among the Reporting Persons dated as of
February 4, 2000.
Exhibit 2 Certificate of Designations, Preferences and Rights of Series C
Convertible Preferred Stock of Synagro Technologies, Inc. filed with
the Delaware Secretary of State on January 26, 2000.
Exhibit 3 Certificate of Designations, Preferences and Rights of Series D
Convertible Preferred Stock of Synagro Technologies, Inc. filed with
the Delaware Secretary of State on January 26, 2000.
Exhibit 4 Purchase Agreement dated as of January 27, 2000 by and between
Synagro Technologies, Inc. and GTCR Fund VII, L.P.
Exhibit 5 Senior Subordinated Loan Agreement dated as of January 27, 2000 by
between Synagro Technologies, Inc. and GTCR Capital Partners, L.P.
Exhibit 6 Warrant Agreement dated as of January 27, 2000 by and between Synagro
Technologies, Inc. and GTCR Capital Partners, L.P.
Exhibit 7 Registration Rights Agreement, dated as of January 27, 2000 among
Synagro Technologies, Inc., GTCR Fund VII, L.P. and GTCR Capital
Partners, L.P.
Page 11 of 14
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: February 4, 2000
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 PARTNERS VII, L.P.
By: GTCR Golder Rauner, L.L.C., its General Partner
By: /s/ David A. Donnini
---------------------------------------------
Name: David A. Donnini
Its: Principal
GTCR GOLDER RAUNER, L.L.C.
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
GTCR MEZZANINE PARTNERS, L.P.
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
GTCR PARTNERS VI, L.P.
By: GTCR Golder Rauner, L.L.C., its General Partner
By: /s/ David A. Donnini
----------------------------------------------
Name: David A. Donnini
Its: Principal
Page 12 of 14
<PAGE>
EXHIBIT INDEX
Exhibit No.
Exhibit 1 Joint Filing Agreement among the Reporting Persons dated as of
February 4, 2000.
Exhibit 2 Certificate of Designations, Preferences and Rights of Series C
Convertible Preferred Stock of Synagro Technologies, Inc. filed with
the Delaware Secretary of State on January 26, 2000.
Exhibit 3 Certificate of Designations, Preferences and Rights of Series D
Convertible Preferred Stock of Synagro Technologies, Inc. filed with
the Delaware Secretary of State on January 26, 2000.
Exhibit 4 Purchase Agreement dated as of January 27, 2000 by and between
Synagro Technologies, Inc. and GTCR Fund VII, L.P.
Exhibit 5 Senior Subordinated Loan Agreement dated as of January 27, 2000 by
and between Synagro Technologies, Inc. and GTCR Capital Partners,
L.P.
Exhibit 6 Warrant Agreement dated as of January 27, 2000 by and between
Synagro Technologies, Inc. and GTCR Capital Partners, L.P.
Exhibit 7 Registration Rights Agreement, dated as of January 27, 2000 among
Synagro Technologies, Inc., GTCR Fund VII, L.P. and GTCR Capital
Partners, L.P.
Page 13 of 14
<PAGE>
SCHEDULE A
The following table sets forth the names and principal occupations of the
executive officers and members of GTCR Golder Rauner, L.L.C. Each such person
is a citizen of the United States. Unless otherwise specified, the business
address of each person listed below is 233 South Wacker Drive, Suite 6100,
Chicago, IL 60606.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ------------------------ -----------------------------
<S> <C>
Philip A. Canfield Principal and Member
David A. Donnini Principal and Member
Donald J. Edwards Principal and Member
Edgar D. Jannotta, Jr. Principal and Member
William C. Kessinger Principal and Member
Joseph P. Nolan Principal and Member
Bruce V. Rauner Principal and Managing Member
Steven I. Ross Chief Financial Officer
</TABLE>
Page 14 of 14
<PAGE>
Exhibit 1
JOINT FILING AGREEMENT
The undersigned hereby agree as follows:
(i) Each of them agrees that the Schedule 13D to which this Agreement is
attached as an exhibit is filed on behalf of each of them.
(ii) Each of them is responsible for the timely filing of such Schedule 13D
and any amendments thereto, and for the completeness and accuracy of the
information concerning such person contained therein; but none of them is
responsible for the completeness or accuracy of the information concerning the
other persons making the filing, unless such person knows or has reason to
believe that such information is inaccurate.
Dated:
February 4, 2000 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 PARTNERS VII, L.P.
By: GTCR Golder Rauner, L.L.C., its General Partner
By: /s/ David A. Donnini
---------------------------------------------
Name: David A. Donnini
Its: Principal
GTCR GOLDER RAUNER, L.L.C.
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
Page 1
<PAGE>
[CONTINUATION OF SIGNATURE PAGE TO JOINT FILING AGREEMENT]
GTCR MEZZANINE PARTNERS, L.P.
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
GTCR PARTNERS VI, L.P.
By: GTCR Golder Rauner, L.L.C., its General Partner
By: /s/ David A. Donnini
-----------------------------------------------
Name: David A. Donnini
Its: Principal
Page 2
<PAGE>
EXHIBIT 2
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
<PAGE>
(or other period in the case of the initial Dividend Reference Date) ending upon
each such Dividend 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
-2-
<PAGE>
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
- ---------------
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
-3-
<PAGE>
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 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
-4-
<PAGE>
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.
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.
-5-
<PAGE>
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 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.
-6-
<PAGE>
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).
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
-7-
<PAGE>
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 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
-8-
<PAGE>
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.
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 sub scription
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.
-9-
<PAGE>
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.
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
-10-
<PAGE>
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.
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.
-11-
<PAGE>
(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 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.
-12-
<PAGE>
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 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
-13-
<PAGE>
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 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
-14-
<PAGE>
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.
"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.
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<PAGE>
"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
(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).
-16-
<PAGE>
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
-17-
<PAGE>
EXHIBIT 3
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
------------------
<PAGE>
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 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.
-2-
<PAGE>
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.
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
-3-
<PAGE>
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
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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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 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.
-7-
<PAGE>
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.
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
-8-
<PAGE>
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.
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
-9-
<PAGE>
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, 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
-10-
<PAGE>
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.
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
-11-
<PAGE>
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.
(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
-12-
<PAGE>
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 consider ation 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
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
-13-
<PAGE>
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 liquida
tion) 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 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
-14-
<PAGE>
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, securities 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 sub scription
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.
---------------------
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
-15-
<PAGE>
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;
-16-
<PAGE>
(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.
-17-
<PAGE>
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
-18-
<PAGE>
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.
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.
-19-
<PAGE>
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.
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
-20-
<PAGE>
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 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
-21-
<PAGE>
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 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.
-22-
<PAGE>
"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 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).
-23-
<PAGE>
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
-24-
<PAGE>
EXHIBIT 4
EXECUTION
________________________________________________________________________________
PURCHASE AGREEMENT
Dated as of January 27, 2000
Between
SYNAGRO TECHNOLOGIES, INC.
and
GTCR FUND VII, L.P.
________________________________________________________________________________
<PAGE>
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................................... -3-
-----------------------------------------------
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-
-------------------------------
Section 4. Covenants............................................................................... -7-
---------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
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.......................................... -23-
----------------------------------
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>
<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) Enviromental Liabilities................................. -53-
------------------------
8O. Standstill................................................... -53-
----------
</TABLE>
iii
<PAGE>
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>
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.
-2-
<PAGE>
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.
-3-
<PAGE>
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.
-4-
<PAGE>
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.
-5-
<PAGE>
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.
-6-
<PAGE>
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
-7-
<PAGE>
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:
-8-
<PAGE>
(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
-9-
<PAGE>
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.
-10-
<PAGE>
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;
--------
-11-
<PAGE>
(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;
-12-
<PAGE>
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
-13-
<PAGE>
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);
-14-
<PAGE>
(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
-15-
<PAGE>
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"),
-------
-16-
<PAGE>
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.
-17-
<PAGE>
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
-18-
<PAGE>
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
-19-
<PAGE>
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.
-20-
<PAGE>
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
-21-
<PAGE>
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
-22-
<PAGE>
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;
-23-
<PAGE>
(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
-24-
<PAGE>
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.
-25-
<PAGE>
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 (S)341(f) of the Internal Revenue Code of 1986, as
amended. Neither the Company nor any Subsidiary is liable for the Taxes of
another Person that is not a Subsidiary in a material amount under (a) Treas.
Reg. (S) 1.1502-6 (or comparable provisions of state, local or foreign law), (b)
as a transferee or successor, (c) by contract or indemnity or (d) otherwise.
Neither the Company nor any Subsidiary is a party to any tax sharing agreement.
The Company, each Subsidiary and each Affiliated Group have disclosed on their
federal income Tax Returns any position taken for which substantial authority
(within the meaning of IRC (S)6662(d)(2)(B)(i)) did not exist at the time the
return was filed. Neither the Company nor any Subsidiary has made any payments,
is obligated to
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<PAGE>
make payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC (S)280G.
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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<PAGE>
(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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<PAGE>
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 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 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>
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 hereby, or the
consummation by the Company of any other transactions contemplated
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<PAGE>
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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<PAGE>
(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>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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.
-37-
<PAGE>
"Affiliated Group" means any affiliated group as defined in IRC
----------------
(S)1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
the Company or any of its Subsidiaries was a member.
"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.
-38-
<PAGE>
"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
-39-
<PAGE>
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).
-40-
<PAGE>
"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. (S)6903(5), any hazardous substance as defined by 42 U.S.C. (S)9601(14),
any pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance regulated by
any Environmental Law, excluding household hazardous waste.
"Hedging Obligations" means, with respect to any Person, all
-------------------
liabilities of such Person under interest rate, currency and commodity swap
agreements, cap agreements and collar
-41-
<PAGE>
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
-42-
<PAGE>
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 certif icate
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
------------
-43-
<PAGE>
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.
-44-
<PAGE>
"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.
-45-
<PAGE>
"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
-46-
<PAGE>
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
-47-
<PAGE>
(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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<PAGE>
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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<PAGE>
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.
-50-
<PAGE>
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
-51-
<PAGE>
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.
-52-
<PAGE>
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.
* * * * *
-53-
<PAGE>
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>
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>
Exhibit 5
______________________________________________________________________________
SENIOR SUBORDINATED LOAN AGREEMENT
Dated as of January 27, 2000
Among
SYNAGRO TECHNOLOGIES, INC.,
as Borrower,
CERTAIN SUBSIDIARY GUARANTORS,
as Guarantors,
and
GTCR CAPITAL PARTNERS, L.P.,
as Lender
________________________________________________________________________________
<PAGE>
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>
<PAGE>
<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>
<PAGE>
<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
-----------------------------------------------
SECTION 11. MISCELLANEOUS..................................... 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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>
<PAGE>
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,
--------------
-1-
<PAGE>
dated as of the date hereof, by and between the Company and the Lender (the
"Warrant Agreement"); and
-----------------
WHEREAS, the Lender, as holder of the Warrants, will enter into a
Registration Agreement (the "Registration Agreement"), dated as of the date
----------------------
hereof, by and among the Company , the Lender, GTCR Fund VII, L.P., and others.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. Capitalized terms used in this Agreement shall
---------------------
have the meanings set forth in Exhibit A hereto.
---------
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered pursuant hereto
shall be prepared, in accordance with GAAP. No Accounting Changes shall affect
the financial covenants, standards or terms contained in this Agreement;
provided, that, the Company shall include a description in each Borrowers'
- --------
Certificate and other financial reports required to be delivered hereunder which
explains the differences between the financial statements delivered (which
reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes).
SECTION 2. MAKING AND BORROWING OF LOANS
2.1 Making and Borrowing of Loans. Subject to the terms and conditions of
-----------------------------
this Agreement and on the basis of the representations and warranties set forth
herein, the Lender may make loans (each a "Loan," and collectively, the "Loans")
---- -----
to the Company as set forth in Section 2.2, and the Company may borrow, prepay
-----------
and repay such Loans hereunder in accordance with the terms of this Agreement,
at any time and from time to time on any Business Day prior to the termination
of this Agreement. The obligation of the Company to repay any Loan made by the
Lender and borrowed by the Company shall be evidenced by the Company's execution
and delivery to the Lender of the Note described in Section 3.1 below.
-----------
2.2 Making of Loans; Notice.
-----------------------
2.2.1. Minimum Amount. Each Loan borrowed by the Company hereunder
--------------
shall be in a minimum aggregate principal amount of $100,000 or an integral
multiple thereof.
2.2.2. Initial Loan. The initial Loan shall be made on the date hereof
------------
in the amount of $20,000,000 (the "Initial Loan").
------------
-2-
<PAGE>
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
-3-
<PAGE>
error in making any such notation shall not limit or expand or otherwise affect
the obligations of the Company hereunder or under the Note.
3.2 Interest on the Loans.
---------------------
3.2.1. The Loans shall bear interest at a rate equal to 12 % per annum
on the unpaid principal amount thereof from and including the Closing Date until
the principal amount shall be paid in full, such interest to be payable in cash
in the manner specified in Section 3.7. Notwithstanding the foregoing, upon the
-----------
occurrence of an Event of Default hereunder and for so long as an Event of
Default is continuing, the interest rate, to the extent permitted by law, on the
unpaid principal amount of the Loans shall increase to 14%.
3.2.2. Interest shall be payable with respect to the Loans, in
arrears, on the last day of each Interest Period, upon any prepayment of the
Loans (to the extent of accrued interest on the principal amount of the Loans so
prepaid) and at maturity of the Loans. The "Interest Period" means (i)
---------------
initially, the period commencing on the Closing Date (with respect to the
Initial Loan) or on the date any subsequent Loan is made (with respect to
subsequent Loans) and ending on the next succeeding Interest Payment Date and
(ii) thereafter, each quarterly period ending on March 31, June 30, September
30, or December 31, as applicable (each such date for an interest payment, an
"Interest Payment Date" ); provided, that, no Interest Period shall extend
--------------------- -------- ----
beyond the Maturity Date.
3.2.3. Interest on the Loans shall be computed on the basis of a 360-
day year of twelve 30-day months. In computing such interest, the date or dates
of the making of the Loans shall be included and the date of payment shall be
excluded.
3.3 Payment of Loans. The unpaid principal amount of the Loans plus all
----------------
accrued and unpaid interest thereon and all other amounts owed thereunder with
respect thereto shall be paid in full in cash on the Maturity Date.
3.4 Voluntary Prepayments. Subject to the terms and conditions of the
---------------------
Credit Documents, the Loans may be prepaid, at the Company's option, at any time
and from time to time, in whole or in part, without premium, fee or penalty, (a)
upon not less than five (5) Business Days and not more than thirty (30) Business
Days prior written notice to the Lender (which notice shall be irrevocable) and
(b) in an aggregate minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of that amount.
3.5 Mandatory Prepayments.
---------------------
3.5.1. Asset Sales. Subject to the terms and conditions of the Credit
-----------
Documents (which do require application of proceeds), concurrently with the
receipt by the Company or any Subsidiary of any Applicable Asset Sale Proceeds,
the Company shall make a prepayment of the Loans in an amount equal to 100% of
such Applicable Asset Sale Proceeds (rounded down, if necessary, to an integral
multiple of $100,000); provided that no such prepayment shall be required unless
--------
the aggregate amount of Applicable Asset Sale Proceeds so received together with
all Applicable Asset Sale Proceeds previously received and not previously
applied to prepay the Loans pursuant to this clause 3.5.1 exceeds $100,000.
------------
-4-
<PAGE>
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.
-5-
<PAGE>
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 transac
tions contemplated by this Agreement. The copies of the Company's and each
Subsidiary's charter documents and bylaws which have been furnished to the
Lender's special counsel reflect all amendments made thereto at any time prior
to the date of this Agreement and are correct and complete.
4.2 Capital Stock and Related Matters.
---------------------------------
4.2.1 As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of:
(a) 10,000,000 shares of preferred stock, (i) of which 500,000 shares
shall be designated as Series A Preferred, none of which shall be issued
and outstanding, (ii) of which 1,458,335 shares shall be designated as
Series B Preferred, none of which shall be issued and outstanding, (iii) of
which 30,000 shares shall be designated as Series C Convertible Preferred
Stock, of which 17,358.824 shares shall be issued and outstanding, (iv) of
which 32,000 shares shall be designated as Series D Convertible Preferred
Stock, of which (a) 5,498.319 shares shall be issued and outstanding and
(b) 17,358.824 shares shall be reserved for future issuance upon conversion
of the Series C Convertible Preferred Stock, (v) of which 15,000 shares
shall be reserved for future issuance under the Warrant Agreement and (vi)
of which 105,000 shares shall be reserved for future issuance pursuant to
the Preferred Stock Purchase Agreement; and
-6-
<PAGE>
(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 out standing capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which its ownership of property or the
conduct of business requires it to qualify (except in those instances in which
the failure to be so qualified or to be validly existing and in good standing
has not and would not reasonably be expected to have a Material Adverse Effect).
All of the outstanding shares of capital stock of each Subsidiary are validly
issued, full paid and nonassessable, and all such shares are owned by the
Company or
-7-
<PAGE>
another Subsidiary free and clear of any Lien, except for Liens under
the Credit Documents, and not subject to any option or right to purchase any
such shares. Except as set forth on the Subsidiary Schedule, neither the Company
nor any Subsidiary owns or holds the right to acquire any shares of stock or any
other security or interest in any other Person.
4.4 Authorization; No Breach. The execution, delivery and performance of
------------------------
this Agreement, the Warrants, the Warrant Agreement, the Preferred Stock
Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement and all other agreements contemplated hereby to which
the Company is a party, the filing of the Certificates of Designation, the
amendment of the Company's Certificate of Incorporation by the Certificate
Amendment and the amendment of the Company's bylaws have been duly authorized by
the Company. This Agreement, the Warrants, the Warrant Agreement, the Preferred
Stock Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement, the Acquisition Agreement, the
Intercreditor Agreement, the Certificates of Designation, the Company's
Certificate of Incorporation (as amended by the Certificate Amendment) and all
other agreements contemplated hereby to which the Company is a party each
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms (except as limited by bankruptcy, insolvency or other
laws affecting the enforcement of creditors' rights). Except as set forth on the
attached "Restrictions Schedule," the execution and delivery by the Company
---------------------
of this Agreement, the Registration Agreement, the Intercreditor Agreement, the
Acquisition Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering, sale and issuance of the Purchased Preferred,
the issuance of the Common Stock upon conversion of the Convertible Preferred
Stock, the issuance of Warrants pursuant to the Warrant Agreement, the issuance
of the Warrant Shares upon exercise of Warrants, the filing of the Certificates
of Designation, the filing of the Certificate Amendment and the amendment of the
Company's bylaws and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, the Certificates of Designation or the charter or bylaws
of the Company or any Subsidiary, or any law, statute, rule or regulation to
which the Company or any Subsidiary is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the Restrictions Schedule, none of the Subsidiaries are
subject to any restrictions upon making loans or advances or paying dividends
to, transferring property to, or repaying any Debt owed to, the Company or
another Subsidiary.
4.5 Financial Statements. Attached hereto as the "Financial Statements
-------------------- --------------------
Schedule" are the following financial statements:
- --------
4.5.1 the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997 and 1998, and the related statements of
income and cash flows (or the equivalent) for the respective twelve-month
periods ended December 31, 1996, 1997 and 1998; and
-8-
<PAGE>
4.5 the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of November 30, 1999 (the "Latest Balance Sheet"), and the
--------------------
related statements of income and cash flows (or the equivalent) for the eleven-
month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is accurate and complete in all material respects, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete in all material respects) and has been prepared in
accordance with GAAP, consistently applied, subject in the case of the unaudited
financial statements to the absence of footnote disclosure and changes resulting
from normal year-end adjustments for recurring accruals (none of which would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
The pro forma consolidated balance sheet of the Company and its Subsidiaries as
of December 31, 1999, which gives effect to the Transactions and the
Acquisition, is also attached hereto in the Financial Statement Schedule and is
----------------------------
complete and correct in all material respects and presents fairly in all
material respects the consolidated financial condition of the Company and its
Subsidiaries as of such date as if the transactions contemplated by this
Agreement had occurred immediately prior to such date, and such balance sheet
contains all pro forma adjustments necessary in order to fairly reflect such
assumption.
4.6 Absence of Undisclosed Liabilities. Except as set forth on the
----------------------------------
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
--------------------
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business consistent with past practice (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit), (iii) other liabilities and obligations expressly disclosed in the
other Schedules to this Agreement and (iv) obligations under contracts not
required to be disclosed on the Contracts Schedule.
4.7 No Material Adverse Change. Except as set forth on the attached
--------------------------
"Adverse Change Schedule" or, without duplication, as a result of the Special
-----------------------
Charges, since November 30, 1999, there has been no material adverse change in
the financial condition, operating results, assets, operations, business
prospects, employee relations or customer or supplier relations of the Company
and its Subsidiaries taken as a whole.
4.8 Absence of Certain Developments.
-------------------------------
4.8.1 Except as expressly contemplated by this Agreement or as set
forth on the attached "Developments Schedule," since the date of the Latest
---------------------
Balance Sheet, neither the Company nor any Subsidiary has
-9-
<PAGE>
(a) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount or incurred or become subject to any
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary
course of business;
(c) discharged or satisfied any Lien or paid any obligation or
liability, other than current liabilities paid in the ordinary course of
business;
(d) declared or made any payment or distribution of cash or other
property to its stockholders with respect to its capital stock or other
equity securities or purchased or redeemed any shares of its capital stock
or other equity securities (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities);
(e) mortgaged or pledged any of its properties or assets or subjected
them to any Lien, except for Permitted Encumbrances;
(f) sold, assigned or transferred any of its tangible assets, except
in the ordinary course of business, or canceled any debts or claims;
(g) sold, assigned or transferred any patents or patent applications,
trademarks, service marks, trade names, corporate names, copyrights or
copyright registrations, trade secrets or other intangible assets, or
disclosed any proprietary confidential information to any Person;
(h) suffered any extraordinary losses or waived any rights of value,
whether or not in the ordinary course of business or consistent with past
practice;
(i) made capital expenditures or commitments therefor that aggregate
in excess of $250,000;
(j) made any loans or advances to, guarantees for the benefit of, or
any Investments in, any Persons in excess of $50,000 in the aggregate;
(k) made any charitable contributions or pledges in excess of $10,000
in the aggregate;
(l) suffered any damage, destruction or casualty loss exceeding in the
aggregate $100,000, whether or not covered by insurance;
(m) made any Investment in or taken steps to incorporate any
Subsidiary except for the incorporation of Wholly-Owned Subsidiaries in
connection with Future Acquisitions approved by the Board and the Lenders;
or
-10-
<PAGE>
(n) entered into any other transaction other than in the ordinary
course of business or entered into any other material transaction, whether
or not in the ordinary course of business consistent with past practice.
4.8.2. No officer, director, employee or agent of the Company or any
of its Subsidiaries has been or is authorized to make or receive, and the
Company does not know of any such person making or receiving, any bribe,
kickback or other illegal payment.
4.9 Assets. Except as set forth on the attached "Assets Schedule," the
------ ---------------
Company and each Subsidiary have good and marketable title to, or a valid
leasehold interest in, the properties and assets used by them, located on their
premises or shown on the Latest Balance Sheet or acquired thereafter, free and
clear of all Liens, except for properties and assets disposed of in the ordinary
course of business since the date of the Latest Balance Sheet and except for
Liens disclosed on the Latest Balance Sheet (including any notes thereto) and
Permitted Encumbrances. Except as described on the Assets Schedule, the
Company's and each Subsidiary's buildings, equipment and other tangible assets
are in good operating condition in all material respects and are fit for use in
the ordinary course of business. The Company and each Subsidiary own, or have a
valid leasehold interest in, all assets necessary for the conduct of their
respective businesses as presently conducted and as presently proposed to be
conducted.
4.1 Real Property.
-------------
4.10.1. Owned Properties. The "Owned Real Property Schedule" attached
---------------- ----------------------------
hereto sets forth a list of all owned real property (the "Owned Real Property")
-------------------
used by the Company or any of it Subsidiaries in the operation of the Company's
or any of it Subsidiaries' business. With respect to each such parcel of Owned
Real Property and except for Liens in favor of the Senior Lenders: (i) such
parcel is free and clear of all covenants, conditions, restrictions, easements,
liens or other encumbrances, except Permitted Encumbrances; (ii) there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any person the right of use or occupance of any portion of such
parcel; and (iii) there are no outstanding actions or rights of first refusal to
purchase such parcel, or any portion thereof or interest therein.
4.10.2. Leased Properties. The "Leased Property Schedule" attached
----------------- ------------------------
hereto sets forth a list of all of the leases and subleases ("Leases") and each
------
leased and subleased parcel of real property in which the Company or any of it
Subsidiaries have a leasehold and subleasehold interest (the "Leased Real
-----------
Property"). The Company has delivered to the Lender true, correct, complete and
- --------
accurate copies of each of the Leases described in the Leased Property Schedule.
With respect to each Lease listed on the Leased Property Schedule: (i) the
Lease is legal, valid, binding, enforceable and in full force and effect; (ii)
the Lease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing; (iii) neither the
Company nor any of its Subsidiaries nor, to the best of the Company's knowledge,
any other party to the Lease is in breach or default, and no event has occurred
which, with notice or lapse of time, would constitute such a breach or default
or permit termination, modification or acceleration under the Lease; (iv) to the
best of the Company's knowledge, no party to the Lease has repudiated any
provision thereof; (v) to the best of the Company's knowledge, there are no
disputes, oral agreements, or forbearance
-11-
<PAGE>
programs in effect as to the Lease; (vi) the Lease has not been modified in any
respect, except to the extent that such modifications are disclosed by the
documents delivered to the Lender; and (vii) neither the Company nor any of it
Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the Lease.
4.10.3. Real Property Disclosure. Except as disclosed in the Owned
------------------------
Real Property Schedule and the Leased Property Schedule, there is no Real
Property leased or owned by the Company or any of it Subsidiaries used in the
Company's or any of it Subsidiaries' business.
4.11 Tax Matters.
-----------
4.11.1. Except as set forth on the attached "Taxes Schedule": the
--------------
Company, each Subsidiary and each Affiliated Group have filed all Tax Returns
which they are required to file under applicable laws and regulations; all such
Tax Returns are complete and correct in all material respects and have been
prepared in compliance with all applicable laws and regulations in all material
respects; the Company, each Subsidiary and each Affiliated Group in all material
respects have paid all Taxes due and owing by them (whether or not such Taxes
are required to be shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
party; neither the Company, any Subsidiary nor any Affiliated Group has waived
any statute of limitations with respect to any Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency; the accrual for Taxes
on the Latest Balance Sheet would be adequate to pay all Tax liabilities of the
Company and its Subsidiaries if their current tax year were treated as ending on
the date of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income); since
the date of the Latest Balance Sheet, the Company and its Subsidiaries have not
incurred any liability for Taxes other than in the ordinary course of business;
the assessment of any additional Taxes for periods for which Tax Returns have
been filed by the Company, each Subsidiary and each Affiliated Group shall not
exceed the recorded liability therefor on the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing differences between
book and Tax income); the federal income Tax Returns of the Company and its
Subsidiaries have been audited and closed for all tax years through 1998; to the
best of the Company's knowledge, no foreign, federal, state or local tax audits
or administrative or judicial proceedings are pending or being conducted with
respect to the Company, any Subsidiary or any Affiliated Group; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; no written notice indicating an intent to open an audit
or other review has been received by the Company from any foreign, federal,
state or local taxing authority; and there are no material unresolved questions
or claims concerning the Company's, any Subsidiary's or any Affiliated Group Tax
liability.
4.11.2 Neither the Company nor any of its Subsidiaries has made an
election under (S)341(f) of the Internal Revenue Code of 1986, as amended.
Neither the Company nor any Subsidiary is liable for the Taxes of another Person
that is not a Subsidiary in a material amount under (a) Treas. Reg. (S) 1.1502-6
(or comparable provisions of state, local or foreign law), (b) as a transferee
or successor, (c) by contract or indemnity or (d) otherwise. Neither the
Company nor any Subsidiary is a party to any tax sharing agreement. The
Company, each Subsidiary and each Affiliated Group have disclosed on their
federal income Tax Returns any position taken for which
-12-
<PAGE>
substantial authority (within the meaning of IRC (S)6662(d)(2)(B)(i)) did not
exist at the time the return was filed. Neither the Company nor any Subsidiary
has made any payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would not be
deductible under IRC (S)280G.
4.12 Contracts and Commitments.
-------------------------
4.12.1. Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule" or the attached "Employee Benefits
------------------ -----------------
Schedule," neither the Company nor any Subsidiary is a party to or bound by any
- --------
written or oral:
(a) pension, profit sharing, stock option, employee stock purchase or
other plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit plan or arrangement, or any
collective bargaining agreement or any other contract with any labor union,
or severance agreements, programs, policies or arrangements;
(b) contract for the employment of any officer, individual employee or
other Person on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $75,000 or contract relating to loans to
officers, directors or Affiliates;
(c) contract under which the Company or Subsidiary has advanced or
loaned any other Person amounts in the aggregate exceeding $100,000;
(d) agreement or indenture relating to borrowed money or other Debt or
the mortgaging, pledging or otherwise placing a Lien on any material asset
or material group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation in excess of $100,000 (other than by
the Company of a Wholly-Owned Subsidiary's debts or a guarantee by a
Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any Subsidiary is
lessee of or holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property under which
the aggregate annual rental payments do not exceed $100,000;
(g) lease or agreement under which the Company or any Subsidiary is
lessor of or permits any third party to hold or operate any property, real
or personal, owned or controlled by the Company or any Subsidiary;
(h) assignment, license, indemnification or agreement with respect to
any intangible property (including, without limitation, any Intellectual
Property);
(i) warranty agreement with respect to its services rendered or its
products sold or leased;
-13-
<PAGE>
(j) agreement under which it has granted any Person any registration
rights (including, without limitation, demand and piggyback registration
rights);
(k) sales, distribution or franchise agreement;
(l) contract, agreement or other arrangement with any officer,
director, stockholder, employee or Affiliate, or any Affiliate of any
officer, director, stockholder or employee;
(m) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world;
(n) contract or group of related contracts with the same party or
group of affiliated parties the performance of which involves consideration
in excess of $200,000; or agreement with a term of more than six months
which is not terminable by the Company or any Subsidiary upon less than 30
days notice without penalty.
4.12.2. All of the contracts, agreements and instruments set forth on
the Contracts Schedule are valid, binding and enforceable in accordance with
their respective terms in all material respects. The Company and each
Subsidiary have performed all material obligations required to be performed by
them and are not in default under or in breach of nor in receipt of any claim of
default or breach under any material contract, agreement or instrument to which
the Company or any Subsidiary is subject; no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of noncompliance by the Company or any Subsidiary under any
material contract, agreement or instrument to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; and
neither the Company nor any Subsidiary has knowledge of any breach or
anticipated breach by the other parties to any material contract, agreement,
instrument or commitment to which it is a party.
4.12.3. The Lender's special counsel has been supplied with a true
and correct copy of each of the written instruments, plans, contracts and
agreements and an accurate description of each of the oral arrangements,
contracts and agreements which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
4.13 Intellectual Property Rights.
----------------------------
4.13.1 The attached "Intellectual Property Schedule" contains a
------------------------------
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Company or any Subsidiary, (b) pending
patent applications and applications for registrations of other Intellectual
Property Rights filed by the Company or any Subsidiary, (c) unregistered trade
names and corporate names owned or used by the Company or any Subsidiary and (d)
unregistered trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary, in each case which are
material to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries taken as a whole. The
Intellectual Property Schedule also contains a complete and accurate list of all
licenses
-14-
<PAGE>
and other rights granted by the Company or any Subsidiary to any third party
with respect to any Intellectual Property Rights and all licenses and other
rights granted by any third party to the Company or any Subsidiary with respect
to any Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. Except as set forth on the Intellectual Property
Schedule, the Company or one of its Subsidiaries owns all right, title and
interest to, or has the right to use pursuant to a valid license, all
Intellectual Property Rights necessary for the operation of the businesses of
the Company and its Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens. The loss or expiration of
any Intellectual Property Right or related group of Intellectual Property Rights
owned or used by the Company or any Subsidiary has not had and would not
reasonably be expected to have a Material Adverse Effect, and no such loss or
expiration is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
reasonably necessary and desirable actions to maintain and protect the
Intellectual Property Rights which they own. To the best of the Company's
knowledge, the owners of any Intellectual Property Rights licensed to the
Company or any Subsidiary have taken all reasonably necessary and desirable
actions to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
4.13.2. (a) The Company and its Subsidiaries own all right, title and
interest in and to all of the Intellectual Property Rights listed on such
schedule, free and clear of all Liens, (b) there have been no claims made
against the Company or any Subsidiary asserting the invalidity, misuse or
unenforceability of any of such Intellectual Property Rights, and, to the best
of the Company's knowledge, there are no grounds for the same, (c) neither the
Company nor any Subsidiary has received any notices of, and is not aware of any
facts which indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any Subsidiary license any rights from a third party), (d) the conduct of the
Company's and each Subsidiary's business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct as
presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons and (e) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed to
the Company or any Subsidiary have not been infringed, misappropriated or
conflicted by other Persons. The transactions contemplated by this Agreement
shall have no material adverse effect on the Company's or any Subsidiary's
right, title and interest in and to the Intellectual Property Rights listed on
the Intellectual Property Schedule.
4.14 Litigation, etc. Except as set forth on the attached "Litigation
--------------- ----------
Schedule," there are no actions, suits, proceedings, orders, investigations or
- --------
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company and its Subsidiaries with respect to their
businesses or proposed business activities), or pending or threatened by the
Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the best
of the Company's knowledge, any governmental
-15-
<PAGE>
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.
-16-
<PAGE>
4.19 Employee Benefit Plans.
----------------------
4.19.1. The attached Employee Benefits Schedule sets forth an accurate
--------------------------
and complete list of each employee benefit plan (as such term is defined in
Section 3(3) of ERISA), and any other bonus, deferred compensation, incentive
compensation, stock, severance or other plan or arrangement, other than a non-
material fringe benefit plan (each of the foregoing, a "Benefit Plan"),
------------
currently maintained or contributed to by the Company and its Subsidiaries or
with respect to which the Company and its Subsidiaries have or may have any
material liability.
4.19.2. None of the Benefit Plans is subject to Title IV of ERISA or
the minimum funding requirements of Section 412 of the Code or Section 302 of
ERISA. No underfunded defined benefit plan has been, during the five years
preceding the Closing Date, transferred out of the Company's Controlled Group.
4.19.3. None of the Benefits Plans is a multiemployer plan (as defined
in Section 3(37) of ERISA).
4.19.4. None of the Benefit Plans provides for medical or life
insurance benefits to current or future retired or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service (other than as required under Section 4980B of the Code or applicable
state law).
4.19.5. None of the Benefit Plans obligates the Company or any
Subsidiary to pay any severance or similar benefit solely as a result of a
change in control or ownership within the meaning of Section 280G of the Code.
4.19.6. All required contributions to date by the Company or any
Subsidiary under the terms of any Benefit Plan or applicable law have been made
within the time prescribed by any such plan or applicable law or properly
accrued on the appropriate balance sheet. All contributions, premiums and
expenses payable to or in respect of any Benefit Plan or the operation or
administration thereof relating to any period on or prior to the date hereof
have been paid or properly accrued on the appropriate balance sheet. No
material liability has been assessed or is expected to be incurred by the
Company or any Subsidiary or any trade or business, whether or not incorporated,
which is or would have been at any date of determination occurring within the
preceding six years treated as a single employer under Section 414 of the Code
together with the Company or the Subsidiaries (each such person, a "Related
-------
Person") (either directly or indirectly, including as a result of an
- ------
indemnification obligation or any joint and several liability obligations) under
or pursuant to Title I or IV of ERISA or the penalty, excise tax or joint and
several liability provisions of the Code relating to employee benefit plans, and
no event, transaction or condition has occurred or exists that could result in
any material liability to the Buyer, the Company, any Subsidiary or any Related
Person or any employee benefit plan of the Company, any Subsidiary or any
Related Person. No actions, suits, investigations or claims with respect to any
Benefit Plan (other than routine claims for benefits) are pending or, to the
knowledge of the Company, threatened which could reasonably be expected to
result in liability to the Company or any Subsidiary.
-17-
<PAGE>
4.19.7. Each of the Benefit Plans has been administered in accordance
with its terms in all material respects and is in compliance in all material
respects with applicable laws and regulations including, without limitation,
ERISA and the Code.
4.19.8. Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of Section 401(a) of the Code and the trust forming a
part thereof has received a favorable determination letter from the IRS to be so
qualified and to the extent that each such trust is exempt from taxation under
section 501(a) of the Code, and, to the knowledge of the Company, nothing has
occurred since the date of such determination that could adversely affect such
qualification or tax-exempt status.
4.19.9. With respect to each Benefit Plan, the Company previously has
furnished to the Lender a true and correct copy of, where applicable, (a) the
most recent annual report (Form 5500) filed with the IRS, (b) the plan document
if written, or a description of such plan if not written, (c) each trust
agreement, group annuity contract or other funding arrangement, if any, relating
to such Benefit Plan, (d) the most recent actuarial report or valuation relating
to such Benefit Plan (in the event such Benefit Plan is subject to Title IV of
ERISA, is a non-U.S. pension plan, or provides any post-employment health,
medical or life insurance benefits), (e) the most recent summary plan
description and (f) the most recent determination letter issued by the IRS.
4.20 Compliance with Laws. Neither the Company nor any Subsidiary has
--------------------
violated any law or any governmental regulation or requirement which violation
has had or would reasonably be expected to have a Material Adverse Effect and
neither the Company nor any Subsidiary has received notice of any such
violation.
4.21 Environmental and Safety Matters.
--------------------------------
4.21.1. Except as set forth on the attached "Environmental Schedule":
----------------------
(a) The Company and its Subsidiaries have complied with and are
currently in compliance with all Environmental and Safety Requirements, and
neither the Company nor its Subsidiaries have received any oral or written
notice, report or information regarding any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) or any corrective,
investigatory or remedial obligations arising under Environmental and
Safety Requirements which relate to the Company or its Subsidiaries or any
of their properties or facilities that has not been complied with.
(b) Without limiting the generality of the foregoing, the Company and
its Subsidiaries have obtained and complied with, and are currently in
compliance with, all material permits, licenses and other authorizations
that may be required pursuant to any Environmental and Safety Requirements
for the occupancy of their properties or facilities or the operation of
their businesses. A list of all such permits, licenses and other
authorizations is set forth on the attached Environmental Schedule.
-18-
<PAGE>
(c) Neither this Agreement nor the consummation of the transactions
con templated by this Agreement shall impose any obligations on the Company
and its Subsidiaries or otherwise for site investigation or cleanup, or
notification to or consent of any government agencies or third parties
under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations).
(d) To the best of the Company's knowledge, none of the following
exists at any property or facility owned, occupied or operated by the
Company or any of its Subsidiaries if the existence of same would violate
Environmental Laws:
(i) underground storage tanks or surface impoundments;
(ii) asbestos-containing materials in any form or
condition; or
(iii) materials or equipment containing polychlorinated
biphenyls.
(e) Neither the Company nor any of its Subsidiaries has treated,
stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company or
its Subsidiaries pursuant to Environmental and Safety Requirements
(including, without limitation, any liability for response costs, natural
resource damages or attorneys fees pursuant to CERCLA).
(f) Neither the Company nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person
relating to any Environmental and Safety Requirements.
(g) No Environmental Lien has attached to any property owned, leased
or operated by the Company or any of its Subsidiaries.
4.22 Affiliated Transactions. Except as set forth on the attached
-----------------------
"Affiliated Transactions Schedule," no officer, director , employee, or
--------------------------------
Affiliate of the Company or any Subsidiary or any individual related by blood,
marriage or adoption to any such individual or any entity in which any such
Person or individual owns any beneficial interest, is a party to any agreement,
contract, commitment or transaction with the Company or any Subsidiary or has
any material interest in any material property used by the Company or any
Subsidiary.
4.23 Real Property Holding Corporation Status. Since its date of
----------------------------------------
incorporation, the Company has not been, and as of the date of the Closing shall
not be, a "United States real property holding corporation", as defined in
Section 897(c)(2) of the Code, and in Section 1.897-2(b) of the Treasury
Regulations issued thereunder. The Company has no current plans or intentions
which would cause the Company to become a "United States real property holding
company," and the Company has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Treasury Regulations.
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<PAGE>
4.24 Customers and Suppliers.
-----------------------
4.24.1 The attached "Customer Schedule" lists the 10 largest
-----------------
customers of the Company (on a consolidated basis) for each of the two most
recent Fiscal Years and sets forth opposite the name of each such customer the
percentage of consolidated net sales attributable to such customer. The
Customer Schedule also lists any additional current customers which the Company
anticipates shall be among the 10 largest customers for the current Fiscal Year.
4.24.2 Since the date of the Latest Balance Sheet, no material
supplier of the Company or any Subsidiary has indicated that it shall stop, or
materially decrease the rate of, supplying materials, products or services to
the Company or any Subsidiary, and no customer listed on the Customer Schedule
has indicated that it shall stop, or materially decrease the rate of, buying
materials, products or services from the Company or any Subsidiary.
4.25 Reports with the Securities and Exchange Commission. The Company has
---------------------------------------------------
furnished the Lender with complete and accurate copies of its annual report on
Form 10-K for its three most recent Fiscal Years, all other reports or documents
required to be filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the filing of the most recent annual report on Form 10-K and
its most recent annual report to its stockholders. Such reports and filings do
not contain any material false statements or any misstatement of any material
fact and do not omit to state any fact necessary to make the statements set
forth therein not misleading. The Company has made all filings with the
Securities and Exchange Commission which it is required to make, and the Company
has not received any request from the Securities and Exchange Commission to file
any amendment or supplement to any of the reports described in this paragraph.
4.26 Investment Company. The Company is not an "investment company" as
------------------
defined under the Investment Company Act of 1940.
4.27 Section 203 of the DGCL; Takeover Statute. The Board has taken all
-----------------------------------------
actions necessary or advisable so that the restrictions contained in Section 203
of the Delaware General Corporate Law (the "DGCL") applicable to a "business
----
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Documents or the
consummation of the transactions contemplated hereby or thereby, including the
issuance of the Convertible Preferred Stock, the Warrants and all future
issuances of Convertible Preferred Stock. The execution, delivery and
performance of this Agreement or any of the other Documents and the consummation
of the transactions contemplated hereby or thereby will not cause to be
applicable to the Company any "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws.
4.28 Public Utility Holding Company Act. Neither the Company nor any
----------------------------------
Subsidiary is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935.
-20-
<PAGE>
4.29 Regulation U. The Company is not engaged principally, or as one of
------------
its important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
4.30 Solvency, etc. On the Closing Date and the date of each subsequent
--------------
Loan hereunder (or, in the case of any Person which becomes a Guarantor after
the Closing Date, on the date such Person becomes a Guarantor), and immediately
prior to and after giving effect to each borrowing hereunder and under the
Credit Agreement and the use of the proceeds thereof (and after giving effect to
any right of contribution and subrogation), (a) each of the Company's and each
Guarantor's assets will exceed its liabilities and (b) each of the Company and
each Guarantor will be solvent, will be able to pay its debts as they mature,
will own property with fair saleable value greater than the amount required to
pay its debts and will have capital sufficient to carry on its business as then
constituted.
4.31 Stockholder Consent. The Stockholders Consent was executed by the
-------------------
stockholders of the Company set forth on the attached "Shareholders Consent
--------------------
Schedule", each of whom owns the number of shares of Common Stock indicated next
- --------
to such person's name on the Shareholders Consent Schedule (the "Consenting
----------
Stockholders"). The Consenting Stockholders collectively own a majority of the
- ------------
outstanding Common Stock. The disclosure provided to the Consenting
Stockholders in connection with the solicitation of the Stockholders Consent did
not contain a material misstatement of fact or an omission of a material fact
necessary to make the statements made, in light of the circumstances in which
they were made, not misleading.
4.32 Disclosure. All information heretofore or contemporaneously herewith
----------
furnished in writing by the Company or any Subsidiary to the Lender for purposes
of or in connection with this Agreement and the transactions contemplated hereby
is, and all written information hereafter furnished by or on behalf of the
Company or any Subsidiary to the Lender pursuant hereto or in connection
herewith will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and none of such information is or
will be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Lender that (a) any projections and forecasts provided
by the Company are based on good faith estimates and assumptions believed by the
Company to be reasonable as of the date of the applicable projections or
assumptions and that actual results during the period or periods covered by any
such projections and forecasts will likely differ from projected or forecasted
results and (b) any information provided by the Company or any Subsidiary with
respect to any Person or assets acquired or to be acquired by the Company or any
Subsidiary shall, for all periods prior to the date of such acquisition, be
limited to the knowledge of the Company or the acquiring Subsidiary after
reasonable inquiry). There is no fact known to the Company which the Company has
not disclosed to the Lender in writing and of which any of its officers,
directors or executive employees is aware (other than general economic and
industry conditions) and which has had or would reasonably be expected to have a
Material Adverse Effect.
On the Closing Date and the date of each subsequent Loan hereunder, or at any
other time at which the Company or its Subsidiaries is required to make
representations and warranties hereunder, each representation and warranty shall
be made after giving effect to each borrowing hereunder and under the Credit
Agreement and the application of the proceeds therefrom including the
acquisition of RESTEC or any Future Acquisitions as if said acquisition had at
that time been made. Without
-21-
<PAGE>
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>
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>
to the Acquisition and the transactions contemplated hereby and reflecting
estimated purchase accounting adjustments, prepared by the chief financial
officer of the Company, and (c) the business plan and financial projections
of the Company and its Subsidiaries for Fiscal Years 2000 through 2004.
(i) A Borrower's Certificate in a form reasonably satisfactory to
the Lender, dated the Closing Date, stating that the conditions specified
in Sections 5.1.1 and 5.1.2 and Sections 5.1.9 through 5.1.16 (inclusive)
------------------------ -----------------------------
have been satisfied.
5.1.7. Corporate/Capital Structure. The Lender shall be satisfied
---------------------------
with the ownership, corporate and legal structure and capitalization of the
Company and its Subsidiaries, including, without limitation, the terms and
conditions of their respective charters and by-laws, the terms of the Company's
and such Subsidiaries' capital stock, options, warrants or other securities and
any agreements related thereto.
5.1.8. Lender's Equity. The Lender shall have received the Warrants
---------------
to be issued to it pursuant to the Warrant Agreement.
5.1.9. No Material Adverse Change. Nothing shall have occurred (and
--------------------------
the Lender shall not be aware of any facts or conditions not previously known)
which the Lender shall determine has or reasonably could be expected to have, a
Material Adverse Effect.
5.1.10. Litigation. There shall exist no action, suit, investigation,
----------
litigation or proceeding affecting the Company or any of its Subsidiaries or any
of their respective properties pending or, to the knowledge of the Company,
threatened before any court, governmental agency or arbitrator that (i) could
reasonably be expected to have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of the Documents or the
consummation of the transactions contemplated hereby and thereby. No order,
judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the Lender from making the Loans.
5.1.11. Certain Fees. On the Closing Date, the Company shall pay all
------------
expenses of the Lender (including, without limitation, legal fees and expenses)
incurred in connection with the negotiation and execution of this Agreement and
the other Documents.
5.1.12 No Violation of Regulations U or X. The making of the Loans
----------------------------------
shall not violate Regulations U or X of the FRB.
5.1.13. Monitoring Agreement. The Company shall have entered into the
--------------------
Monitoring Agreement, the Monitoring Agreement shall be in full force and
effect, and any fees due thereunder shall have been paid in full.
5.1.14. Authorization; Listing. The Company's shares issuable upon
----------------------
conversion of the Convertible Preferred shall have been duly authorized and
reserved for issuance and such shares shall have been approved for listing on
Nasdaq, subject to official notice of issuance.
-24-
<PAGE>
5.1.15. Rights Plan. The Company shall have amended its Rights
-----------
Agreement to provide that the provisions of such agreement will not be triggered
by the execution, delivery or performance of this Agreement or any of the other
Documents or the consummation of the transactions contemplated hereby or
thereby.
5.1.16. Stockholder Consent. A majority of the Company's stockholders
-------------------
shall have executed an action on written consent (the "Stockholders Consent")
--------------------
(and such consent shall continue to be in full force and effect) approving (i)
the amendment to the Company's Certificate of Incorporation in the form set
forth on Exhibit E hereto (the "Certificate Amendment") and (ii) the issuance of
--------- ---------------------
the Convertible Preferred Stock (including the issuance of Warrant Shares) and
the Common Stock issuable upon conversion of the Convertible Preferred Stock and
the Company shall have delivered such executed consents to the Lender.
5.2 Conditions to Lender's Obligations to Make Subsequent Loans After the
---------------------------------------------------------------------
Closing Date. The obligation of the Lender to make subsequent Loans to the
- ------------
Company hereunder after the Closing Date is subject to the satisfaction of the
following conditions, each as of the date of each such subsequent Loan:
5.2.1. Representations and Warranties. All representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (other than representations and warranties qualified by
a materiality standard including, without limitation, a Material Adverse Effect
qualifier, which shall be true and correct in all respects) as of the making of
such subsequent Loan, before and after giving effect to such Loan and to the
application of the proceeds therefrom, with the same effect as though such
representations and warranties had been made on and as of such date, except that
(a) references to financial statements and the Latest Balance Sheet in such
representations and warranties shall be deemed to refer for this purpose to the
financial statements required to be provided to the Lender pursuant to Section
-------
6.3 hereof and the latest consolidated balance sheet of the Company required to
- ---
be provided to the Lender pursuant to Section 6.3 hereof, respectively, and (b)
-----------
references to the date of this Agreement, the Closing Date and the like shall
be deemed to refer to the date of the making of such subsequent Loan.
5.2.2. No Default. No Default or Event of Default shall exist as of
----------
the date of such subsequent Loan or would result from the consummation of the
borrowings made by the Company on the date of such subsequent Loan.
5.2.3. Approved Use. The Lender shall have received evidence
------------
satisfactory to it that the proceeds of such subsequent Loan will be used for
the Approved Use. The Lender shall have approved any Future Acquisition being
financed therewith and the Lender shall have received such documents and
deliveries in connection therewith as requested by the Lender.
5.2.4. Acquisitions. No default or material breach of performance
------------
shall have occurred under the agreements related to the Future Acquisition, if
any, for which the Loan is being made, and all of the buyers' material
conditions to closing thereunder shall have been satisfied and not waived
(except with the Lender's consent).
-25-
<PAGE>
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
-26-
<PAGE>
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
-27-
<PAGE>
by the chief financial officer of the Company, containing a computation of each
of the financial ratios and restrictions set forth in Section 6.8 and to the
-----------
effect that such officer has not become aware of any Event of Default or Default
that has occurred and is continuing or, if there is any such event, describing
it and the steps, if any, being taken to cure it; and (b) an updated
organizational chart listing all Subsidiaries and the locations of their
businesses.
6.3.5. Reports to SEC and to Shareholders. Promptly upon the filing
----------------------------------
or sending thereof, copies of all regular, periodic or special reports of the
Company or any Subsidiary filed with the SEC (excluding exhibits thereto,
provided that the Company shall promptly deliver any such exhibit to the Lender
upon request therefor); copies of all registration statements of the Company or
any Subsidiary filed with the SEC (other than on Form S-8); and copies of all
proxy statements or other communications made to shareholders generally
concerning material developments in the business of the Company or any of its
Subsidiaries.
6.3.6. Notice of Default, Litigation and ERISA Matters. Promptly upon
-----------------------------------------------
becoming aware of any of the following, written notice describing the same and
the steps being taken by the Company or the Subsidiary affected thereby with
respect thereto:
(a) the occurrence of an Event of Default or a Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Lender which has
been instituted or, to the knowledge of the Company, is threatened against
the Company or any of its Subsidiaries or to which any of the properties of
any thereof is subject which, if adversely determined, might reasonably be
expected to have a Material Adverse Effect;
(c) the institution of any steps by any member of the Controlled
Group or any other Person to terminate any Pension Plan, or the failure of
any member of the Controlled Group to make a required contribution to any
Pension Plan (if such failure is sufficient to give rise to a lien under
Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Company furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such
plan is or may be terminated, or that any such plan is or may become
insolvent;
(d) any cancellation (without replacement) or material change in
any insurance maintained by the Company or any Subsidiary thereof;
-28-
<PAGE>
(e) any event (including any violation of any Environmental Law or
the assertion of any Environmental Claim) which has had or would reasonably
be expected to have a Material Adverse Effect;
(f) any event or circumstance which requires the Company to give
notice to the Senior Lenders under the Credit Documents; or
(g) any notice of default received by it under any Credit
Document.
6.3.7. Subsidiaries. Promptly upon any change in the list of its
------------
Subsidiaries from that set forth on the attached "Subsidiaries Schedule" (or in
---------------------
the most recent notice pursuant to this Section), notification of such change.
6.3.8. Management Reports. Promptly upon the request of the Lender,
------------------
copies of all detailed financial and management reports submitted to the Company
by independent auditors in connection with each annual or interim audit made by
such auditors of the books of the Company.
6.3.9. Projections. As soon as practicable and in any event within 60
-----------
days after the commencement of each Fiscal Year, financial projections for the
Company and its Subsidiaries for such Fiscal Year prepared in a manner
consistent with those projections delivered by the Company to the Lender prior
to the Closing Date.
6.3.10. Other Information. From time to time such other information
-----------------
concerning the Company and its Subsidiaries as the Lender may reasonably
request.
6.4 Books, Records and Inspections. Keep, and cause each Subsidiary to
------------------------------
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each Subsidiary to permit, the Lender or any
representative thereof upon reasonable prior notice to inspect the properties
and operations of the Company and of such Subsidiary; and permit, and cause each
Subsidiary to permit, at any reasonable time during normal business hours and
with reasonable notice (or at any time without notice if an Event of Default
exists), the Lender or any representative thereof to visit any or all of its
offices, to discuss its financial matters with its officers and its independent
auditors (and the Company hereby authorizes such independent auditors to discuss
such financial matters with the Lender or any representative thereof whether or
not any representative of the Company or any Subsidiary is present), and to
examine (and, at the expense of the Company or the applicable Subsidiary,
photocopy extracts from) any of its books or other corporate records.
6.5 Insurance. Maintain, and cause each Subsidiary to maintain, with
---------
responsible insurance companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of the
Lender, furnish to the Lender a certificate setting forth in reasonable detail
the nature and extent of all insurance maintained by the Company and its
Subsidiaries.
-29-
<PAGE>
6.6 Compliance with Laws, Material Contracts; Payment of Taxes and
--------------------------------------------------------------
Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material
- -----------
respects with all material applicable laws (including Environmental Laws),
rules, regulations, decrees, orders, judgments, licenses, material contracts and
permits; and (b) pay, and cause each Subsidiary to pay, prior to delinquency,
all Federal taxes and all other material taxes and other governmental charges
against it or any of its property, as well as claims of any kind which, if
unpaid, might become a Lien on any of its property; provided that the foregoing
--------
shall not require the Company or any Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP.
6.7 Maintenance of Existence, etc. Maintain and preserve, and (subject to
-----------------------------
Section 6.13) cause each Subsidiary to maintain and preserve, (a) its existence
- ------------
and good standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each jurisdiction
where the nature of its business makes such qualification necessary (except in
those instances in which the failure to be qualified or in good standing does
not have a Material Adverse Effect).
6.8 Financial Covenants.
-------------------
6.8.1. Fixed Charge Coverage Ratio. So long as the Lender and its
---------------------------
Affiliates hold at least 50% of the outstanding interests in the Note, not
permit the Fixed Charge Coverage Ratio at any time to be less than the
applicable ratio set forth below:
Computation Fixed Charge
Period Ending: Coverage Ratio
-------------- --------------
Closing Date through 12/31/00 0.85 to 1.0
1/01/01 through 12/31/01 0.95 to 1.0
1/01/02 through 12/31/02 1.00 to 1.0
1/01/03 and thereafter 1.05 to 1.0.
6.8.2. Minimum Interest Coverage. Not permit the Interest Coverage
-------------------------
Ratio as of the last day of any Computation Period to be less than the
applicable ratio set forth below:
Computation Interest
Period Ending: Coverage Ratio
-------------- --------------
Closing Date through 12/31/00 1.49 to 1.0
1/01/01 through 12/31/01 1.70 to 1.0
1/01/02 and thereafter 1.91 to 1.0
6.8.3. Funded Debt to Adjusted EBITDA Ratio. Not permit the Funded
------------------------------------
Debt to Adjusted EBITDA Ratio as of the last day of any Computation Period to
exceed the applicable ratio set forth below:
-30-
<PAGE>
Computation Funded Debt to
Period Ending: Adjusted EBITDA Ratio
------------- ---------------------
Closing Date through 12/31/00 5.18 to 1.0
1/01/01 through 12/31/01 4.89 to 1.0
1/01/02 through 12/31/02 4.60 to 1.0
1/01/03 through 12/31/03 4.31 to 1.0
1/01/04 and thereafter 4.03 to 1.0.
6.8.4. Senior Funded Debt to Adjusted EBITDA Ratio. Not permit the
-------------------------------------------
Senior Funded Debt to Adjusted EBITDA Ratio as of the last day of any
Computation Period to exceed the applicable ratio set forth below:
Senior Funded
Computation Debt to
Period Ending: Adjusted EBITDA Ratio
------------- ---------------------
Closing Date through 12/31/00 4.03 to 1.0
1/01/01 through 12/31/01 3.77 to 1.0
1/01/02 through 12/31/02 3.45 to 1.0
1/01/03 through 12/31/03 3.16 to 1.0
1/01/04 and thereafter 2.88 to 1.0.
6.8.5. Debt to Capitalization Ratio. Not permit the ratio of (a)
----------------------------
Funded Debt to (b) the sum of Funded Debt plus Net Worth at any time to exceed
the applicable percentage set forth below during any period set forth below:
Debt to
Capitalization
Period: Percentage
------ --------------
Closing Date through 12/31/00 75%
1/01/01 through 12/31/01 70%
1/01/02 and thereafter 65%
6.8.6. Capital Expenditures. The Company will not permit the aggregate
--------------------
amount of all Capital Expenditures (excluding amounts, if any, paid to
consummate Future Acquisitions approved by the Lender which constitute Capital
Expenditures) made by the Company and its Subsidiaries during any period of 12
consecutive months to exceed the product of (i) 1.50 (or, for any date of
determination during the period from the date of the acquisition of EPIC through
December 31, 2000, 1.75) multiplied by (ii) the depreciation of the Company and
its Subsidiaries during the preceding period of 12 consecutive months
(calculated on a pro forma basis giving effect to acquisitions and sales and
--- -----
other dispositions made subsequent to such preceding 12 months).
6.9 Limitations on Debt. Not, and not permit any Subsidiary to, create,
-------------------
incur, assume or suffer to exist any Debt, except:
-31-
<PAGE>
(a) Debt under the Credit Agreement or Permitted Refinancing Debt with
respect thereto in an aggregate principal amount at any one time
outstanding (including loans, the nominal amount of outstanding letters of
credit and all unused commitments) not to exceed (as determined from time
to time, the "Maximum Senior Indebtedness") (i) $10,000,000 of revolving
---------------------------
Senior Indebtedness, (ii) $100,000,000 of term Senior Indebtedness, (iii)
$15,000,000 of additional Senior Indebtedness (whether revolving or term),
and (iv) up to $10,000,000 of additional Senior Indebtedness (whether
revolving or term) incurred to fund the Rhode Island Project in each case
with respect to this Section 6.9 less the aggregate principal amount of any
-----------
permanent reductions of commitments for revolving Senior Indebtedness or
repayments of term Senior Indebtedness under the instruments governing such
Senior Indebtedness (including, without limitation, payments actually
applied to the Senior Indebtedness pursuant to Section 3.5 hereof) and
-----------
guaranties in respect of Debt described in the foregoing clauses (i), (ii)
and (iii);
(b) unsecured seller Debt which represents all or part of the purchase
price payable in connection with a Future Acquisition approved by the
Lender and the existing Debt listed on the attached "Unsecured Seller Debt
---------------------
Schedule"; provided that the aggregate principal amount of all such Debt
-------- --------
(other than (i) the Debt designated with an asterisk on the Unsecured
-------------
Seller Debt Schedule, and (ii) an unsecured seller note payable in
--------------------
connection with the acquisition of EPIC not in excess of $6,000,000, the
payment of which is contingent upon the performance of EPIC) shall not at
any time exceed $7,500,000;
(c) Debt arising under Capital Leases, Debt secured by Liens permitted
by subsection 6.10(c) or (d) and other Debt outstanding on the date hereof
------------------ ---
and listed on the attached "Capital Lease Debt Schedule", and refinancings
---------------------------
of any such Debt so long as the terms applicable to such refinanced Debt
are no less favorable to the Company or the applicable Subsidiary than the
terms in effect immediately prior to such refinancing, provided that the
--------
aggregate amount of all such Debt at any time outstanding shall not exceed
$15,000,000;
(d) Debt of Subsidiaries owed to the Company;
(e) Hedging Obligations of the Company for the hedging of interest
payments on the Senior Indebtedness to the extent required by the Credit
Agreement;
(f) unsecured Debt of the Company to Subsidiaries;
(g) the RESTEC Bonds; provided that the RESTEC Bonds must be repaid or
--------
defeased not later than 360 days after the Closing Date; and
(h) the Loans made hereunder.
6.10 Liens. Not, and not permit any Subsidiary to, create or permit to
-----
exist any Lien on any of its real or personal properties, assets or rights of
whatsoever nature (whether now owned or hereafter acquired), except:
-32-
<PAGE>
(a) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in good
faith by appropriate proceedings and, in each case, for which it maintains
adequate reserves;
(b) Liens arising in the ordinary course of business (such as (i)
Liens of carriers, warehousemen, mechanics and materialmen and other
similar Liens imposed by law and (ii) Liens incurred in connection with
worker's compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
bonds, bids, performance bonds and similar obligations) for sums not
overdue or being contested in good faith by appropriate proceedings and not
involving any deposits or advances or borrowed money or the deferred
purchase price of property or services, and, in each case, for which it
maintains adequate reserves;
(c) Liens identified in the attached "Liens Schedule";
--------------
(d) subject to the limitation set forth in Section 6.9(c), (i) Liens
--------------
existing on property at the time of the acquisition thereof by the Company
or any Subsidiary (and not created in contemplation of such acquisition)
and (ii) Liens that constitute purchase money security interests on any
property securing debt incurred for the purpose of financing all or any
part of the cost of acquiring such property, provided that any such Lien
--------
attaches to such property within 60 days of the acquisition thereof and
such Lien attaches solely to the property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding $1,000,000 arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is effectively
stayed and the claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(f) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the Company
or any Subsidiary; and
(g) Liens in favor of the Senior Lenders arising under the Credit
Documents.
6.11 [Reserved].
----------
6.12 Restricted Payments. Not, and not permit any Subsidiary to, (a)
-------------------
declare or pay any dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any such stock or any warrants, units,
options or other rights in respect of such stock, (c) make any other
distribution to shareholders, or (d) set aside funds for any of the foregoing;
provided that any Subsidiary may declare and pay dividends to the Company or to
- --------
any other Wholly-Owned Subsidiary.
6.13 Mergers, Consolidations, Sales. Not, and not permit any Subsidiary
------------------------------
to, be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any stock of any class of, or any
partnership or joint venture interest in, any other Person, or sell,
-33-
<PAGE>
transfer, convey or lease all or any substantial part of its assets, or sell or
assign with or without recourse any receivables, except for (a) any such merger
or consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into the Company or into, with or to any other Wholly-
Owned Subsidiary; (b) any such purchase or other acquisition by the Company or
any Wholly-Owned Subsidiary of the assets or stock of any Wholly-Owned
Subsidiary; and (c) any such purchase or other acquisition by the Company or any
wholly-owned Subsidiary of the assets or stock of any other Person where (1)
such assets (in the case of an asset purchase) are for use, or such Person (in
the case of a stock purchase) is, or after the acquisition will be, engaged in
the business activities permitted by Section 6.20; (2) immediately before or
------------
after giving effect to such purchase or acquisition, no Event of Default or
Default shall have occurred and be continuing; (3) the aggregate consideration
to be paid by the Company and its Subsidiaries (including any Debt assumed or
issued in connection therewith, the amount thereof to be calculated in
accordance with GAAP) in connection with such purchase or other acquisition
after the date hereof (or any series of related acquisitions) is less than
$3,000,000 for any single transaction or series of related transactions and less
than $10,000,000 in the aggregate for all such transactions; (4) the Company is
in pro forma compliance with all the financial ratios and restrictions set forth
--- -----
in Section 6.8; and (5) the proceeds of any of the Loans hereunder are not used
-----------
to finance such transactions. Notwithstanding the foregoing, the Company shall
not, and shall not permit any Subsidiary to, consummate any such merger,
consolidation or purchase described above within the 120 days immediately
following the Closing Date without the prior written consent of the Lender other
than Future Acquisitions approved by the Lender.
6.14 Further Assurances. Take, and cause each Subsidiary to take, such
------------------
actions as are necessary, or as the Lender may reasonably request, from time to
time to ensure that the obligations of the Company and the Guarantors hereunder
and under the other Subordinated Loan Documents are enforceable in accordance
with their terms and are guaranteed by all of the Subsidiaries of the Company
(including, promptly upon the acquisition or creation thereof, the execution by
any Subsidiary acquired or created after the date hereof of a counterpart to
this Agreement); provided that no Foreign Subsidiary shall have an obligation to
--------
execute a counterpart hereto; and provided further that, so long as the RESTEC
-------- -------
Bonds issued by such Subsidiary are outstanding, neither of Netco-Waterbury,
Limited Partnership nor New Haven Residuals, Limited Partnership shall have an
obligation to execute a counterpart hereto.
6.15 Transactions with Affiliates. Not, and not permit any Subsidiary to,
----------------------------
enter into, or cause, suffer or permit to exist any transaction, arrangement or
contract with any of its other Affiliates (other than the Company and its
Subsidiaries) which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
6.16 Employee Benefit Plans. Maintain, and cause each Subsidiary to
----------------------
maintain, each Pension Plan in substantial compliance with all applicable
requirements of law and regulations.
6.17 Environmental Laws. Conduct, and cause each Subsidiary to conduct,
------------------
its operations and keep and maintain its property in material compliance with
all Environmental Laws (other than Immaterial Laws).
-34-
<PAGE>
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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<PAGE>
(i) bank deposits in the ordinary course of business; provided that
--------
the aggregate amount of all such deposits (excluding (x) amounts in payroll
accounts or for accounts payable, in each case to the extent that checks
have been issued to third parties, and (y) amounts maintained (in the
ordinary course of business consistent with past practice) in accounts of
any Person which is acquired by the Company or a Subsidiary in accordance
with the terms hereof during the 45 days following the date of such
acquisition) which are maintained with any bank other than a Senior Lender
shall not at any time exceed (x) in the case of such deposits with any
single bank, $115,000 for three consecutive Business Days and (y) in the
case of all such deposits, $1,115,000 for three consecutive Business Days;
provided that no Investment otherwise permitted by clause (b), (c), (d), (e),
- -------- ---------- --- --- ---
(f) or (g) shall be permitted to be made if, immediately before or after giving
- --- ---
effect thereto, any Event of Default or Default shall have occurred and be
continuing.
6.22 Other Subordinated Debt. The Company shall not and shall not permit
-----------------------
any of its Subsidiaries to, directly or indirectly, incur, create, or suffer to
exist any Debt that by its express terms is subordinate or junior in right of
payment (to any extent) to any Debt of the Company or a Guarantor unless, by its
terms or by the terms of the instrument creating or evidencing it, such Debt (A)
has a maturity and Weighted Average Life to Maturity longer than the Loans and
(B) is subordinate or junior in right of payment to the Loans (or, in the case
of a Guarantor, to the Guaranty).
6.23 Foreign Subsidiaries. Not at any time permit more than 10% of its
--------------------
consolidated assets to be owned by, or more than 10% of its consolidated
revenues for any Fiscal Quarter to be earned by, Foreign Subsidiaries.
6.24 Business Plan and Financial Projections. Not later than ten Business
---------------------------------------
Days after the Closing Date, deliver to the Lender a business plan and financial
projections of the Company and its Subsidiaries for Fiscal Years 2000 through
2006.
6.25 Amendments to Certain Documents. The Company shall not make or agree
-------------------------------
to any amendment to or modification of, or waive any of its rights under, any of
the terms of the Credit Agreement or any other agreement or instrument governing
any document relating to Debt which would (a) have the effect of (i) breaching
the covenant set forth in Section 6.9(a) hereof, (ii) increasing the principal
--------------
amount payable thereon or redemptions thereof, or (iii) providing for earlier
payment in respect of principal or redemptions or otherwise or (b) otherwise
adversely affect the interest of the Lender.
6.26 Listing. The Company shall use its reasonable best efforts to continue
-------
to have the Common Stock listed on the NASDAQ SmallCap Market ("Nasdaq") or a
------
national securities exchange for so long as any of the Convertible Preferred
Stock or any shares into which the Convertible Preferred Stock is convertible
are outstanding. Prior to the Closing, the Company shall prepare and submit to
Nasdaq a listing application covering the shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock and shall obtain approval for the
listing of such shares, subject to official notice of issuance.
-36-
<PAGE>
6.27 Current Public Information. The Company shall file all reports
--------------------------
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder and shall take such further
action as any holder or holders of the Convertible Preferred Stock may
reasonably request, all to the extent required to enable such holders to sell
the Convertible Preferred Stock pursuant to Rule 144 adopted by the SEC under
the Securities Act (as such rule may be amended from time to time) or any
similar rule or regulation hereafter adopted by the SEC. Upon request, the
Company shall deliver to any holder of the Convertible Preferred Stock a written
statement as to whether it has complied with such requirements.
6.28 Section 203 of the DGCL. The Board shall not adopt any resolution
-----------------------
containing any provisions relating to the exemption from Section 203 of the DGCL
granted to the Lender which would adversely affect or otherwise impair the
rights of the Lender thereunder.
6.29 Fiscal Year. The Company will not change its Fiscal Year from that
-----------
currently in effect.
6.30 Board. The maximum number of directors on the Board shall be fixed at
-----
no more than six; provided that the maximum number of directors on the Board may
be increased as a result of the exercise of any special rights to elect
directors upon events of default or events of noncompliance granted to the
holders of the Convertible Preferred Stock and the Lender or the holders of the
Note hereunder.
6.31 Filing of Information Statement. Within twenty (20) days after the
-------------------------------
Closing, the Company shall file with the SEC an information statement pursuant
to Section 14(c) and Regulation 14C of the Exchange Act regarding the
Stockholders Consent. The Company shall comply with all of its obligations
pursuant to Section 14(c) and Regulation 14C of the Exchange Act in connection
with the Stockholders Consent.
6.32 Amendment to Certificate of Incorporation. Twenty-one calender days
-----------------------------------------
after the date that the Company sends or gives its shareholders the information
statement required pursuant to Section 14(c) and Regulation 14C of the Exchange
Act relating to the Stockholders Consent, the Company shall file the Certificate
Amendment. The Company and the Board shall at all times comply with and give
effect to the provisions of the Certificate Amendment.
SECTION 7. EVENTS OF DEFAULT
7.1 Events of Default. If one or more of the following events set forth
-----------------
in Sections 7.2 through 7.15 hereof shall occur and be continuing it shall
-------------------------
constitute an event of default hereunder (the "Events of Default").
-----------------
7.2 Payment Default. The Company shall fail to pay (i) any principal of
---------------
the Note when the same becomes due and payable, whether upon maturity,
prepayment, acceleration or otherwise, (ii) any interest on the Note, for a
period of five (5) days after the same shall become due and payable
-37-
<PAGE>
or (iii) any other amount due hereunder within five (5) days after the same
shall become due and payable; or
7.3 Other Debt. (i) The Company shall fail to pay in excess of $2,000,000
----------
in the aggregate of Senior Indebtedness (including interest and fees) when due
(whether upon maturity, prepayment, acceleration or otherwise); (ii) the
maturity of the Senior Indebtedness shall have been accelerated (whether by
having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); (iii) the Company shall fail to pay in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt (including interest and fees) of the Company or any Subsidiary when
due (whether upon maturity, prepayment, acceleration or otherwise); or (iv) in
excess of $2,000,000 in the aggregate (less the aggregate amount of any payments
on the Senior Indebtedness which have not as of such time been paid when due) of
other Debt of the Company or any Subsidiary shall have been accelerated (whether
by having become due and payable by its terms or by having been declared due and
payable prior to its stated maturity); provided that the default by RESTEC under
any "non-transfer" provision in connection with the RESTEC Bonds shall not
constitute an Event of Default hereunder; or
7.4 Other Material Obligations. Default in the payment when due, or in
--------------------------
the performance or observance of, any material obligation of, or condition
agreed to by, the Company or any Subsidiary with respect to any material
purchase or lease of goods or services where such default, singly or in the
aggregate with other such defaults might reasonably be expected to have a
Material Adverse Effect (except only to the extent that the existence of any
such default is being contested by the Company or such Subsidiary in good faith
and by appropriate proceedings and appropriate reserves have been made in
respect of such default).
7.5 Non-Compliance with Provisions of This Agreement. (a) Failure by the
------------------------------------------------
Company or its Subsidiaries to comply with or to perform any covenant set forth
in Sections 6.7 through 6.15 or Sections 6.25, 6.28, 6.29, 6.30, 6.31 or 6.32;
------------ -----------------------------------------------------
or (b) failure by the Company or its Subsidiaries to comply with or to perform
any other provision of this Agreement (and not constituting an Event of Default
under any of the other provisions of this Section 7) and continuance of such
---------
failure for 30 days after notice thereof to the Company from the Lender; or
7.6 Breach of Representations or Warranties. Any representation or
---------------------------------------
warranty made by the Company in this Agreement or in any statement or
certificate at any time given by them in writing pursuant hereto or in
connection herewith or therewith is false or misleading (i) in any respect, in
the case of representations or warranties qualified by a materiality standard
including, without limitation, a "material adverse effect" qualifier, or (ii) in
any respect which is material to the business, assets, property, operations,
results, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, in the case of all other representations or
warranties, in each case on the date made or furnished; or
7.7 Involuntary Bankruptcy, Appointment of Receiver, etc. (a) A court
----------------------------------------------------
having jurisdiction shall enter a decree or order for relief in respect of the
Company or any Subsidiary in an involuntary case under the Bankruptcy Code or
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not dismissed, stayed or discharged within 60
days after
-38-
<PAGE>
filing; or any other similar relief is not granted and remains unstayed or
undismissed under any applicable federal or state law; or (b) an involuntary
case is commenced against the Company or any of its Subsidiaries under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Company or any of its Subsidiaries
or over all or a substantial part of any of their respective properties shall
have been entered; or an interim receiver, trustee or other custodian of the
Company or any of its Subsidiaries for all or a substantial part of their
respective properties is involuntarily appointed, such events under this clause
(b) continue for 60 days unless dismissed, bonded, stayed, vacated or
discharged; or
7.8 Voluntary Bankruptcy, Appointment of Receiver, etc. (a) The Company
--------------------------------------------------
or any of its Subsidiaries shall have an order for relief entered with respect
to it or commence a voluntary case under the Bankruptcy Code or any other
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; or (b) the Company or any of its Subsidiaries makes any assignment for
the benefit of creditors; or (c) the board of directors of the Company or any of
its Subsidiaries (or any committee thereof) adopts any resolution or otherwise
authorizes any action to approve any of the foregoing; or
7.9 Judgments. Final judgments which exceed an aggregate of $1,000,000
---------
shall be rendered against the Company or any Subsidiary and shall not have been
paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments; or
7.10 Dissolution. Any order, judgment or decree is entered against the
-----------
Company or any of its Subsidiaries decreeing the dissolution or split up of the
Company or such Subsidiary and such order remains undischarged or unstayed for a
period in excess of thirty (30) days; or
7.11 Solvency. The Company or any of its Subsidiaries ceases to be solvent
--------
or admits in writing its present or prospective inability to pay its debts as
they become due; or
7.12 Injunction. The Company or any of its Subsidiaries is enjoined,
----------
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business for more than thirty (30) days; or
7.13 ERISA; Pension Plans. (i) Institution of any steps by the Company or
--------------------
any other Person to terminate a Pension Plan if as a result of such termination
the Company could be required to make a contribution to such Pension Plan, or
could incur a liability or obligation to such Pension Plan, in excess of
$1,000,000; (ii) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA; or (iii) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Pension
Plan and the withdrawal liability (without unaccrued interest) to Multiemployer
Pension Plans as a result of such withdrawal (including any outstanding
-39-
<PAGE>
withdrawal liability that the Company and the Controlled Group have incurred on
the date of such withdrawal) exceeds $1,000,000; or
7.14 Invalidity of Subordinated Loan Documents. Any of the Subordinated
-----------------------------------------
Loan Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and effect or is
declared to be null and void, or the Company or its Subsidiaries denies that it
has any further liability under any Subordinated Loan Documents to which it is
party, or gives notice to such effect; or
7.15 Change in Control. (a) Any Person or group of Persons (within the
-----------------
meaning of Section 13 or 14 of the Exchange Act, but excluding (i) the executive
managers of the Company as of the Closing Date and (ii) GTCR Capital Partners,
L.P., GTCR Fund VII, L.P. ("GTCR Fund VII") and their respective Affiliates)
-------------
shall acquire beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of the outstanding voting stock of the Company equal to
the greater of (x) 25% of the then outstanding shares of voting stock of the
Company and (y) the proportion of the then outstanding shares of voting stock of
the Company held by GTCR Fund VII and its Affiliates; or (b) during any 12-month
period, individuals who at the beginning of such period constituted the Board
(together with any directors designated by the holders of the Convertible
Preferred Stock or the Lender and new directors whose election by the Board or
whose nomination for election by the Company's shareholders was approved by a
vote of at least majority of the directors who either were directors at
beginning of such period or whose election or nomination was previously so
approved) cease for any reason to constitute a majority of the Board; (each of
clauses (a) and (b) constituting a "Change of Control");
- ------------------- -----------------
7.16 Consequences of Default. Upon the occurrence and continuation of any
-----------------------
Event of Default (but subject to the terms of the Intercreditor Agreement):
7.16.1. With respect to any Event of Default (i) by the Guarantors or
(ii) by the Company other than pursuant to Section 7.7 or 7.8 hereof, the Lender
------------------
may, and shall upon the request of the Majority Holders, upon 30 days prior
written notice to the Lender, and upon written notice to the Company, declare
the Note to be due and payable, whereupon the principal amount of the Note,
together with accrued interest thereon, shall automatically become immediately
due and payable, without any other notice of any kind, and without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by the Company.
7.16.2. The Lender may exercise the rights granted to holders of the
Notes in Article Ninth, Part B of the Company's Certificate of Incorporation (as
---------------------
in effect following amendment by the Certificate Amendment) to elect an
additional director to the Company's Board.
7.16.3. With respect to any Event of Default by the Company pursuant
to Section 7.7 or 7.8 hereof, the principal amount of the Note, together with
------------------
accrued interest thereon, shall automatically become immediately due and
payable, without any other notice of any kind, and without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Company.
-40-
<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
not due and payable by the Company) shall forthwith become due and payable by
such Guarantor for purposes of Section 9.1.
-----------
9.7 Continuing Guarantee. The guarantee in this Section 9 is a continuing
-------------------- ---------
guarantee, and shall apply to all of the Loan Obligations whenever arising.
Notwithstanding anything to the contrary in this Agreement, upon (i) the release
by the Lenders under this Agreement and the Note of all guarantees of a
Guarantor, or (ii) the sale or disposition (whether by merger, stock purchase,
asset sale or otherwise) of a Guarantor (or all or substantially all of its
assets) to an entity which is not a Subsidiary of the Company and which sale or
disposition is otherwise in compliance with the terms of this Agreement, such
Guarantor shall be deemed released from all obligations under this Section 9
---------
without any further action required on the part of the Lender.
9.8 Subordination of Guaranteed Obligations. Notwithstanding anything to
---------------------------------------
the contrary in this Agreement, the Company, each Guarantor and the Lender, in
making the Loans hereunder, agrees and covenants that the Guaranteed Obligations
shall be subordinated and junior in right of payment to the prior payment in
full of the Senior Indebtedness, in the same manner, and to the same extent, as
the Loan Obligations are subordinated and junior in right of payment to the
Senior Indebtedness pursuant to the Intercreditor Agreement, if any.
SECTION 10. TRANSFERS OF NOTE; LEGENDS
10.1 Assignments of Note.
-------------------
10.1.1. Subject to the terms and conditions of the Credit Documents,
the Lender shall have the right at any time, to sell, assign, transfer or
negotiate all or any part of the Loans and the Note to one or more Persons, and
may grant participations in all or any part of the Note or the Loans evidenced
thereby to one or more Persons, provided in either case that such Person is an
Eligible Assignee. In the case of any sale, assignment, transfer or negotiation
of all or part of the Loans and the Note authorized under this Section 10.1 (but
------------
not in the case of a participation), the assignee, transferee or recipient shall
have, to the extent of such sale, assignment, transfer or negotiation, the same
rights, benefits and obligations as it would if it were a Lender with respect to
such Note or the Loans evidenced thereby.
10.1.2. The Company shall keep at its principal office a register in
which the Company shall provide for the registration of the Note and for the
transfer of the same. Upon surrender for registration of transfer of the Note
at the principal office of the Company, the Company shall, at its expense,
promptly execute and deliver one or more new Note of like tenor and of a like
aggregate principal amount, registered in the name(s) of such transferee(s) and,
in the case of a transfer in part, a new Note in the appropriate partial amount
registered in the name(s) of such transferor(s).
10.1.3. In connection with any sales, assignments or transfers of the
Note, the transferor shall give notice to the Company and the Lender of the
identity of such parties and obtain agreements from the transferees that all
nonpublic information given to such parties pursuant to this Agreement will be
held in strict confidence pursuant to a confidentiality agreement reasonably
satisfactory to the Company.
-44-
<PAGE>
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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<PAGE>
"THIS NOTE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
PURSUANT TO A SUBORDINATION AND INTERCREDITOR AGREEMENT (THE "INTERCREDITOR
AGREEMENT") TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANY
PURSUANT TO A SENIOR CREDIT AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT,
BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE
INTERCREDITOR AGREEMENT; AND A COPY OF THE INTERCREDITOR AGREEMENT SHALL BE
AVAILABLE UPON REQUEST TO THE COMPANY BY THE HOLDER HEREOF WITHOUT CHARGE."
10.5 Note Legend relating to Original Issue Discount. The Note shall bear
-----------------------------------------------
a legend in substantially the following form:
"THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN REQUEST TO THE
CHIEF EXECUTIVE OFFICER OF SYNAGRO TECHNOLOGIES, INC. IN HOUSTON, TEXAS,
INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT,
ISSUE DATE AND YIELD TO MATURITY WILL BE MADE AVAILABLE."
SECTION 11. MISCELLANEOUS
11.1 Expenses. If and only if the transactions contemplated hereby shall
--------
be consummated, the Company agrees to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and related
documents and all costs of furnishing all opinions by counsel for the Company
(including, without limitation, any opinions requested by the Lender as to any
legal matters arising hereunder), and of the Company's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, (ii) the reasonable fees, expenses and disbursements
of counsel to the Lender in connection with the negotiation, preparation, and
execution of the Documents and with the review of other documents related to the
Transactions and any Future Acquisitions, and any amendments and waivers hereto
or thereto and (iii) after the occurrence of an Event of Default, all costs and
expenses (including reasonable attorneys' fees) incurred by the Lender in
enforcing any obligations of or in collecting any payments due hereunder or
under the Note by reason of such Event of Default or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a workout, or any insolvency or bankruptcy
proceedings.
11.2 Indemnity.
---------
11.2.1. General. In addition to the payment of expenses pursuant to
-------
Section 11.1, whether or not the transactions contemplated hereby shall be
- ------------
consummated, the Company (as "Indemnitor") agrees to indemnify, pay and hold the
----------
Lender, and the officers, directors, employees, agents, and Affiliates of the
Lender (collectively called the "Indemnitees") harmless from and against any and
-----------
all other liabilities, costs, expenses liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of one counsel for such Indemnitees in connection
-46-
<PAGE>
with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto),
which may be imposed on, incurred by, or asserted against that Indemnitee, in
any manner relating to or arising out of this Agreement, the Loans or the other
documents related to the Transactions, the Lender's agreement to make the Loans
or the use or intended use of the proceeds of any of the proceeds thereof to the
Company (the "Indemnified Liabilities"); provided, that, the Indemnitor shall
----------------------- -------- ----
not have any obligation to an Indemnitee hereunder with respect to an
Indemnified Liability to the extent that such Indemnified Liability arises from
the gross negligence or willful misconduct of that Indemnitee. THIS INDEMNITY
INDEMNIFIES THE INDEMNITEES AGAINST THEIR OWN NEGLIGENCE. Each Indemnitee shall
give the Indemnitor prompt written notice of any claim that might give rise to
Indemnified Liabilities setting forth a description of those elements of such
claim of which such Indemnitee has knowledge; provided, that, any failure to
-------- ----
give such notice shall not affect the obligations of the Indemnitor unless (and
then solely to the extent) such Indemnitor is prejudiced. The Indemnitor shall
have the right at any time during which such claim is pending to select counsel
to defend and control the defense thereof and settle any claims for which they
are responsible for indemnification hereunder (provided, that, the Indemnitor
-------- ----
will not settle any such claim without (i) the appropriate Indemnitee's prior
written consent which consent shall not be unreasonably withheld or (ii)
obtaining an unconditional release of the appropriate Indemnitee from all claims
arising out of or in any way relating to the circumstances involving such claim)
so long as in any such event the Indemnitor shall have stated in a writing
delivered to the Indemnitee that, as between the Indemnitor and the Indemnitee,
the Indemnitor is responsible to the Indemnitee with respect to such claim to
the extent and subject to the limitations set forth herein; provided, that, the
-------- ----
Indemnitor shall not be entitled to control the defense of any claim in the
event that in the reasonable opinion of counsel for the Indemnitee there are one
or more material defenses available to the Indemnitee which are not available to
the Indemnitor; provided, further, that with respect to any claim as to which
-------- -------
the Indemnitee is controlling the defense, the Indemnitor will not be liable to
any Indemnitee for any settlement of any claim pursuant to this Section 11.2
------------
that is effected without its prior written consent. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Company shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them. No
Indemnitee (in its capacity as the Lender or holder of the Warrants or Warrant
Shares) shall be liable for any indirect or consequential damages in connection
with its activities relating to this Agreement, the Note or other documents
relating to the Transactions.
11.2.2. Environmental Liabilities. Without limiting the generality of
-------------------------
the indemnity set out in Section 11.2.1 above, the Company shall defend,
--------------
protect, indemnify and hold harmless the Lender and all other Indemnitees from
and against any and all actions, causes of action, suits, losses, liabilities,
damages, injuries, penalties, fees, costs, expenses and claims of any and every
kind whatsoever paid, incurred or suffered by, or asserted against, the Lender
or any other Indemnitee for, with respect to, or as a direct or indirect result
of, the past, present or future environmental condition of any property owned,
operated or used by the Company, any Subsidiary, their predecessors or
successors or of any offsite treatment, storage or disposal location associated
therewith, including, without limitation, the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, release, or threatened
release into, onto or from, any such property or location of any toxic, chemical
or hazardous substance, material or waste (including, without limitation, any
losses,
-47-
<PAGE>
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
-48-
<PAGE>
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
-49-
<PAGE>
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
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<PAGE>
LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION.
11.13 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO
--------------------
THE FULL EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER DOCUMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE LENDER FOR ANY LOST
PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL
FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER THE OTHER DOCUMENTS, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; THE COMPANY HEREBY WAIVES,
RELEASES AND AGREES NOT TO 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.
-51-
<PAGE>
11.16 Entirety. This Agreement and the Documents embody the entire
--------
agreement among the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
* * * * *
-52-
<PAGE>
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>
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/ Ross M. Patten
--------------------------
Name: Ross M. Patten
------------------------
Title: _______________________
NEW HAVEN RESIDUALS SYSTEMS, INC.
RESIDUAL TECHNOLOGIES SYSTEMS, INC.
FAIRHAVEN RESIDUAL SYSTEMS, INC.
NEW ENGLAND TREATMENT COMPANY, INC.
NETCO-CONNECTICUT, INC.
NETCO-WATERBURY SYSTEMS, INC.
NETCO-RESIDUALS MANAGEMENT SYSTEMS, INC.
By: /s/ Ross M. Patten
--------------------------
Name: Ross M. Patten
------------------------
Title: _______________________
<PAGE>
NETCO-RESIDUALS MANAGEMENT, LIMITED
PARTNERSHIP
By: Netco-Residuals Management Systems, Inc.,
its General Partner
By: /s/ Ross M. Patten
------------------------
Name: Ross M. Patten
----------------------
Title:______________________
RESIDUAL TECHNOLOGIES, LIMITED
PARTNERSHIP
By: Residual Technologies Systems, Inc.,
its General Partner
By: /s/ Ross M. Patten
------------------------
Name: Ross M. Patten
----------------------
Title:______________________
FAIRHAVEN RESIDUALS, LIMITED PARTNERSHIP
By: Fairhaven Residual Systems, Inc.,
its General Partner
By: /s/ Ross M. Patten
------------------------
Name: Ross M. Patten
----------------------
Title:______________________
PROVIDENCE SOILS, LLC
By: /s/ Ross M. Patten
---------------------------
its Member
By:_________________________
Name: Ross M. Patten
----------------------
Title:______________________
<PAGE>
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>
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.
-i-
<PAGE>
"Affiliate," as applied to any Person, means any other Person directly or
---------
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly,
indirectly or beneficially, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities or by contract or otherwise. The Lender nor any parent of the Lender
nor any Subsidiary of the Lender shall not be treated as an Affiliate of the
Company nor shall be deemed to be a holder of 5% or more of any class of equity
securities of the Company.
"Affiliated Group" means any affiliated group as defined in IRC (S)1504
----------------
that has filed a consolidated return for federal income tax purposes (or any
similar group under state, local or foreign law) for a period during which the
Company or any of its Subsidiaries was a member.
"Agent" has the meaning set forth in the recitals to the Agreement.
-----
"Agreement" means this Senior Subordinated Loan Agreement, as from time to
---------
time in effect, of which this Exhibit is a part.
"Applicable Asset Sale Proceeds" means the Net Cash Proceeds from any Asset
------------------------------
Sale, excluding (i) Net Cash Proceeds from any Asset Sale of transportation,
---------
processing and spreading equipment so long as such Net Cash Proceeds are used to
purchase similar transportation, processing or spreading equipment within six
months after such Asset Sale and (ii) the first $250,000 of Net Cash Proceeds
received from all other Asset Sales in any Fiscal Year.
"Approved Use" has the meaning set forth in Section 2.2.3 to the Agreement.
------------ -------------
"Asset Sale" means the sale, lease, assignment or other transfer for value
----------
by the Company or any Subsidiary to any Person (other than the Company or any
Subsidiary) of any asset or right of the Company or such Subsidiary (including
any sale or other transfer of stock of any Subsidiary, whether by merger,
consolidation or otherwise).
"Bankruptcy Code" means Title 11 of the United States Code, as now and
---------------
hereafter in effect, or any successor statute.
"Benefit Plan" has the meaning set forth in Section 4.19.1 of the
------------ --------------
Agreement.
"Board" means the Board of Directors of the Company.
-----
"Borrowers' Certificate" means, as applied to any company, a certificate
----------------------
executed on behalf of such company by its chairman of the board (if an officer),
its chief executive officer, its president or its Chief Financial Officer;
provided, that, every Borrowers' Certificate with respect to the compliance with
- -------- ----
a condition precedent to the making of loans hereunder shall include (i) a
statement that the officer or officers making or giving such Borrowers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement of
-ii-
<PAGE>
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.
-iii-
<PAGE>
"Change of Control" has the meaning set forth in Section 7.15 of the
----------------- ------------
Agreement.
"Chief Financial Officer" means the highest ranking officer of any company
-----------------------
then in charge of the financial matters of such company.
"Closing" has the meaning set forth in Section 2.4 to the Agreement.
------- -----------
"Closing Date" has the meaning set forth in Section 2.4 to the Agreement.
------------ -----------
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
successor statute.
"Common Stock" means the Company's common stock, par value $.002 per share.
------------
"Company" has the meaning set forth in the preamble to this Agreement.
-------
"Computation Period" means each period of four consecutive Fiscal Quarters
------------------
ending on the last day of a Fiscal Quarter.
"Consolidated Net Income" means, with respect to the Company and its
-----------------------
Subsidiaries for any period, the net income (or loss) of the Company and its
Subsidiaries for such period, excluding any extraordinary gains during such
---------
period.
"Controlled Group" means all members of a controlled group of corporations
----------------
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the Code or Section 4001 of ERISA.
"Contributor" has the meaning set forth in Section 9.5.1 to the Agreement.
----------- --------------
"Contribution Percentage" has the meaning set forth in Section 9.5.1 to the
----------------------- -------------
Agreement.
"Convertible Preferred Stock" means the Company's Series D Convertible
---------------------------
Preferred Stock, par value $.002 per share, and each other series of the
Company's convertible preferred stock issued, or from time to time issuable,
pursuant to the Preferred Stock Purchase Agreement and the exercise of Warrants
issued pursuant to the Warrant Agreement.
"Credit Agreement" has the meaning set forth in the recitals to the
----------------
Agreement, together with any schedules, exhibits, appendices or other
attachments thereto, as such agreement may be amended, restated, extended,
renewed, supplemented, refinanced, replaced or otherwise modified from time to
time (including, without limitation, by increasing the amount of available
borrowings thereunder or adding any direct or indirect Subsidiaries of the
Company as additional borrowers or guarantors thereunder) and whether by the
same or any other agent, lender or group of lenders.
"Credit Documents" means, collectively, the Credit Agreement, the related
----------------
security agreements, guarantees, pledge agreements, notes and the other
documents executed in connection
-iv-
<PAGE>
therewith, the Intercreditor Agreement, and each other document or instrument
executed by the Company, any Subsidiary of the Company or any other obligor
under any such documents, including any schedules, exhibits, appendices or other
attachments thereto.
"Debt" of any Person means, without duplication, (a) all indebtedness of
----
such Person for borrowed money, whether or not evidenced by bonds, debentures,
notes or similar instruments, (b) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person, (c) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person
(including the letters of credit), (f) all Hedging Obligations of such Person,
(g) all Suretyship Liabilities of such Person and (h) all Debt of any
partnership in which such Person is a general partner. The amount of any
Person's Debt in respect of any obligation to pay the deferred purchase price of
property or services where such obligation (including any such obligation
evidenced by a note or similar instrument) is contingent upon sales, revenues,
the achievement of a particular business goal or any similar test shall be the
maximum amount which (at any date of determination) is reasonably expected to be
paid in respect of such obligation as estimated by the Company (subject to the
approval of the Lender, which shall not be unreasonably withheld).
"Default" means any event, act or condition which with notice or lapse of
-------
time, or both, would constitute an Event of Default.
"DGCL" has the meaning set forth in Section 4.27 of the Agreement.
---- ------------
"Documents" means the Credit Documents, the Subordinated Loan Documents,
---------
the Acquisition Agreement, the Warrant Agreement, the Warrants, the Preferred
Stock Purchase Agreement, the Registration Agreement, the Professional Services
Agreement, the Monitoring Agreement and all documents, certificates and
agreements delivered with respect thereto, in each case, together with any
schedules, exhibits, appendices or other attachments thereto.
"EBITDA" means, for any period, Consolidated Net Income for such period
------
plus to the extent deducted in determining such Consolidated Net Income,
- ----
Interest Expense, income tax expense, depreciation and amortization for such
period.
"Eligible Assignee" means (i) any Lender or any affiliate (as defined in
-----------------
the Exchange Act) of any Lender, (ii) any commercial bank, insurance company,
mutual fund, (iii) any investment fund or finance company or other entity that
is an institutional "accredited investor" (as defined in Regulation D under the
Securities Act) and which extends credit or buys loans as one of its businesses
(such commercial bank, insurance company, mutual fund, investment fund, finance
company or other entity
-v-
<PAGE>
collectively referred to herein as a "Finance Company"), which, in the case of
any Finance Company, together with such Finance Company's affiliates (as defined
in the Exchange Act), has assets or assets under management equal to or greater
than $500,000,000.
"Environmental Claims" means all claims, however asserted, by any
---------------------
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law, or
for release of Hazardous Substances or injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
------------------
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed and enforceable duties, licenses, authorizations
and permits of, and agreements with, any governmental authority, in each case
relating to environmental matters.
"Environmental Lien" shall mean any Lien, whether recorded or unrecorded,
------------------
in favor of any governmental entity, relating to any liability of the Company or
any Subsidiary arising under any Environmental and Safety Requirements.
"Environmental and Safety Requirements" shall mean all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation).
"EPIC" means Environmental Protection & Improvement Co., a New Jersey
----
corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor statute.
"Event of Default" has the meaning set forth in Section 7.1 of the
---------------- -----------
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, and any successor statute.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means the fiscal year of the Company and its Subsidiaries,
-----------
which period shall be the 12-month period ending on December 31 of each year.
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., "Fiscal Year 1999") refer to the Fiscal Year ending on December 31 of
such calendar year.
"Fixed Charge Coverage Ratio" means:
---------------------------
-vi-
<PAGE>
(a) for any Computation Period ending on or prior to December 31, 2000, the
ratio of (i) Adjusted EBITDA less Adjusted Capital Expenditures for such
Computation Period to (ii) the sum of Interest Expense to the extent payable in
cash for such Computation Period plus the actual aggregate amount of all
principal payments on Debt required to be made by the Company and its
Subsidiaries during such Computation Period; provided that (x) in calculating
--------
Capital Expenditures, capital expenditures of any Person (or division or similar
business unit) acquired by the Company or any Subsidiary during such period
shall be included on a pro forma basis for such period and the capital
--- -----
expenditures of any Person (or division or similar business unit) disposed of by
the Company or any Subsidiary during such period shall be excluded on a pro
---
forma basis for such period and (y) in calculating Interest Expense, any Debt
- -----
incurred or assumed in connection with the acquisition of any Person (or
division or similar business unit) shall be assumed to have been incurred or
assumed on the first day of such period and any Debt assumed by any Person
(other than the Company or any Subsidiary) in connection with the disposition of
any Person (or division or similar business unit) disposed of by the Company or
any Subsidiary during such period shall be assumed to have been repaid on the
first day of such period; and
(b) for any Computation Period thereafter, the ratio of (i) EBITDA less
Adjusted Capital Expenditures for such Computation Period to (ii) the sum of
Interest Expense to the extent payable in cash for such Computation Period plus
the actual aggregate amount of all principal payments on Debt required to be
made by the Company and its Subsidiaries during such Computation Period.
"Foreign Subsidiary" means each Subsidiary of the Company which is
------------------
organized under the laws of any jurisdiction other than, and which is conducting
the majority of its business outside of, the United States or any state thereof.
"FRB" means the Board of Governors of the Federal Reserve System or any
---
successor thereto.
"Funded Debt" means all Debt of the Company and its Subsidiaries, excluding
-----------
(i) contingent obligations in respect of undrawn letters of credit and
Suretyship Liabilities (except, in each case, to the extent constituting
Suretyship Liabilities in respect of Debt of a Person other than the Company or
any Subsidiary), (ii) Hedging Obligations and (iii) Debt of the Company to
Subsidiaries and Debt of Subsidiaries to the Company or to other Subsidiaries.
"Funded Debt to Adjusted EBITDA Ratio" means, for any Computation Period,
------------------------------------
the ratio of (i) Funded Debt as of the last day of such Computation Period to
(ii) Adjusted EBITDA for such Computation Period.
"Future Acquisitions" has the meaning set forth in Section 2.2.3 to the
-------------------
Agreement.
"GAAP" means generally accepted accounting principles set forth from time
----
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination.
-vii-
<PAGE>
"GTCR Fund VII" has the meaning set forth in Section 7.15 to the Agreement.
------------- ------------
"Guaranteed Obligations" has the meaning set forth in Section 9.1.1 of the
----------------------
Agreement.
"Guarantor" means, on any day, each Subsidiary that has executed a
---------
counterpart of this Agreement (or is required to execute a counterpart of this
Agreement on that date).
"Guarantor Net Worth" has the meaning set forth in Section 9.5.1 of the
------------------- -------------
Agreement.
"Guaranty" has the meaning set forth in Section 9.1 of the Agreement
-------- -----------
"Hazardous Substances" means any hazardous waste, as defined by 42 U.S.C.
--------------------
(S)6903(5), any hazardous substance as defined by 42 U.S.C. (S)9601(14), any
pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) or any toxic
substance, oil or hazardous material or other chemical or substance regulated by
any Environmental Law, excluding household hazardous waste.
"Hedging Obligations" means, with respect to any Person, all liabilities of
-------------------
such Person under interest rate, currency and commodity swap agreements, cap
agreements and collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates, currency
exchange rates or commodity prices.
"Immaterial Law" means any provision of any Environmental Law the violation
--------------
of which will not (a) violate any judgment, decree or order which is binding
upon the Company or any Subsidiary, (b) result in or threaten any injury to
public health or the environment or any material damage to the property of any
Person or (c) result in any liability or expense (other than any de minimis
-- -------
liability or expense) for the Company or any Subsidiary; provided that no
provision of any Environmental Law shall be an Immaterial Law if the Lender has
notified the Company that the Lender has determined in good faith that such
provision is material.
"Indemnified Liabilities" has the meaning set forth in Section 11.2 of the
----------------------- ------------
Agreement.
"Indemnitees" has the meaning set forth in Section 11.2 of the Agreement.
----------- ------------
"Indemnitors" has the meaning set forth in Section 11.2 of the Agreement.
----------- ------------
"Initial Loan" has the meaning set forth in Section 2.2.2 of the Agreement.
------------
"Intellectual Property Rights" means all (i) patents, patent applications,
----------------------------
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names, logos and corporate names and registrations and applications for
registration thereof together with all of the goodwill associated therewith,
(iii) copyrights (registered or unregistered) and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer
software, data, data bases and documentation thereof, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how,
-viii-
<PAGE>
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial and marketing plans and customer and
supplier lists and information), (vii) other intellectual property rights and
(viii) copies and tangible embodiments thereof (in whatever form or medium).
"Intercreditor Agreement" has the meaning set forth in Section 8 of the
----------------------- ---------
Agreement.
"Interest Coverage Ratio" means, for any Computation Period, the ratio of
-----------------------
(a) EBITDA for such Computation Period plus, if applicable, any Special Charges
(net of any Recoveries received or taken) to (b) Interest Expense to the extent
payable in cash for such Computation Period.
"Interest Expense" means, as to any Person for any Computation Period, the
----------------
consolidated interest expense of the Company and its Subsidiaries for such
Computation Period (including all imputed interest on Capital Leases).
"Interest Payment Date" has the meaning set forth in Section 3.2.2 of the
--------------------- -------------
Agreement.
"Interest Period" has the meaning set forth in Section 3.2.2 of the
--------------- -------------
Agreement.
"Investment" means, relative to any Person, (a) any loan or advance made by
----------
such Person to any other Person (excluding any commission, travel or similar
advances made to directors, officers and employees of the Company or any of its
Subsidiaries), (b) any Suretyship Liability of such Person, (c) any ownership or
similar interest held by such Person in any other Person and (d) deposits and
the like relating to prospective acquisitions of businesses.
"Leases" has the meaning set forth in Section 4.10.2 of the Agreement.
------
"Lender" shall have the meaning set forth in the preamble to the Agreement,
------
and shall also mean any assignees of the Note pursuant to Section 10 of the
----------
Agreement.
"Lien" means, with respect to any Person, any interest granted by such
----
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, charge or other
security interest of any kind, whether arising by contract, as a matter of law,
by judicial process or otherwise.
"Loan" and "Loans" have the meaning set forth in Section 2.1 of the
---- ----- -----------
Agreement.
"Loan Obligations" mean any and all obligations of the Company or the
----------------
Guarantors under the Subordinated Loan Documents, including, without limitation,
the obligation to pay principal, interest, expenses, attorneys' fees and
disbursements, indemnities and other amounts payable thereunder or in connection
therewith or related thereto.
"Majority Holders" means the holders in interest of more than 50% of the
----------------
aggregate principal amount of the Note and Loans evidenced thereby.
-ix-
<PAGE>
"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).
-x-
<PAGE>
"Note" has the meaning set forth in Section 3.1 of this Agreement.
---- -----------
"Other Documents" means the Documents other than the Subordinated Loan
---------------
Documents.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in Section
------------ -------
3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer
- ----
Pension Plan), and to which the Company or any member of the Controlled Group
may have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
------------
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
------------
"Permitted Encumbrances" means (a) statutory liens for current taxes or
----------------------
other governmental charges with respect to the Real Property not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings by the Company and for which appropriate reserves have
been established in accordance with GAAP; (b) mechanics, carriers workers,
repairers and similar statutory liens arising or incurred in the ordinary course
of business for amounts which are not delinquent and which are not, individually
or in the aggregate, material to the operation of the Company's or its
Subsidiaries' business; (c) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the Real
Property which are not violated by the current use and operation of the Real
Property; and (d) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the Real Property which do not
materially impair the occupancy or use of the Real Property for the purposes for
which it is currently used in connection with the Company's or its Subsidiaries'
business.
"Permitted Refinancing Debt" means any Debt issued in exchange for, or the
--------------------------
net proceeds of which are used to refinance, renew, replace, defease or refund
the Senior Indebtedness (including, without limitation, the stated amounts of
letters of credit and all unused commitments); provided that: (1) the principal
-------- ----
amount of such Debt does not exceed the Maximum Senior Indebtedness (including,
without limitation, the stated amounts of letters of credit and all unused
commitments) at the time of such refinancing renewal, replacement, defeasance or
refunding (plus the amount of reasonable fees and expenses incurred in
connection therewith); (2) such Debt has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the Senior
Indebtedness being refinanced, renewed, replaced, defeased or refunded and such
Debt has a final maturity equal to or later than the Senior Indebtedness being
refinanced, renewed, replaced, defeased or refunded ; (3) such Debt is ranked
superior in right of payment to the Loans on terms at least as favorable to the
holders of the Loans as those, if any, contained in the documentation governing
the Senior Indebtedness (including the Intercreditor Agreement); (4) the annual
interest rate with respect to such Debt (x) if it is a fixed rate, it is not
more than 2% per annum more than, and such interest is payable no more
frequently than, that of the Senior Indebtedness as in effect on the date hereof
and (y) if it is a variable rate, the index used for the calculation of the
annual interest rate is substantially similar to and the margins applied to such
index are not more than 2% per annum more than, and such interest is payable no
more frequently than, that of the Senior Indebtedness as in effect on the date
-xi-
<PAGE>
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.
-xii-
<PAGE>
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Senior Funded Debt" means the remainder of (a) Funded Debt minus (b)
------------------ -----
Subordinated Debt.
"Senior Funded Debt to Adjusted EBITDA Ratio" means , for any Computation
-------------------------------------------
Period, the ratio of (i) Senior Funded Debt as of the last day of such
Computation Period to (ii) Adjusted EBITDA for such Computation Period.
"Senior Indebtedness" means all obligations of the Company now or hereafter
-------------------
incurred pursuant to the Credit Documents, including any increase, refinancing,
refunding, renewal, extension or replacement thereof permitted hereunder,
whether for principal, premium (if any), interest, fees or expenses payable
thereon or pursuant thereto.
"Senior Lenders" has the meaning set forth in the recitals to the
--------------
Agreement.
"Special Charges" means 1999 Special Charges and any charge taken by the
---------------
Company with respect to below market stock option prices provided for stock
options granted to its employees in conjunction with investments by GTCR VII,
the Lender and/or their Affiliates.
"Stockholders Consent" has the meaning set forth in Section 5.1.15 to the
-------------------- --------------
Agreement.
"Subordinated Debt" means (a) the Loan Obligations, (b) and any other Debt
-----------------
of the Company which is subordinated to the Senior Lenders.
"Subordinated Loan Documents" means, collectively, this Agreement, the
---------------------------
Note, and the Guaranties, including all exhibits, schedules and other
attachments thereto.
"Subsidiary" means, with respect to any Person, a corporation, partnership,
----------
limited liability company or other entity of which such Person and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares or
other ownership interests as have more than 50% of the ordinary voting power for
the election of directors or other managers of such entity. Unless the context
otherwise requires, each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Company.
"Suretyship Liability" means any agreement, undertaking or arrangement by
--------------------
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any indebtedness,
obligation or other liability of any other Person (other than by endorsements of
instruments in the course of collection), or guarantees the payment of dividends
or other distributions upon the shares of any other Person. The amount of any
Person's obligation in respect of any Suretyship Liability shall (subject to any
limitation set forth therein) be deemed to be the principal amount of the debt,
obligation or other liability supported thereby.
-xiii-
<PAGE>
"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>
EXHIBIT 6
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.
------------------------------
1A. 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."
--------------------
1B. 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.
1C. 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
<PAGE>
Loan. The date of each Subsequent Closing is hereinafter referred to as a
"Subsequent Closing Date").
-----------------------
1D. 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 2. 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:
2A. Good Standing. The Company is a corporation duly organized,
-------------
validly existing and in good standing under the laws of the State of Delaware.
2B. 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).
2C. 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.
2D. 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, be duly and validly issued, fully paid and non-
assessable, and free and clear of all liens, claims and encumbrances.
-2-
<PAGE>
2E. 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.
2F. 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 3. Investment Representations; Legends.
-----------------------------------
3A. 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.
3B. 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.
3C. 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.
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
-3-
<PAGE>
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 4. 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 5. Miscellaneous
-------------
5A. 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.
"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.
-4-
<PAGE>
"Warrant Shares" means, collectively, the Initial Warrant Shares and
--------------
any Subsequent Warrant Shares then outstanding.
5B. 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
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.
-5-
<PAGE>
5C. 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.
5D. Amendment. This Agreement may be amended only by a written
---------
instrument signed by the Company, the holders of a majority of the Warrant
Shares.
5E. 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.
5F. 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.
5G. 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.
5H. 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.
5I. 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.
5J. 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.
5K. 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.
-6-
<PAGE>
5L. 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.
* * * *
-7-
<PAGE>
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>
Capitalization Schedule
<PAGE>
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>
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
-------------------
1A. 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.
1B. 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.
(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
-2-
<PAGE>
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.
1C. 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.
-3-
<PAGE>
Section 2. 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.
- ---------
2A. 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.
2B. 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.
-4-
<PAGE>
2C. 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.
---------
2D. 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.
(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 3. 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 4. 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 5. Definitions. The following terms have meanings set forth
-----------
below:
-5-
<PAGE>
"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.
"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 6. 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 7. 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 8. 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
-6-
<PAGE>
shall be issued. All Warrants representing portions of the rights hereunder are
referred to herein collectively as the "Warrant."
-------
Section 9. 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).
Section 10. 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 11. 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 12. 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 13. 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 jurisdictions) that would
cause the application of the laws of any jurisdiction other than the State of
Illinois.
* * * *
-7-
<PAGE>
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>
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>
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:
Names of Assignee Address Class of Shares No. of Shares
- ----------------- ------- --------------- -------------
Dated: Signature _______________________
_______________________
Witness _______________________
<PAGE>
Exhibit 7
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
<PAGE>
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 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
-2-
<PAGE>
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.
(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
-3-
<PAGE>
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.
(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.
-4-
<PAGE>
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 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
-5-
<PAGE>
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 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;
-6-
<PAGE>
(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 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
-7-
<PAGE>
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.
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.
-8-
<PAGE>
(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 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 such Losses
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
-9-
<PAGE>
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 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
-10-
<PAGE>
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 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
-11-
<PAGE>
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).
------------
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
-12-
<PAGE>
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.
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
-13-
<PAGE>
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 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
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<PAGE>
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 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>
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>
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
