-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QdCPQkFBn9mfBvPyon2DDNZ8KRnHMnIW6+NixOYLNrwRTNZq0WaV2CMcBESPAHSn LLXuFnmt/3wYaEjHDAFjRg== /in/edgar/work/20000719/0000950131-00-004408/0000950131-00-004408.txt : 20000920 0000950131-00-004408.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950131-00-004408 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000719 GROUP MEMBERS: CHURCHILL CAPITAL ENVIRONMENTAL GROUP MEMBERS: CHURCHILL CAPITAL, INC. GROUP MEMBERS: CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ASCHE TRANSPORTATION SERVICES INC CENTRAL INDEX KEY: 0000927809 STANDARD INDUSTRIAL CLASSIFICATION: [4213 ] IRS NUMBER: 363964954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-50651 FILM NUMBER: 675534 BUSINESS ADDRESS: STREET 1: 10214 N MT VERNON RD CITY: SHANNON STATE: IL ZIP: 61078 BUSINESS PHONE: 8158642421 MAIL ADDRESS: STREET 1: 10214 N MT VERNON ROAD CITY: SHANNON STATE: IL ZIP: 61078 FORMER COMPANY: FORMER CONFORMED NAME: AASCHE TRANSPORTATION SERVICES INC DATE OF NAME CHANGE: 19940802 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS LP CENTRAL INDEX KEY: 0001074863 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 411927528 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3100 METROPOLITAN CENTRE STREET 2: 333 S 7TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6126736700 MAIL ADDRESS: STREET 1: 333 SOUTH 7TH STREET STREET 2: SUITE 3100 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 SC 13D/A 1 0001.txt AMENDMENT # 4 TO FORM SC 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D Under the Securities Exchange Act of 1934 (Amendment No. 4)* ASCHE TRANSPORTATION SERVICES, INC. (Name of Issuer) COMMON STOCK, PAR VALUE $.0001 (Title of Class of Securities) 04362T100 (CUSIP Number) KEVIN C. DOOLEY, ESQ. SENIOR VICE PRESIDENT AND LEGAL COUNSEL CHURCHILL CAPITAL, INC. 3100 METROPOLITAN CENTRE 333 SOUTH 7TH STREET MINNEAPOLIS, MINNESOTA 55402 (612) 673-6708 ________________________________________________________________________________ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 7, 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 Rule 13d-1(b)(3) or (4), check the following box [_]. - ------------------ -------------------- CUSIP No. 04362T00 13D Page 2 of 10 Pages - ------------------ -------------------- - ------------------------------------------------------------------------------ NAMES OF REPORTING PERSON 1 CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 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 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 6,727,778 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 6,727,778 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 6,727,778 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 53% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 PN - ------------------------------------------------------------------------------ * SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------ -------------------- CUSIP No. 04362T00 13D Page 3 of 10 Pages - ------------------ -------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 CHURCHILL CAPITAL ENVIRONMENTAL L.L.C. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 AF - ------------------------------------------------------------------------------ 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 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 6,727,778 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 6,727,778 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 6,727,778 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 53% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ * SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------ -------------------- CUSIP No. 04362T00 13D Page 4 of 10 Pages - ------------------ -------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 CHURCHILL CAPITAL, INC. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2 (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4 AF - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E) [_] 5 - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 MINNESOTA - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 6,727,778 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 6,727,778 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 6,727,778 - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12 [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 53% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14 CO - ------------------------------------------------------------------------------ * SEE INSTRUCTIONS BEFORE FILLING OUT! SCHEDULE 13D ------------ This Amendment No. 4 relates to shares of Common Stock, $0.0001 par value per share ("Common Stock"), of Asche Transportation Services, Inc., a Delaware ------------ corporation (the "Issuer") with principal offices located at 10214 North Mount ------ Vernon Road, Shannon, Illinois 61078, and is being filed jointly by Churchill Environmental & Industrial Equity Partners, L.P., a Delaware limited partnership ("CEIP"), Churchill Capital Environmental, L.L.C., a Delaware limited liability ---- company ("CCE"), and Churchill Capital, Inc., a Minnesota corporation ("CCI", --- --- and together with CEIP and CCE, the "Reporting Persons"). This Amendment No. 4 ----------------- supplements and amends the statement on Schedule 13D originally filed with the Commission on September 17, 1999, as amended by Amendment No. 1 filed with the Commission on or about October 6, 1999, Amendment No. 2 filed with the Commission on May 24, 2000 ("Amendment No. 2"), and Amendment No. 3 filed with --------------- the Commission on June 20, 2000 ("Amendment No. 3") (as amended, the --------------- "Statement"). --------- Item 3. Source and Amount of Funds or Other Consideration - ------- ------------------------------------------------- The Issuer issued the Warrant (as defined below) to CEIP in consideration of a $7,000,000 investment by CEIP in Specialty Transportation Services, Inc. ("STS"), a wholly owned subsidiary of the Issuer. The proceeds of such --- investment were and will be used as working capital by STS and to fund an intercompany loan (the "Intercompany Loan") in the amount of $2,250,000 by STS ----------------- to the Issuer. The source of the funds invested in STS by CEIP, a private investment fund, as part of the Transaction was investment funds provided to CEIP by its limited partners. Item 4. Purpose of Transaction - ------- ---------------------- On July 7, 2000, CEIP, STS and the Issuer entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement") and related documents and ------------------ agreements, and the transactions contemplated thereunder were consummated as of such date. Such transactions consisted of an investment by CEIP in STS in the amount of $7,000,000 in exchange for (a) a senior subordinated convertible promissory note (the "Note") convertible at any time into at least 70% but no ---- more than 85% of the common stock of STS (such variance to depend upon the amount and form of interest paid under the Note and whether certain cash flow targets for STS's 2000 fiscal year are achieved, as more fully described in the Purchase Agreement), (b) the issuance by the Issuer of a warrant (the "Warrant") ------- to acquire 950,000 shares of Common Stock (or the greater number of shares necessary to protect the holder's anti-dilution rights as described more fully in the Purchase Agreement), and (c) the issuance by the Issuer of 3,111,111 shares of Common Stock in acceleration of CEIP's right thereto as set forth under the Stock Purchase Agreement among STS, the Issuer and CEIP dated August 17, 1999. The material terms of the transactions contemplated under the Purchase Agreement were memorialized in the Letter of Intent among CEIP, STS and the Issuer dated as of June 9, 2000 (described in Amendment No. 3). Item 5. Interest in Securities of the Issuer - ------- ------------------------------------ As of the date of filing of this Amendment No. 4, the Reporting Persons directly own 5,777,778 shares of Common Stock, representing approximately 45.52% of the outstanding shares of Common Stock on a fully diluted basis. If the Warrant is exercised by CEIP, CEIP would hold 6,727,778 shares, or 53% of the outstanding shares of Common Stock on a fully diluted basis. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to - ------- ------------------------------------------------------------------------ Securities of the Issuer ------------------------ CEIP holds the right to acquire an aggregate of 6,727,778 shares of Common Stock, or 53% of the outstanding shares of Common Stock on a fully diluted basis. Neither the filing of this Statement nor any of its contents shall be deemed to constitute an admission that the Reporting Persons (or any of them) are the beneficial owners of any shares of Common Stock referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or for any other purpose, and such beneficial ownership is expressly disclaimed. 2 EXHIBIT INDEX ------------- Exhibit 7.1. Note and Warrant Purchase Agreement dated July 7, 2000, among - ------------ the Issuer, STS and CEIP Exhibit 7.2. Stock Purchase Warrant dated July 7, 2000, issued by the Issuer - ------------ to CEIP Exhibit 7.3. Convertible Senior Subordinated Promissory Note dated July 7, - ------------ 2000, by STS in favor of CEIP Exhibit 7.4. Amendment No. 1 to Registration Rights Agreement dated July 7, - ------------ 2000, between the Issuer and CEIP Exhibit 7.5 Security Agreement dated July 7, 2000, between STS and CEIP - ----------- Exhibit 7.6. Subordination and Intercreditor Agreement dated July 7, 2000, - ------------ among STS, CEIP and Mellon Bank, N.A. 3 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. Dated: July 19, 2000 CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership By Churchill Capital Environmental, L.L.C., a Delaware limited liability company Its General Partner By Churchill Capital, Inc. Its Managing Agent By: /s/ Kevin C. Dooley ----------------------------------- Name: Kevin C. Dooley Title: Senior Vice President and Legal Counsel 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. Dated: July 19, 2000 CHURCHILL CAPITAL ENVIRONMENTAL, L.L.C. By Churchill Capital, Inc. Its Managing Agent By: /s/ Kevin C. Dooley -------------------------------- Name: Kevin C. Dooley Title: Senior Vice President and Legal Counsel 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. Dated: July 19, 2000 CHURCHILL CAPITAL, INC. By: /s/ Kevin C. Dooley --------------------------------------- Name: Kevin C. Dooley Title: Senior Vice President and Legal Counsel EX-7.1 2 0002.txt NOTE & WARRANT PURCHASE DATED JULY 7, 2000 [EXECUTION COPY] NOTE AND WARRANT PURCHASE AGREEMENT DATED JULY 7, 2000 BETWEEN CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., ASCHE TRANSPORTATION SERVICES, INC., AND SPECIALTY TRANSPORTATION SERVICES, INC. TABLE OF CONTENTS -----------------
Page ---- 1. Authorization and Closing.................................................................................. 1 ------------------------- 1A. Authorization of the Note and the Warrant............................................................. 1 ----------------------------------------- 1B. Purchase and Sale of the Note and the Warrant......................................................... 1 --------------------------------------------- 1C. The Closing........................................................................................... 1 ----------------- 1D. Issuance of Additional Shares......................................................................... 1 ----------------------------- 2. Conditions of Purchaser's Obligation at the Closing........................................................ 2 --------------------------------------------------- 2A. Representations and Warranties; Covenants............................................................. 2 ----------------------------------------- 2B. Registration Agreement................................................................................ 2 ---------------------- 2C. Security Agreement.................................................................................... 2 ------------------ 2D. STS Credit Agreement.................................................................................. 2 -------------------- 2E. Subordination Agreement............................................................................... 2 ----------------------- 2F. Intercompany Loan and Business Plan................................................................... 3 2G. ATS Credit Agreement.................................................................................. 3 2H. STS and ATS Unsecured Creditors....................................................................... 3 ------------------------------- 2I. Consents and Approvals................................................................................ 3 ---------------------- 2J. Fairness Opinion...................................................................................... 4 ---------------- 2K. STS Business Plan..................................................................................... 4 ----------------- 2L. No Material Adverse Change............................................................................ 4 -------------------------- 2M. No Litigation......................................................................................... 4 ------------- 2N. Charter Amendments.................................................................................... 4 ------------------ 2O. Special Account....................................................................................... 4 --------------- 2P. Securities Law Compliance............................................................................. 5 ------------------------- 2Q. Opinion of Counsel.................................................................................... 5 ------------------ 2R. Closing Documents..................................................................................... 5 ----------------- 2S. Proceedings........................................................................................... 6 ----------- 2T. Waiver................................................................................................ 6 ------ 2U. Expenses.............................................................................................. 6 -------- 3. Covenants.................................................................................................. 6 --------- 3A. Financial Statements and Other Information............................................................ 6 ------------------------------------------ 3B. Inspection of Property................................................................................ 9 ---------------------- 3C. Attendance at Board Meetings.......................................................................... 9 ---------------------------- 3D. ATS Restrictive Covenants............................................................................. 9 ------------------------- 3E. ATS Affirmative Covenants............................................................................. 10 ------------------------- 3F. Use of Proceeds....................................................................................... 11 --------------- 3G. Intentionally Omitted................................................................................. 11 --------------------- 3H. Insurance............................................................................................. 11 --------- 3I. Payment of Taxes and Other Potential Charges and Priority Claims...................................... 11 ---------------------------------------------------------------- 3J. Preservation of Corporate Status....................................................................... 12 --------------------------------
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Page ---- 3K. Governmental Approvals and Filings.................................................................... 12 ---------------------------------- 3L. Maintenance of Properties............................................................................. 12 ------------------------- 3M. Avoidance of Other Conflicts.......................................................................... 12 ---------------------------- 3N. Financial Accounting Practices........................................................................ 13 ------------------------------ 3O. Continuation of or Change in Business................................................................. 13 ------------------------------------- 3P. Consolidated Tax Return............................................................................... 13 ----------------------- 3Q. Fiscal Year........................................................................................... 13 ----------- 3R. Plan and Multiemployer Plans.......................................................................... 13 ---------------------------- 3S. Liens................................................................................................. 14 ----- 3T. Indebtedness.......................................................................................... 15 ------------ 3U. Guaranties, Indemnities, etc.......................................................................... 16 ----------------------------- 3V. Loans, Advances and Investments....................................................................... 16 ------------------------------- 3W. Dividends and Related Distributions................................................................... 17 ----------------------------------- 3X. Sale-Leasebacks....................................................................................... 17 --------------- 3Z. Mergers, Acquisitions, etc............................................................................ 17 --------------------------- 3AA. Dispositions of Properties............................................................................ 18 -------------------------- 3BB. Subsidiaries.......................................................................................... 18 ------------ 3CC. Dealings with Affiliates.............................................................................. 18 ------------------------ 3DD. Capital Expenditures.................................................................................. 18 -------------------- 3EE. Issuance of Equity.................................................................................... 19 ------------------ 3FF. Limitations on Modification of Certain Agreements and Instruments..................................... 19 ----------------------------------------------------------------- 3GG. Limitation on Payments and Modification of Restricted Indebtedness.................................... 19 ------------------------------------------------------------------ 3HH. Limitation on Other Restrictions on Liens, Transfer or Dispositions................................... 19 ------------------------------------------------------------------- 3II. Limitation on Other Restrictions on Amendment of the Loan Documents, etc.............................. 20 4. Representations and Warranties of ATS and STS.............................................................. 20 --------------------------------------------- 4A. Organization, Corporate Power and Licenses............................................................ 20 ------------------------------------------ 4B. Capital Stock and Related Matters..................................................................... 20 --------------------------------- 4C. Subsidiaries; Investments............................................................................. 21 ------------------------- 4D. Authorization; No Breach.............................................................................. 21 ------------------------ 4E. Financial Statements.................................................................................. 22 -------------------- 4F. Absence of Undisclosed Liabilities.................................................................... 23 ---------------------------------- 4G. No Material Adverse Change............................................................................ 23 -------------------------- 4H. Assets................................................................................................ 23 ------ 4I. Tax Matters........................................................................................... 23 ----------- 4J. Contracts and Commitments............................................................................. 24 ------------------------- 4K. Intellectual Property Rights.......................................................................... 24 ---------------------------- 4L. Litigation, and Related Matters....................................................................... 25 ------------------------------- 4M. Brokerage............................................................................................. 25 --------- 4N. Insurance............................................................................................. 25 --------- 4O. Employees............................................................................................. 25 ---------
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Page ---- 4P. ERISA................................................................................................. 26 ----- 4Q. Compliance with Laws.................................................................................. 27 -------------------- 4R. Environmental and Safety Matters...................................................................... 27 -------------------------------- 4S. Affiliated Transactions............................................................................... 29 ----------------------- 4T. Solvency, etc......................................................................................... 29 -------------- 4U. Investment Company; Public Utility Holding Company.................................................... 29 -------------------------------------------------- 4W. Disclosure............................................................................................ 29 ---------- 4X. Knowledge............................................................................................. 30 --------- 5. Transfer of Restricted Securities.......................................................................... 30 --------------------------------- 5A. General Provisions.................................................................................... 30 ------------------ 5B. Opinion Delivery...................................................................................... 30 ---------------- 5C. Rule 144A............................................................................................. 30 --------- 5D. Legend Removal........................................................................................ 30 -------------- 5E. Purchaser's Investment Representations................................................................ 30 -------------------------------------- 6. Terms Applicable to the Note............................................................................... 31 ---------------------------- 6A. Events of Default..................................................................................... 31 ----------------- 6B. Consequences of Events of Default..................................................................... 32 --------------------------------- 6C. Business Days......................................................................................... 33 ------------- 6D. Usury Laws............................................................................................ 33 ---------- 6E. Conversion............................................................................................ 34 ---------- 6F. Liquidating Dividends................................................................................. 40 --------------------- 6G. Purchase Rights....................................................................................... 41 --------------- 7. Definitions................................................................................................ 41 ----------- 7A. Definitions........................................................................................... 41 ----------- 8. Miscellaneous.............................................................................................. 50 ------------- 8A. Expenses.............................................................................................. 50 -------- 8B. Closing Fee........................................................................................... 50 ----------- 8C. Remedies.............................................................................................. 50 -------- 8D. Intentionally Omitted................................................................................. 51 --------------------- 8E. Consent to Amendments................................................................................. 51 --------------------- 8F. Survival of Representations and Warranties............................................................ 51 ------------------------------------------ 8G. Successors and Assigns................................................................................ 51 ---------------------- 8H. Generally Accepted Accounting Principles.............................................................. 51 ---------------------------------------- 8I. Severability.......................................................................................... 51 ------------ 8J. Counterparts.......................................................................................... 51 ------------ 8K. Descriptive Headings; Interpretation.................................................................. 51 ------------------------------------ 8L. Governing Law......................................................................................... 52 ------------- 8N. Notices............................................................................................... 52 -------
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Page ---- 8O. Consideration for the Note and the Warrant............................................................ 53 ------------------------------------------ 8P. No Strict Construction................................................................................ 53 ---------------------- 8Q. Indemnification....................................................................................... 54 --------------- 8R. Payment Set Aside..................................................................................... 54 -----------------
SCHEDULES AND EXHIBITS ---------------------- List of Exhibits - --------------- Exhibit A Note Exhibit B Warrant Exhibit C Registration Agreement Amendment Exhibit D Security Agreement Exhibit E Subordination Agreement Exhibit F Opinion of Counsel List of Disclosure Schedules - ---------------------------- Equity Schedule Sources and Uses Schedule Guaranty Schedule Loans and Investments Schedule Affiliated Transactions Schedule Capitalization Schedule Subsidiary Schedule Restrictions Schedule Financial Statements Schedule Liabilities Schedule Material Adverse Change Schedule Taxes Schedule Intellectual Property Schedule Litigation Schedule Brokerage Schedule Employees Schedule ERISA Schedule Compliance Schedule Environmental Schedule Affiliated Transactions Schedule -iv- THIS AGREEMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AND INTERCREDITOR AGREEMENT, DATED AS OF JULY 7, 2000, IN FAVOR OF MELLON BANK, N.A., AS AGENT NOTE AND WARRANT PURCHASE AGREEMENT ----------------------------------- THIS AGREEMENT is made as of July 7, 2000, among Asche Transportation Services, Inc., a Delaware corporation ("ATS"), Specialty Transportation --- Services, Inc., an Illinois corporation ("STS"), and Churchill Environmental & --- Industrial Equity Partners, L.P., a Delaware limited partnership ("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 Note and the Warrant. STS shall authorize ----------------------------------------- the issuance and sale to Purchaser of its Convertible Senior Subordinated Promissory Note in an aggregate principal amount of $7,000,000, containing the terms and conditions and in the form set forth in Exhibit A attached hereto (the --------- "Note" and together with all PIK Notes issued with respect thereto, the "Notes") ---- ----- which shall be initially convertible in accordance with the provisions of Section 6E below into 10,500,000 shares of STS Common Stock. ATS shall authorize the issuance and sale to Purchaser of its Stock Purchase Warrant, containing the terms and conditions and in the form set forth in Exhibit B --------- attached hereto (the "Warrant"), to acquire 950,000 shares of ATS Common Stock. ------- 1B. Purchase and Sale of the Note and the Warrant. At the Closing, --------------------------------------------- STS and ATS shall sell to Purchaser and, subject to the terms and conditions set forth herein, Purchaser shall purchase from STS and ATS, respectively, the Note and the Warrant, in exchange for $7,000,000 (the "Purchase Price"). -------------- 1C. The Closing. The closing of the purchase and sale of the Note ----------- and the Warrant (the "Closing") shall take place at the offices of Kirkland & ------- Ellis at 10:00 a.m. on July 7, 2000, or at such other place or on such other date as may be mutually agreeable to ATS, STS and Purchaser. At the Closing, STS and ATS shall deliver to Purchaser instruments evidencing the Note payable to the order of Purchaser or its nominee and the Warrant registered in Purchaser's or its nominee's name upon payment of the Purchase Price by Purchaser by wire transfer of immediately available funds to STS in an amount equal to the Purchase Price. 1D. Issuance of Additional Shares. In further consideration of ----------------------------- Purchaser entering into the transactions contemplated hereby, ATS, STS and Purchaser hereby agree that the issuance of ATS Common Stock to Purchaser pursuant to Section 2.02(c) of the Stock Purchase Agreement among STS, ATS and Purchaser dated August 17, 1999 (the "Asche Stock Purchase Agreement") as ------------------------------ "Additional Shares" (as defined in the Asche Stock Purchase Agreement) shall be ----------------- accelerated and shall be effected at the Closing, notwithstanding the fact that the Adjustment Period (as defined in the Asche Stock Purchase Agreement) has not expired or that any of the other conditions to the issuance of the Additional Shares have not been satisfied. Accordingly, at the Closing, ATS shall issue to Purchaser 3,111,111 shares of ATS Common Stock, free and clear of all Liens and other encumbrances, in full satisfaction of its obligation to issue the Additional Shares and ATS shall deliver to Purchaser a certificate evidencing the Additional Shares requested in Purchaser's or its nominee's name. Section 2. Conditions of Purchaser's Obligation at the Closing. The --------------------------------------------------- obligation of Purchaser to purchase and pay for the Note and the Warrant 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 4 hereof shall be true and correct as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein, and ATS and STS shall have performed in all material respects all of the covenants required to be performed by it hereunder prior to the Closing. 2B. Registration Agreement. ATS and Purchaser shall have amended the ---------------------- Registration Rights Agreement dated as of August 17, 1999 (the "Registration ------------ Agreement") to provide that Purchaser shall be entitled to all rights and - --------- benefits thereunder with respect to all ATS Common Stock held by Purchaser prior to and following the issuance of the Additional Shares and the exercise of the Warrant, such amendment to be in form and substance as set forth in Exhibit C --------- attached hereto (the "Registration Agreement Amendment"), and the Registration -------------------------------- Agreement Amendment and the Registration Agreement, as amended by the Registration Agreement Amendment, shall be in full force and effect as of the Closing. 2C. Security Agreement. STS and Purchaser shall have entered into a ------------------ security agreement (the "Security Agreement") in form and substance as set forth ------------------ in Exhibit D attached hereto, and the Security Agreement shall be in full force --------- and effect at the Closing. 2D. STS Credit Agreement. The Credit Agreement dated as of January -------------------- 30, 1998, amended and restated as of July 7, 2000, among STS, the lender parties thereto (the "Senior Lenders") Mellon Bank, N.A., as issuing bank and as agent -------------- (the "Agent"), as amended (the "STS Credit Agreement"), shall have been executed ----- -------------------- and delivered by the parties thereto in form and substance satisfactory to Purchaser. 2E. Subordination Agreement. STS, Purchaser and the Agent on behalf ----------------------- of the Senior Lenders shall have entered into a subordination and intercreditor agreement (the "Subordination Agreement") setting forth the respective rights ----------------------- and priorities of Purchaser and the Agent on behalf of the Senior Lenders with respect to STS, in form substantially the same as that attached hereto as Exhibit E, and the Subordination Agreement shall be in full force and effect at - --------- the Closing. -2- 2F. Intercompany Loan and Business Plan. The documentation for the ----------------------------------- Intercompany Loan (including, without limitation, a subordination agreement with ATS's senior lenders) shall have been executed and delivered by ATS, STS and the other parties thereto in form and substance reasonably satisfactory to Purchaser, and a two-year business plan for ATS and its Subsidiaries shall have been submitted to Purchaser in form and substance reasonably satisfactory to Purchaser. 2G. ATS Credit Agreement. The Loan and Security Agreement dated as -------------------- of June 23, 1998, among Asche Transfer, Inc. and AG Carriers, Inc. (as borrowers), ATS (as guarantor) and American National Bank and Trust Company of Chicago, as amended (the "ATS Credit Agreement"), shall have been amended by the -------------------- parties thereto in form and substance satisfactory to Purchaser. 2H. STS and ATS Unsecured Creditors. Agreements in form and ------------------------------- substance reasonably satisfactory to Purchaser shall have been reached between (i) ATS and Richard S. Baugh, (ii) STS and trade creditors of STS to which STS owes a minimum aggregate amount of $750,000, and (iii) trade creditors of ATS or its Subsidiaries (other than STS) to which ATS or its Subsidiaries other than STS owe a minimum aggregate amount of $750,000, providing for the extension of the period during which the respective amounts owed by STS, ATS and its Subsidiaries (as appropriate) must be paid. 2I. Consents and Approvals. ---------------------- (i) ATS and STS shall have received or obtained all stockholder and third-party consents and approvals that are necessary for the consummation of the transactions contemplated hereby (including the issuance of ATS Common Stock upon exercise of the Warrant and STS Common Stock upon conversion of the Notes) or to prevent a breach of or default under, or a termination, modification or acceleration of, any material instrument, contract, lease, license or other agreement to which ATS, STS and/or any Subsidiary is a party, in each case on terms and conditions reasonably satisfactory to Purchaser. (ii) Purchaser, ATS and STS shall have received or obtained all governmental and regulatory consents, approvals, licenses and authorizations that are necessary for the consummation of the transactions contemplated hereby or for Purchaser to own the Note and Warrant and the ATS Common Stock issuable upon exercise of the Warrant and the STS Common Stock issuable upon conversion of the Notes, in each case on terms and conditions reasonably satisfactory to Purchaser (provided that filings and clearance under the Hart-Scott-Rodino Act with respect to the issuance of stock upon exercise of the Warrant or the conversion of the Note need not be obtained prior to the Closing). (iii) ATS shall have taken all actions reasonably necessary to ensure that Purchaser, following issuance or exercise of the Warrant, shall not be deemed to be an "interested stockholder" under, or otherwise be subject to the provisions of, Section 203 of -3- the Delaware General Corporation Law, or any other applicable anti- takeover or similar law of any jurisdiction. 2J. Fairness Opinion. STS and ATS shall have received an opinion ---------------- from Houlihan Smith & Company, Inc. reasonably satisfactory in form and substance to Purchaser as to the fairness of the transactions contemplated under this Agreement. 2K. STS Business Plan. A two-year business plan for STS, including ----------------- appropriate financial projections, shall have been submitted to Purchaser in form and substance reasonably satisfactory to Purchaser. 2L. No Material Adverse Change. Except for the June 14, 2000 -------------------------- delisting of the ATS Common Stock from the NASDAQ Stock Market, since April 30, 2000, there shall have been no material adverse change or development, in the aggregate taking into account all changes and developments, in the business, financial condition, value, operating results, assets, operations, business prospects, cash flow or customer, supplier or employee relations of STS, ATS or any of their Subsidiaries (as determined by Purchaser in its sole discretion). 2M. No Litigation. No suit, action or other proceeding shall be ------------- pending or threatened before any court or governmental or regulatory official, body or authority or any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (iii) affect adversely the right of Purchaser to (A) own the Warrant, the Notes, the ATS Common Stock issuable upon exercise of the Warrant or the STS Common Stock issuable upon conversion of the Notes or (B) exercise voting control of ATS or STS or (iv) affect adversely the right of ATS or STS to own their respective assets or control their respective business, and no such injunction, judgment, order, decree or ruling shall have been entered or be in effect. 2N. Charter Amendments. STS shall have amended its articles of ------------------ incorporation (the "Charter Amendment") to provide that the number of authorized ----------------- shares of STS Common Stock shall be increased as necessary to enable STS to issue the STS Common Stock issuable upon conversion of the Note. 2O. Release of Mellon Cash Collateral by Agent. Prior to or ------------------------------------------- contemporaneous with the Closing, Mellon Bank, N.A. shall have released to STS all remaining Mellon Cash Collateral (as such term is used and defined in the STS Credit Agreement). 2P. Securities Law Compliance. The Company shall have made all ------------------------- filings under all applicable federal and state securities laws necessary to consummate the issuance of the Notes and the Warrant pursuant to this Agreement to comply with such laws. -4- 2Q. Opinion of Counsel. Purchaser shall have received from Sachnoff ------------------ & Weaver, Ltd., counsel for ATS and STS, an opinion with respect to the matters set forth in Exhibit F, which shall be addressed to Purchaser, dated the date of --------- the Closing and in form and substance reasonably satisfactory to Purchaser. 2R. Closing Documents. ATS and STS shall each have delivered to ----------------- Purchaser all of the following documents: (i) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in Section 1 and Sections 2A through 2P, inclusive, have been fully satisfied; (ii) certified copies of the resolutions duly adopted by ATS's and STS's boards of directors authorizing (as appropriate) the execution, delivery and performance of this Agreement and each of the other agreements contemplated hereby, the issuance and sale of the Note, the issuance of the Warrant, the reservation of shares of STS Common Stock issuable upon conversion of the Notes and the reservation of shares of ATS Common Stock issuable upon exercise of the Warrant, and the consummation of all other transactions contemplated by this Agreement; (iii) certified copies of ATS's and STS's respective certificates and articles of incorporation and bylaws, each as in effect at the Closing, containing, in the case of STS, the Charter Amendment. (iv) certified copies of the STS Credit Agreement, the ATS Credit Agreement and the agreements evidencing the Intercompany Loan, each as in effect at the Closing; (v) 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); (vi) good standing certificates for ATS and STS for each jurisdiction in which such corporation is organized or in which it is required to qualify to do business as a foreign corporation; (vii) duly executed UCC financing statements for each jurisdiction in which STS owns any personal property; (viii) insurance policy endorsements as required by the Security Agreement; (ix) the Note executed in favor of Purchaser; (x) the Warrant registered in Purchaser's name; -5- (xi) a stock certificate registered in Purchaser's name evidencing the Additional Shares; and (xii) such other documents relating to the transactions contemplated by this Agreement as Purchaser or its special counsel may reasonably request. 2S. Proceedings. All corporate and other proceedings taken or ----------- required to be taken by ATS or STS in connection with the transactions contemplated hereby to be consummated at or prior to the Closing and all documents incident thereto shall be satisfactory in form and substance to Purchaser and its special counsel. 2T. Waiver. Any condition specified in this Section 2 may be waived ------ if consented to by Purchaser. 2U. Expenses. At the Closing, ATS shall have reimbursed Purchaser -------- for its fees and expenses as provided in Section 8A. Section 3. Covenants. --------- 3A. Financial Statements and Other Information. ATS (commencing ------------------------------------------ immediately following the completion of the audited 1999 ATS financial statements or December 31, 2000, whichever first occurs) and STS (commencing immediately following the Closing) shall deliver to Purchaser (so long as Purchaser holds any Notes, the Warrant, any ATS Common Stock or any STS Common Stock), and to all other holders of Note(s) or Warrant(s) (if any): (i) as soon as available but in any event within 30 days after the end of each monthly accounting period in each fiscal year, unaudited consolidating and consolidated statements of income and cash flows of ATS and its Subsidiaries and of STS and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month, and unaudited consolidating and consolidated balance sheets of ATS and its Subsidiaries and of STS and its Subsidiaries as of the end of such monthly period, setting forth in each case (as appropriate) comparisons to ATS's or STS's annual budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with generally accepted accounting principles, consistently applied and shall be certified by ATS's or STS's president or chief financial officer (as appropriate); (ii) accompanying the STS financial statements referred to in subparagraph (i) above, an Officer's Certificate stating that there is no Event of Default or Potential Event of Default in existence and that neither STS nor any of its Subsidiaries is in default under the STS Credit Agreement or any other material agreement to which it is a party or, if any Event of Default or Potential Event of Default or any such default exists, specifying the nature and period of existence thereof and what actions STS and its Subsidiaries have taken and propose to take with respect thereto; -6- (iii) within 90 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows of ATS and its Subsidiaries and of STS and its Subsidiaries for such fiscal year, and consolidating and consolidated balance sheets of ATS and its Subsidiaries and of STS and its Subsidiaries as of the end of such fiscal year, setting forth in each case comparisons (as appropriate) to ATS's or STS's annual budget and to the preceding fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by (a) with respect to the consolidated portions of such statements, an opinion of an independent accounting firm of recognized national standing, (b) a certificate from such accounting firm, addressed to STS's board of directors, stating that in the course of its examination nothing came to its attention that caused it to believe that there was an Event of Default or Potential Event of Default in existence or that there was any other default by STS or any of its Subsidiaries in the fulfillment of or compliance with any of the terms, covenants, provisions or conditions of any other material agreement to which STS or any of its Subsidiaries is a party or, if such accountants have reason to believe any Event of Default or Potential Event of Default or other default by STS or any of its Subsidiaries exists, a certificate specifying the nature and period of existence thereof, and (c) copies of such firm's annual management letters to ATS's and STS's boards of directors; (iv) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of ATS's or STS's operations or financial affairs given to ATS or STS by its independent accountants (and not otherwise contained in other materials provided hereunder); (v) no later than five days following the end of each business week, weekly financial reports regarding the operations of STS and its Subsidiaries during such week, including updated monthly forecasts of revenue and EBITDA and a statement of amounts available to be drawn by STS under the revolving credit portion of the Senior Debt; (vi) prior to the beginning of each fiscal year, an annual budget prepared on a monthly basis for ATS and its Subsidiaries and for STS and its Subsidiaries for such fiscal year (displaying anticipated statements of income and cash flows and balance sheets), and promptly upon preparation thereof any other significant budgets and any material revisions of such annual or other budgets, and within 30 days after any monthly period in which there is a material adverse deviation from either annual budget, an Officer's Certificate giving notice thereof; (vii) written notice of any of the following, promptly upon becoming aware thereof, together with an Officer's Certificate setting forth the details thereof and any action with respect thereto taken or proposed to be taken by ATS and STS: (A) any Event of Default or Potential Event of Default; -7- (B) any material adverse change or development affecting the business, operations or condition (financial or otherwise) or prospects of ATS or STS; (C) any pending or threatened action, suit, proceeding or investigation by or before any governmental authority against or affecting ATS or STS or any of their Subsidiaries, involving an amount of $50,000 or more or seeking specific performance or injunctive relief; (D) any material violation, breach or default by ATS or STS or any of their Subsidiaries of or under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of STS or any of its Subsidiaries; and (E) any amendment or supplement to, or extension, renewal, refinancing, or refunding of, or waiver by any other party thereto of any right under or conditions of any agreement or instrument creating, evidencing or securing any Indebtedness involving an amount of $50,000 or more. (viii) concurrently with STS's delivery or receipt thereof, copies of any reports, certificates or notices furnished by STS to any other party to any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of STS or any of its Subsidiaries or any agreement or instrument creating, evidencing or securing any Indebtedness of STS or any of its Subsidiaries involving an amount of $50,000 or more; (ix) [intentionally omitted]; (x) promptly upon their becoming available to ATS or STS, a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which ATS or STS shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by ATS or STS to its stockholders, bondholders or the financial community generally, and (iii) all accountants management letters pertaining to, all other reports submitted by accountants in connection with any audit of, and all other material reports from outside accountants with respect to, ATS or STS; and (xi) with reasonable promptness, such other information and financial data concerning ATS and its Subsidiaries or STS and its Subsidiaries as any Person entitled to receive information under this Section 3A may reasonably request. Each of the financial statements referred to in subparagraphs (i) and (iii) above shall be true and correct in all material respects as of the dates and for the periods stated therein, subject in the case of the unaudited financial statements to changes resulting from normal year-end adjustments for recurring accruals (none of which would, alone or in the aggregate, be materially adverse to the -8- financial condition, operating results, assets, operations or business prospects of ATS and its Subsidiaries or STS and its Subsidiaries). 3B. Inspection of Property. STS shall permit any representatives ---------------------- designated by Purchaser (so long as Purchaser holds any Notes or any STS Common Stock) and any other holder of the Note(s), upon reasonable notice and during normal business hours to (i) visit and inspect any of the properties of STS and its Subsidiaries, (ii) examine the corporate and financial records of STS 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 STS and its Subsidiaries. The presentation of an executed copy of this Agreement by Purchaser to STS's independent accountants shall constitute STS's permission to its independent accountants to participate in discussions with such Persons. 3C. Attendance at Board Meetings. STS shall permit a representative ---------------------------- of Purchaser (other than representatives of Purchaser serving on the board of STS) to attend as an observer all meetings of STS directors and all committees thereof. 3D. ATS Restrictive Covenants. From the date hereof to and including ------------------------- the date of the Closing and thereafter so long as Purchaser holds the Warrant or any ATS Common Stock, ATS shall not, without Purchaser's prior written consent: (i) directly or indirectly declare or pay any dividends or make any distributions upon any of its capital stock or other equity securities; (ii) directly or indirectly redeem, purchase or otherwise acquire, or permit any of its Subsidiaries to redeem, purchase or otherwise acquire, any of its or any of its Subsidiaries' capital stock or other equity securities (including, without limitation, warrants, options and other rights to acquire such capital stock or other equity securities); (iii) except as expressly contemplated by this Agreement, authorize, issue or enter into any agreement providing for the issuance (contingent or otherwise) of any of its capital stock or other equity securities other than (A) the granting and exercise of Options granted subsequent to the date of this Agreement to officers and employees of ATS and its Subsidiaries, provided that such Options are not exercisable in the aggregate into more than one percent of the ATS Common Stock outstanding on a fully-diluted basis assuming exercise and conversion of all outstanding Options and Convertible Securities, including all of such Options, and (B) the exercise of the presently outstanding Options identified on the Equity ------ Schedule; -------- (iv) merge or consolidate with any Person or permit any of its Subsidiaries to merge or consolidate with any Person (other than a Wholly- Owned Subsidiary); (v) sell, lease or otherwise dispose of, or permit any of its Subsidiaries to sell, lease or otherwise dispose of, (A) any of the STS Common Stock owned by ATS or (B) any -9- assets having a value (based on the greater of the book value thereof, determined in accordance with generally accepted accounting principles consistently applied, or the consideration paid therefor) of more than $100,000 in any transaction or series of related transactions (other than sales in the ordinary course of business), except for the truck terminals owned by ATS located in Atlanta, Georgia and Rockford, Illinois; (vi) liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction (including, without limitation, any reorganization into a limited liability company, a partnership or any other non-corporate entity which is treated as a partnership for federal income tax purposes); (vii) acquire, or permit any of its Subsidiaries to acquire, any interest in any company or business (whether by a purchase of assets, purchase of stock, merger or otherwise), or enter into any joint venture; (viii) enter into, or permit any of its Subsidiaries to enter into, the ownership, active management or operation of any business other than that engaged in by them as of the date hereof; or (ix) settle, compromise or dismiss with prejudice any material litigation to which ATS or any of its Subsidiaries is a party. 3E. ATS Affirmative Covenants. From the date hereof to and including ------------------------- the Closing and thereafter so long as Purchaser holds the Warrant or any ATS Common Stock, ATS shall deliver to Purchaser, promptly following receipt thereof, any written notices or correspondence from the Securities and Exchange Commission, the National Association of Securities Dealers or any other governmental or private regulatory body, and ATS shall consult and cooperate with Purchaser in preparing any notices or responses to any such regulatory body. ATS hereby forever waives its right under Section 5.02(c) of the Stock Purchase Agreement among Purchaser, ATS and STS to prohibit Purchaser and Churchill Capital, Inc. from buying, selling or otherwise disposing of shares of ATS Common Stock. ATS shall prepare all documentation necessary to comply with and shall cooperate with Purchaser, in complying with the Hart-Scott-Rodino Act in connection with Purchaser's exercise of the Warrant, and ATS shall file such documents with the Federal Trade Commission promptly after the Closing and shall request early termination of the waiting period. 3F. Use of Proceeds. STS shall not, nor shall it permit any of its --------------- Subsidiaries to, use any proceeds from the sale of the Note hereunder, directly or indirectly, for the purposes of purchasing or carrying any "margin securities" within the meaning of one or more regulation(s) promulgated by the Board of Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit secured, directly or indirectly, in whole or in part by collateral that includes any "margin securities," and STS shall apply the proceeds of the sale of the Note only for working capital, general corporate purposes, the funding of the Intercompany Loan and the repayment of up to $600,000 of Indebtedness owed by STS to another Subsidiary of ATS, in each case in accordance with the attached Sources and Uses Schedule. STS shall not use ------------------------- the proceeds of -10- the sale of the Note directly or indirectly for any unlawful purpose, in any manner inconsistent with this Section 3F, or inconsistent with any other provision of this Agreement. 3G. Intentionally Omitted. --------------------- 3H. Insurance. STS and each of its Subsidiaries shall (i) maintain --------- with financially sound and reputable insurers acceptable to Purchaser insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of Persons engaged in the same or similar businesses or having similar properties similarly situated (including, without limitation, business interruption, product and other liability, casualty, workers' compensation and umbrella insurance), (ii) provide that such insurance cannot terminate, expire, be canceled or amended in any material respect without 30 days' prior notice to Purchaser, (iii) furnish to Purchaser from time to time upon request the policies under which such insurance is issued, certificates of insurance and such other information relating to such insurance as Purchaser may request, and (iv) provide such other insurance and endorsements as are required by this Agreement or the Security Agreement. 3I. Payment of Taxes and Other Potential Charges and Priority --------------------------------------------------------- Claims. STS and each of its Subsidiaries shall pay or discharge - ------ (i) on or prior to the date on which penalties attach thereto, all taxes, assessments and other governmental charges imposed upon it or any of its properties; (ii) on or prior to the date when due, all claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, would result in the creation of a Lien upon such property; and (iii) on or prior to the date when due, all other lawful claims which, if unpaid, would result in the creation of a Lien upon any such property or which, if unpaid, would give rise to a claim entitled to priority over general creditors of STS or any of its Subsidiaries in a case under Title 11 (Bankruptcy) of the United States Code, as amended; provided that unless and until foreclosure, distraint, levy, sale or similar - -------- proceedings shall have been commenced STS or such Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted, (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor, and (z) such failure to pay or discharge, individually or in the aggregate, would not have a Material Adverse Effect. 3J. Preservation of Corporate Status. STS and each of its -------------------------------- Subsidiaries shall maintain their status as a corporation duly organized, validly existing and in good standing under the laws of their respective jurisdiction of incorporation and to be duly qualified to do business as a foreign corporation and in good standing in all jurisdictions in which the ownership of its properties or the -11- nature of its business or both make such qualification necessary or advisable, except for matters that, individually or in the aggregate, would not have a Material Adverse Effect. 3K. Governmental Approvals and Filings. STS and each of its ---------------------------------- Subsidiaries shall keep and maintain in full force and effect all Governmental Actions necessary in connection with execution and delivery of this Agreement, the Notes and the Security Agreement, consummation of the transactions herein or therein contemplated, performance of or compliance with the terms and conditions hereof or thereof or to ensure the legality, validity, binding effect, enforceability or admissibility in evidence hereof or thereof. 3L. Maintenance of Properties. STS and each of its Subsidiaries ------------------------- shall maintain or cause to be maintained in good repair, working order and condition all material properties now or hereafter owned, leased or otherwise possessed by them and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times. 3M. Avoidance of Other Conflicts. STS and each of its Subsidiaries ---------------------------- shall not violate or conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with (i) any Law, (ii) their respective articles or certificates of incorporation or bylaws (or other constituent documents), or (iii) any agreement or instrument to which they are a party or by which they or any of their properties (now owned or hereafter acquired) may be subject or bound, except for matters that could not, individually or in the aggregate, have a Material Adverse Effect. 3N. Financial Accounting Practices. STS and each of its Subsidiaries ------------------------------ shall make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization, (ii) transactions are recorded as necessary (A) to permit preparation of financial statements in conformity with GAAP and (B) to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 3O. Continuation of or Change in Business. STS and each of its ------------------------------------- Subsidiaries shall continue to engage in their respective businesses substantially as conducted and operated during the present and preceding fiscal year, and STS and each of its Subsidiaries shall not engage in any business other than solid waste and bulk industrial transport services. -12- 3P. Consolidated Tax Return. Prior to the full conversion of all ----------------------- Notes, STS shall not file or consent to the filing of any consolidated income tax return with any Person, except as permitted under the Tax Sharing Agreement. STS shall not amend, or consent to an amendment of, the Tax Sharing Agreement. 3Q. Fiscal Year. STS and each of its Subsidiaries shall not change ----------- their respective fiscal year or fiscal quarter. 3R. Plan and Multiemployer Plans. ---------------------------- (i) STS shall, and shall cause each of its Controlled Group Members to, make contributions to each Plan maintained by STS and its Controlled Group Members, respectively, when due in accordance with the terms of the Plan and minimum funding requirements under ERISA and the Code applicable to such Plan and pay PBGC premiums as and when due for such Plan. (ii) As soon as such liability has been determined, or within 65 days after STS receives a request for such liability determination from Purchaser, STS shall deliver or cause to be delivered to Purchaser (i) with respect to each Plan subject to Title IV of ERISA and maintained by STS or any Controlled Group Member, the "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA), as certified by the actuary for each such Plan, and (ii) the aggregate amount of Postretirement Benefit Obligations, as certified by an actuary satisfactory to Purchaser. STS shall notify Purchaser within 30 days of the occurrence of any event that would materially affect the "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) for any such Plan or materially affect Postretirement Benefit Obligations. (iii) Within not more than 60 days after the earlier of implementation, or corporate authorization to implement, a Plan (other than one described in subparagraph (b) of the definition thereof herein), STS shall give written notice to Purchaser of such action. (iv) Within not more than 60 days after STS or any Controlled Group Member becomes obligated to any Multiemployer Plan, STS shall give written notice thereof to Purchaser. (v) STS shall, and shall cause each of its Controlled Group Members to, make contributions required to be made by it, or any of them, to each Multiemployer Plan when due in accordance with its, or any of their, obligations under any collective bargaining agreement related to such Multiemployer Plan or participation agreements applicable to such Multiemployer Plan; provided nothing herein shall be interpreted as preventing STS from contesting in good faith any said obligation and/or the contributions required thereunder. 3S. Liens. Neither STS nor any of its Subsidiaries shall at any time ----- create, incur, assume or suffer to exist any Lien on any of its property (now owned or hereafter acquired), or agree, -13- become or remain liable (contingently or otherwise) to do any of the foregoing, except for the following ("Permitted Liens"): --------------- (i) Liens pursuant to the Senior Debt Documents in favor of the Agent for the benefit of the Senior Lenders and the Agent to secure the debt incurred thereunder; (ii) Liens pursuant to the Security Agreement in favor of Purchaser to secure the debt evidenced by the Notes, subject to the Subordination Agreement; (iii) Liens existing on the date hereof securing obligations existing on the date hereof, as and to the extent such Liens exist as of the date hereof (and Liens securing successor obligations incurred to refinance predecessor obligations allowed under this subsection (iii); provided that in each case the successor obligation is an obligation of the -------- same Person subject to the predecessor Indebtedness and is not greater than (and is not otherwise on terms less advantageous than) the predecessor obligation immediately before such refinancing, and the Lien securing the predecessor obligation immediately before such refinancing); (iv) Liens (whether or not assumed) existing on property at the time of purchase thereof by STS or to secure payment of the purchase price thereof, provided, that: (A) such Lien is created before or substantially simultaneously with the purchase of such property in the ordinary course of business by STS; (B) such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof; (C) the aggregate amount secured by all such Liens on any particular property at the time purchased by STS, as the case may be, shall not exceed the lesser of the purchase price of such property or the fair market value of such property at the time of purchase thereof ("purchase price" for this purpose including the amount secured by each such Lien thereon whether or not assumed); and (D) the obligation secured by such Lien is Indebtedness permitted under Section 3T(ii); (v) Liens arising from taxes, assessments, charges or claims described in Section 3I that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the proviso to such Section 3I; (vi) Deposits or pledges of cash or securities in the ordinary course of business to secure (A) workmen's compensation, unemployment insurance or other social security obligations, (B) performance of bids, tenders, trade contracts (other than for payment of -14- money) or leases, (C) stay, surety or appeal bonds, or (D) other obligations of a like nature incurred in the ordinary course of business; (vii) Zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not in the aggregate materially detract from the value of a property or asset to, or materially impair its use in the business of, STS; and (viii) With respect to the real property owned by STS, (i) mechanics', materialmen's, carriers', landlords' or other like liens arising by operation of law and in the ordinary course of business and securing obligations of a Person that are not overdue for a period of more than 30 days or are being contested in good faith; and (ii) easements, rights-of-way, zoning and similar restrictions and other charges or encroachments or encumbrances not interfering with the ordinary conduct of the business of STS and which do not detract materially from the value of the property to which they attach or impair materially the use thereof by STS. "Permitted Lien" shall in no event include any Lien imposed by, or required to -------------- be granted pursuant to, ERISA or any Environmental Law. Nothing in this Section 3S shall be construed to limit any other restriction on Liens imposed by the Security Agreement. 3T. Indebtedness. Neither STS nor any of its Subsidiaries shall at ------------ any time create, incur, assume or suffer to exist any Indebtedness, or agree, become or remain liable (contingently or otherwise) to create, incur, assume or suffer to exist any Indebtedness, except: (i) subject to the Subordination Agreement, Indebtedness to the Senior Lenders and the Agent pursuant to the Senior Debt Documents; (ii) Indebtedness to Purchaser under this Agreement, the Notes and the Security Agreement; (iii) Indebtedness secured by Liens permitted by Section 3S(iv); provided, that the aggregate principal amount of such Indebtedness shall not exceed $1,000,000; (iv) Accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business, other than under trac leases of trucks, tractors, trailers, tippers and other equipment the payment terms of which are extended under agreements reached no later than 30 days following the Closing; provided that (i) such account payable is payable not later than 90 days after the original invoice date according to the original term of sale, and (ii) such account payable is not overdue by more than 90 days according to the original terms of sale (except to the extent such account payable is being contested in good faith ------ and by appropriate proceedings diligently conducted and so long as -15- such reserves or other appropriate provisions as may be required by GAAP shall have been made with respect therefor); (v) Indebtedness under Interest Rate Hedging Agreements; or (vi) Capitalized Lease Obligations, to the extent permitted by Section 3DD hereof. 3U. Guaranties, Indemnities, etc. Neither STS nor any of its ----------------------------- Subsidiaries shall be or become subject to or bound by any Guaranty Equivalent, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (i) Guaranty Equivalents existing on the date hereof and listed in the Guaranty Schedule hereto (and extensions, renewals and refinancings ----------------- thereof and of the associated Assured Obligations on terms no more burdensome to STS than those existing immediately before such extension, renewal or refinancing); (ii) contingent liabilities arising from the endorsement of negotiable or other instruments for deposit or collection or similar transactions in the ordinary course of business; and (iii) indemnities by STS of the liabilities of its directors or officers, in their capacities as such, pursuant to provisions presently contained in STS's articles or certificates of incorporation or bylaws or as permitted by Law. 3V. Loans, Advances and Investments. Neither STS nor any of its ------------------------------- Subsidiaries shall at any time make or suffer to exist or remain outstanding any loan or advance to, to purchase, acquire or own (beneficially or of record) any stock, bonds, notes or securities of, or any partnership interest (whether general or limited) in, or any other interest in, or make any capital contribution to or other investment in, any other Person, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: ------ (i) loans and investments existing on the date hereof and listed in the Loans and Investments Schedule (and extensions, renewals and ------------------------------ refinancings thereof on terms no less favorable than those existing immediately before such extension, renewal or refinancing); (ii) receivables owing to STS arising from providing services under usual and customary terms in the ordinary course of business; and loans and advances extended by STS to subcontractors or suppliers (excluding contractors or suppliers who are Affiliates of STS) under usual and customary terms in the ordinary course of business; -16- (iii) advances to officers and employees of the STS to meet expenses incurred by such officers and employees in the ordinary course of business and in the aggregate amounts at any time outstanding not exceeding $300,000; (iv) Cash Equivalent Investments; and (v) the Intercompany Loan. 3W. Dividends and Related Distributions. Neither STS nor any of its ----------------------------------- Subsidiaries shall declare or make any Stock Payment, or agree, become or remain liable (contingently or otherwise) to do so. 3X. Sale-Leasebacks. Neither STS nor any of its Subsidiaries shall --------------- at any time enter into or suffer to remain in effect any transaction to which STS or such Subsidiary is a party involving the sale, transfer or other disposition by STS or such Subsidiary of any property (now owned or hereafter acquired), with a view directly or indirectly to the leasing back of any part of the same property or any other property used for the same or a similar purpose or purposes, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing. 3Y. Leases. Neither STS nor any of its Subsidiaries shall at any ------- time enter into or suffer to remain in effect any lease, as lessee, of any property, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, other than the leasing of tractors, trailers, tippers and other equipment, terminals and other property in the ordinary course of business. 3Z. Mergers, Acquisitions, etc. Neither STS nor any of its --------------------------- Subsidiaries shall (i) merge with or into or consolidate with any other Person, (ii) liquidate, wind-up, dissolve or divide, (iii) acquire all or any substantial portion of the properties of any going concern or going line of business, (iv) acquire all or any substantial portion of the properties of any other Person other than in the ordinary course of business, or (v) agree, become or remain liable (contingently or otherwise) to do any of the foregoing. 3AA. Dispositions of Properties. Neither STS nor any of its -------------------------- Subsidiaries shall sell, convey, assign, lease, transfer, abandon or otherwise dispose of, voluntarily or involuntarily, any of its properties, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except STS may, for no consideration other than cash, dispose of equipment in the ordinary course of business which is obsolete or no longer useful in the business of STS; provided, that STS will report such disposition to Purchaser in -------- writing at least quarterly. 3BB. Subsidiaries. STS shall not, and shall not allow any of its ------------ Subsidiaries to, establish or acquire any additional Subsidiary. 3CC. Dealings with Affiliates. Neither STS nor any of its ------------------------ Subsidiaries shall enter into or carry out any transaction with (including, without limitation, purchase or lease property or services from, sell or lease property or services to, loan or advance to, or enter into, suffer to remain in -17- existence or amend any contract, agreement or arrangement with) any Affiliate of STS or such Subsidiary, directly or indirectly, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (i) Existence and performance of contracts, agreements and arrangements of STS in existence as of the date hereof or proposed as of the date hereof (including without limitation the Intercompany Loan) and in any event set forth in the Affiliated Transactions Schedule; and -------------------------------- (ii) Officers and employees of STS may be compensated for services rendered in such capacity to STS, provided that (A) such compensation is in -------- good faith and on terms no less favorable to STS than those that could have been obtained in a comparable transaction on an arm's-length basis from an unrelated Person, (B) the board of directors of STS (including a majority of the directors having no direct or indirect interest in such transaction) approve such compensation and (C) such compensation to any single officer or employee in any fiscal year shall not exceed $300,000. 3DD. Capital Expenditures. Neither STS nor any of its Subsidiaries -------------------- shall make any Capital Expenditures on or after the date hereof, except (i) subject to subsection (iii) below, Capital Expenditures by STS not in excess of $4,000,000 in any fiscal year of STS; and (ii) Capital Expenditures by STS funded entirely with the proceeds of the sale or other disposition of equipment in accordance with Section 3AA hereof. 3EE. Issuance of Equity. Neither STS nor any of its Subsidiaries ------------------ shall issue any capital stock or other equity securities or rights to acquire capital stock or other equity securities, except (i) in connection with the conversion of the Notes and (ii) options granted to STS management, provided -------- that Purchaser shall be granted full anti-dilution protections with respect to all such options granted on or prior to December 31, 2001. 3FF. Limitations on Modification of Certain Agreements and ----------------------------------------------------- Instruments. Neither STS nor any of its Subsidiaries shall amend, modify or - ----------- supplement their respective articles or certificates of incorporation or bylaws (or similar constituent documents). 3GG. Limitation on Payments and Modification of Restricted ----------------------------------------------------- Indebtedness. Neither STS nor any of its Subsidiaries shall directly or - ------------ indirectly, pay, prepay, purchase, redeem, retire, defease or acquire, or make any payment (on account of principal, interest, premium or otherwise) of, or grant, or amend, modify or supplement any of the terms and conditions of, any Indebtedness, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except as follows: -18- (i) STS may pay principal and interest on the Senior Debt to the extent consistent with the Subordination Agreement; and (ii) STS may amend, modify or supplement the terms of the Senior Debt and the Senior Debt Documents to the extent consistent with the Subordination Agreement. 3HH. Limitation on Other Restrictions on Liens, Transfer or ------------------------------------------------------ Dispositions. Neither STS nor any of its Subsidiaries shall enter into, become - ------------ or remain subject to any agreement or instrument to which STS or any of its Subsidiaries is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound containing provisions that would prohibit, restrict or limit the grant or continuance of any Lien upon any of its properties (now owed or hereafter acquired) or prohibit, restrict or limit its ability to transfer or dispose of any of its properties (now owned or hereafter acquired), to require it to apply the proceeds of any such transfer disposition in a specified manner, except: (i) The STS Credit Agreement; (ii) This Agreement, the Securities Agreement and the documents and agreements contemplated hereby and thereby; and (iii) Restrictions pursuant to a non-assignment provision of any executory contract or of any lease by STS as lessee, and restrictions on granting Liens on property of STS subject to a Permitted Lien for the benefit of the holder of such Permitted Lien to the extent in existence on the date hereof. 3II. Limitation on Other Restrictions on Amendment of the Loan --------------------------------------------------------- Documents, etc. Neither STS nor any of its Subsidiaries shall enter into, become - --------------- or remain subject to any agreement or instrument to which STS or any of its Subsidiaries is a party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound that would prohibit or require the consent of any Person to any amendment, modification or supplement to this Agreement, the Notes and the Security Agreement except the STS Credit Agreement and the Subordination Agreement. 3JJ. Environmental Matters. ATS, STS and their Subsidiaries shall: --------------------- (i) Comply in all material respects with all Environmental and Safety Requirements, including, without limitation, all permits, licenses and authorizations required thereunder; and (ii) Promptly respond to, investigate and remediate all spills or releases of or contamination by hazardous materials, substances or wastes (including without limitation petroleum products and constituents thereof) resulting from the operations of ATS, STS or their respective Subsidiaries or occurring at any of their facilities or properties. -19- Section 4. Representations and Warranties of ATS and STS. As a --------------------------------------------- material inducement to Purchaser to enter into this Agreement and purchase the Note and the Warrant hereunder, each of ATS and STS hereby represents and warrants that: 4A. Organization, Corporate Power and Licenses. Each of ATS and STS ------------------------------------------ is a corporation duly organized, validly existing and in good standing under the laws of Delaware and Illinois, respectively, and are qualified to do business in every jurisdiction in which their respective ownership of property or conduct of business requires them to qualify. Each of ATS and STS 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 ATS's and STS's charter documents and bylaws which have been furnished to Purchaser's special counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. 4B. Capital Stock and Related Matters. --------------------------------- (i) As of the Closing and immediately thereafter, the authorized capital stock of ATS shall consist of 25,000,000 shares of ATS Common Stock, of which 8,623,587 shares shall be issued and outstanding, 3,111,111 shares shall be issued as the Additional Shares and 950,000 shares shall be reserved for issuance upon exercise of the Warrant. As of the Closing and immediately thereafter, the authorized capital stock of STS shall consist of 35,000,000 shares of STS Common Stock, of which 4,500,000 shares shall be issued and outstanding and 25,500,000 shares shall be reserved for issuance upon conversion of the Notes, and 100,000 shares of preferred stock, none of which shall be issued and outstanding. As of the Closing, neither ATS nor STS 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 Note and the Warrant and as set forth on the attached Capitalization Schedule. As of the Closing, neither ATS nor STS 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. As of the Closing, all ----------------------- of the outstanding shares of ATS's and STS's capital stock (including, without limitation, the Additional Shares) shall be validly issued, fully paid and nonassessable. (ii) There are no statutory or, to the best of ATS's and STS's knowledge, contractual stockholders preemptive rights or rights of refusal with respect to the issuance of the Notes or the Warrant hereunder or the issuance of the ATS Common Stock or STS Common Stock upon conversion of the Notes or upon exercise of the Warrant, respectively. Neither ATS nor STS has 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 -20- issuance of the Note or the Warrant hereunder do not require registration under the Securities Act or any applicable state securities laws. To the best of ATS's and STS's knowledge, there are no agreements between their stockholders with respect to the voting or transfer of their capital stock or with respect to any other aspect of their affairs, except for the Registration Agreement and as set forth on the Capitalization Schedule. ----------------------- 4C. Subsidiaries; Investments. The attached Subsidiary Schedule ------------------------- ------------------- correctly sets forth the name of each Subsidiary of ATS and STS, 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. 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 ATS or another Subsidiary free and clear of any Lien, except as set forth on the Subsidiary ---------- Schedule, and not subject to any option or right to purchase any such shares. - -------- Except as set forth on the Subsidiary Schedule, none of ATS, STS or any ------------------- Subsidiary owns or holds the right to acquire any shares of stock or any other security or interest in any other Person. 4D. Authorization; No Breach. The execution, delivery and ------------------------ performance of this Agreement, the Note, the Amended Registration Agreement, the Warrant, the Security Agreement and all other agreements and instruments contemplated hereby to which ATS and/or STS is a party have been duly authorized by ATS and STS (as the case may be). This Agreement, the Amended Registration Agreement, the Note, the Warrant, the Security Agreement and all other agreements and instruments contemplated hereby to which ATS and/or STS is a party each constitutes a valid and binding obligation of ATS and STS, enforceable in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and by principals of equity. Except as set forth on the attached Restrictions Schedule (as the case may be), the execution and delivery by ATS - --------------------- and STS of this Agreement, the Notes, the Amended Registration Agreement , the Warrant, the Security Agreement and all other agreements and instruments contemplated hereby to which ATS and/or STS is a party, the offering, sale and issuance of the Notes and the Warrant hereunder, the issuance of the STS Common Stock upon conversion of the Notes, the issuance of ATS Common Stock upon exercise of Warrant, the issuance of the Additional Shares and the fulfillment of and compliance with the respective terms hereof and thereof by ATS and/or STS, 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 ATS and/or STS 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 charter or bylaws of the ATS, STS or any Subsidiary, or any law, statute, rule or regulation to which the ATS, STS or any Subsidiary is subject (including, without limitation, any usury laws applicable to the -21- Note), or any material agreement, instrument, order, judgment or decree to which ATS, STS 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 Indebtedness owed to, ATS, STS or another Subsidiary. 4E. Financial Statements. With respect to the following financial -------------------- statements: (i) the audited consolidated balance sheet of STS and its Subsidiaries as of December 31, 1998, and the related statements of income and cash flows (or the equivalent) for the twelve-month period then ended; (ii) the unaudited consolidated balance sheet of STS and its Subsidiaries as of December 31, 1999, and the related statements of income and cash flows (or the equivalent) for the twelve-month period then ended; and (iii) the unaudited consolidated balance sheets of STS and its Subsidiaries as of April 30, 2000 (the "Latest Balance Sheet"), and the --------------------- related statements of income and cash flows (or the equivalent) for the four-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 STS and ATS (which, in turn, are accurate and complete in all material respects) and has been prepared in accordance with GAAP, except that (i) matters relating to intercompany transactions between STS and ATS and its Subsidiaries may render such statements inaccurate and incomplete, and Ernst & Young L.L.P. has withdrawn its opinion with respect to its audit of the 1998 ATS and STS financial statements, and (ii) the unaudited financial statements are subject to normal year-end adjustments and lack footnote and other presentation items. 4F. Absence of Undisclosed Liabilities. Except as set forth on the ---------------------------------- attached Liabilities Schedule, none of ATS, STS or its Subsidiaries is subject -------------------- to any material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to ATS, STS 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 (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) liabilities and obligations which have not had and could not reasonably be expected to have a Material Adverse Effect. 4G. No Material Adverse Change. Except as set forth on the Material -------------------------- -------- Adverse Change Schedule, since the date of the Latest Balance Sheet, there has - ----------------------- been no material adverse -22- change in the financial condition, operating results, assets, operations, business prospects, employee relations or customer or supplier relations of ATS, STS or any Subsidiary. 4H. Assets. ATS, STS and each Subsidiary have good and marketable ------ title to, or a valid leasehold interest in, all of the material 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 Permitted Liens. ATS, STS and each Subsidiary own, or have a valid leasehold interest in, all material assets necessary for the conduct of their respective businesses as presently conducted. 4I. Tax Matters. ----------- (i) Except as set forth on the attached Taxes Schedule: ATS, -------------- STS and each Subsidiary have filed all material 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; ATS, STS and each Subsidiary 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 ATS, STS nor any Subsidiary 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; no foreign, federal, state or local tax audits or administrative or judicial proceedings are pending or being conducted with respect to ATS or any Subsidiary, no information related to Tax matters has been requested by any foreign, federal, state or local taxing authority and no written notice indicating an intent to open an audit or other review has been received by ATS or STS from any foreign, federal, state or local taxing authority; and there are no material unresolved questions or claims concerning ATS's or any Subsidiary's Tax liability. (ii) Neither ATS nor any Subsidiary has made an election under (S)341(f) of the Internal Revenue Code of 1986, as amended. ATS and each Subsidiary 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 ATS 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. (iii) "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, ---------- -23- information report or filing with respect to Taxes, including any schedules attached thereto and including any amendment thereof. 4J. Contracts and Commitments. All material contracts, agreements ------------------------- and instruments to which ATS, STS or any of their Subsidiaries is a party (the "Material Contracts") are valid, binding and enforceable in accordance with ------------------ their respective terms. ATS, STS and each Subsidiary have performed all material obligations required to be performed by them under Material Contracts and are not in default or breach in any material respect under nor in receipt of any claim of default or breach under any Material Contract; no event has occurred which with the passage of time or the giving of notice or both would result in a material default, breach or event of noncompliance by ATS or any Subsidiary under any Material Contract; neither ATS, STS nor any Subsidiary has knowledge of any breach or anticipated breach by the other parties to any Material Contract. 4K. Intellectual Property Rights. Except as set forth on the ---------------------------- Intellectual Property Schedule, ATS 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 ATS and its Subsidiaries as presently conducted and as presently proposed to be conducted, free and clear of all Liens, except Permitted Liens. Except as set forth on the Intellectual Property Schedule, the loss or expiration of any ------------------------------ Intellectual Property Right or related group of Intellectual Property Rights owned or used by ATS or any Subsidiary has not had and would not reasonably be expected to have a Material Adverse Effect on the conduct of ATS's and its Subsidiaries' respective businesses. ATS and its Subsidiaries have taken all necessary actions to maintain and protect the Intellectual Property Rights which they own. Except as set forth on the Intellectual Property Schedule, (a) there ------------------------------ have been no claims made against ATS or any Subsidiary asserting the invalidity, misuse or unenforceability of any of such Intellectual Property Rights, (b) neither ATS 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 ATS or any Subsidiary license any rights from a third party), and (c) the conduct of ATS'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 which has had or would reasonably be expected to have a Material Adverse Effect. Except as set forth on the Intellectual ------------ Property Schedule, the transactions contemplated by this Agreement shall have no - ----------------- Material Adverse Effect on ATS's or any Subsidiary's right, title and interest in and to the Intellectual Property Rights listed on the Intellectual Property --------------------- Schedule. - -------- 4L. Litigation, and Related Matters. 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 ATS's and STS's knowledge, threatened against or affecting ATS or any Subsidiary (or to the best of the ATS's and STS's knowledge, pending or threatened against or affecting any of the officers, directors or employees of ATS 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 -24- investigations with respect to the transactions contemplated by this Agreement); neither ATS nor any Subsidiary is subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of ATS's and STS's knowledge, any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit). 4M. Brokerage. Except as set forth in the attached Brokerage Schedule, --------- ------------------ 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 ATS or any Subsidiary. ATS shall pay, and hold 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. 4N. Insurance. Neither ATS nor any Subsidiary is in default in any --------- material respect of its obligations under any insurance policy maintained by it, and neither ATS nor any Subsidiary has been denied insurance coverage. The insurance coverage of ATS and its Subsidiaries is customary for corporations of similar size engaged in similar lines of business. 4O. Employees. Except as set forth on the attached Employees Schedule, --------- ------------------ neither ATS nor STS is aware that any executive or key employee of ATS or any Subsidiary or any group of employees of ATS or any Subsidiary has any plans to terminate employment with ATS or any Subsidiary. ATS 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 except as set forth on the Employees Schedule, ------------------ neither ATS nor STS is 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). Except as set forth in the Employees Schedule, neither ATS, its ------------------ Subsidiaries nor, to the best of ATS'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 ATS and its Subsidiaries, except for agreements between ATS and its present and former employees. 4P. ERISA. ----- (i) Multiemployer Plans. Except as set forth in the ERISA ------------------- ----- Schedule, to the knowledge of ATS and STS neither STS nor any Controlled -------- Group Member has any obligation to contribute to (or any other liability, including current or potential withdrawal liability, with respect to) any Multiemployer Plan. (ii) Retiree Welfare Plans. Neither STS nor any Controlled Group --------------------- Member maintains or has any obligation to contribute to (or any other liability with respect to) any plan or arrangement whether or not terminated, which provides medical, health, life insurance or other welfare-type benefits for current or future retired or terminated employees -25- (except for limited continued medical benefit coverage required to be provided under Section 4980B of the IRC or as required under applicable state law). (iii) Defined Benefit Plans. Except as set forth in the ERISA --------------------- ----- Schedule, neither STS nor any Controlled Group Member maintains, -------- contributes to or has any liability under (or with respect to) any employee plan which is a tax-qualified "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated. (iv) Defined Contribution Plans. Except as set forth in the ERISA -------------------------- ----- Schedule, neither STS nor any Controlled Group Member maintains, -------- contributes to or has any liability under (or with respect to) any Plan which is a tax-qualified "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated. (v) Contributions. Except as set forth in the ERISA Schedule, all ------------- -------------- contributions to Plans have been timely made in accordance with ERISA, the Code, other applicable law and the terms of such Plan. (vi) Compliance. Except as set forth in the ERISA Schedule, to the ---------- -------------- knowledge of ATS and STS, all Plans comply in form and operation in all material respects with the applicable requirements of ERISA and the Code and meet the requirements of "qualified plans" under Section 401(a) of the Code, and no prohibited transaction under Section 406 of ERISA or 4975 of the Code has occurred with respect to any Plan. (vii) Correct Copies. STS has provided Purchaser with true and -------------- complete copies of all documents pursuant to which the Plans are maintained and administered and the most recent annual reports (Form 5500 and attachments) for the Plans and except as set forth in the ERISA Schedule, -------------- all such reports have been filed in a timely and complete manner. (viii) Compliance. The Plans and all related trusts, insurance ---------- contracts and funds have been maintained, funded and administered in compliance in all material respects with the applicable provisions of ERISA, the IRC and other applicable laws. Neither ATS nor any trustee or administrator of any Plan has engaged in any transaction with respect to the Plans which could subject ATS or any trustee or administrator or the Plans, or any party dealing with any such Plan, nor do the transactions contemplated by this Agreement constitute transactions which could subject any such party to either a civil penalty assessed pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited transactions imposed by Section 4975 of the IRC. No actions, suits or claims with respect to the assets of the Plans (other than routine claims for benefits) are pending or, to the knowledge of STS and ATS, threatened which could result in or subject ATS to any material liability, and there are no circumstances which could give rise to or be expected to give rise to any such actions, suits or claims. 4Q. Compliance with Laws. Except as set forth on the Compliance -------------------- ---------- Schedule, neither ATS nor any of its Subsidiaries has violated any law or any - -------- governmental regulation or requirement -26- which violation has had or would reasonably be expected to have a Material Adverse Effect on ATS or any of its Subsidiaries, and neither ATS nor any of its Subsidiaries has received notice of any such violation. 4R. Environmental and Safety Matters. Except as set forth on the -------------------------------- Environmental Schedule, to the knowledge of ATS, STS and their Subsidiaries: - ---------------------- (i) ATS, STS and their Subsidiaries have complied and are currently in compliance in all material respects with all Environmental and Safety Requirements, and neither ATS, STS nor any of their Subsidiaries have received any oral or written notice, report or other information regarding any material liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) or any material corrective, investigatory or remedial obligations arising under Environmental and Safety Requirements and relating to any of them or their properties or facilities. (ii) Without limiting the generality of the foregoing, ATS, STS, and their Subsidiaries have obtained and complied with, and are currently in compliance with, all material permits, licenses and other authorizations that are required pursuant to any Environmental and Safety Requirements for the occupancy of their properties or facilities or the operation of their businesses. (iii) Neither this Agreement nor the consummation of the transactions contemplated by this Agreement will result in any liability 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). (iv) None of the following exists at any property or facility owned, occupied or operated by ATS, STS or any of their Subsidiaries: (1) underground storage tanks, surface impoundments or disposal areas; (2) asbestos-containing materials in any form or condition; or (3) materials or equipment containing polychlorinated biphenyls. (v) Neither ATS, STS, any of their Subsidiaries nor any of their respective predecessors 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 (and no such property or facility is contaminated by any such substance), in a manner that has or would give rise to any material liabilities including any liabilities for response costs, corrective action costs, personal injury, property damage, natural resource damages or attorneys fees pursuant to the -27- Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other Environmental and Safety ------ Requirements. (vi) Without limiting the generality of the foregoing, no facts, events or conditions relating to the past or present properties, facilities or operations of ATS, STS or their Subsidiaries or any of their respective predecessors shall prevent, hinder or limit continued compliance with Environmental and Safety Requirements, give rise to any corrective, investigatory or remedial obligations pursuant to Environmental and Safety Requirements or give rise to any other liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to Environmental and Safety Requirements including, without limitation, those liabilities relating to onsite or offsite Releases or threatened Releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage. (vii) Neither ATS, STS nor any of their Subsidiaries has, either expressly or by operation of law, assumed or undertaken or otherwise become subject to any liability or corrective, investigatory or remedial obligation of any other Person relating to any Environmental and Safety Requirements. (viii) No Environmental Lien has attached to any property owned, leased or operated by ATS, STS or any of their Subsidiaries. (ix) ATS and STS have furnished to Purchaser all environmental audits, reports and other material environmental documents relating to the current and former operations and facilities of ATS, STS, and their respective Subsidiaries and Affiliates, which are in their possession, custody or control. 4S. Affiliated Transactions. Except as set forth on the attached ----------------------- Affiliated Transactions Schedule, no officer, director, employee, stockholder or - -------------------------------- Affiliate of ATS 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 ATS or any Subsidiary or has any material interest in any material property used by ATS or any Subsidiary. 4T. Solvency, etc. STS shall not become insolvent as a result of -------------- the consummation of the transactions contemplated by this Agreement. STS is, and after giving effect to the transactions contemplated by this Agreement shall be, able to pay its debts as they become due, and STS's property now has, and after giving effect to the transactions contemplated hereby shall have, a fair salable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities). STS has adequate capital to carry on its businesses, and after giving effect to the transactions contemplated by this Agreement, STS shall have adequate capital to conduct its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company. -28- 4U. Investment Company; Public Utility Holding Company. Neither STS nor -------------------------------------------------- any of its Subsidiaries is an "investment company" as defined under the Investment Company Act of 1940, as amended, or a "holding company" or "subsidiary and company" of a "holding company" or an "affiliate" of a "holding company" as defined under the Public Utility Holding Company Act of 1935, as amended. 4V. Margin Securities. Neither STS nor any of its Subsidiaries is ----------------- engaged in the business of extending credit for the purpose of buying or carrying "margin securities" within the meaning of any regulations promulgated by the Board of Governors of the Federal Reserve Board, and no part of the proceeds realized from the sale of the Note or Warrant shall be used to buy or carry any such margin securities or used in violation of such regulations. 4W. Disclosure. To ATS's and STS's knowledge, neither this Agreement, ---------- nor any of the exhibits, schedules, attachments, written statements, documents, certificates or other items prepared or supplied to Purchaser by or on behalf of ATS or STS with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. There is no fact which ATS or STS has not disclosed to Purchaser in writing and of which any of its officers, directors or executive employees is aware and which has had or would reasonably be expected to have a Material Adverse Effect on STS or ATS and its Subsidiaries taken as a whole. 4X. Knowledge. As used in this Section 4, the terms "knowledge" or --------- "aware" shall mean and include (i) the actual knowledge or awareness of ATS or any of its Subsidiaries (which shall include the actual knowledge and awareness of the officers, directors and key employees of ATS and its Subsidiaries and the general managers of each facility of ATS and its Subsidiaries) and (ii) the knowledge or awareness which a prudent business person would have obtained in the conduct of his business after making reasonable inquiry and reasonable diligence with respect to the particular matter in question. Section 5. Transfer of Restricted Securities. --------------------------------- 5A. General Provisions. Restricted Securities are transferable only ------------------ pursuant to (i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule or rules then in force) if such rule is available and (iii) subject to the conditions specified in this Section 5, any other legally available means of transfer. 5B. Opinion Delivery. In connection with the transfer of any Restricted ---------------- Securities (other than a transfer described in Section 5A(i) or (ii) above), the holder thereof shall deliver written notice to ATS or STS (as appropriate) describing in reasonable detail the transfer of proposed transfer, together with an opinion of Kirkland & Ellis or other counsel which (to the reasonable satisfaction of ATS or STS, as appropriate) 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 ATS or STS (as appropriate) an opinion of Kirkland & Ellis or such other counsel that no subsequent -29- transfer of such Restricted Securities shall require registration under the Securities Act, ATS or STS (as appropriate) 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 5E. If ATS or STS (as appropriate) 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 ATS or STS (as appropriate) in writing its agreement to be bound by the conditions contained in this Section 5. 5C. Rule 144A. Upon the request of Purchaser, ATS or STS (as --------- appropriate) shall promptly supply to Purchaser or its prospective transferees all information regarding ATS or STS (as appropriate) required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission. 5D. Legend Removal. If any Restricted Securities become eligible for -------------- sale pursuant to Rule 144(k), ATS or STS (as appropriate) shall, upon the request of the holder of such Restricted Securities, remove the legend set forth in Section 5E from the certificates for such Restricted Securities. 5E. Purchaser's Investment Representations. Purchaser hereby represents -------------------------------------- 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; provided that nothing contained herein shall prevent Purchaser and subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of Section 5 hereof. Each certificate or instrument representing Restricted Securities shall be imprinted with a legend in substantially the following form: "The securities represented by this certificate were originally issued on _________ ___, 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 Note and Warrant Purchase Agreement, dated as of July 7, 2000 and as amended and modified from time to time, between 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." Section 6. Terms Applicable to the Note. ---------------------------- 6A. Events of Default. For purposes of this Agreement and the Notes, an ----------------- "Event of Default" shall be deemed to have occurred if ---------------- -30- (i) STS fails to pay (either in cash or by issuance of PIK Notes) when due and payable (whether at maturity or otherwise) the full amount of interest then accrued on the Notes, or the full amount of any principal payment on the Notes or any other amount due and payable under the terms of this Agreement, the Notes or the Security Agreement and any such amounts remain unpaid for more than five Business Days; (ii) STS or any Subsidiary fails to perform or observe any other provision contained in this Agreement, the Notes or the Security Agreement, and such failure is not cured within 30 days after written notice thereof; (iii) any representation, warranty or information contained in this Agreement, the Notes or the Security Agreement relating to STS or its Subsidiaries or required to be furnished by STS to Purchaser hereunder or thereunder, or any writing furnished by STS to Purchaser, is false or misleading in any material respect on the date made or furnished; (iv) STS or any of its Subsidiaries 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 STS or any of its Subsidiaries bankrupt or insolvent; or any order for relief with respect to STS or any of its Subsidiaries is entered under the Federal Bankruptcy Code; or STS or any of its Subsidiaries petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of STS or any of its Subsidiaries, or of any substantial part of the assets of STS or any of its Subsidiaries, or commences any proceeding (other than a proceeding for the voluntary liquidation and dissolution of any Subsidiary) relating to STS or any of its Subsidiaries 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 STS or any of its Subsidiaries and either (A) STS or any of its Subsidiaries 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 $300,000 is rendered against STS or any of its Subsidiaries and, within 60 days after entry thereof, such judgment is not discharged in full or execution thereof stayed pending appeal, or within 60 days after the expiration of any such stay, such judgment is not discharged in full; or (vi) STS or any of its Subsidiaries defaults in the performance of any obligation if the effect of such default is to cause an amount exceeding $250,000 of Indebtedness to become due prior to its stated maturity or to permit the holder or holders of such obligation to cause an amount exceeding $250,000 to become due prior to its stated maturity; provided that with respect to Senior Debt, an Event of Default shall occur under this clause (vi) only if all or a portion of the Senior Debt has been accelerated; or (vii) a Change in Control occurs. -31- The foregoing shall constitute Events of Default whatever the reason or cause for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. 6B. Consequences of Events of Default. --------------------------------- (i) If any Event of Default has occurred and is continuing, the interest rate on the Notes shall increase immediately by an increment of two percentage point(s) to the extent permitted by law. Any increase of the interest rate resulting from the operation of this subparagraph shall terminate as of the close of business on the date on which no Events of Default exist (subject to subsequent increases pursuant to this subparagraph). (ii) If an Event of Default of the type described in Section 6A(iv) has occurred, the aggregate principal amount of the Notes (together with all accrued interest thereon and all other amounts due and payable with respect thereto) shall become immediately due and payable without any action on the part of Purchaser, and STS shall immediately pay to Purchaser all amounts due and payable with respect to the Notes. (iii) If any Event of Default (other than under paragraph 6A(iv)) has occurred and is continuing, Purchaser may declare all or any portion of the outstanding principal amount of the Notes (together with all accrued interest thereon and all other amounts due and payable with respect thereto) to be immediately due and payable and may demand immediate payment of all or any portion of the outstanding principal amount of the Notes (together with all such other amounts then due and payable) owned by Purchaser. (iv) Purchaser shall also have any other rights which Purchaser may have been afforded under this Agreement or any other contract or agreement (including, without limitation, the Security Agreement) at any time and any other rights which Purchaser may have pursuant to applicable law. All rights and remedies of Purchaser under this Agreement, the Notes and the Security Agreement are subject to the provisions of the Subordination Agreement. (v) STS hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor and nonpayment of the Notes, and expressly agrees that the Notes, or any payment thereunder, may be extended from time to time and that Purchaser may accept security for the Notes or release security for the Notes, all without in any way affecting the liability of STS under this Agreement, the Notes or the Security Agreement. 6C. Business Days. If any payment on the Notes is due, or any time ------------- period for giving notice or taking action expires, on a day which is a Saturday, Sunday or legal holiday in the State of Indiana (any other day being hereinafter sometimes referred to as a "Business Day"), the payment shall be due and payable ------------ on, and the time period shall automatically be extended to, the next -32- Business Day immediately following such Saturday, Sunday or legal holiday, and interest shall continue to accrue at the required rate hereunder until any such payment is made. 6D. Usury Laws. It is the intention of STS and Purchaser to conform ---------- strictly to all applicable usury laws now or hereafter in force, and any interest payable under the Notes shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. If the maturity of the Notes is accelerated by reason of an election by Purchaser resulting from an Event of Default or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of Purchaser either be rebated to STS or credited on the principal amount of the Notes, or if the Notes has been paid, then the excess shall be rebated to STS. The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under the Notes shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of the Notes remaining unpaid from time to time. If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to STS or credited on the principal amount of the Notes, or if the Notes has been repaid, then such excess shall be rebated to STS. 6E. Conversion. ---------- (i) Conversion Procedure. -------------------- (A) At any time and from time to time prior to the repayment of the Notes in full, the holder of the Notes may convert all or any portion of the outstanding principal amount of the Notes into a number of shares of Conversion Stock determined by dividing the principal amount designated by the holder thereof to be converted, by the Conversion Price then in effect; provided that the Notes shall not be convertible into Conversion Stock to the extent (if any) that the number of shares of Conversion Stock to be issued upon any conversion of the Notes plus the number of shares of Conversion Stock which have been issued upon any prior partial conversion of the Notes exceeds 80% (or such percentage as is adjusted under Section 6E(ii)(C) below) of the Common Stock outstanding on a fully diluted basis assuming exercise and conversion of all outstanding Options and Convertible Securities (including the Notes except to the extent limited by this proviso). (B) Except as otherwise expressly provided herein, each conversion of the Notes shall be deemed to have been effected as of the close of business on the date on which such Notes have been surrendered for conversion at the principal office of STS. At such time as such conversion has been effected, the rights of the holder of the Notes as such holder to the extent of the conversion 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. -33- (C) Notwithstanding any other provision hereof, if a conversion of any portion of the Notes is to be made in connection with a registered public offering or a sale of STS, the conversion of any portion of the Notes may, at the election of the holder thereof, be conditioned upon the consummation of the public offering or the sale of STS, in which case such conversion shall not be deemed to be effective until the consummation of such transaction. (D) As soon as possible after a conversion has been effected (but in any event within five business days in the case of clause (1) below), STS shall deliver to the converting holder: (1) 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 denomination or denominations as the converting holder has specified; (2) payment in an amount equal to the sum of all accrued interest with respect to the principal amount converted, which has not been paid prior thereto (either in cash or by issuance of PIK Notes); and (3) a new Note representing any portion of the principal amount which was represented by the Note(s) surrendered to STS in connection with such conversion but which was not converted. (E) The issuance of certificates for shares of Conversion Stock upon conversion of the Notes shall be made without charge to the holder hereof for any issuance tax in respect thereof or other cost incurred by STS in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of the Notes, STS 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. (F) STS shall not close its books against the transfer of Conversion Stock issued or issuable upon conversion of the Notes in any manner which interferes with the timely conversion of the Notes. STS shall assist and cooperate with any holder of the Notes required to make any governmental filings or obtain any governmental approval prior to or in connection with the conversion of the Notes (including, without limitation, making any filings required to be made by STS). (G) STS 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 Notes, such number of shares of Conversion Stock issuable upon the conversion of all outstanding Notes. 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. STS shall take all such actions as may be necessary to assure that all such shares -34- 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 STS upon each such issuance). (ii) Conversion Price. ---------------- (A) The initial Conversion Price shall be $0.66666. In order to prevent dilution of the conversion rights granted under the Notes, the Conversion Price shall be subject to adjustment from time to time pursuant to this Section 6E(ii). (B) If and whenever on or after the date of the Closing STS issues or sells, or in accordance with Section 6E(iii) is deemed to have issued or sold, any shares of STS Common Stock for a consideration per share less than the Conversion Price in effect immediately prior to such time, then immediately upon such issue or sale the Conversion Price shall be reduced to the Conversion Price determined by dividing (A) an amount equal to 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 STS Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (y) the consideration, if any, received or deemed received by STS upon such issue on sale, by (B) the number of shares of STS Common Stock Deemed Outstanding immediately after such issue or sale. (C) In addition to the other adjustments to the Conversion Price to be made hereunder, if STS's EBITDA for the fiscal year ended on December 31, 2000, is less than $7,300,000, the Conversion Price shall be reduced automatically to the extent necessary to increase the number of shares of Conversion Stock issuable upon conversion of the Notes according to the following table:
Increase in the Number of Shares of Conversion Stock Issuable 2000 EBITDA upon Conversion of the Notes - ------------------------------------------------ ----------------------------------- Less than $7,300,000 but more than $7,039,999.99 1% of Fully-Diluted Common Less than $7,040,000 but more than $6,779,999.99 2% of Fully-Diluted Common Less than $6,780,000 but more than $6,519,999.99 3% of Fully-Diluted Common Less than $6,520,000 but more than $6,259,999.99 4% of Fully-Diluted Common Less than $6,260,000 5% of Fully-Diluted Common
For purposes of this Agreement, "EBITDA" with respect to STS means STS's and its ------ Subsidiaries' consolidated net income for the fiscal year ended December 31, 2000, plus all fees and expenses incurred and paid by STS and treated as current expenses (including without limitation fees and expenses of legal counsel, accountants and other consultants) in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated by this Agreement, plus the amount of interest expense, income taxes and depreciation and amortization expense for such fiscal year, all determined in accordance with generally accepted accounting principles, consistently applied, and "Fully Diluted Common" means the STS Common Stock on a -------------------- -35- fully-diluted basis assuming exercise and conversion of all outstanding Options and Convertible Securities, including all of the Notes. If any adjustment to the Conversion Price is made pursuant to this Section 6E(ii)(C), the 80% limit set forth in Section 6E(i)(A) above shall be increased by the applicable number of percentage points set forth in the table above. Notwithstanding the foregoing, the calculation of EBITDA under this Section 6E(ii)(C) shall not take into account expenses incurred in connection with the transactions contemplated under this Agreement. (iii) Effect on Conversion Price of Certain Events. For purposes of -------------------------------------------- determining the adjusted Conversion Price under Section 6E(ii), the following shall be applicable: (A) Issuance of Rights or Options. If STS in any manner grants or ----------------------------- sells any Options and the price per share for which STS 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 Conversion Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of STS Common Stock issuable upon the exercise of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options, shall be deemed to be outstanding and to have been issued and sold by STS at the time of the granting or sale of such Option for such price per share. For purposes of this paragraph, the "price per share for which STS Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such Convertible Securities" is determined by dividing (A) the total amount, if any, received or receivable by STS as consideration for the granting or sale of such Options, plus the minimum aggregate amount of additional consideration payable to STS upon the 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 STS upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of STS 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 adjustment of the Conversion Price shall be made upon the actual issuance of such STS Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such STS Common Stock upon conversion or exchange of such Convertible Securities. (B) Issuance of Convertible Securities. If STS in any manner issues ---------------------------------- or sells any Convertible Securities and the price per share for which STS Common Stock is issuable upon conversion or exchange thereof is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then the maximum number of shares of STS Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by STS 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 STS Common Stock is issuable upon conversion or exchange thereof" is determined by dividing (A) the total amount received or receivable by STS as consideration for the issue or sale of such Convertible Securities, plus -36- the minimum aggregate amount of additional consideration, if any, payable to STS upon the conversion or exchange thereof, by (B) the total maximum number of shares of STS Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No adjustment of the Conversion Price shall be made upon the actual issue of such STS Common Stock upon 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 6E(iii), no further adjustment of the Conversion Price shall be made by reason of such issue or sale. (C) Change in Option Price or Conversion Rate. If the purchase price ----------------------------------------- provided for in any Option, the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Security, or the rate at which any Convertible Security is convertible into or exchangeable for STS Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price which would have been in effect at such time had such Option or Convertible Security originally provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6E(iii)(C), if the terms of any Option or Convertible Security which was outstanding as of the date of the Closing 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. (D) 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 Securities without the exercise of 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 Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. For purposes of this Section 6E(iii)(D), the expiration or termination of any Option or Convertible Security which was outstanding as of the date of the Closing shall not cause the Exercise 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 the Closing. (E) Calculation of Consideration Received. If any STS Common Stock, ------------------------------------- Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by STS therefor. In case any STS Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by STS shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by -37- STS shall be the Market Price thereof as of the date of receipt. In case any STS Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which STS is the surviving entity, 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 STS Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash and securities shall be determined jointly by STS and the holders of a majority of the outstanding principal amount of the Notes. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an appraiser jointly selected by STS and the holders of a majority of the outstanding principal amount of the Notes. 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 STS. (F) Integrated Transactions. In case any Option is issued in ----------------------- connection with the issue or sale of other securities of STS, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options shall be deemed to have been issued without consideration. (G) Treasury Shares. The number of shares of STS Common Stock Deemed --------------- Outstanding at any given time does not include shares owned or held by or for the account of STS or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (H) Record Date. If STS takes a record of the holders of Common ----------- Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in STS Common Stock, Options or in Convertible Securities or (2) to subscribe for or purchase STS 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 STS Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (iv) Subdivision or Combination of STS Common Stock. If STS at any ---------------------------------------------- time subdivides (by any stock split, stock dividend or otherwise) one or more classes of outstanding shares of STS Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if STS at any time combines (by reverse stock split or otherwise) one or more classes of outstanding shares of STS Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. (v) Reorganization, Reclassification, Consolidation, Merger or Sale. --------------------------------------------------------------- Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of STS's assets or other transaction, which in each case is effected in such a manner that holders of' STS Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for STS -38- Common Stock is referred to herein as an "Organic Change." Prior to the -------------- consummation of any Organic Change, STS shall make lawful and adequate provision (in form and substance satisfactory to the holders of a majority of the principal amount of the Notes then outstanding) to insure that the holders of the Notes shall thereafter have the right to acquire and receive, in lieu of or addition to (as the case may be) shares of Conversion Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Notes, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Conversion Stock immediately theretofore acquirable and receivable upon conversion of such holder's Note had such Organic Change not taken place. In any such case, appropriate provision (in form and substance satisfactory to the holders of a majority of the principal amount of the Notes then outstanding) shall be made with respect to such holder's rights and interests to insure that the provisions of this Section 6E(v) and Sections 6F and 6G shall thereafter be applicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of the Notes (including, in the case of any such consolidation, merger or sale in which the successor entity or purchasing entity is other than STS, an immediate adjustment of the Conversion Price to the value for the STS 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 the Notes, if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). STS shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor entity (if other than STS) resulting from consolidation or merger or the entity purchasing such assets assumes by written instrument (in form reasonably satisfactory to the holders of a majority of the principal amount of the Notes 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. (vi) Certain Events. If any event occurs of the type contemplated -------------- by the provisions of this Section 6E 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 STS's board of directors shall make an appropriate adjustment in the Conversion Price so as to protect the rights of the holders of the Notes; provided that no such adjustment shall increase the Conversion Price as otherwise determined pursuant to this Section 6E or decrease the number of shares of Conversion Stock issuable upon conversion of the Notes then outstanding. (vii) Notices. ------- (A) Immediately upon any adjustment of the Conversion Price, STS shall send written notice thereof to the holder of the Notes, setting forth in reasonable detail and certifying the calculation of such adjustment. (B) STS shall send written notice to the holder of the Notes at least 20 days prior to the date on which STS closes its books or takes a record (A) with respect to any -39- dividend or distribution upon the STS Common Stock, (B) with respect to any pro rata subscription offer to holders of STS Common Stock or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (C) STS shall also give at least 20 days prior written notice of the date on which any Organic Change, dissolution or liquidation shall take place. 6F. Liquidating Dividends. If STS declares a dividend upon the --------------------- STS 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 STS Common Stock (a "Liquidating Dividend"), then STS shall pay to the holders of -------------------- the Notes at the time of payment thereof the Liquidating Dividend which would have been paid to the holder of the Notes on the Conversion Stock had the Notes been fully 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 STS Common Stock entitled to such dividends are to be determined. 6G. Purchase Rights. If at any time STS 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 STS Common Stock (the "Purchase Rights"), then each holder of the Notes 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 Note 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 STS Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Section 7. Definitions. ----------- 7A. Definitions. For the purposes of this Agreement, the following terms ----------- have the meanings set forth below: "Additional Shares" has the meaning set forth in Section 1D. ----------------- "Affiliate" of any particular Person means any other Person controlling, --------- controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise; provided, that notwithstanding the foregoing, Purchaser shall not be deemed an Affiliate of either ATS or STS. "Agent" has the meaning set forth in Section 2D. ----- "Asche Stock Purchase Agreement" has the meaning set forth in Section ------------------------------ 1D. -40- "Assured Obligations" shall have the meaning set forth in the definition ------------------- of "Guaranty Equivalent." "ATS" has the meaning set forth in the preamble. --- "ATS Common Stock" means, collectively, the ATS common stock, par value $.0001 per share, and any capital stock of any class of ATS common stock 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 ATS. "ATS Credit Agreement" has the meaning set forth in Section 2G. -------------------- "Business Day" has the meaning set forth in Section 6C. ------------ "Capital Expenditures" of any Person shall mean, for any period, all -------------------- expenditures (whether paid in cash or accrued as liabilities during such period) of such Person during such period which would be classified as capital expenditures in accordance with GAAP (including, without limitation, expenditures for maintenance and repairs which are capitalized, and Capitalized Leases to the extent an asset is recorded in connection therewith in accordance with GAAP). "Capitalized Lease" shall mean at any time any lease which is, or is ----------------- required under GAAP to be, capitalized on the balance sheet of the lessee at such time, and "Capitalized Lease Obligation" of any Person at any time shall ---------------------------- mean the aggregate amount which is, or is required under GAAP to be, reported at such time as a liability on the balance sheet of such Person as lessee under a Capitalized Lease. "Cash Equivalent Investments" shall mean any of the following, to the --------------------------- extent acquired for investment and not with a view to achieving trading profits: (a) obligations fully backed by the full faith and credit of the United States of America maturing not in excess of six months from the date of acquisition, (b) commercial paper maturing not in excess of six months from the date of acquisition and rated "P-1" by Moody's Investors Service or "A-1" by Standard & Poor's Corporation on the date of acquisition, and (c) the following obligations of any domestic commercial bank having capital and surplus in excess of $1,000,000,000, which has, or the holding company of which has, a commercial paper rating meeting the requirements specified in clause (b) above: (i) time deposits, certificates of deposit and acceptances maturing not in excess of six months from the date of acquisition, or (ii) repurchase obligations with a term of not more than seven days for underlying securities of the type referred to in clause (a) above. "Change of Control" shall mean that at any time Purchaser or ATS shall not ----------------- have the sole right to vote at least 51% of the shares of the capital stock of STS (assuming for purposes of such calculation that all then-outstanding options, warrants, conversion rights or other rights held by any Person other than Purchaser or ATS which may in any circumstances give such other Person the right to acquire shares of capital stock are exercised at such time by such other Person (so that all shares -41- of capital stock potentially issuable pursuant to such rights shall be deemed outstanding and held by such other Person for purposes of such calculation), regardless of whether such rights are in fact then exercisable or whether any conditions to such exercise are then met). "Charter Amendments" has the meaning set forth in Section 2N. ------------------ "Closing" has the meaning set forth in Section 1C. ------- "Closing Fee" has the meaning set forth in Section 8B. ----------- "Controlled Group Member" shall mean each trade or business (whether or not ----------------------- incorporated) which together with STS is treated as a single employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the IRC. "Conversion Price" has the meaning as used in Section 6E. ---------------- "Conversion Stock" means shares of STS's authorized but unissued STS Common ---------------- Stock; provided that if there is a change such that the securities issuable upon conversion of the Notes are issued by an entity other than STS or there is a change in the class of securities so issuable, then the term "Conversion Stock" shall mean one share of the security issuable upon conversion of these Notes 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 Securities" means, with respect to an entity, any stock or ---------------------- securities (directly or indirectly) convertible into or exchangeable for such entity's Common Stock. "EBITDA" has the meaning set forth in Section 6E(ii)(C). ------ "Environmental and Safety Requirements" shall mean all federal, state, ------------------------------------- local and foreign statutes, regulations, ordinances and other provisions having the force of effect of law, all judicial and administrative orders and determinations, all contractual obligations and all common law 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, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as amended and as now or hereafter in effect. "Environmental Laws" has the meaning set forth in Section 4Q. ------------------ "Environmental Lien" has the meaning set forth in Section 4R(i). ------------------ "ERISA" has the meaning set forth in Section 4P(i). ----- -42- "Event of Default" has the meaning set forth in Section 6A. ---------------- "Fully Diluted Common" has the meaning set forth in Section 6E(ii)(C). -------------------- "GAAP" shall mean United States generally accepted accounting principles, ---- as in effect from time to time. "Governmental Actions" has the meaning set forth in Section 3K. -------------------- "Governmental Authority " shall mean any government or political ----------------------- subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Guaranty Equivalent": A Person (the "Deemed Guarantor") shall be deemed ------------------- ---------------- to be subject to a Guaranty Equivalent in respect of any indebtedness, obligation or liability (the "Assured Obligation") of another Person (the ------------------ "Deemed Obligor") if the Deemed Guarantor directly or indirectly guarantees, -------------- becomes surety for, endorses, assumes, agrees to indemnify the Deemed Obligor against, or otherwise agrees, becomes or remains liable (contingently or otherwise) for, such Assured Obligation other than endorsements of instruments in the ordinary course of business. Without limitation, a Guaranty Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or remains liable (contingently or otherwise), directly or indirectly: (a) to purchase or assume, or to supply funds for the payment, purchase or satisfaction of, an Assured Obligation, (b) to make any loan, advance, capital contribution or other investment in, or to purchase or lease any property or services from, a Deemed Obligor (i) to maintain the solvency of the Deemed Obligor, (ii) to enable the Deemed Obligor to meet any other financial condition, (iii) to enable the Deemed principal to satisfy any Assured Obligation or to make any Stock Payment or any other payment, or (iv) to assure the holder of such Assured Obligation against loss, (c) to purchase or lease property or services from the Deemed Obligor regardless of the non-delivery of or failure to furnish of such property or services, (d) in a transaction having the characteristics of a take-or-pay or throughput contract or as described in paragraph 6 of FASB Statement of Financial Accounting Standards No. 47, or (e) in respect of any other transaction the effect of which is to assure the payment or performance (or payment of damages or other remedy in the event of nonpayment or nonperformance) of any Assured Obligation. "Indebtedness" of a Person shall mean the following (without duplication): ------------ (i) all obligations on account of money borrowed by, or credit extended to or on behalf of, or for or on account of deposits with or advances to, such Person; (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (iii) all obligations of such Person for the deferred purchase price of property or services other than trade payables incurred in the ordinary course of business and on terms customary in the trade; (iv) all obligations secured by a Lien on property owned by such Person (whether or not assumed); and all obligations of such Person under Capitalized Leases (without regard to any limitation of the rights and remedies the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property; (v) the face amount of all letters of credit issued for the account of such Person and, without duplication, the -43- unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (vi) all obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; (vii) all obligations of such Person under a product financing or similar arrangement described in paragraph 8 of FASB Statement of Accounting Standards No. 49 or any similar requirement of GAAP; and (viii) all obligations of such Person under any interest rate or currency protection agreement, interest rate or currency future, interest rate or currency option, interest rate or currency swap or cap or other interest rate or currency hedge agreement. "Indemnified Liabilities" has the meaning set forth in Section 8Q(i). ----------------------- "Indemnitees" has the meaning set forth in Section 8Q(i). ----------- "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). "Intercompany Loan" shall mean a loan on or promptly following the Closing ----------------- by STS to ATS in an amount not to exceed $2,250,000. "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. "IRS" means the United States Internal Revenue Service. --- "Latest Balance Sheet" has the meaning set forth in Section 4E(ii). -------------------- "Law" shall mean any law (including common law), constitution, statute, --- treaty, convention, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority. "Liens" means any mortgage, pledge, security interest, encumbrance, lien ----- or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against ATS or STS or any -44- Subsidiary or any Affiliate thereof, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third party of property leased to ATS or STS or any Subsidiary or any Affiliate thereof under a lease which is not in the nature of a conditional sale or title retention agreement, or any subordination arrangement in favor of another Person (other than any subordination arising in the ordinary course of business). "Liquidating Dividend" has the meaning set forth in Section 6F. -------------------- "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 sale on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which "Market Price" is being determined and the 20 consecutive business days prior to such day. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the "Market Price" shall be the fair value thereof determined jointly by STS and the holders of a majority of the outstanding principal amount of the Notes. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an appraiser jointly selected by STS and the holders of a majority of the outstanding principal amount of the Notes. 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 STS. "Material Adverse Effect" shall mean, with respect to any Person: (a) a ----------------------- material adverse effect on the business, operations, condition (financial or otherwise) or prospects of such Person, (b) a material adverse effect on the ability of such Person to perform or comply with any of the terms and conditions of this Agreement or any instrument, document or agreement contemplated hereunder, (c) an adverse effect on the legality, validity, binding effect, enforceability or admissibility into evidence of this Agreement or any instrument, document or agreement contemplated hereunder, or the ability of Purchaser to enforce any rights or remedies under or in connection with this Agreement or any instrument, document or agreement contemplated hereunder. "Material Contracts" has the meaning set forth in Section 4J. ------------------ "Multiemployer Plan" shall mean any employee benefit plan which is a ------------------ "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which STS or any Controlled Group Member has or had an obligation to contribute. "Note" has the meaning set forth in Section 1A. ---- -45- "Officer's Certificate" means, with respect to an entity, a certificate --------------------- signed by such entity's president or its chief financial officer, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (ii) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. "Options" means, with respect to an entity, any rights or options to ------- subscribe for or purchase such entity's Common Stock or Convertible Securities. "Organic Change" has the meaning set forth in Section 6E(v). -------------- "PBGC" means the Pension Benefit Guaranty Corporation established under ---- Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Permitted Liens" has the meaning set forth in Section 3S. --------------- "Person" means an individual, a partnership, a corporation, a limited ------ liability company, 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. "PIK Notes" has the meaning set forth in the Note. --------- "Plan" means any employee pension benefit plan within the meaning of ---- Section 3(2) of ERISA (other than a Multiemployer Plan) of which STS or any Controlled Group Member is or has been within the preceding five years a "contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or which is or has been within the preceding five years maintained for employees of STS or any Controlled Group Member. "Postretirement Benefit Obligation" shall mean that portion of the --------------------------------- actuarial present value of all Postretirement Benefits expected to be provided by STS which is attributable to employees' service rendered to the date of determination (assuming that such liability accrues ratably over an employee's working life to the earlier of his date of retirement or the date on which the employee would first become eligible for full benefits), reduced by the fair market value as of the date of determination of any assets which are segregated from the assets of STS and which have been restricted so that they cannot be used for any purpose other than to provide Postretirement Benefits or to defray related expenses. "Postretirement Benefits" shall mean any benefits, other than retirement ----------------------- income, provided by STS to retired employees, or to their spouses, dependents or beneficiaries, including, without limitation, group medical insurance or benefits, or group life insurance or death benefits. -46- "Potential Event of Default" means any event or occurrence which with the -------------------------- passage of time or the giving of notice or both would constitute an Event of Default. "Purchase Price" has the meaning set forth in Section 1B. -------------- "Purchase Rights" has the meaning set forth in Section 6G. --------------- "Purchaser" has the meaning set forth in the preamble. --------- "Registration Agreement" has the meaning set forth in Section 2B. ---------------------- "Registration Agreement Amendment" has the meaning set forth in Section -------------------------------- 2B. "Release" has the meaning set forth in Section 4R(i). ------- "Restricted Securities" means (i) the Additional Shares, the Notes and --------------------- the Warrant, (ii) the STS Common Stock and ATS Common Stock issued upon conversion of the Notes or upon exercise of the Warrant, respectively, and (iii) any securities issued with respect to the securities referred to in clauses (i) or (ii) 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) been distributed to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act or become eligible for sale pursuant to Rule 144 (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 5E have been delivered by STS or ATS (as the case may be) in accordance with Section 5. Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from STS or ATS (as the case may be), without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in Section 5E. "Securities Act" means the Securities Act of 1933, 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. "Securities Exchange Act" means the Securities Exchange Act of 1934, as ----------------------- amended, or any similar federal law then in force. "Security Agreement" has the meaning set forth in Section 2C. ------------------ "Senior Debt" means the Senior Debt as defined in the Subordination ----------- Agreement. -47- "Senior Debt Documents" means the STS Credit Agreement and all other --------------------- documents, agreements and instruments contemplated thereunder that are executed or delivered in connection therewith. "Senior Lenders" has the meaning set forth in Section 2D. -------------- "Stock Payment" by any Person shall mean any dividend, distribution or ------------- payment of any nature (whether in cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "STS" has the meaning set forth in the preamble. --- "STS Common Stock" means, collectively, the STS common stock, par value ---------------- $.01 per share, and any capital stock of any class of STS common stock 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 STS. "STS Common Stock Deemed Outstanding" means, at any given time, the ----------------------------------- number of shares of STS Common Stock actually outstanding at such time, plus the number of shares of STS Common Stock issuable upon exercise of all outstanding Options and upon conversion or exchange of all outstanding Convertible Securities, regardless of whether such Options and Convertible Securities are actually exercisable at such time, including all shares of STS Common Stock issuable upon conversion of the Notes. "STS Credit Agreement" has the meaning set forth in Section 2D. -------------------- "Subordination Agreement" has the meaning set forth in Section 2E. ----------------------- "Subsidiary" means, with respect to an entity, 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 such entity either directly or through one or more Subsidiaries; provided, that notwithstanding the foregoing, neither ATS nor STS nor any of their Subsidiaries shall be deemed a Subsidiary of Purchaser. "Tax" or "Taxes" has the meaning set forth in Section 4I(iii). --- ----- "Tax Return" has the meaning set forth in Section 4I(iii). ---------- -48- "Tax Sharing Agreement" shall mean the Tax Sharing Agreement among --------------------- ATS and its Subsidiaries dated as of January 30, 1998, as such agreement may be amended from time to time. "Warrant" has the meaning set forth in Section 1A. ------- "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. ATS shall pay, and hold Purchaser harmless against -------- liability for the payment of, the fees and expenses incurred by Purchaser and its Affiliates (including without limitation fees and expenses of legal counsel, accountants and other consultants) in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated by this Agreement which shall be payable at the Closing or, if the Closing does not occur, payable upon demand. ATS and STS shall pay, and hold Purchaser harmless against liability for the payment of, (i) 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 Notes, the Warrant, the Security Agreement and the agreements and instruments contemplated hereby and thereby, (ii) 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 the Notes or the Warrant or any shares of STS Common Stock issuable upon conversion of Notes or ATS Common Stock issuable upon exercise of the Warrant, (iii) the fees and expenses incurred with respect to the enforcement of the rights granted under this Agreement, the Notes, the Warrant, the Security Agreement or the other agreements or instruments contemplated hereby and thereby, and (iv) the reasonable fees and expenses incurred by Purchaser in any filing with any governmental agency with respect to its investment in STS and ATS (including, without limitation, any filings under the Hart-Scott-Rodino Antitrust Investment Act of 1976) or in any other filing with any governmental agency with respect to STS and ATS which mentions Purchaser. Notwithstanding the foregoing, in the event that the transactions contemplated under this Agreement are not consummated as a result of the failure to obtain the third party consents identified in Section 2I hereof despite the good faith efforts of STS and ATS, no fees or expenses shall be payable to Purchaser under this Section 8A. 8B. Closing Fee. ATS shall pay to Churchill Capital, Inc. a closing ----------- fee ("Closing Fee") in an amount equal to 3% of the Purchase Price, payable in ----------- twelve equal monthly installments in the amount of $17,500 commencing July 15, 2000. 8C. Remedies. 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. 8D. Intentionally Omitted. --------------------- -49- 8E. Consent to Amendments. Except as otherwise expressly provided --------------------- herein, the provisions of this Agreement may be amended and STS or ATS may take action herein prohibited, or omit to perform any act herein required to be performed by it, only if STS or ATS (as the case may be) has obtained the written consent of Purchaser or its assign(s), and no other course of dealing between STS or ATS and Purchaser or any delay in exercising any rights hereunder or under the Notes or Warrant or the Security Agreement or the respective certificates or articles of incorporation of ATS or STS shall operate as a waiver of any rights of Purchaser. Subject only to the Subordination Agreement, no document, agreement or instrument relating to the Intercompany Loan that is executed by, on behalf of or for the benefit of STS and/or ATS may be modified, altered or amended except with the prior written consent of Purchaser. 8F. Survival of Representations and Warranties. All representations ------------------------------------------ and warranties contained herein or 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, regardless of any investigation made by Purchaser or on its behalf. 8G. 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 Purchaser's benefit as a purchaser or holder of the Notes, the Warrant, ATS Common Stock or STS Common Stock are also for the benefit of, and enforceable by, any subsequent holder of the Notes, the Warrant, ATS Common Stock or Underlying STS Common Stock. 8H. 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 generally accepted accounting principles, consistently applied. 8I. 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. 8J. 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. 8K. Descriptive Headings; Interpretation. The descriptive headings ------------------------------------ of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation. -50- 8L. Governing Law. All issues and questions concerning the ------------- construction, validity, enforcement and interpretation 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. 8M. Waiver of Jury Trial. Each party to this Agreement hereby waives, -------------------- to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any action, suit or proceeding arising out of or relating to this Agreement or any of the transactions contemplated hereunder. 8N. 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 Purchaser, ATS and STS at the addresses indicated below: Purchaser: Churchill Environmental & Industrial Equity Partners, L.P. c/o Churchill Capital, Inc. Attn: John J. Quirk 590 Madison Avenue, 38/th/ Floor New York, NY 10022 Telecopier: 212/832-4270 with a copy to: Kirkland & Ellis 200 East Randolph Chicago, IL 60601 Attn: Edward T. Swan, Esq. Telecopy: (312) 861-2200 ATS: Asche Transportation Services, Inc. Attn: Gary I. Goldberg 5965 McCasland Avenue Portage, IN 46368 Telecopier: 219/764-4747 -51- with a copy to: Joel R. Schaider, Esq. Sachnoff & Weaver, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Telecopier: (312) 207-6400 STS: Specialty Transportation Services, Inc. Attn: Gary I. Goldberg 5965 McCasland Avenue Portage, IN 46368 Telecopier: 219/764-4747 with a copy to: Joel R. Schaider, Esq. Sachnoff & Weaver, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Telecopier: (312) 207-6400 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. 8O. Consideration for the Note and the Warrant. Purchaser, STS and ------------------------------------------ ATS acknowledge and agree that the fair market value of the Note issued hereunder is $6,990,000 and the fair market value of the Warrant issued hereunder is $10,000 and that, for all purposes (including tax and accounting), the consideration for the issuance of the Warrant shall be allocated in accordance with such amounts. Purchaser, STS and ATS shall file their respective federal, state and local tax returns in a manner which is consistent with such valuation and allocation and shall not take any contrary position with any taxing authority. 8P. No Strict Construction. The parties hereto have participated ---------------------- jointly in the negotiation and drafting of 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. -52- 8Q. Indemnification. --------------- (i) General. In consideration of Purchaser's execution and ------- delivery of this Agreement and acquiring the Note and Warrant hereunder and in addition to all of ATS's and STS's other obligations under this Agreement, ATS and STS shall defend, protect, indemnify and hold harmless Purchaser and all of its 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 (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Note and Warrant or (b) the execution, delivery, performance or enforcement of this Agreement and any other instrument, document or agreement executed pursuant hereto by any of the Indemnitees. (ii) Environmental Liabilities. Without limiting the generality ------------------------- of the indemnity set out in Section 7P(i) above, ATS and STS shall defend, protect, indemnify and hold harmless 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 (including without limitation any claims for personal injury, property damages or natural resource damages) paid, incurred or suffered by, or asserted against, Purchaser or any other Indemnitee for, with respect to, or as a direct or indirect result of, any violations of, or any liabilities or investigatory, corrective or remedial obligations arising under, Environmental, Health and Safety Requirements with respect to the past, current or future properties, facilities or operations of ATS, STS, their Subsidiaries or their respective predecessors or Affiliates (including, without limitation any past, present or future environmental condition thereof), whether or not constituting a breach of any representation or warranty hereunder and whether or not disclosed to Purchaser prior to the Closing Date (whether on the Environmental Schedule ---------------------- or otherwise) or identified by Purchaser or its agents or representatives through their due diligence investigations prior to the Closing Date. 8R. Payment Set Aside. To the extent that ATS or STS makes a payment ----------------- or payments to Purchaser hereunder or under the Notes or Purchaser enforces its rights or exercises its right of setoff hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to ATS or STS, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended -53- to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. * * * * * -54- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. ASCHE TRANSPORTATION SERVICES, INC. By _________________________________________ Gary I. Goldberg, Chief Executive Officer SPECIALTY TRANSPORTATION SERVICES, INC. By _________________________________________ Gary I. Goldberg, President CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership By Churchill Capital Environmental, L.L.C., a Delaware limited liability company, Its General Partner By Churchill Capital, Inc., Its Managing Agent By: ___________________________________ Name: John J. Quirk Title: Principal -55- EX-7.2 3 0003.txt STOCK PURCHASE WARRANT [EXECUTION COPY] The security represented by this certificate was originally issued on July 7, 2000, and has not been registered under the Securities Act of 1933, as amended. The transfer of such security is subject to the conditions specified in the Note and Warrant Purchase Agreement, dated as of July 7, 2000 (as amended and modified from time to time), between the issuer hereof (the "Company"), Specialty Transportation Services, Inc. and the initial holder hereof, and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge. ASCHE TRANSPORTATION SERVICES, INC. STOCK PURCHASE WARRANT ---------------------- Date of Issuance: July 7, 2000 Certificate No. W-______ FOR VALUE RECEIVED, Asche Transportation Services, Inc., a Delaware corporation (the "Company"), hereby grants to Churchill Environmental & Industrial Equity Partners, L.P., a Delaware limited partnership or its registered assigns (the "Registered Holder"), the right to purchase from the Company initially 950,000 shares of Warrant Stock at a price per share of $.01 (as adjusted from time to time hereunder, the "Exercise Price"). This Warrant is the warrant issued pursuant to the terms of the Note and Warrant Purchase Agreement, dated as of July 7, 2000 (the "Purchase Agreement"), between the Company, Specialty Transportation Services, Inc. and the initial holder hereof. Certain capitalized terms used herein are defined in Section 5 hereof. The amount and kind of securities obtainable pursuant to the rights granted hereunder and the purchase price 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 $10,000. This Warrant is subject to the following provisions: Section 1. Exercise of Warrant. ------------------- 1A. Exercise Period. The Registered Holder may exercise, in whole or --------------- in part (but not as to a fractional share of Warrant Stock), the purchase rights represented by this Warrant at any time and from time to time after the Date of Issuance to and including the fifth anniversary of the date hereof (the "Exercise Period"); provided that the Exercise Period shall continue until the seventh anniversary of the date hereof with respect to any Additional Warrant Shares issuable upon exercise of this Warrant as provided by paragraph 2F below. 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 paragraph 1C below, executed by the Person exercising all or part of the purchase rights represented by this Warrant (the "Purchaser"); (b) this Warrant; (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; and (d) either (1) a check payable to the Company in an amount equal to the product of the Exercise Price multiplied by the number of shares of Warrant Stock being purchased upon such exercise (the "Aggregate Exercise Price"), (2) the surrender to the Company of debt or equity securities of the Company or any of its wholly-owned Subsidiaries having a Market Price equal to the Aggregate Exercise Price of the Warrant Stock being purchased upon such exercise (provided that for purposes of this subparagraph, the Market Price of any note or other debt security or any preferred stock shall be deemed to be equal to the aggregate outstanding principal amount or liquidation value thereof plus all accrued and unpaid interest thereon or accrued or declared and unpaid dividends thereon) or (3) a written notice to the Company that the Purchaser is exercising the Warrant (or a portion thereof) by authorizing the Company to withhold from issuance a number of shares of Warrant Stock issuable upon such exercise of the Warrant which when multiplied by the Market Price of the Warrant Stock is equal to the Aggregate Exercise Price (and such withheld shares shall no longer be issuable under this Warrant). (ii) Certificates for shares of Warrant Stock purchased upon exercise of this Warrant shall be delivered by the Company to the Purchaser within five business days after the 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 Stock 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 Stock at the Exercise Time. (iv) The issuance of certificates for shares of Warrant Stock 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 -2- related issuance of shares of Warrant Stock. Each share of Warrant Stock issuable upon exercise of this Warrant shall, upon payment of the Exercise Price therefor, 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 share of Warrant Stock 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 Stock acquirable 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, 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 but unissued shares of Warrant Stock solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Warrant Stock issuable upon the exercise of all outstanding Warrants. The Company shall take all such actions as may be necessary to assure that all such shares of Warrant 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 Warrant Stock 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 Warrant Stock to be less than the number of such shares required to be reserved hereunder for issuance upon exercise of the Warrants. 1C. Exercise Agreement. Upon any exercise of this Warrant, the ------------------ Exercise Agreement shall be substantially in the form set forth in Exhibit I --------- hereto, except that if the shares of Warrant Stock are not to be issued in the name of the Person in whose name this Warrant is registered, the Exercise Agreement shall also state the name of the Person to whom the certificates for the shares of Warrant Stock are to be issued, and if the number of shares of Warrant Stock to be issued does not include all the shares of Warrant Stock purchasable hereunder, it 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. 1D. Fractional Shares. If a fractional share of Warrant Stock ----------------- would, but for the provisions of paragraph 1A, be issuable upon exercise of the rights represented by this Warrant, the Company shall, within five business days after the date of the Exercise Time, deliver to the Purchaser a check payable to the Purchaser in lieu of such fractional share in an amount equal to the -3- difference between the Market Price of such fractional share as of the date of the Exercise Time and the Exercise Price of such fractional share. 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 shall be subject to adjustment from time to time as provided in this Section 2, and the number of shares of Warrant Stock obtainable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 2. 2A. Adjustment of Exercise Price and Number of Shares upon Issuance --------------------------------------------------------------- of Common Stock. - --------------- (i) If and whenever on or after the Date of Issuance of this Warrant the Company issues or sells, or in accordance with paragraph 2B is deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Market Price of the Common Stock determined as of the date of such issue sale, then immediately upon such issue or sale the Exercise Price shall be reduced to the Exercise Price determined by multiplying the Exercise 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 of sale, plus (2) the consideration, if any, received by the Company 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. (ii) Upon each such adjustment of the Exercise Price hereunder, the number of shares of Warrant Stock acquirable upon exercise of this Warrant shall be adjusted to the number of shares determined by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Warrant Stock acquirable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (iii) Notwithstanding the foregoing, there shall be no adjustment to the Exercise Price or the number of shares of Warrant Stock obtainable upon exercise of this Warrant with respect to the granting on or subsequent to the date hereof of stock options to employees of the Company and its Subsidiaries, or the exercise thereof, for an aggregate of up to 128,128 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations). 2B. Effect on Exercise Price of Certain Events. For purposes of ------------------------------------------ determining the adjusted Exercise Price under paragraph 2A, the following shall be applicable: (i) Issuance of Rights or Options. If the Company 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 determined immediately prior ro the time of the granting -4- or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options, shall be deemed to be outstanding and to have been issued and sold by the Company at such time for such price per share. For purposes of this paragraph, the "price per share for which Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such Convertible Securities" is determined by dividing (A) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Options, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus in the case of such Options which are exercisable into Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company 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 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 Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities. (ii) Issuance of Convertible Securities. If the Company 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 determined immediately prior to the time of such issue or sale, 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 Company for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable upon conversion or exchange thereof" is determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company 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 Exercise Price shall be made upon the actual issue of such Common Stock upon 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 Exercise Price had been or are to be made pursuant to other provisions of this paragraph 2B, no further adjustment of the Exercise 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 issue, 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 Exercise Price in effect at the time of such change shall be adjusted immediately to the Exercise 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 changed conversion rate, as the case may be, at the time initially granted, issued or sold and the number of shares of Warrant Stock shall be correspondingly adjusted. For purposes of this paragraph 2B, if the terms of any Option or Convertible Security which was outstanding as of the date of issuance of this Warrant are changed -5- 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 Exercise 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 Securities without the exercise of such Option or right, the Exercise Price then in effect and the number of shares of Warrant Stock acquirable hereunder shall be adjusted immediately to the Exercise Price and the number of shares which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued. For purposes of this paragraph 2B, the expiration or termination of any Option or Convertible Security which was outstanding as of the date of issuance of this Warrant shall not cause the Exercise 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 this Warrant. (v) Calculation of Consideration Received. If any Common Stock, ------------------------------------- Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company 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 Company shall be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity 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, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities shall be determined jointly by the Company and the Registered Holder of the Warrant. If such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an appraiser jointly selected by the Company and the Registered Holder of this Warrant. The determination of such appraiser shall be final and binding on the Company and the Registered Holder of this Warrant, and the fees and expenses of such appraiser shall be paid by the Company. (vi) Integrated Transactions. In case any Option is issued in ----------------------- connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options shall be deemed to have been issued without consideration. (vii) Treasury Shares. The number of shares of Common Stock --------------- outstanding at any given time does not include shares owned or held by or for the account of the Company or any Subsidiary, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. -6- (viii) Record Date. If the Company 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 the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. 2C. Subdivision or Combination of Common Stock. If the Company 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 Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of shares of Warrant Stock obtainable upon exercise of this Warrant shall be proportionately increased. If the Company 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 Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of shares of Warrant Stock obtainable upon exercise of this Warrant shall be proportionately decreased. 2D. 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 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 "Organic Change." Prior to the consummation of any Organic Change, the Company shall make appropriate provision (in form and substance satisfactory to the Registered Holder of this Warrant) to insure that the Registered Holder of this Warrant shall thereafter have the right to acquire and receive, in lieu of or addition to (as the case may be) the shares of Warrant Stock immediately theretofore acquirable and receivable upon the exercise of such holder's Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Warrant Stock immediately theretofore acquirable and receivable upon exercise of such holder's Warrant had such Organic Change not taken 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 such holders' rights and interests to insure that the provisions of this Section 2 and Sections 3 and 4 hereof shall thereafter be applicable to the 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 each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. 2E. 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 (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's board of directors shall make an appropriate adjustment in the Exercise Price and the number of shares of Warrant Stock obtainable upon exercise of this Warrant so as to protect -7- the rights of the holder of this Warrant; provided that no such adjustment shall increase the Exercise Price or decrease the number of shares of Warrant Stock obtainable as otherwise determined pursuant to this Section 2. 2F. Additional Warrant Shares. Notwithstanding any other provision ------------------------- of this Warrant, the total number of shares of Warrant Stock issuable upon exercise of this Warrant shall be increased by 1.13 shares of Warrant Stock (collectively, the "Additional Warrant Shares") for each share of Common Stock issued by the Company after the date hereof but prior to the seventh anniversary of the date hereof upon exercise of any Options, Convertible Securities or other rights to acquire shares of Common Stock from the Company outstanding as of the date hereof. 2G. 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 Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation. (iii) The Company shall also give written notice to the Registered Holders 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 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 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 such Registered Holder on the Warrant Stock had this Warrant been fully exercised 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 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 any class of Common Stock (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 shares of Warrant Stock acquirable upon complete exercise of this Warrant 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. -8- Section 5. Definitions. The following terms have meanings set forth ----------- below: "Common Stock" means, collectively, the Company's Common Stock and any ------------ capital stock of any class of the Company 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 Company. "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 paragraphs 2B(i) and 2B(ii) hereof regardless of whether the Options or Convertible Securities are actually exercisable at such time, including any shares of Common Stock issuable upon exercise of the Warrants. "Convertible Securities" means any stock or securities (directly or ---------------------- indirectly) convertible into or exchangeable for Common Stock. "Market Price" means as to any security the average of the closing ------------ prices of such security's sales on all domestic securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, on such day, 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; provided that if such security is listed on any domestic securities exchange the term "business days" as used in this sentence means business days on which such exchange is open for trading. If at any time such security is not listed on any domestic securities exchange or quoted in the NASDAQ System or the domestic over-the-counter market, the "Market Price" shall be the fair value thereof determined jointly by the Company and the Registered Holder of this Warrant; provided that if such parties are unable to reach agreement within a reasonable period of time, such fair value shall be determined by an appraiser jointly selected by the Company and the Registered Holder of this Warrant. The determination of such appraiser shall be final and binding on the Company and the Registered Holder of this Warrant, and the fees and expenses of such appraiser shall be paid by the Company. "Options" means any rights or options to subscribe for or purchase ------- Common Stock 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. -9- "Warrant Stock" means the Company's Common Stock; provided that if ------------- there is a change such that the securities issuable upon exercise of the Warrants 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 Stock" 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. Other capitalized terms used in this Warrant but not defined herein shall have the meanings set forth in the Purchase Agreement. 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 Stock, and no enumeration herein of the rights or privileges of the Registered Holder shall give rise to any liability of such holder for the Exercise Price of Warrant Stock acquirable by exercise hereof or as a stockholder of the Company. Section 7. Warrant Transferable. Subject to the transfer conditions -------------------- referred to in the legend endorsed hereon, 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 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 of such new Warrants shall represent such portion of such rights as is designated by the Registered Holder at the time of such surrender. The date the Company initially issues this Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the number of times new certificates representing the unexpired and unexercised rights formerly represented by this Warrant shall be issued. All Warrants representing portions of the rights hereunder are referred to herein 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 any certificate evidencing this Warrant, 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 such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the same rights represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. 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 or -10- deposited in the U. S. 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 the Warrants 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 Registered Holder of this Warrant. Section 12. Descriptive Headings; Governing Law. 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. The corporation laws of the State of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by the internal law 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 jurisdictions other than the State of Illinois. * * * * -11- IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and attested by its duly authorized officers under its corporate seal and to be dated the Date of Issuance hereof. ASCHE TRANSPORTATION SERVICES, INC. By: ________________________________________ Its: ________________________________________ [Corporate Seal] Attest: ____________________________ Secretary EXHIBIT I EXERCISE AGREEMENT ------------------ To: Dated: The undersigned, pursuant to the provisions set forth in the attached Warrant (Certificate No. W-____), hereby agrees to subscribe for the purchase of ______ shares of the Warrant Stock covered by such Warrant and makes payment herewith in full therefor at the price per share provided by such Warrant. Signature ______________________________ Address ______________________________ 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 shares of the Warrant Stock covered thereby set forth below, unto: Names of Assignee Address No. of Shares - ----------------- ------- ------------- Dated: Signature ______________________________ ______________________________ Witness ______________________________ EX-7.3 4 0004.txt CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE [EXECUTION COPY] The security represented by this instrument was originally issued on July 7, 2000, and has not been registered under the Securities Act of 1933, as amended. The transfer of such security is subject to the conditions specified in the Note and Warrant Purchase Agreement, dated as of July 7, 2000 (as amended and modified from time to time), between the issuer hereof (the "Company"), Asche Transportation Services, Inc. and the initial holder hereof, and the Company reserves the right to refuse the transfer of such security until such conditions have been fulfilled with respect to such transfer. Upon written request, a copy of such conditions shall be furnished by the Company to the holder hereof without charge. This instrument is subject to the terms of a Subordination and Intercreditor Agreement, dated as of July 7, 2000, in favor of Mellon Bank, N.A., as agent which agreement (as amended in accordance with its terms) is incorporated herein by reference. Notwithstanding any statement to the contrary contained in this instrument, no payment on account of the obligations hereunder whether of principal, interest or otherwise, shall be made, paid, received or accepted except in accordance with the express terms of the Subordination and Intercreditor Agreement. SPECIALTY TRANSPORTATION SERVICES, INC. CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE ---------------------------- July 7, 2000 $7,000,000 FOR VALUE RECEIVED, Specialty Transportation Services, Inc., an Illinois corporation (the "Company"), promises to pay to Churchill Environmental ------- & Industrial Equity Partners, L.P., a Delaware limited partnership or its assigns (the "Holder"), the principal amount of Seven Million Dollars ------ ($7,000,000) together with interest thereon calculated from the date hereof in accordance with the provisions of this Note payable on July 7, 2007 (the "Maturity Date"). In the event that any payment of principal and/or interest - -------------- hereunder is not paid when due as provided for herein, and without affecting any of the Holder's other rights and remedies, the unpaid principal balance hereof shall thereafter accrue interest at the default rate (the "Default Rate") ------------ specified in the Purchase Agreement (as defined below). This Note was issued pursuant to a Note and Warrant Purchase Agreement, dated as of July 7, 2000 (as amended and modified from time to time, the "Purchase Agreement"), among the Company, Asche Transportation Services, ------------------ Inc. and the Holder, and this Note is one of the "Notes" referred to in the Purchase Agreement. The Purchase Agreement contains terms governing the rights of the Holder, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Unless otherwise defined herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement. 1. Payment of Interest. ------------------- (a) Generally. Interest shall accrue at the interest rate per annum --------- announced from time to time by Mellon Bank, N.A. as its prime rate or the Default Rate as provided in the Purchase Agreement (in each case, computed on the basis of a 360-day year and the actual number of days elapsed in any year) on the unpaid principal amount of this Note outstanding from time to time, or (if less) at the highest rate then permitted under applicable law. The Company shall pay to the Holder all accrued interest on the last day of each March, June, September and December, beginning September 30, 2000. Unless prohibited under applicable law, any accrued interest which is not paid (either in cash or by the issuance of PIK Notes pursuant to paragraph 1(b) below) on the date on which it is due and payable shall bear interest at the same rate at which interest is then accruing on the principal amount of this Note until such interest is paid (either in cash or by the issuance of PIK Notes pursuant to paragraph 1(b) below). Any accrued interest which for any reason has not theretofore been paid (either in cash or by the issuance of PIK Notes pursuant to paragraph 1(b) below) shall be paid in full on the date on which the final principal payment on this Note is made. Interest shall accrue on any principal payment due under this Note and, to the extent permitted by applicable law, on any interest which has not been paid on the date on which it is due and payable until such time as payment therefor is actually delivered to the Holder. (b) PIK Notes. If at any time the Company is prohibited from paying --------- interest in cash hereunder pursuant to the Subordination Agreement, the Company shall, and if not so prohibited, the Company in its sole discretion may, in lieu of the payment in whole or in part of interest in cash on this Note, pay interest on this Note through the issuance of additional promissory notes of like tenor ("PIK Notes"). The PIK Notes (if any) shall be issued in an --------- aggregate principal amount equal to the amount of interest which has accrued with respect to this Note (less any cash interest payments), and the terms of all PIK Notes shall be otherwise substantially similar to the Note (including but not limited to the payment of principal on July 7, 2007). 2. Payment of Principal. The Company shall pay the principal amount --------------------- of $7,000,000 (or such lesser principal amount then outstanding) to the Holder on July 7, 2007 together with all accrued and unpaid interest on the principal amount being repaid. The voluntary payment of any principal amount of this Note by the Company prior to July 7, 2007, shall not be permitted without the prior consent of the Holder. 3. Conversion. The Holder may convert all or any portion of the ---------- outstanding principal amount of this Note in accordance with the terms of the Purchase Agreement until such time as such principal amount has been paid in full. -2- 4. Subordination. The indebtedness evidenced by this Note is ------------- subordinate and junior in right of payment to the Company's Senior Debt to the extent and in the manner set forth in the Intercreditor and Subordination Agreement dated July 7, 2000 among the Company, the Holder and Mellon Bank, N.A., as agent. 5. Events of Default and Remedies. Upon the occurrence of an Event ------------------------------ of Default (as defined in the Purchase Agreement), the Holder shall be entitled to take such actions and enforce such remedies as are set forth in the Purchase Agreement and the Security Agreement. 6. Amendment and Waiver. The provisions of this Note 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. 7. Cancellation. After all principal and accrued interest at any ------------ time owed on this Note has been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be reissued, unless and to the extent that any such payments are required by law or under the Subordination Agreement to be returned to the Company or otherwise disgorged. 8. Payments. All payments to be made to the Holder shall be made in -------- the lawful money of the United States of America in immediately available funds. 9. Place of Payment. Payments of principal and interest shall be ---------------- delivered to the Holder at the following address: Churchill Environmental & Industrial Equity Partners, L.P. Attn: Melissa M. White 333 South 7/th/ Street, Suite 3100 Minneapolis, MN 55402 Telephone: 612/673-6734 Telecopier: 612/673-6630 or to such other address or to the attention of such other Person as specified by prior written notice to the Company. IN WITNESS WHEREOF, the Company has executed and delivered this Note on July 7, 2000. SPECIALTY TRANSPORTATION SERVICES, INC. By: ________________________________ Its: ________________________________ -3- EX-7.4 5 0005.txt AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT [EXECUTION COPY] AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT This AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (this "Amendment No. ------------- 1") is dated as of July 7, 2000, between ASCHE TRANSPORTATION SERVICES, INC., a - - Delaware corporation (the "Company"), and CHURCHILL ENVIRONMENTAL & INDUSTRIAL ------- EQUITY PARTNERS, INC., a limited partnership organized under the laws of the State of Delaware (together with its assigns under the Agreement, the "Holder"). ------ WHEREAS, the Company and the Holder entered into a Registration Rights Agreement (the "Agreement") in conjunction and contemporaneously with a Stock --------- Purchase Agreement, dated as of August 17, 1999, between the Company and the Holder (the "Stock Purchase Agreement"); ------------------------ WHEREAS, under the Agreement, the Holder was granted by the Company certain registration rights with respect to Registrable Shares (as defined therein); WHEREAS, the Company, the Holder and certain other persons have entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement"), pursuant ------------------ to which the Company has issued to the Holder a Warrant to purchase shares of the Company's common stock (the "Warrant Shares") and has accelerated and issued -------------- additional shares of common stock as required to be issued by the Stock Purchase Agreement (the "Additional Shares"); ----------------- WHEREAS, the Holder owns all of the Registrable Shares; WHEREAS, Section 12(h) of the Agreement requires the written consent of the holder(s) of a majority of the Registrable Shares prior to amending the Agreement; NOW THEREFORE, the parties hereto acknowledge and agree as follows: 1. The Warrant Shares and the Additional Shares shall be deemed and shall in fact be Registrable Shares, as defined in the Agreement. 2. All rights of the Holder with respect to the Registrable Shares under the Agreement shall pertain to the Warrant Shares and the Additional Shares. 3. Except as amended hereby, the Agreement shall remain in full force and effect, as amended hereby, and each of the parties thereto hereby reaffirms all of its rights and obligations under the Agreement, as amended hereby. 4. Holder's consent to this Amendment No. 1 is effected and evidenced by the Holder's execution of this Amendment No. 1. IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Registration Rights Agreement as of the date first written above. COMPANY: SPECIALTY TRANSPORTATION SERVICES, INC. ------- By:_________________________________ Title: _______________________________ HOLDER: CHURCHILL ENVIRONMENTAL & ------ INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership By Churchill Capital Environmental, L.L.C., a Delaware limited liability company Its General Partner By Churchill Capital, Inc., Its Managing Agent By: ______________________________________ Name: ___________________________________ Title: ____________________________________ EX-7.5 6 0006.txt SECURITY AGREEMENT DATED JULY 7, 2000 [EXECUTION COPY] THIS AGREEMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AND INTERCREDITOR AGREEMENT, DATED AS OF JULY 7, 2000, IN FAVOR OF MELLON BANK, N.A., AS AGENT SECURITY AGREEMENT THIS AGREEMENT, dated as of July 7, 2000 made by SPECIALTY TRANSPORTATION SERVICES, INC., an Illinois corporation ("STS"), in favor of --- CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership ("Churchill"). --------- Recitals: WHEREAS, STS and Churchill have entered into a Note and Warrant Purchase Agreement, dated as of July 7, 2000 (as amended, modified or supplemented from time to time, the "Purchase Agreement"), whereby Churchill is ------------------ investing $7,000,000 in STS, as evidenced by and to be repaid with interest thereon in accordance with a subordinated convertible promissory note, dated as of July 7, 2000, made by STS to Churchill (as amended, modified, or supplemented from time to time, and together with the PIK Notes issued with respect thereto, the "Notes"); WHEREAS, it is a condition precedent to the investment under the Purchase Agreement that STS execute and deliver this Agreement, and this Agreement is made by STS, among other things, to induce Churchill to enter into the Purchase Agreement, and to induce Churchill to make an investment in STS as evidenced by the Notes; WHEREAS, STS acknowledges that Churchill has relied and will rely on this Agreement in entering into the Purchase Agreement and making the investment in STS as evidenced by the Notes; and NOW, THEREFORE, in consideration of the promises, and intending to be legally bound hereby, STS hereby agrees as follows: Article I Definitions 1.01. Definitions. In addition to the words and terms defined ----------- in this Agreement, capitalized terms not defined herein shall have the meanings given to them in the Purchase Agreement. Unless otherwise defined herein or by reference herein, or the context otherwise clearly requires, all words and terms defined in the UCC shall have the same meaning in this Agreement. In addition, as used in this Agreement, the following words and terms shall have the following meanings: "Accounts" shall mean (a) all rights to payment of money for -------- goods sold or leased or for services rendered which are not evidenced by an Instrument or Chattel Paper and (b) all other property now or hereafter constituting an "account" as defined in the UCC, in each case whether now existing or hereafter acquired and whether or not earned by performance. "Agent" shall mean Churchill or Churchill's designee which ----- will act as its agent or bailee for purposes of holding, perfecting and/or securing Churchill's interest in the Collateral or Alternative Collateral, which is the subject of this Agreement. "Alternative Collateral" shall mean either a bond or other ---------------------- collateral, in form, substance and amount reasonably satisfactory to Churchill, securing payment by STS of all Contingent Secured Obligations. "Chattel Paper" shall mean (a) all writings which evidence ------------- both a monetary obligation and a security interest in, or a lease of, such goods, including any Instrument evidencing such monetary obligation and security interest or lease and (b) all other property now or hereafter constituting "chattel paper" as defined in the UCC, in each case whether now owned or hereafter acquired and whether or not earned by performance. "Collateral" shall have the meaning given to such term in ---------- Section 2.01. "Collateral Account" shall have the meaning given to such term ------------------ in Section 5.05(a) of the Security Agreement given by STS in favor of Mellon Bank, N.A. as agent under the Credit Agreement, dated as of January 30, 1998, between STS and Mellon Bank, N.A. (the "Mellon Credit Agreement"), which definition is incorporated by reference herein. "Contingent Secured Obligation" at any time shall mean a ----------------------------- Secured Obligation which at such time is a contingent obligation under an indemnification provision that survives indefinitely. A Secured Obligation under such an indemnification provision shall not constitute a Contingent Secured Obligation if an unsatisfied claim for payment under such provision has been made, or if an action, suit, proceeding or investigation is pending or threatened which, in the judgment of Churchill, might thereafter give rise to a claim under such provision. "Contract Rights" shall mean (a) all rights to receive monies --------------- due and to become due under or in connection with any contract (including, but not limited to, the Contracts) not yet earned by performance, which are not evidenced by an Instrument or Chattel Paper, (b) all -2- rights to terminate, to perform, to compel performance, and otherwise to exercise rights or remedies under or in connection with any contract (including, but not limited to, the Contracts), (c) all claims for damages arising out of or for breach of or default under any contract (including, but not limited to, the Contracts), and (d) all rights to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to any contract (including, but not limited to, the Contracts), in each case whether now existing or hereafter acquired. "Contracts" shall mean all material agreements and contracts --------- of STS as set forth in Schedule 3.07, in each case as the same may be amended, modified or supplemented from time to time. "Deposit Account Collateral" shall mean (a) the deposit -------------------------- accounts set forth in Schedule 3.09, (b) all funds held in any of the foregoing, and all certificates and instruments, if any, from time to time representing or evidencing any of the foregoing, (c) all notes, deposit accounts (including certificates of deposit), checks and other instruments from time to time hereafter delivered to or otherwise possessed by Churchill or its Agent for or on behalf of STS in substitution for or in addition to any of the Deposit Account Collateral, and (d) all interest, dividends, cash, instruments, and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the Deposit Account Collateral. "Documents" shall mean all property now or hereafter --------- constituting "documents of title" as defined by the UCC, whether now owned or hereafter acquired. "Equipment" shall mean (a) all forms of equipment or fixtures --------- of STS, and all accessions, additions, attachments, parts, substitutions, replacements and documents of title thereto or therefor and (b) all other property of STS now or hereafter constituting "equipment" as defined in the UCC, in each case whether now owned or hereafter acquired and wherever located. "Instruments" shall mean (a) (i) all negotiable instruments, ----------- (ii) all certificated securities and (iii) all other writings which evidence a right to the payment of money, but which are not themselves security agreements or leases and are of a type which is in the ordinary course of business transferred by delivery with any necessary endorsement or assignment and (b) all other property now or hereafter constituting an "instrument" as defined in the UCC, in each case whether now owned or hereafter acquired. "Inventory" shall mean (a) all forms of inventory of STS held --------- for sale or lease or furnished or to be furnished under contracts of service, all raw materials, work in process and materials used or consumed in the manufacture thereof, and all accessions, products and documents of title thereto or therefor and (b) all other property of STS now or hereafter -3- constituting "inventory" as defined in the UCC, in each case whether now owned or hereafter acquired and wherever located. "Investment Property" shall mean (a) all securities of STS and ------------------- (b) all other property of STS now or hereafter constituting "investment property" as defined in the UCC, whether now owned or hereafter acquired. "Letter of Credit Collateral Account" shall have the meaning ----------------------------------- given to such term in Section 5.06(a) of the Security Agreement given by STS in favor of Mellon Bank, N.A. as agent under the Mellon Credit Agreement, which definition is incorporated by reference herein. "Marks" shall mean all trademarks and service marks ----- (registered or unregistered), all registrations, recordings and applications made, filed or recorded in the United States Patent and Trademark Office or any similar office or agency of any other Governmental Authority for trademarks or service marks, all other trademarks, tradenames, fictitious business names, business names, company names, corporate names, business identifiers, trade styles, trade dress, service marks, logos or designs, and all other property or rights of similar nature, all renewals, reissues and extensions of any of the foregoing, the goodwill of STS's business symbolized by any of the foregoing, all licenses and license agreements with respect to any of the foregoing, and all proceeds of and rights associated with any of the foregoing (including but not limited to all license royalties and all claims of right or priority of use, causes of action and rights to collect damages now or hereafter existing by reason of any past, present or future infringement or dilution of any of the foregoing or injury to the associated goodwill). "Motor Vehicles" shall mean all forms of motor vehicles of -------------- STS, and all accessions, additions, attachments, parts, substitutions, replacements and documents of title thereto or therefor, whether now owned or hereafter acquired and wherever located. "Obligor" shall mean any Person now or hereafter obligated for ------- any reason to make any payment now or hereafter to STS. "Proceeds" shall mean whatever is received when any of the -------- Collateral is sold, exchanged, collected or otherwise disposed of, both cash and non-cash, and, to the extent not otherwise included, all payments under any insurance or any indemnity, warranty or guaranty payable by reason of loss or damage to or otherwise with respect to any Collateral. "Receivables" shall mean all Accounts, Chattel Paper, Contract ----------- Rights, Documents, and Instruments of STS (including, without limitation, all right, title and interest of STS in, to or under any Related Receivables Document), in each case whether now owned or hereafter acquired and whether or not earned by performance. -4- "Related Receivables Documents" shall mean (a) all contracts ----------------------------- and agreements to which STS is a party, is bound or is a beneficiary and (b) all mortgages, security agreements, guaranties, Guaranty Equivalents, leases and other agreements and Instruments, which, in the case of clause (a), creates, evidences, secures or relates to any Receivable (except to the extent that the assignment of such agreement pursuant to this Agreement would result in a violation by STS of any agreement pursuant to which the related Receivable was issued or secured), in each case whether now existing or owned or hereafter arising or acquired. "Secured Obligations" shall mean all indebtedness, obligations ------------------- and other liabilities from time to time of STS to Churchill under or in connection with the Purchase Agreement, the Notes and this Agreement, including all obligations to pay principal, interest, fees, indemnities or other amounts, in each whether such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising; provided, that Secured Obligations shall not include any indebtedness, obligations or other liabilities of Asche Transportation Services, Inc. under the Purchase Agreement or relating to the Warrant (as defined in the Purchase Agreement). "Subordination Agreement" shall mean the Subordination and ----------------------- Intercreditor Agreement, dated as of July 7, 2000, among STS, Churchill and Mellon Bank, N.A., as such agreement may be amended from time to time. "UCC" shall mean the Uniform Commercial Code as in effect in --- the applicable United States jurisdiction from time to time. Article II Security 2.01. Grant of Security. Subject only to the pre-existing and ----------------- superior security interest in the Collateral (the "Senior Security Interest") in ------------------------ favor of Mellon Bank, N.A., as agent for the Senior Lenders (the "Senior ------ Agent"), as more fully set forth in the Subordination Agreement, as security for - ----- the full and timely payment and performance of each of the Secured Obligations, STS hereby assigns, pledges, transfers, and sets over unto Churchill, and hereby grants and creates in favor of Churchill a security interest in and to, all of STS*STS's right, title and interest in, to and under the following, in each case whether now existing or hereafter arising, now owned or hereafter acquired, and wherever located (the "Collateral"): (a) all Contracts and Contract Rights; (b) all Equipment; -5- (c) all Inventory; (d) all Investment Property; (e) all Marks; (f) all Motor Vehicles; (g) all Receivables; (h) all Deposit Account Collateral; (i) the Collateral Account; (j) the Letter of Credit Collateral Account; (k) all Proceeds; and (l) all books, correspondence, credit files, customer lists, computer software, data bases, records and other documents relating to the foregoing. 2.02. STS Remains Liable. Notwithstanding anything herein to ------------------ the contrary, (a) STS shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by Churchill of any of the rights hereunder shall not release STS from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) Churchill shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement, nor shall Churchill be obligated to perform any of the obligations or duties of STS thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 2.03. Continuing Agreement. This Agreement creates a -------------------- continuing security interest in the Collateral and shall continue in full force and effect until all Secured Obligations (other than Contingent Secured Obligations if Alternative Collateral has been delivered to Churchill or its Agent) have been paid in cash and performed in full, and all commitments to extend credit under the Purchase Agreement and the Notes have terminated. Upon the payment in cash and performance in full of all Secured Obligations (other than Contingent Secured Obligations if Alternative Collateral has been delivered to Churchill or its Agent) and termination of all commitments to extend credit under the Purchase Agreement and the Notes, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to STS. Upon any such termination, Churchill or its Agent will, at STS's request and expense, return to STS, without any representations, warranties or recourse of any kind whatsoever, such of the Collateral as then may be held by -6- Churchill or its Agent hereunder, and execute and deliver to STS such documents as STS may reasonably request to evidence such termination. 2.04. Delivery of Instruments and Chattel Paper. Subject only ----------------------------------------- to the Senior Security Interest as provided in the Subordination Agreement, STS shall deliver to Churchill or its Agent on the date hereof all certificates or instruments representing or evidencing Instruments or Chattel Paper included in the Collateral or Deposit Account Collateral; provided that on and prior to the date of payment in full of the Senior Debt (the "Senior Debt Retirement Date"), STS shall not deliver to Churchill or its Agent any such certificates or instruments, including without limitation certificates or instruments relating to the Intercompany Loan. Such certificates or instruments shall be in suitable form for transfer by delivery and shall be accompanied by instruments of transfer or assignment, undated and duly executed in blank, all in form and substance satisfactory to Churchill or its Agent. Subject only to the Senior Security Interest as provided in the Subordination Agreement, Churchill or its Agent shall have the right, at any time following the occurrence of an Event of Default or Potential Event of Default and without notice to STS, to transfer to or to register in the name of Churchill or its Agent any or all of the Instruments and the Chattel Paper included in the Collateral and the Deposit Account Collateral, at STS's expense. 2.05. Deposit Account Letter Agreements. On or promptly --------------------------------- following the Senior Debt Retirement Date, STS shall deliver to Churchill or its Agent a fully executed Deposit Account Letter Agreement, substantially in the form attached hereto as Exhibit A (the "Deposit Account Letter Agreement") for each deposit account of STS existing on the date of such delivery. Article III Representations And Warranties STS hereby represents and warrants to Churchill as follows: 3.01. Title. STS is the legal and beneficial owner of the ----- Collateral, free and clear of any lien, security interest, option or other charge or encumbrance, except for (a) the Senior Security Interest, (b) the security interest under this Agreement in favor of Churchill securing the Secured Obligations and (c) Permitted Liens. No effective financing statement or other item similar in effect covering any Collateral is on file in any recording office, except such as may be filed in favor of the Senior Agent pursuant to the Senior Security Interest, or in favor of Churchill relating to this Agreement. 3.02. Validity, Perfection and Priority. Subject only to the --------------------------------- Senior Security Interest as more fully set forth in the Subordination Agreement, this Agreement creates a valid security interest in the Collateral in favor of Churchill securing the Secured Obligations, which security interest (other than with respect to Motor Vehicles) has been duly perfected and is prior to all other liens, security interests, options or other charges or encumbrances. All filings and other actions -7- necessary or desirable to perfect and protect such security interest (other than with respect to Motor Vehicles) in favor of Churchill have been duly made and taken. 3.03. Governmental Approvals and Filings. No authorization, ---------------------------------- approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is or will be necessary (a) for the grant by STS of the security interest in the Collateral hereunder or for the execution, delivery or performance of this Agreement by STS, (b) to ensure the validity, perfection or priority of the security interest in the Collateral granted hereunder or (c) for the exercise by Churchill of any of its rights or remedies hereunder, except ------ for the filing of financing statements and continuation statements in the jurisdictions set forth in Schedule 3.03 (as such Schedule may be amended from time to time in accordance with Section 4.03) pursuant to the UCC as in effect in such jurisdictions. 3.04. Places of Business and Names. ----------------------------- (a) Places of Business. Schedule 3.04(a) (as such Schedule ------------------ may be amended from time to time in accordance with Section 4.03) identifies as of the date hereof the address of (a) the principal place of business and chief executive office of STS, (b) the office where STS keeps its records concerning the Collateral and (c) each place of business of STS. (b) Names. Except as set forth in Schedule 3.04(b) (as such ----- Schedule may be amended from time to time in accordance with Section 4.03), neither STS nor any of its direct or indirect predecessors by merger, consolidation or other corporate reorganization is or has been known by or used any corporate or fictitious name or trade name (other than the corporate name of STS as of the date hereof), nor has STS or any such predecessor been the subject of any merger, consolidation or other corporate reorganization, nor has STS or any such predecessor otherwise changed its name, identity or corporate structure during the one year period ending on the date hereof. For each such direct and indirect predecessor of STS, Schedule 3.04(b) also identifies the respective addresses referred to in Section 3.05 for all times during such period. 3.05. Equipment and Inventory. Schedule 3.05 (as such Schedule ----------------------- may be amended from time to time in accordance with Section 4.03) identifies as of the date hereof the address of each place at which Equipment (other than Motor Vehicles) and Inventory of STS is located. 3.06. Instruments and Chattel Paper. All certificates and ----------------------------- instruments required to be delivered by STS to Churchill or its Agent under Section 2.04 evidencing Instruments and Chattel Paper, together with instruments of transfer or assignment, undated and duly executed in blank, have been delivered to Churchill or its Agent as required under Section 2.04. STS owns the Instruments and Chattel Paper beneficially and, to the extent such Instruments and Chattel Paper may be held of record, also of record (or, in the case of record ownership, such Instruments and Chattel Paper may be owned of record by Churchill or its Agent pursuant to this Agreement), free and clear of any Lien, -8- except for the Senior Security Interest and the Permitted Liens. Each Instrument or Chattel Paper is the legal, valid and binding obligation of the issuer thereof and is not in default. 3.07. Contracts. Schedule 3.07 sets forth a list of all of the --------- Contracts of STS as of the date hereof. A true and correct copy of each Contract has been furnished to Churchill. Each Contract has been duly authorized, executed and delivered by all parties thereto, enforceable against each party thereto in accordance with its terms. There exists no material default under any Contract by any party thereto. No Contract is evidenced by a promissory note, instrument or chattel paper. 3.08. Marks. STS has no Marks as of the date hereof. ----- 3.09. Deposit Accounts. Schedule 3.09 (as amended from time to ---------------- time in accordance with Section 4.09) sets forth a list of deposit accounts of STS. The term "deposit accounts," as used in this Agreement, shall be construed to include, but is not limited to, any certificate of deposit, negotiable or nonnegotiable, amounts on deposit in any deposit accounts, Collateral Accounts, Letter of Credit Collateral Accounts or lockboxes of STS. Article IV Certain Covenants STS hereby covenants to Churchill as follows: 4.01. Books and Records; Inspection. STS shall (a) keep ----------------------------- complete and accurate books and records concerning the Collateral and, at the request of Churchill from time to time, permit Churchill or its Agent to inspect and copy such books and records, (b) at the request of Churchill from time to time, permit Churchill or its Agent to inspect any Collateral not in the possession of Churchill or its Agent, and (c) furnish to Churchill or its Agent such information and reports in connection with the Collateral at such times and in such form as Churchill may reasonably request. Churchill or its Agent shall have the right to examine and verify the Collateral from time to time, and STS shall cooperate with Churchill and its Agent in such examination and verification. 4.02. Transfers and Other Liens, etc. ------------------------------- (a) Transfers. STS shall not sell, assign, transfer or --------- otherwise dispose of any Collateral (voluntarily or involuntarily, by operation of law or otherwise), except as permitted by the Purchase Agreement or the Subordination Agreement. (b) Other Liens. STS shall not create or permit to exist any ----------- lien, security interest, option or other charge or encumbrance on any Collateral (voluntarily or involuntarily, by operation of law or otherwise), except as permitted under the Purchase Agreement or the Subordination Agreement. -9- 4.03. Change of Location, Name or Filing Offices, etc. STS ----------------------------------------------- shall not (a) change its principal place of business or chief executive office from that set forth in Schedule 3.04(a), (b) open or change the location of any office where STS keeps its records concerning the Receivables from that set forth in Schedule 3.04(a), (c) be known by or use any corporate or fictitious name or trade name other than as set forth in Section 3.04(b) hereof, (d) maintain Equipment at any address other than as set forth on Schedule 3.04(a), or (e) otherwise take any action or omit to take any action which would at any time make any provision of Section 3.04 or 3.06 untrue as of such time, except in accordance with this Section 4.03. If STS desires to make any change in any of the items referred to in Section 3.03, 3.04(a) or 3.04(b), STS shall give Churchill at least 30 days (or, in the case of changes in Schedule 3.03 arising out of changes in applicable Law, the lesser of 30 days and the number of days available to STS before such Law becomes effective) prior written notice of its intention to do so, together with the proposed change in writing or a proposed supplement to such Schedule, as the case may be. If STS has taken all of the actions deemed necessary or desirable by Churchill or its Agent to maintain at all times the perfection and priority of the Lien granted to Churchill, Churchill shall consent to such written change or supplement (and upon giving such consent such written change or supplement to such Schedule shall constitute a part of this Agreement). No such amendment or other action by Churchill shall relieve STS of its obligation under Section 4.09 or any other obligation under the Purchase Agreement, the Notes or this Agreement. 4.04. Additional Covenants Pertaining to Equipment and ------------------------------------------------ Inventory. - --------- (a) Maintenance and Repair. STS shall cause the Equipment ---------------------- to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any applicable manufacturers manual; and STS shall forthwith, or in the case of any loss or damage to any of the Equipment as promptly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary or desirable to such ends. STS shall promptly notify Churchill of any material loss or damage to any of the Equipment. (b) Possession and Control. Subject to the Senior Security ---------------------- Interest, STS shall at all times retain exclusive possession and control of all Equipment and Inventory. 4.05. Additional Covenants Pertaining to Receivables. ---------------------------------------------- (a) Location. STS shall keep its chief executive office, -------- and the offices (whether maintained by STS or otherwise) where books and records relating to the Collateral are kept, and its places of business, at the respective addresses identified in Schedule 3.04(a) or, upon 60 days notice (specifically referring to this Section 4.05(a)) to Churchill, at such other locations in jurisdictions where all actions referred to in Section 4.08(a) have been completed. STS shall maintain its chief executive office in the 48 contiguous United States. -10- (b) Collection; Servicing. Except as otherwise provided in --------------------- this Section 4.05(b), STS shall continue to collect, at its own expense, all amounts due or to become due STS under the Receivables. In connection with such collections, STS may take (and on or following the Senior Debt Retirement Date, at the direction of Churchill or its Agent, shall take) such action as STS (or, on or following the Senior Debt Retirement Date, Churchill) may deem necessary or advisable to enforce collection of the Receivables; provided, however, that Churchill shall have the right at any time on or following the Senior Debt Retirement Date, upon the occurrence and during the continuance of an Event of Default or Potential Event of Default and upon notice to STS of its intention to do so, to notify (or require STS to notify) the account debtors or Obligors under any Receivables of the security interest in favor of Churchill in the Receivables and, subject only to the rights of the Senior Agent under the Senior Security Interest as provided in the Subordination Agreement, to direct such account debtors or Obligors to make payments of all amounts due or to become due to STS thereunder directly to Churchill or its Agent and, upon such notification and at the expense of STS, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as STS may have done. After receipt by STS of the notice from Churchill referred to in the proviso to the preceding sentence, and in any case only on or following the Senior Debt Retirement Date, (i) all amounts and proceeds (including instruments) received by STS in respect of the Receivables shall be received in trust for the benefit of Churchill hereunder, shall be segregated from other funds of STS and shall be forthwith paid over or delivered to Churchill or its Agent in the same form as so received (with any necessary endorsement) to be held as Collateral hereunder and either (A) released to STS so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, or (B) if any Event of Default or Potential Event of Default shall have occurred and be continuing, and if Churchill or its Agent does not otherwise in its discretion elect to release such amounts to STS, applied to pay down the balance due to Churchill under the Notes and the Purchase Agreement, subject only to the Senior Security Interest as provided in the Subordination Agreement and (ii) STS shall not adjust, settle or compromise the amount or payment of any Receivable, release wholly or partly any account debtor or Obligor thereof, or allow any credit or discount thereon. 4.06. Additional Covenants Pertaining to Instruments and -------------------------------------------------- Investment Property. - ------------------- (a) Voting Rights. Subject to the terms and provisions of ------------- the Senior Debt Documents, and notwithstanding the security interest in the Collateral granted to and created in favor of Churchill by this Agreement, STS shall have the right, until the occurrence and continuation of an Event of Default or Potential Event of Default, to collect and retain all dividends paid upon the Collateral, to collect and retain all payments on the Collateral, to exercise all voting rights with respect to the Collateral, to maintain the Collateral in its own name or that of its nominees and to give all consents, waivers and ratifications in respect thereof. (b) Stock Dividends. On and following the Senior Debt --------------- Retirement Date, STS agrees to deliver to Churchill or its Agent forthwith upon receipt by STS, to be held by Churchill or its Agent as part of the Collateral under and subject to the terms of this Agreement, all stock -11- dividends and instruments received by STS at any time and paid upon any securities included in the Collateral and all other securities or instruments included within the definition of Collateral which are received by STS at any time after the execution hereof, in each case together with undated stock powers therefor duly signed by STS in blank or endorsements as described in Section 2.04. 4.07. Additional Covenants Pertaining to Contracts. -------------------------------------------- (a) Performance, etc. STS shall perform and observe all of ---------------- the terms and provisions of each Contract to be performed or observed by it, maintain each Contract in full force and effect, enforce each Contract in accordance with its terms and, on and following the Senior Debt Retirement Date, take all such action to such ends as Churchill may request from time to time. (b) Notices; Demands. STS shall furnish to Churchill ---------------- promptly upon receipt thereof, copies of all notices and other communications received by STS under or in connection with each Contract (exclusive of routine communications, unless otherwise requested by Churchill), and from time to time upon the request of Churchill on and following the Senior Debt Retirement Date, make to any other party to any Contract such demands and requests for information and reports or for action as STS is entitled to make under or in connection therewith. (c) No Amendments, etc. On and following the Senior Debt ------------------ Retirement Date, STS shall not (i) amend or otherwise modify any Contract or give any consent, waiver or approval thereunder, or adjust, settle or compromise any amount payable by or to, or any claim by or against, STS thereunder, (ii) cancel or terminate any Contract or consent to or accept any cancellation or termination thereof, (iii) waive any material breach of or default under any Contract, (iv) consent to or permit or accept any prepayment of amounts to become due to STS under or in connection with any Contract, or (v) take any other action in connection with any Contract that would impair the value of the interest or rights of STS thereunder or that would impair the interests or rights of Churchill. 4.08. Additional Covenants Pertaining to Marks. ---------------------------------------- (a) General. STS shall (i) act prudently and in good faith ------- with respect to the preservation of its rights in any Mark, (ii) taking into account the value of any Mark and giving consideration to STS*s relationships with its customers, take all actions reasonably necessary or appropriate to preserve, protect and defend STS*s rights in and ownership of such Mark, and (iii) notify Churchill in writing, with reasonable supporting detail, of each pending or, to STS*s knowledge, threatened, action, suit, proceeding, claim or assertion that STS*s use of any Mark violates the rights of any third party. (b) Required Filings. STS (i) shall not use any Mark in the ---------------- ordinary course of STS*s business which is registered with, or for which an application has been made with, the United States Patent and Trademark Office or any similar office or agency of any other Governmental -12- Authority and (ii) shall not, and shall not permit any of its agents, employees, licensees or designees, to file an application for the registration of any Mark with the United States Patent and Trademark Office or any similar office or agency of any other Governmental Authority, unless, in each case, on or following the Senior Debt Retirement Date STS promptly executes and delivers to Churchill an Agreement of Liens on Patents and Trademarks, in substantially the form attached hereto as Exhibit B (the "Agreement of Liens on Patents and --------------------------------- Trademarks"), for filing with the appropriate office or agency. - ---------- 4.09. Additional Covenants Pertaining to Deposit Accounts. If --------------------------------------------------- STS desires to establish any additional deposit accounts on or following the Senior Debt Retirement Date, STS shall (a) give Churchill written notice of its intention to do so at least 10 days prior to adding any such account, together with a description of such deposit account and (b) on or before the date such deposit account is established, deliver a fully executed Deposit Account Letter Agreement regarding such deposit account to Churchill. 4.10. Risk of Loss. Risk of loss of, damage to or destruction ------------ of the Collateral is and shall remain upon STS. 4.11. Maintenance of Liens. STS at its expense will cause -------------------- financing statements (and continuation statements with respect to such financing statements), and any other appropriate instruments, to be recorded, published, registered and filed in such manner, at such times and in such places, and will pay all such recording, publishing, registration, filing or other taxes, fees and charges, and will do such other acts and things as may be required from time to time to establish, perfect, maintain, preserve and protect the Liens hereof as valid and perfected Liens on the Collateral prior to all other Liens except the Senior Security Interest. 4.12. Further Assurances. ------------------ (a) General. Subject to the Senior Security Interest, STS ------- shall from time to time, at its expense, promptly execute and deliver all further instruments and agreements, and take all further actions, that may be necessary or appropriate, or that Churchill may reasonably request, in order to perfect or protect any assignment, pledge or security interest granted or purported to be granted hereby or to enable Churchill to exercise or enforce its rights and remedies hereunder. Without limiting the generality of the foregoing, STS will: (i) on or following the Senior Debt Retirement Date, if any Collateral shall be evidenced by a promissory note or other instrument, chattel paper or negotiable document, immediately deliver to Churchill or its Agent such promissory note or instrument or chattel paper or negotiable document, duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Churchill; and -13- (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Churchill may request, in order to perfect and preserve any assignment, pledge or security interest granted or purported to be granted hereby; and (iii) on or following the Senior Debt Retirement Date, mark conspicuously each copy of all chattel paper and negotiable documents included in the Collateral and, at the request of Churchill or its Agent, each Related Contract and each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to Churchill, indicating that such chattel paper, negotiable document, Related Contract or Collateral is subject to the security interest granted pursuant hereto. (b) Financing Statements, etc. STS hereby authorizes ------------------------- Churchill to file one or more financing or continuation statements, and amendments thereto, relating to any Collateral without the signature of STS where permitted by law. A photocopy or other reproduction of this Agreement or any financing statement covering any Collateral shall be sufficient as a financing statement where permitted by law. Article V Certain Rights And Remedies Of Churchill 5.01. Duties of Churchill. ------------------- (a) No Duty to Perform. Subject to the terms and provisions ------------------ of the Subordination Agreement, if STS fails to perform any agreement or condition contained herein or in any of the Related Receivables Documents, Churchill may (but shall have no duty to) itself perform, or cause performance of, such agreement or condition, and the expenses of Churchill incurred in connection therewith shall be reimbursed by STS. The powers conferred on Churchill under this Agreement are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. (b) Specific Duties. Except for exercise of reasonable care --------------- in the custody and preservation of any Collateral in its possession and accounting for monies received by it pursuant to this Agreement, Churchill shall have no duty as to any Collateral. In any event Churchill (a) shall have no duty to take any steps to preserve rights against prior parties or any other rights pertaining to any Collateral and (b) shall not be liable for any action, omission, insolvency or default on the part of the Agent, or any designee or custodian (other than Churchill) appointed by Churchill in good faith. Churchill shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if it takes such action for such purpose as STS requests in writing from time to time (but failure to take any such action shall not in itself be deemed a failure to exercise reasonable care or evidence of such failure). Subject only to the performance by Churchill of its -14- duties set forth in this Section 5.01, risk of loss, damage and diminution in value of the Collateral, of whatever nature and however caused, shall be on STS. 5.02. Power of Attorney. Subject only to the rights of the ----------------- Senior Agent under the Senior Security Interest, as provided in the Subordination Agreement, STS hereby irrevocably appoints Churchill or its Agent, with full power of substitution, to be the attorney-in-fact of STS on and following the Senior Debt Retirement Date, with full authority in the place and stead of STS and in the name of STS or otherwise, from time to time in Churchill*s or its Agent's discretion, to take any action and to execute any instruments and agreements which Churchill or its Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including the following: (a) to demand, collect, enforce, file claims for, sue for, recover, compromise, release, and take any action or institute any proceedings to collect or enforce, all rights to payments due or to become due and all other rights of STS under or in connection with any Collateral. (b) to receive, endorse and collect any checks, notes or other instruments, documents, chattel paper or any other payment media in connection with the foregoing clause (a), and (c) to perform all obligations of STS hereunder; provided, that, except for taking actions referred to in Section 4.12(a), such - -------- power of attorney may be exercised on and following the Senior Debt Retirement Date only so long as an Event of Default or Potential Event of Default has occurred and is continuing. Such power of attorney is irrevocable and coupled with an interest. All third parties are entitled to rely conclusively on a representation by Churchill that it is entitled to exercise such power of attorney. 5.03. Certain Remedies. Subject only to the rights of the ---------------- Senior Agent under the Senior Security Interest as provided in the Subordination Agreement, if any Event of Default shall have occurred and be continuing, Churchill shall have such rights and remedies with respect to the Collateral and each part thereof as are provided to a secured party by the UCC and all other rights and remedies which it may have under this Agreement, the Purchase Agreement or the Notes, any other instrument or agreement, at law or in equity or otherwise, and, in addition, the following provisions shall apply: (a) Subject to the Subordination Agreement, and in any event on and following the Senior Debt Retirement Date, Churchill or its Agent may (i) take absolute possession and control of the Collateral or any part thereof, (ii) transfer any Collateral into its name, (iii) notify the parties obligated on the Collateral to make to Churchill any payments due or to become due, (iv) receive any payments made under or in connection with the Collateral, (v) exercise all rights and remedies of STS under or in connection with the Collateral, (vi) demand, collect, enforce, file claims for, sue for, recover, compromise, release, and take any action or institute any proceedings to collect or enforce, -15- all rights to payments due or to become due and all other rights of STS under or in connection with any Collateral, and (vii) otherwise deal in and act with respect to the Collateral in all respects as though it were the outright owner thereof. (b) Subject only to the rights of the Senior Agent under the Senior Security Interest as provided in the Subordination Agreement, Churchill may require STS to, and STS hereby agrees that it will, at its expense, from time to time on Churchill*s request, forthwith assemble all or part of the tangible Collateral as directed by Churchill and make it available to Churchill at STS*s premises or such other place as may be designated by Churchill; and Churchill may enter into and occupy any premises owned or leased by STS where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate Churchill*s rights and remedies hereunder or under law, without obligation to STS in respect of such occupation. (c) Subject only to the rights of the Senior Agent under the Senior Security Interest as provided in the Subordination Agreement, Churchill may, without being required to give any notice except to the extent hereinafter provided, apply the cash, if any, then held by it or its Agent as Collateral hereunder to the payment of the Secured Obligations and, if there shall be no such cash or the cash so applied shall be insufficient to pay in full all Secured Obligations, sell all or any portion of the Collateral at any broker's board or on any securities exchange or at any public or private sale, for cash, upon credit or for future delivery, in one lot or in separate parcels, all as Churchill may deem commercially reasonable (and Churchill may be the purchaser of any or all of the Collateral so sold and in such event shall thereafter own and hold the same, absolutely, free from any right or claim of whatsoever kind, and Churchill shall have the right to bid-in the Secured Obligations or any part thereof for such purpose). (d) STS recognizes that, on or following the Senior Debt Retirement Date, Churchill may be unable, or may deem it inadvisable, to effect a public sale of all or a portion of the Collateral by reason of certain provisions contained in the Securities Act of 1933, as amended, or applicable state securities laws, but may deem it advisable, for purposes of complying with such laws, to resort to one or more private sales to a restricted group of purchasers who will be obliged, among other things, to acquire such Collateral for their own accounts for investment and not with a view to the distribution or resale thereof. STS agrees that private sales so made may be at prices and on other terms less favorable to the seller than if such Collateral were sold at public sale and that Churchill shall have no obligation to delay sale of any such Collateral for the period of time necessary to permit the issuers of such Collateral, even if such issuers would agree, to register or qualify such Collateral for public sale under the Securities Act of 1933, as amended, or applicable state securities laws. STS agrees that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner. (e) Subject to the Subordination Agreement, and in any event on and following the Senior Debt Retirement Date, upon any sale of the Collateral, Churchill shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser (which -16- may include Churchill) at any such sale shall hold the property sold absolutely, free from any claim or right of whatever kind, including any equity or rights of redemption, of STS, and STS specifically waives, to the fullest extent permitted by Law, against any such purchaser all rights of redemption, stay or appraisal which STS has or may have under any Law now existing or hereafter adopted. (f) On and following the Senior Debt Retirement Date, to the fullest extent permitted by Law, STS waives any notice of the time or place of any sale of Collateral by Churchill and all other notices in connection with the exercise of remedies with respect to the Collateral and, to the extent notice of sale is required by Law, it is understood and agreed that ten days notice is commercially reasonable. Churchill shall not be obligated to make any sale pursuant to any such notice. Churchill may adjourn any such public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (g) On or following the Senior Debt Retirement Date, Churchill may, without being required to give any notice except to the extent hereinafter required, exercise its right to collect, demand or withdraw from the depositary institution all or any part of the Deposit Account Collateral, and all other funds, investments and other property therein, liquidate investments in such accounts as it deems appropriate and apply the resulting funds in such order as Churchill may elect, to the Secured Obligations. (h) On and following the Senior Debt Retirement Date, all payments and distributions on account of the Collateral and the proceeds of any sale of any part of the Collateral, and any other cash held by Churchill or its Agent under this Agreement, shall be applied: (i) first, to the payment of the reasonable costs and expenses in connection with such sale, including without limitation reasonable attorneys' fees and legal expenses, and all reasonable expenses, liabilities and advances made or incurred by Churchill in connection therewith, (ii) second, to pay down the balance due to Churchill under the Notes and (iii) finally, if all Secured Obligations shall have been paid in full, the balance, if any, shall be paid to STS or as otherwise required by Law. STS shall remain fully liable for any deficiency. 5.04. Indemnity and Expenses. Without limitation of any other ---------------------- right to indemnity which Churchill or any other Person may have under this Agreement or otherwise: (a) STS agrees to indemnify Churchill from and against any and all claims, losses and liabilities arising out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities if the same result solely from the gross negligence or willful misconduct of Churchill, as finally determined by a court of competent jurisdiction; and (b) STS will on demand pay to Churchill the amount of any and all expenses, including reasonable fees and disbursements of counsel and of any experts and agents, which Churchill may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of Churchill hereunder, or (iv) the failure by STS to perform or observe any of the -17- provisions hereof. The agreements contained in this Section shall survive the termination of this Agreement. Article VI Miscellaneous 6.01. Amendments and Waivers. Neither this Agreement nor any ---------------------- term hereof may be amended, waived, discharged or terminated except to the extent specifically set forth in a writing manually signed by or on behalf of STS and Churchill. Such amendments or waivers shall be made in accordance with, and shall be subject to, Section 8E of the Purchase Agreement. 6.02. No Implied Waiver; Remedies Cumulative. No delay or -------------------------------------- failure of Churchill in exercising any right or remedy under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies of Churchill under this Agreement are cumulative and not exclusive of any other rights or remedies available hereunder, under any other agreement, at law, or otherwise. 6.03. Notices. Except to the extent, if any, otherwise ------- expressly provided herein, all notices and other communications (collectively "Notices") under this Agreement shall be given, shall be effective, and may be relied upon, in the same way as notices under Section 8N of the Purchase Agreement. 6.04. Termination of Liens. Upon indefeasible payment in full -------------------- in cash of all Secured Obligations (other than Contingent Secured Obligations if Alternative Collateral has been delivered to Churchill or its Agent), or termination of the obligations of Churchill to make the loans under the Purchase Agreement, Churchill shall, at the request of STS, release the Liens created hereby and redeliver to STS any remaining Collateral in the possession of Churchill or its Agent. 6.05. Entire Agreement. This Agreement, the Subordination ---------------- Agreement, the Purchase Agreement and the Notes constitute the entire agreement of STS and Churchill with respect to the subject matter hereof and supersedes all prior negotiations, agreements, understandings and communications. No representation, understanding, promise or condition concerning the subject matter hereof shall be binding upon Churchill unless expressed herein or therein. No course of dealing, course or performance, trade usage or parole evidence of any nature, whether based on actions, omissions or circumstances occurring or existing heretofore or hereafter, may be used in any way to alter or supplement the terms hereof. 6.06. Survival. The obligations of STS under Sections 2.03 -------- and 6.04 shall survive termination of this Agreement and all other events and conditions whatever. All representations and -18- warranties of STS contained in or made in connection with this Agreement shall survive, and shall not be waived by, the execution and delivery of this Agreement, any investigation by or knowledge of Churchill, any extension of credit, termination of this Agreement, or any other event or circumstance whatever. 6.07. Counterparts. This Agreement may be executed in any ------------ number of counterparts, each of which shall be deemed an original, and all such counterparts shall constitute but one and the same agreement. 6.08. Construction. In this Agreement, unless the context ------------ otherwise clearly requires, references to the plural include the singular, the singular the plural, and the part the whole; the neuter case includes the masculine and feminine cases; and "or" is not exclusive. In this Agreement, any references to property (and similar terms) include an interest in such property (or other item referred to); "include," "includes," "including" and similar terms are not limiting; and "hereof," "herein," "hereunder" and similar terms refer to this Agreement as a whole and not to any particular provision; and "expenses," "costs," "out-of-pocket expenses" and similar terms include the charges of in-house counsel, auditors and other professionals of the relevant Person to the extent that such amounts are routinely identified and charged under such Person*s cost accounting system. Section and other headings in this Agreement, and any table of contents herein, are for reference only and shall not affect the interpretation of this Agreement in any respect. Section and other references in this Agreement are to this Agreement unless otherwise specified. This Agreement has been fully negotiated between the applicable parties, each party having the benefit of legal counsel, and accordingly neither any doctrine of construction of security agreements in favor of STS, nor any doctrine of construction of ambiguities against the party controlling the drafting, shall apply to this Agreement. 6.09. Successors and Assigns. This Agreement shall be binding ---------------------- upon STS and its successors and assigns, and shall inure to the benefit of and be enforceable by Churchill and its successors and assigns. Without limitation of the foregoing, Churchill (and any successive assignee or transferee) from time to time may assign or otherwise transfer all or any portion of its rights or obligations under the Purchase Agreement, the Notes or this Agreement (including all or any portion of any commitment to extend credit), or any Secured Obligations, to any other Person, and such Secured Obligations (including any Secured Obligations resulting from extension of credit by such other Person under or in connection with the Purchase Agreement, the Notes or this Agreement) shall be and remain Secured Obligations entitled to the benefit of this Agreement, and to the extent of its interest in such Secured Obligations such other Person shall be vested with all the benefits in respect thereof granted to Churchill in this Agreement or otherwise. 6.10. Governing Law. This Agreement shall be governed by, ------------- construed and enforced in accordance with the domestic laws of the State of Illinois, without regard to any choice of law or conflict of law provisions or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any other jurisdiction other than the State of Illinois. -19- * * * * * -20- IN WITNESS WHEREOF, STS has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. ATTEST: SPECIALTY TRANSPORTATION SERVICES, INC. By:_______________________________________________ By:_________________________________ Title: ___________________________________________ Title:______________________________ ACCEPTED: CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership By Churchill Capital Environmental, L.L.C., a Delaware limited liability company Its General Partner By Churchill Capital, Inc., Its Managing Agent By: ______________________________________________ Name: ____________________________________________ Title: ___________________________________________
-21- Exhibit A to Security Agreement DEPOSIT ACCOUNT LETTER AGREEMENT ______________________, 20___ [Name and address of Deposit Account Bank] Ladies and Gentlemen: We refer to the account on Annex A hereto maintained with you by Specialty Transportation Services, Inc. ("STS") (together with all --- subaccounts thereunder, and all monies, instruments and other property therein from time to time, collectively, the "Account"). ------- Churchill Environmental & Industrial Equity Partners, L.P. ("Churchill") is the holder of a security interest under the Security Agreement, --------- dated as of July 7, 2000 made by STS in favor of Churchill. STS has assigned, pledged and transferred to Churchill and has granted and created in favor of Churchill a security interest in and to, the Account, including all monies, instruments and other property therein from time to time. Churchill's security interest in the Account is subordinate and junior only to the security interest given by STS to Mellon Bank, N.A., under a Security Agreement dated as of January 30, 1998 (the "Senior Security Interest"), as more fully described in ------------------------ the Subordination and Intercreditor Agreement, dated as of July 7, 2000, between and among STS, Mellon Bank, N.A. and Churchill. By signing this Letter Agreement, you acknowledge notice of, and consent to, the foregoing. You also agree as follows, notwithstanding anything to the contrary in any other agreement relating to the Account: (a) From and after the date hereof, subject only to the Senior Security Interest, and: (i) subject to clause (ii), Churchill shall have sole of dominion and control with respect to the Account as though it were the sole owner thereof; (ii) prior to the occurrence of an Event of Default under the Purchase Agreement dated as of July 7, 2000, as amended from time to time, between STS and Churchill, Churchill hereby directs you to release funds to STS or at the direction of STS; (iii) if an Event of Default has occurred and is continuing or exists, you shall act upon instructions of Churchill with respect to the Account and shall not be required to determine whether or not an Event of Default has occurred and is continuing or exists prior to so acting. (b) As of the date hereof, you have received no notice of any other currently effective assignment or pledge of, security interest or other lien in, attachment, garnishment, execution or other writ or process against, or other adverse interest or claim of adverse interest in, -22- the Account, other than the Senior Security Interest, and you will promptly notify Churchill, upon receiving notice of any assertion by any person of any of the foregoing. (c) You agree to provide access at any time during your normal business hours to any and all of your records of, or relating to, STS and its accounts maintained by you, including without limitation records of all collections and disbursements and other transfers of any kind for STS. (d) All service charges and fees with respect to the Account and the actions contemplated by this Letter Agreement shall be payable by, and shall be the sole responsibility of, STS. Such service charges and fees may be deducted from the Account. (e) You hereby waive and agree not to assert, claim or endeavor to exercise any right of set-off, banker's lien or any other right or claim you may now or hereafter have with respect to the Account, and you shall have no rights in the Account (except only that you may set-off against the Account the face amount of any payment item deposited in and credited to the Account which is subsequently returned, and except that you may deduct from the Account service charges and fees with respect to the Account as provided in paragraph (d) hereof). You shall not be liable to STS in any manner for actions taken upon instructions of Churchill pursuant to paragraph (a) above. STS hereby authorizes you to treat Churchill as the owner of the Account and does hereby authorize Churchill at any time, and from time to time, to have all or any part of the Account transferred into its own name, or into the name of its nominee, and thereafter, subject to the provisions of paragraph (a) above, to exercise all rights relating to said Account. This letter agreement shall be binding upon you and your successors and assigns and shall inure to the benefit of Churchill and its respective successors, transferees and assigns. * * * * * -23- This letter agreement shall be governed by and construed in accordance with the laws of the [State of ________________________]. Very truly yours, SPECIALTY TRANSPORTATION SERVICES, INC. By:____________________________________ Name:___________________________________ Title:__________________________________ CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P., a Delaware limited partnership By Churchill Capital Environmental, L.L.C., a Delaware limited liability company Its General Partner By Churchill Capital, Inc. Its Managing Agent By:____________________________________ Name:___________________________________ Title:__________________________________ Address for notices to Churchill Environmental & Industrial Equity Partners, L.P. Churchill Environmental & Industrial Equity Partners, L.P. 333 South Seventh Street, Suite 2400 Minneapolis, MN 55402 Attention: _____________________ -24- Acknowledged and agreed to as of this day of _________________, 2000 [NAME OF DEPOSIT ACCOUNT BANK] By:__________________________________ Name:________________________________ Title:_______________________________ -25- ANNEX A [Identify Account] -26- Exhibit B to Security Agreement AGREEMENT OF LIEN ON TRADEMARKS, SERVICE MARKS AND PENDING APPLICATIONS THIS AGREEMENT, by SPECIALTY TRANSPORTATION SERVICES, INC., an Illinois corporation ("STS"), in favor of CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY --- PARTNERS, L.P., a Delaware limited partnership ("Churchill"). --------- Recitals: A. STS has adopted, used and is using certain marks which are registered in, or applications for which are pending in, the United States and/or foreign countries, all of which marks, registrations thereof and applications therefor are more particularly described hereinafter. B. STS and Churchill have entered into a Security Agreement dated as of July 7, 2000 (as amended, modified or supplemented from time to time, the "Security Agreement"). Pursuant to the Security Agreement, STS ------------------ has granted to and created in favor of Churchill, to secure the Obligations, a lien on and security interest in certain property of STS, including the marks, registrations thereof and pending applications therefor referred to above. NOW, THEREFORE, STS, intending to be legally bound, hereby confirms that it has granted to and created in favor of Churchill, pursuant to the Security Agreement, and hereby grants to and creates in favor of Churchill, a lien on and security interest in and to the following marks, registrations thereof and pending applications therefor, together with the goodwill of the business symbolized by such marks, as security for the full and timely payment and performance of the Secured Obligations. Churchill's security interest in the Trademarks, Service Marks and Pending Applications is subordinate and junior only to the security interest given by STS to Mellon Bank, N.A., under a Security Agreement dated as of January 30, 1998, as more fully described in the Subordination and Intercreditor Agreement, dated as of July 7, 2000, between and among STS, Mellon Bank, N.A. and Churchill: I. U.S. Trademark/Service Mark Registrations: ------------------------------------------ Mark Reg No. Reg Date Int. Class Goods - ---- ------- -------- ---------- ----- II. U.S. Trademark/Service Mark Applications: ----------------------------------------- Mark App. No. App. Date Int. Class Goods - ---- -------- --------- ---------- ----- -27- This Agreement is part of the Security Agreement referred to in the Note and Warrant Purchase Agreement, dated as of July 7, 2000, between STS and Churchill, as amended or supplemented from time to time. WITNESS the due execution hereof as of the __ day of ________, 2000. SPECIALTY TRANSPORTATION SERVICES, INC. By:_____________________________________ Name:____________________________________ Title:___________________________________ -28- STATE OF____________ ) ) SS: COUNTY OF___________ ) On this, the __ day of _______________, 2000, before me, a Notary Public, the undersigned officer, personally appeared _____________________, who acknowledged himself/herself to be _________________ of Specialty Transportation Services, Inc., an Illinois corporation, and that he/she as ______________, being authorized to do so, executed the foregoing instrument for the purpose therein contained by signing the name of the corporation by himself/herself as ________________. IN WITNESS WHEREOF, I hereunto set my hand and official seal. -------------------------------------- Notary Public My Commission Expires: (Notarial Seal) -29- EX-7.6 7 0007.txt SUBORDINATION & INTERCREDITOR AGREEMENT EXECUTION COPY SUBORDINATION AND INTERCREDITOR AGREEMENT THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement"), dated as --------- of July 7, 2000, is made by SPECIALTY TRANSPORTATION SERVICES, INC., a Delaware corporation (the "Borrower"), and CHURCHILL ENVIRONMENTAL & INDUSTRIAL PARTNERS, -------- L.P., a Delaware limited partnership (the "Subordinated Lender"), in favor of ------------------- MELLON BANK, N.A., as agent (the "Senior Agent") for the lenders under the ------------ Senior Loan Agreement (the "Senior Lenders"). -------------- Recitals WHEREAS, pursuant to the terms of the Subordinated Debt Agreements between the Borrower and the Subordinated Lender, the Subordinated Lender is providing the Subordinated Debt to the Borrower; WHEREAS, pursuant to the terms of the Senior Debt Agreements between the Borrower, the Senior Lenders and the Senior Agent, the Senior Lenders are providing the Senior Debt to the Borrower; WHEREAS, the Borrower and the Subordinated Lender desires to induce the Senior Lenders to continue to provide the Senior Debt to the Borrower pursuant to the Senior Debt Agreements; and WHEREAS, the Senior Lenders are willing to provide the Senior Debt to the Borrower, subject to the terms and conditions set forth in this Agreement. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements of the parties set forth herein, and intending to be legally bound hereby, the parties agree as follows: Section 1. Certain Definitions. As used herein, the following terms shall have the following meanings: "Additional Senior Debt Agreement" shall mean any agreement or instrument -------------------------------- pursuant to which the Borrower has incurred indebtedness and which is designated as an Additional Senior Debt Agreement by the Borrower with the written consent of the Senior Lender. "Bankruptcy Code" shall mean Title 11 of the United States Code, as now --------------- constituted or hereafter amended. "Blockage Notice" has the meaning specified in Section 2.2(b). --------------- "Blockage Period" shall mean the period from and including the date of the --------------- related Blockage Notice to and including the nine (9) month anniversary of such date. "Borrower Party" shall mean each of the Borrower and its Subsidiaries. -------------- "Business Day" shall mean any day other than a Saturday, Sunday, public ------------ holiday under the laws of the Commonwealth of Pennsylvania or other day on which banking institutions are authorized or obligated to close in Pittsburgh, Pennsylvania. "Covered Event" has the meaning set forth in Section 17. ------------- "Covered Release" has the meaning set forth in Section 13. --------------- A "distribution" may consist of cash, securities or other property, by ------------ setoff or otherwise. "Foreclosure Action" shall mean any action to foreclose upon or otherwise ------------------ enforce a lien or security interest, or any contractual right or remedy available under an instrument or agreement creating such lien or security interest, whether or not upon the occurrence of a default thereunder, against the Shared Collateral or other property of the Borrower, including, but not limited to, commencing judicial or nonjudicial foreclosure or sale proceedings or actions with respect to, seeking to have a trustee, receiver, liquidator or similar official appointed for or over, entering upon and taking possession of, pursuing any action relating to obtaining a deed in lieu of foreclosure with respect to, or taking any enforcement, collection, execution or levy action against, or exercising any other remedy against, any item of real or personal property included within the Shared Collateral. The term "Foreclosure Action" ------------------ shall not include the exercise of any rights afforded to general unsecured creditors in a case under the Bankruptcy Code (including the right to participate in the case generally and raise and be heard on any issue in the case), and shall include the exercise of any rights afforded to secured creditors, but not unsecured creditors, in a case under the Bankruptcy Code. "Insolvency or Liquidation Proceeding" shall mean (a) any insolvency or ------------------------------------ bankruptcy case or proceeding or any receivership, liquidation, reorganization, readjustment, composition or other similar case or proceeding relating to the Borrower or its assets, (b) any liquidation, dissolution, reorganization or winding up of the Borrower, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy proceedings, or (c) any assignment for the benefit of creditors or any other marshaling of the Borrower's assets. "PIK Notes" shall mean the "PIK Notes" under and as defined in the --------- Subordinated Debt Agreement. "Remedial Action" shall mean the acceleration of the maturity of any of the --------------- Subordinated Debt or any other indebtedness of the Borrower or the commencement or joining in the commencement of any suit or proceeding against the Borrower or the filing or joining in the filing of any petition against the Borrower under the Bankruptcy Code or any act or action to foreclose upon or otherwise enforce a lien or security interest, or any contractual right or remedy available under an instrument or agreement creating such lien or security interest (or under an instrument or agreement relating to indebtedness secured by such lien or security interest), in or against any of the Shared Collateral or other property of the Borrower, including, but not limited to, commencing judicial or nonjudicial foreclosure proceedings or actions with the respect to, seeking to have a trustee, receiver, liquidator or similar official appointed for or over, entering upon and taking possession of, pursuing any action relating to obtaining a deed in lieu of foreclosure with respect to, taking any enforcement, collection, execution or levy action against, or exercising any other remedy against, any item of real or personal property, whether or not included within the Shared Collateral. "Reorganization Securities" shall mean any debt or equity securities ------------------------- (including common stock) of the Borrower or any other entity which are distributed to the Subordinated Debt Parties in respect of the Subordinated Debt pursuant to a confirmed plan of reorganization or readjustment and which (a) are subordinated to the Senior Securities to at least the same extent as the Subordinated Debt is subordinated to the Senior Debt under this Agreement; (b) do not have the benefit of any obligation of any person (whether as issuer, guarantor or otherwise) unless the Senior Securities have at least the same benefit of the obligation of such person, (c) are subject to provisions relating to amortization and prepayment and, if -2- applicable, redemption and repurchase to the effect that all principal of the Senior Securities must be paid in full prior to the making of any payment of principal of or any redemption or repurchase of such debt or equity securities, and (d) do not have terms, and are not subject to or entitled to the benefit of any agreement or instrument which has terms, which are more burdensome to the issuer of or other obligor on such debt or equity securities than are the terms of or applicable to the Senior Securities. The term "Senior Securities" shall ----------------- mean the Senior Debt and all securities issued in exchange for or distributed pursuant to a confirmed plan of reorganization or readjustment to the holders of Senior Debt in respect of the Senior Debt. "Representative" shall mean any trustee, agent or representative for the -------------- holders of Senior Debt. "Senior Debt" shall mean (a) all indebtedness, obligations and liabilities ----------- (whether on account of principal, premium (if any) or interest payable by the Borrower (whether accruing before or after the commencement of a bankruptcy proceeding with respect to the Borrower) or otherwise) now or hereafter owing by the Borrower to the Senior Lenders or the Senior Agent under the Senior Debt Agreements, any Senior Refinancing Agreement or any Additional Senior Debt Agreement and (b) breakage and other costs, fees and expenses and all other amounts payable by the Borrower under the Senior Debt Agreements, any Senior Refinancing Agreement or any Additional Senior Debt Agreement; provided, that in -------- no event shall the aggregate principal or face amount of loans and letter of credit reimbursement obligations constituting Senior Debt exceed an amount equal to $40,000,000. "Senior Debt Agreements" shall mean the Credit Agreement, dated as of ---------------------- January 30, 1998, amended and restated as of July 7, 2000, by and among the Borrower, the Senior Lenders, the Issuing Bank and the Senior Agent (the "Senior ------ Loan Agreement"), all notes issued thereunder and all other agreements and - -------------- instruments entered into by such parties in connection therewith, all as originally executed and amended, modified, extended and renewed from time to time in accordance with this Agreement. "Senior Default" shall mean an "Event of Default" under and as defined in -------------- ---------------- the Senior Debt Agreements. "Senior Liens" shall mean, collectively, the liens and security interests ------------ granted to the Senior Lender pursuant to the Senior Debt Agreements. "Senior Potential Default" shall mean a "Potential Default" under and as ------------------------ ----------------- defined in the Senior Debt Agreements. "Senior Refinancing Agreement" shall mean any agreement or instrument ---------------------------- pursuant to which the Borrower has incurred indebtedness, the proceeds of which were used by the Borrower to refinance all or part or any of the indebtedness of the Borrower under the Senior Debt Agreements. "Shared Collateral" shall mean all property as to which both the ----------------- Subordinated Liens and the Senior Liens apply. "Subordinated Debt" shall mean all indebtedness, obligations and ----------------- liabilities (whether on account of principal, premium (if any) or interest (whether accruing before or after the commencement of a bankruptcy proceeding with respect to the Borrower) or otherwise) now or hereafter owing by the Borrower to any of the Subordinated Lender Parties under or relating to any of the Subordinated Debt Agreements and any extensions, renewals, refinancings or refundings thereof in whole or in part. -3- "Subordinated Debt Agreements" shall mean the Note and Warrant Purchase ---------------------------- Agreement, dated as of July 7, 2000, by and among the Borrower, ATS and the Subordinated Lender (the "Subordinated Note Agreement"), all notes issued --------------------------- thereunder and all other agreements and instruments in connection therewith, all as originally executed and amended, modified, extended and renewed from time to time in accordance with this Agreement. "Subordinated Default" shall mean an "Event of Default" under and as -------------------- ---------------- defined in the Subordinated Debt Agreements. "Subordinated Lender Assignee" shall mean any assignee or transferee of any ---------------------------- Subordinated Debt. "Subordinated Lender Party" shall mean each of the Subordinated Lender, the ------------------------- Subordinated Lender Assignees and any other holder of the Subordinated Debt from time to time. "Subordinated Liens" means, collectively, the liens and security interests ------------------ granted to the Subordinated Lender pursuant to the Subordinated Debt Agreements. "UCC" shall mean the Uniform Commercial Code, as enacted and in effect in --- the applicable jurisdiction. Section 2. Subordination. Each of the Borrower and the Subordinated Lender covenants and agrees that the Subordinated Debt is and shall be subordinated and junior in right of payment, in the manner provided in this Agreement, to the prior payment in full of the Senior Debt, and that the subordination is for the benefit of the Senior Agent, the Senior Lenders and any other holder of the Senior Debt from time to time. Section 3. Payment in Full of Senior Debt. Except as set forth in Section 4, no Borrower Party shall make any payment or distribution to any Subordinated Lender Party with respect to the Subordinated Debt and or to acquire from any Subordinated Lender Party any Subordinated Debt for cash or property until the Senior Debt has been paid in full. Section 4. Permitted Payments. The Borrower may (a) issue, and the Subordinated Lender may accept and retain, the PIK Notes as scheduled interest payments under, and in accordance with, the Subordinated Debt Agreements; and (b) subject to Section 5, make payments to any Subordinated Lender Party with respect to third party costs and expenses, which are incurred by such Subordinated Lender Party and are obligations of the Borrower; provided however, that such costs and expenses do not exceed $50,000 in the aggregate during the term of this Agreement. Section 5. Payment Suspension. (a) If any default in the payment of any principal of or premium (if any) or interest on any Senior Debt when due and payable, whether at maturity, upon any redemption, by acceleration or otherwise (a "Senior Payment Default"), ---------------------- occurs and is continuing unwaived, no Borrower Party shall make any payment or distribution to any Subordinated Lender Party with respect to the Subordinated Debt or to acquire from any Subordinated Lender Party any Subordinated Debt for cash, securities or other property, except for the issuance of the PIK Notes as scheduled interest payments under, and in accordance with, the Subordinated Debt Agreements. (b) If (i) any Senior Potential Default or Senior Default (other than a Senior Payment Default) occurs and is continuing unwaived and (ii) the Senior Lender gives written notice describing such Senior -4- Potential Default or Senior Default (which notice shall state that such notice is a Blockage Notice) to the Borrower and the Subordinated Lender (a "Blockage -------- Notice"), then, unless and until (i) the Subordinated Lender or the Borrower - ------ receives a written notice from the Senior Agent stating that such Senior Potential Default or Senior Default has been cured or waived or (ii) the Subordinated Lender or the Borrower receives a written notice from the Senior Agent terminating the Blockage Period commencing with such Blockage Notice, during such Blockage Period, no Borrower Party shall make any payment or distribution to any Subordinated Lender Party with respect to the Subordinated Debt or to acquire from any Subordinated Lender Party any Subordinated Debt for cash, securities or other property, except for the issuance of the PIK Notes as scheduled interest payments under, and in accordance with, the Subordinated Debt Agreements. At the expiration or termination of such Blockage Period, the Borrower shall be obligated to, subject to Section 5(a), promptly pay (in accordance with the Subordinated Debt Agreements) to the Subordinated Lender Parties all sums not paid to the Subordinated Lender Parties during such Blockage Period as a result of this Section 5(b) (it being understood and agreed that any such payment in full by the Borrower shall cure any Subordinated Default which arose solely as a result of the nonpayment of any or all of such sums), so long as such payment does not trigger a Senior Potential Default or Senior Default. (c) In the event that, notwithstanding the foregoing, any payment shall be received by any Subordinated Lender Party when such payment is prohibited by Section 5(a) or 5(b), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the Senior Agent on behalf of the Senior Lenders. Section 6. Insolvency, Liquidation, etc. Upon the occurrence of any Insolvency or Liquidation Proceeding: (a) the Senior Debt shall first be paid in full before any payment or distribution of any character (whether in cash, securities or other property) shall be made on account of or applied with respect to the Subordinated Debt or any acquisition of any Subordinated Debt for cash, securities or other property; (b) any payment or distribution of any character (whether in cash, securities or other property) which would otherwise (but for this clause (b)) be payable or deliverable with respect to the Subordinated Debt shall be paid or delivered directly to the Senior Agent on behalf of the Senior Lenders for application to the Senior Debt, until all Senior Debt has been paid in full; and (c) the Subordinated Lender shall authorize and empower the Senior Agent, at its election and in its name or the name of the Subordinated Lender, to execute and file proofs of claim and other documents to protect completely the interest of the Senior Lenders in the Subordinated Debt if the Subordinated Lender has failed to file any such proofs of claim or other documents within 30 days prior to any deadline therefor. Notwithstanding the foregoing provisions of this Section 6, the Borrower may pay and deliver to the Subordinated Lender, and the Subordinated Lender shall be entitled to receive and retain, any Reorganization Securities distributed in an Insolvency or Liquidation Proceeding. Notwithstanding the foregoing provisions of this Section 6 (and any other provisions of this Agreement), any Subordinated Lender Party may convert the notes issued under, and in accordance with, the Subordinated Debt Agreements into common stock of the Borrower prior to, or after commencement of, any Insolvency or Liquidation Proceeding. -5- Section 7. Limitations on Remedies of Subordinated Lender Parties. Notwithstanding any other provision of this Agreement or any provisions of the Subordinated Debt Agreements, the Subordinated Lender Parties agree that, at any time when any Senior Debt shall be outstanding, none of the Subordinated Lender Parties shall take any Remedial Action with respect to the Subordinated Debt or any collateral therefor (including without limitation the Shared Collateral) until a Subordinated Default occurs and continues uncured and unwaived for nine (9) months after notice of such Subordinated Default, making reference to this Section, is provided to the Senior Agent by the Subordinated Lender; provided, however, that the Subordinated Lender may accelerate the maturity of the Subordinated Debt upon acceleration of the maturity of the Senior Debt by the Senior Lenders; provided, further, that if the Senior Lenders rescind such acceleration, the Subordinated Lender must also rescind acceleration of the Subordinated Debt immediately. In addition to the foregoing, each Subordinated Lender Party agrees that in no event shall any Subordinated Lender Party pursue any Remedial Action except after ten (10) Business Days prior written notice by such Subordinated Lender Party to the Senior Agent describing in general terms the nature of, and the Shared Collateral, if any, which is subject to, such Remedial Action. Such notice may be delivered by the Subordinated Lender at any time during the ten (10) Business Day period prior to the expiration of the applicable nine (9) month period. In addition to the foregoing, each Subordinated Lender Party agrees that it will not, in any Insolvency or Liquidation Proceeding, (a) object in any manner to any motion by the Senior Agent on behalf of the Senior Lenders for relief from the automatic stay (including the automatic stay under Section 362 of the Bankruptcy Code) to foreclose on, sell or otherwise realize upon the Shared Collateral; (b) object in any manner to any sale or other disposition of the Shared Collateral under Section 363 of the Bankruptcy Code to which the Senior Agent on behalf of the Senior Lenders has consented; or (c) object in any manner to any post-petition financing to the Borrower provided or permitted by one or more of the Senior Lenders under Section 364 of the Bankruptcy Code on the grounds of a failure to provide adequate protection for the Shared Collateral. Section 8. Payments in Contravention of this Agreement. Any payment made by any Borrower Party or received by any Subordinated Lender Party in violation of any provision of this Agreement (without the written consent of the Senior Agent) shall be held in trust by such Subordinated Lender Party for the Senior Lenders and shall be promptly delivered, in kind, to the Senior Agent on behalf of the Senior Lenders for the application to the Senior Debt. Section 9. Subrogation. If any payment or distribution with respect to the Subordinated Debt to which the Subordinated Lender would otherwise have been entitled (but for the provisions of this Agreement) shall have been turned over to the Senior Agent on behalf of the Senior Lenders or otherwise applied to the payment of the Senior Debt pursuant to the provisions of this Agreement, then the Subordinated Lender shall be entitled to receive from the Senior Agent or the Senior Lenders any payments or distributions received by it with respect to the Senior Debt in excess of the amount sufficient to pay all Senior Debt in full from whatever sources, and upon receipt by the Senior Lenders of amounts sufficient to pay the Senior Debt in full, the Subordinated Lender shall be subrogated to all rights of the Senior Lenders to receive all further payments or distributions applicable to the Senior Debt until the Subordinated Debt shall have been paid in full. If the Subordinated Lender has been subrogated to the rights of the Senior Lenders pursuant to the operation of this Section 9, the Borrower, the Senior Agent and the Senior Lenders shall take all reasonable actions requested by the Subordinated Lender in order to enable the Subordinated Lender to obtain payments from the Borrower with respect to such subrogation rights as soon as possible. -6- For purposes of the Subordinated Lender's subrogation rights hereunder, payments to the Senior Lenders with respect to the Senior Debt which the Subordinated Lender would have been entitled to receive and retain with respect to the Subordinated Debt but for the provisions of this Agreement shall not, as between the Borrower, its creditors (other that the Senior Lenders) and the Subordinated Lender, be deemed payments with respect to the Senior Debt, but rather shall be deemed payments with respect to the Subordinated Debt. Section 10. Default Notices. The Senior Agent shall promptly notify the Subordinated Lender in writing of (i) the occurrence of any Senior Default (including any demand for payment of the Senior Debt), (ii) the acceleration of all or any portion of the Senior Debt and (iii) the assignment of all or any portion of the Senior Debt (together with the name and address of the assignee). The Subordinated Lender shall promptly notify the Senior Agent in writing of (i) the occurrence of any Subordinated Default, (ii) the acceleration of all or any portion of any Subordinated Debt and (iii) the assignment of all or any portion of the Subordinated Debt (together with the name and address of the assignee). The failure to give any such notice shall not, however, deprive either the Senior Agent, the Senior Lenders or the Subordinated Lender of any rights or remedies to which they are entitled hereunder. Section 11. Priority with respect to Shared Collateral. Notwithstanding anything to the contrary in any other agreement to which any Subordinated Lender Party is a party or of which any Subordinated Lender Party is a beneficiary, each of the Subordinated Lender Parties agrees and acknowledges that, until such time as the Senior Debt has been paid in full: (a) The Subordinated Liens on the Shared Collateral are and shall be expressly subject, subordinate and junior in right of payment, priority and enforcement to the Senior Liens on the Shared Collateral and the Senior Liens on the Shared Collateral are and shall be superior and prior in right of payment, priority and enforcement to the Subordinated Liens on the Shared Collateral; (b) Neither any change in the manner, place or terms of payment of, nor any change or extension of the time of payment of, nor any renewal or alteration of, nor any increase in the amount of the principal of or amount or rate of the interest on, any of the indebtedness secured by the Senior Liens, nor any amendment or supplement to any of the Senior Debt Agreements, nor any exercising or refraining from exercising any rights under the Senior Debt Agreements, including without limitation, the right to waive any default, shall require notice to or consent of any Subordinated Lender Party and none of the foregoing shall in any manner whatsoever impair the priority of the Senior Lien on the Shared Collateral; (c) None of the Subordinated Lender Parties will take or cause to be taken any action, the purpose or effect of which is or could be to give any Subordinated Lender Party any preference or priority over the Senior Agent with respect to the Shared Collateral or any part thereof; (d) No Subordinated Lender Party has any right to direct the Senior Agent to exercise any right, remedy or power with respect to the Shared Collateral; (e) No Subordinated Lender Party will institute any suit or assert in any suit, bankruptcy, insolvency or other proceeding any claim against the Senior Agent or the Senior Lenders seeking damages from it, or other relief, by way of specific performance, injunction or otherwise, with respect to any action with respect to Shared Collateral taken or omitted by the Senior Agent in accordance with this Agreement other than a claim based solely on Section 16(b)(iii); (f) Each of the Subordinated Lender Parties will pay over or deliver and transfer to the Senior Agent on behalf of the Senior Lenders any payment or distribution of any character, direct or -7- indirect, whether in cash, property, securities or otherwise, received by such Subordinated Lender Party as the result of a Foreclosure Action on Shared Collateral or any other payment or distribution of Shared Collateral or any proceeds of Shared Collateral (including without limitation insurance payments or condemnation awards or the proceeds of any sale, lease or other disposition of any item of property included in the Shared Collateral), before the Senior Debt shall have been paid in full; (g) Each Subordinated Lender Party will execute and deliver to the Senior Agent any other instrument reasonably requested by the Senior Agent to further assure the subordinated status, in accordance with this Section 11, of the Senior Liens with respect to the Shared Collateral; (h) Notwithstanding any priority in time of perfection of any of the Subordinated Liens over any of the Senior Liens with respect to after-acquired property of the Borrower or other person constituting part of the Shared Collateral, the Senior Liens with respect to such Shared Collateral shall be superior and prior in right of payment, priority and enforcement to the Subordinated Liens with respect thereto as provided hereby; and (i) The Senior Agent shall be free to take all actions whatsoever in respect of the Shared Collateral without consent of any of the Subordinated Lender Party, each of which waives to the extent permitted by law all requirements for such consents to actions by the Senior Agent. Section 12. Forbearance of Subordinated Lender on Foreclosure Actions. Notwithstanding any other provision hereof or any provisions of any Subordinated Debt Agreements, and without limiting the generality of Section 7, each Subordinated Lender Party agrees that, at any time when any Senior Debt shall be outstanding, none of the Subordinated Lender Parties shall take any Foreclosure Action with respect to the Subordinated Debt or any Shared Collateral until a Subordinated Default under the Subordinated Agreements occurs and continues unwaived for nine (9) months after notice of such Subordinated Default, making reference to this Section, is provided to the Senior Agent by the Subordinated Lender. In addition to the foregoing, each Subordinated Lender Party agrees that in no event shall any Subordinated Lender Party pursue a Foreclosure Action except after ten (10) Business Days prior written notice by such Subordinated Lender Party to the Senior Agent describing in general terms the nature of, and the Shared Collateral which is subject to, such Foreclosure Action. Such notice may be delivered by the Subordinated Lender at any time during the ten (10) Business Day period prior to the expiration of the applicable nine (9) month period. Section 13. Covered Releases. Notwithstanding anything to the contrary contained herein, no Subordinated Lender Party may take any action to challenge the validity, enforceability, amount or priority of the Senior Liens, induce any other entity to take such an action or cooperate with any other entity in taking such an action. However, if and to the extent that the Senior Liens with respect to any property constituting Shared Collateral shall have been avoided by a final order of a bankruptcy court, the provisions of this Agreement shall not operate to subordinate contractually the Subordinated Liens on such property to the Senior Liens on such property, but the provisions of Sections 2 through 10 shall remain in full force and effect. Notwithstanding any provision of the Subordinated Debt Agreements that restricts or prevents the release of property from the Subordinated Liens, each of the Subordinated Lender Parties agrees to release such property and to take all necessary action to effectuate such release whenever such Subordinated Lender Party receives notice that such property is being released, and such property is in fact released, from the Senior Liens pursuant to a Covered Release; provided, however, that, in the -------- event of a sale or other disposition by the Borrower of property which is subject to the Senior Liens (the cash proceeds of which sale or other disposition are in an amount more than the amount required to pay the -8- Senior Debt in full), if, concurrently with the release of such property from the Senior Liens and concurrently with the receipt of such cash proceeds, such cash proceeds as are sufficient to pay the Senior Debt in full are so applied to the indefeasible payment in full of the Senior Debt, then the release of the Subordinated Liens on such property may be made subject to the application to the Subordinated Debt (if otherwise entitled thereto in accordance with law) of the excess portion of such cash proceeds not needed for indefeasible payment in full of the Senior Debt. The Senior Agent is hereby irrevocably appointed the attorney-in-fact of each of the Subordinated Lender Parties in its name and stead to execute any such release and take any such necessary action and, for this purpose, the Senior Agent may execute all appropriate instruments of transfer, and may substitute one or more persons with like power, each Subordinated Lender Party hereby ratifying and confirming all that its said attorneys or such substitute or substitutes shall lawfully do by virtue hereof. The powers and agency granted in this paragraph are coupled with an interest and are irrevocable. Each of the Subordinated Lender Parties agrees to execute and deliver, upon the request of the Senior Agent, its consent to any action to be taken by or on behalf of the Senior Agent in the exercise of rights or remedies under the Senior Debt Agreements, it being understood that this sentence shall not be construed as suggesting that any such consent is required in any event to effect any such right or remedy. Each of the Subordinated Lender Parties agrees that each and every provision of any of the Subordinated Debt Agreements which conflicts with a provision of any of the Senior Debt Agreements, including, without limitation, any provisions relating to the application of insurance or condemnation proceeds, proceeds from the sale of collateral security, or rents, shall not be effective until the Senior Debt shall have been paid in full. As used herein, the term "Covered Release" shall mean a release of Shared --------------- Collateral from the Senior Lien under one or more of the following circumstances: (a) such release is made at a time when a Senior Default under the Senior Debt Agreements has occurred and is continuing or exists or (b) such release covers property which the Borrower is permitted to sell, transfer or otherwise dispose of under and in accordance with the Senior Debt Agreements. Section 14. No Waiver. Nothing contained in this Agreement shall be deemed to impair or affect any obligation of any Borrower Party, or constitute a waiver by any party hereto in favor of any Borrower Party of any rights or remedies against such Borrower Party under the Subordinated Debt Agreements, or the Senior Debt Agreements or under any note, bond or other instrument evidencing the indebtedness secured by any thereof or under any other agreement or document relating to any thereof. Section 15. Waiver of Notices Under the Uniform Commercial Code. Each of the Subordinated Lender Parties hereby waives its right to receive notice under Section 9504(3) of the Uniform Commercial Code of any intended disposition of such assets after a Senior Default, including notices of the time and place of any public or private sale or other intended disposition. Section 16. Bailee for Perfection. (a) The Senior Agent agrees to hold that portion of the Shared Collateral that at any time is in its possession and as to which the Subordinated Lender Parties would not have a perfected security interest in the absence of such possession by the Senior Agent (the "Possessed Collateral") as -------------------- gratuitous bailee for the Subordinated Lender Parties solely for the purpose of perfecting the security interest granted in the Possessed Collateral pursuant to the Subordinated Debt Agreements, subject to -9- the terms and conditions of this Section 16. The rights of the Subordinated Lender Parties shall at all times be subject to the terms of this Agreement and to the rights of the Senior Agent and the Senior Lenders under the Senior Debt Agreements. (b) The Senior Agent and the Senior Lenders shall have no obligation whatsoever to the Subordinated Lender Parties to assure that the Possessed Collateral is genuine and owned by the Borrower or to preserve rights or benefits of any person except as expressly set forth in this Section 16. The duties or responsibilities of the Senior Agent under this Section 16 shall be limited solely to holding the Possessed Collateral as gratuitous bailee for the Subordinated Lender Parties for purposes of perfecting the Subordinated Lien held thereby in the Possessed Collateral. The Senior Agent (i) shall not be obligated to recognize and shall not have any liability or responsibility arising under any instrument to which it is not a party, (ii) may rely upon any instrument believed by it to be genuine and sufficient and properly presented and shall not be liable or responsible for any action taken or omitted in accordance with the provisions thereof, (iii) shall not be liable or responsible for any act it may do or omit to do except in the case of willful misconduct or gross negligence, (iv) in case any Possessed Collateral shall be attached, garnished or levied upon any order of a court, or the delivery thereof shall be stayed or enjoined by any order of a court, or any other writ, order, judgment or decree shall be made or entered by any court affecting such property, or any part thereof, or any of its acts, is expressly authorized in its sole discretion to obey and comply with all writs, orders, judgments or decrees so entered or issued, whether with or without jurisdiction, and in case it obeys and complies with any such writ, order, judgment or decree it shall not be liable to any Subordinated Lender Party or to any other person by reason of such compliance even if such writ, order, judgment or decree is subsequently reversed, modified, annulled, set aside or vacated, (v) shall not be responsible or liable for any forgery or fraudulent impersonations of any person other than itself and (vi) shall not be required to make any determination with respect to a controversy which may arise between any Subordinated Lender Party and any person with respect to the transactions contemplated by the Subordinated Debt Agreements and may await the settlement of such controversy by legal proceedings or otherwise, as it may require and in such event, it shall not be liable for interest or damages. (c) The Senior Agent and the Senior Lenders shall not be under any obligation to institute or defend any action, suit or other proceeding or take any other action against any person in connection with the Possessed Collateral. The Senior Agent shall be entitled to rely upon any writing or other document or telegram believed by the Senior Agent to be genuine and correct and to have been signed, sent or made by the proper person. The Senior Agent and the Senior Lenders may consult counsel with respect to any question arising hereunder or in connection herewith and the Senior Agent and the Senior Lenders shall not be liable for any action taken or omitted to be taken in good faith upon advice of such counsel. (d) The Senior Agent and the Senior Lenders shall not have by reason of the Subordinated Debt Agreements or this Agreement or any other document a fiduciary relationship in respect of the Subordinated Lender Parties. (e) Subject to the rights of any other holder of a Lien, if any, otherwise granted by the Borrower on the Shared Collateral, upon payment in full of the Senior Debt, the Senior Agent shall deliver possession of the Shared Collateral then in its possession to the Subordinated Lender or as otherwise ordered by a court. Section 17. Waivers with respect to Covered Events. If, and to the extent, a Senior Default constituted by, arising from or resulting from a Covered Event are waived or consented to by the Senior Lenders, all Subordinated Defaults constituted by, arising from or resulting from the same Covered Event shall be, and shall automatically be deemed to be, waived or consented to, as the case may be, by the Subordinated Lender Parties. Each of the Subordinated Lender Parties agrees to execute and deliver to the -10- Borrower such consent or approval with respect to, or such waiver of the terms of, one or more of the Subordinated Debt Agreements as shall be necessary to give effect to the immediately preceding sentence. As used herein, the term "Covered Event" shall mean each event or condition the occurrence or existence ------------- of which constitutes, gives rise to or results in both a Subordinated Default and a Senior Default, except for a Subordinated Default under Sections 6A(i), 6A(iv), 6A(vi) or 6A(vii) of the Subordinated Note Agreement. Section 18. Legend. Until the Senior Debt has been paid in full, the Borrower and the Subordinated Lender shall cause each note and other instrument which now or hereafter evidences all or any portion of the Subordinated Debt to be conspicuously marked with the following legend: "This instrument is subject to the terms of a Subordination and Intercreditor Agreement dated as of July 7, 2000, in favor of Mellon Bank, N.A., as agent, which agreement (as amended in accordance with its terms) is incorporated herein by reference. Notwithstanding any statement to the contrary contained in this instrument, no payment on account of the obligations hereunder, whether of principal, interest or otherwise, shall be made, paid, received or accepted except in accordance with the express terms of the Subordination and Intercreditor Agreement." Section 19. No Impairment of Borrower's Obligation. Except as otherwise expressly provided herein, nothing contained in this Agreement shall (a) impair, as between the Borrower and the Subordinated Lender, the obligation of the Borrower, which is unconditional and absolute, to pay the Subordinated Debt to the Subordinated Lender as and when all or any portion thereof shall become due and payable in accordance with its terms or (b) prevent the Subordinated Lender, upon any Subordinated Default, from exercising all rights, powers and remedies otherwise provided in the Subordinated Debt Agreements or by applicable law. Section 20. Remedies; Enforcement. Upon any breach of this Agreement resulting in a Senior Default, the Senior Lenders may declare the Senior Debt immediately due and payable in accordance with the Senior Debt Agreements and may sue and receive from the Subordinated Lender any payment received in violation of this Agreement. The rights and remedies of the Senior Agent and the Senior Lenders hereunder are cumulative and shall be in addition to any other rights and remedies of the Senior Agent and the Senior Lenders under the Senior Debt Agreements or any other agreements or which may now or hereafter exist in law or at equity. No postponement or delay by the Senior Agent or the Senior Lenders in the enforcement of any right hereunder shall constitute a waiver thereof. Section 21. Duration; Amendment of Senior Debt Agreement. This Agreement is of a continuing nature, and it shall continue in force so long as any portion of the Senior Debt remains unpaid or the commitment of the Senior Lenders to lend to the Borrower under the Senior Debt Agreements has not been terminated. As between the Senior Lenders and the Subordinated Lender, the Senior Lenders shall not, without the prior written consent of the Subordinated Lender, amend, modify, extend or renew the terms of the Senior Debt Agreements, any Senior Refinancing Agreement or any Additional Senior Debt Agreement or the Senior Debt if any such change would, (a) during the two year period following the date of this Agreement, increase the interest rate or rates per annum (including the default rate or rates), or (b) release any Liens with respect to the Shared Collateral (other than (a) upon a Senior Default, (b) upon a termination of any Commitments of the Lenders under and as defined in the Senior Debt Agreements, or (c) upon a sale or other disposition of the Shared Collateral by the Borrower). -11- Section 22. Amendment of Subordinated Debt Agreements. As between the Senior Lenders and the Subordinated Lender, the Subordinated Lender shall not, without the prior written consent of the Senior Agent, amend, modify, extend or renew the terms of the Subordinated Debt Agreements or the Subordinated Debt if any such change would (i) increase the aggregate principal amount then outstanding thereunder, (ii) increase the interest rate or rates per annum or fees payable with respect to the Subordinated Debt, (iii) advance the scheduled principal payment dates or final maturity dates of the Subordinated Debt or (iv) impose terms more restrictive in any material respect to the Borrower than under the Subordinated Debt Agreements as then in force. Section 23. Payment Set Aside. To the extent that pursuant to the terms of this Agreement (i) the Subordinated Lender has turned over any cash, securities or other property received as payments from the Borrower to the Senior Agent on behalf of the Senior Lenders under this Agreement for application to the Senior Debt or (ii) any cash, securities or other property to which the Subordinated Lender would otherwise have been entitled (but for the provisions of this Agreement) as payments from the Borrower are paid to the Senior Agent on behalf of the Senior Lenders under this Agreement for application to the Senior Debt, and any such payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from or disgorged by the Subordinated Lender or are otherwise required to be refunded, repaid or restored by the Subordinated Lender to the Borrower or any trustee, receiver or other person under any law (including, without limitation, any bankruptcy or insolvency law or any federal or state equitable cause of action), then to the extent of any such restoration, the Senior Lenders shall repay such amount to the Subordinated Lender and the Subordinated Lender's obligations hereunder shall be renewed and continued in full force and effect as if such payment had not been made to the Subordinated Lender or the Senior Lenders. This Section 23 shall survive the termination of this Agreement. Section 24. Waiver. Except as otherwise expressly provided herein, the Subordinated Lender hereby waives, to the extent permitted by applicable law, presentment for payment, notice of non-payment or non-performance, demand, protest, notice of protest and notice of dishonor or default and, until all the Senior Debt has been paid in full, any right to subrogation or realization on any of the Borrower's property, including participation in any marshaling of the Borrower's assets; provided that if the Senior Agent on behalf of the Senior Lenders has received any payment or distribution which except for the terms of this Agreement or the Senior Debt Agreements would have been payable to the Subordinated Lender with respect to the Subordinated Debt, the Subordinated Lender shall, after the Senior Debt is paid in full, be subrogated to the rights of the holders of the Senior Debt against the Borrower in accordance with Section 9. Section 25. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Borrower referred to in this Agreement, the Subordinated Lender shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to it for the purpose of ascertaining (i) the persons entitled to participate in such payment or distribution, (ii) the holders of the Senior Debt and the holders of other indebtedness of the Borrower, (iii) the amount of the Senior Debt and the amount payable thereon, (iv) the amount or amounts paid or distributed thereon and (v) all other facts pertinent thereto or to this Agreement. Section 26. Inspection of Books and Records. The Borrower shall permit the Senior Agent at any reasonable time and from time to time to examine and make copies and abstracts from the Borrower's books, records, instruments and documents evidencing or pertaining to the Subordinated Debt. -12- Section 27. Payment in Full. For the purpose of this Agreement, Senior Debt shall not be deemed to have been paid in full unless the Senior Lenders and any other holders of the Senior Debt shall have received indefeasible payment in full in cash and terminated their Commitments under and as defined in the Senior Debt Agreements. Section 28. Successor and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower Parties and the Subordinated Lender and their respective successors and assigns, and shall be binding upon and inure to the benefit of the Senior Agent and its respective successors and assigns. This Agreement shall be freely assignable at any time by the Subordinated Lender or the Senior Agent on behalf of the Senior Lenders; provided any such assignment is in conjunction with the assignment of the related Subordinated Debt or Senior Debt, respectively. Section 28. Governing Law; Remedies. This Agreement shall in all respects be governed by, and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to any provision or rules relating to the choice of law or conflict of law that would cause the application of the laws of any jurisdiction other than the Commonwealth of Pennsylvania. The parties hereto acknowledge that the provisions of this Agreement are unique and money damages would not provide an adequate remedy for any breach thereof, and each party may seek specific performance and other equitable remedies for any breaches under this Agreement. Section 29. Amendments and Waivers. This Agreement may be changed, modified or waived only by a writing signed by the Borrower, the Subordinated Lender and the Senior Agent. Section 30. Notices. All notices to be given under this Agreement must be in writing and shall be effective only when given at the addresses and to the attention of the persons stated below, or at such other address or to the attention of such other person as the recipient has designated after the date hereof in writing to the sending party. No party is obligated to give any other party any notices under this Agreement except as expressly set forth herein. Any communication or notice so addressed and mailed shall be deemed to be given five days after mailing. Any communication or notice otherwise delivered shall be deemed to be given when receipt is acknowledged if telecopied or when personally delivered or two days after delivery by reputable overnight courier. Section 31. Counterparts. This Agreement may be executed in multiple counterparts and by different parties hereto on separate counterparts each of which, when so executed and delivered, shall be an original, and all such counterparts shall together constitute one and the same instrument. -13- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. SPECIALTY TRANSPORTATION SERVICES, INC. By: _____________________________________ Title: _____________________________________ Address: 5979 McCasland Avenue Portage, IN 46368 CHURCHILL ENVIRONMENTAL & INDUSTRIAL EQUITY PARTNERS, L.P. By: Churchill Capital Environmental, L.L.C. Its: General Partner By: Churchill Capital, Inc. Its: Managing Member By: _____________________________________ Title: _____________________________________ Address: 3100 Metropolitan Centre 333 South Seventh Street Minneapolis, MN 55402-2435 MELLON BANK, N.A., AS AGENT By: _____________________________________ Title: _____________________________________ Address: Mellon Bank, N.A. Middle Market Banking Department Two Mellon Center Pittsburgh, PA 15259 -----END PRIVACY-ENHANCED MESSAGE-----