-----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, Awq72mk+2ewscuHJF4xpOhikRyNlEH8pMK5rcy7xC3JXMiS9jBElFfrWDZ8VU2VW 0p7d5tApek3lpNQ1XorfLg== 0000950137-98-001314.txt : 19980401 0000950137-98-001314.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950137-98-001314 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19980130 ITEM INFORMATION: FILED AS OF DATE: 19980330 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AASCHE TRANSPORTATION SERVICES INC CENTRAL INDEX KEY: 0000927809 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 363964954 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-24576 FILM NUMBER: 98579857 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 8-K/A 1 AMENDMENT #1 TO FORM 8-K 1 As filed with the Securities and Exchange Commission on March 30, 1998 amending report filed on February 11, 1998. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-KA No. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report: January 30, 1998 (Date of earliest event reported) AASCHE TRANSPORTATION SERVICES, INC. (Exact name of registrant as specified in the charter) Delaware 0-24576 36-3964954 (State or other Jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 10214 N. Mt. Vernon Road Shannon, Illinois 61078 (Address of Principal Executive Offices) (815) 864-2421 (Registrant's telephone number including area code) n/a (Former name or former address, if changed since last report) 2 Item 7. Financial Statements and Exhibits (a) Financial statements of businesses acquired.
Jack Gray Transport Municipal Solid Waste Division Financial Statements* Page ---- Report of Independent Auditors 1 Financial Statements Balance Sheets 2 Statements of Income 3 Statements of Cash Flow 4 Notes to Financial Statements 5 (b) Pro forma financial information of the Company. Pro Forma Consolidating Balance Sheet (Unaudited) 10 Notes to Unaudited Pro Forma Consolidating Balance Sheet 11 Pro Forma Consolidating Statements of Operations (Unaudited) 12 Notes to Unaudited Pro Forma Consolidating Statements of Operations 13
* Information required to be included under Item 2 with respect to Jack Gray Transport Municipal Solid Waste Division was previously filed on an initial report on Form 8-K dated February 11, 1998. (c) Exhibits 10.1 Credit Agreement dated as of January 30, 1998, by and among Specialty Transportation Services, Inc., the Lenders parties thereto from time to time, and Mellon Bank, N.A. 10.2 Subordinated Note and Equity Purchase Agreement, dated January 30, 1998, between Specialty Transportation Services, Inc. and American Capital Strategies, Ltd. 10.3 Term Loan Agreement dated January 30, 1998 between Aasche Transportation Services, Inc. and Aim Financial Corporation 10.4 Promissory Note dated as of January 16, 1998 by Aasche Transportation Services, Inc. payable to Larry L. Asche in the amount of $500,000 2 3 10.5 Promissory Note dated as of January 16, 1998 by Aasche Transportation Services, Inc. payable to Diane L. Asche in the amount of $500,000 10.6 Promissory Note dated as of January 26, 1998 by Aasche Transportation Services, Inc. payable to Diane L. Asche in the amount of $25,000 10.7 Promissory Note dated as of January 20, 1998 by Aasche Transportation Services, Inc. payable to Kevin M. Clark in the amount of $500,000 10.8 Promissory Note dated as of January 26, 1998 by Aasche Transportation Services, Inc. payable to Richard S. Baugh in the amount of $250,000 10.9 Promissory Note dated as of January 26, 1998 by Aasche Transportation Services, Inc. payable to Gary I. Goldberg in the amount of $250,000 10.10 Warrant dated as of January 16, 1998, from Aasche Transportation Services, Inc. to Larry L. Asche 10.11 Warrant dated as of January 16, 1998, from Aasche Transportation Services, Inc. to Diane L. Asche 10.12 Warrant dated as of January 26, 1998, from Aasche Transportation Services, Inc. to Diane L. Asche 10.13 Warrant dated as of January 20, 1998, from Aasche Transportation Services, Inc. to Kevin M. Clark 10.14 Warrant dated as of January 26, 1998, from Aasche Transportation Services, Inc. to Richard S. Baugh 10.15 Warrant dated as of January 26, 1998, from Aasche Transportation Services, Inc. to Gary I. Goldberg 10.16 Employment Agreement dated as of January 2, 1998 between Specialty Transportation Services, Inc. and Gary I. Goldberg (c) Consent of Ernst & Young LLP 3 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Aasche Transportation Services, Inc. (Registrant) By: /s/ Leon M. Monachos -------------------------------- Leon M. Monachos Chief Financial Officer Date: March 27, 1998 4 5 Jack Gray Transport Municipal Solid Waste Division Financial Statements Nine months ended September 30, 1997 and years ended December 31, 1996 and 1995 CONTENTS Report of Independent Auditors..............................................1 Financial Statements Balance Sheets..............................................................2 Statements of Income........................................................3 Statements of Cash Flows....................................................4 Notes to Financial Statements...............................................5
6 Report of Independent Auditors The Board of Directors Jack Gray Transport, Inc. We have audited the accompanying balance sheets of Jack Gray Transport Municipal Solid Waste Division (the Division), a division of Jack Gray Transport, Inc., as of September 30, 1997 and December 31, 1996, and the related statements of income and cash flows for the nine-month period ended September 30, 1997, and the years ended December 31, 1996 and 1995. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jack Gray Transport Municipal Solid Waste Division, a division of Jack Gray Transport, Inc., at September 30, 1997 and December 31, 1996, and the results of its operations and its cash flows for the nine-month period ended September 30, 1997 and the years ended December 31, 1996 and 1995 in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois January 6, 1998 1 7 Jack Gray Transport Municipal Solid Waste Division (A Division of Jack Gray Transport, Inc.) Balance Sheets
SEPTEMBER 30 DECEMBER 31 1997 1996 ----------------------------- ASSETS Current assets: Cash $ 24,488 $ 25,500 Accounts receivable 6,157,002 5,670,718 Receivables from employees 159,110 152,895 Supply inventory 364,549 352,442 Prepaid expenses 436,653 343,396 Other current assets 4,845 8,891 --------------------------- Total current assets 7,146,647 6,553,842 Property and equipment: Land 470,064 470,064 Buildings and improvements 951,408 951,408 Motor carrier equipment 27,832,842 26,976,408 Other equipment, furniture, and fixtures 4,103,092 3,808,274 --------------------------- 33,357,406 32,206,154 Less: Accumulated depreciation and amortization 12,398,072 10,460,585 --------------------------- Net property and equipment 20,959,334 21,745,569 Other assets 2,927,987 3,121,970 --------------------------- $31,033,968 $31,421,381 =========================== LIABILITIES AND DIVISION EQUITY Current liabilities: Accounts payable - Trade $ 518,892 $ 581,202 Accounts payable - Brokers 210,895 147,327 Accrued liabilities 965,850 1,073,000 --------------------------- Total current liabilities 1,695,637 1,801,529 Division equity 29,338,331 29,619,852 --------------------------- $31,033,968 $31,421,381 ===========================
See accompanying notes. 2 8 3 Jack Gray Transport Municipal Solid Waste Division (A Division of Jack Gray Transport, Inc.) Statements of Income
NINE MONTHS ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31 1997 1996 1995 --------------------------------------------- Net revenues $25,565,147 $30,615,962 $31,455,092 Operating expenses: Transportation 12,243,474 14,370,722 14,825,388 Terminal 1,161,592 1,548,046 1,333,966 Maintenance 3,059,517 3,899,291 3,257,634 Taxes and licenses 1,984,895 2,578,330 2,757,567 Insurance and safety 1,154,998 1,373,757 1,323,515 Allocated general and administrative 1,168,793 1,418,645 1,307,357 Depreciation and amortization 2,203,738 2,688,638 2,542,831 --------------------------------------------- Total operating expenses 22,977,007 27,877,429 27,348,258 --------------------------------------------- Operating income 2,588,140 2,738,533 4,106,834 Other income - Net 63,691 29,643 162,974 Allocated interest expense 656,068 849,521 642,189 ============================================ Net income $ 1,995,763 $ 1,918,655 $ 3,627,619 ============================================
See accompanying notes. 3 9 Jack Gray Transport Municipal Solid Waste Division (A Division of Jack Gray Transport, Inc.) Statements of Cash Flows
NINE MONTHS ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31 1997 1996 1995 ------------------------------------------------ OPERATING ACTIVITIES Net income $ 1,995,763 $ 1,918,655 $ 3,627,619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,203,738 2,688,638 2,542,831 Gain on sale of property and equipment (4,730) (94,649) (147,309) Changes in operating assets and liabilities: Accounts receivable (486,284) (1,055,468) (679,396) Receivables from employees (6,215) (40,113) (2,782) Supply inventory (12,107) (49,162) 71,381 Prepaid expenses (93,257) 144,957 168,908 Other current assets 4,046 16,722 4,583 Other assets 193,983 (103,570) (272,344) Accounts payable - Trade (62,310) 346,919 (31,811) Accounts payable - Brokers 63,568 44,564 (40,659) Accrued liabilities (107,150) 37,177 (35,583) ---------------------------------------------- Net cash provided by operating activities 3,689,045 3,854,670 5,205,438 INVESTING ACTIVITIES Purchases of property and equipment (1,488,836) (2,956,673) (3,318,914) Proceeds from sale of property and equipment 52,420 247,468 261,018 ---------------------------------------------- Net cash used in investing activities (1,436,416) (2,709,205) (3,057,896) FINANCING ACTIVITIES Distributions to Parent, net (2,253,641) (1,144,465) (2,151,042) ---------------------------------------------- Net cash used in financing activities (2,253,641) (1,144,465) (2,151,042) ---------------------------------------------- Net increase (decrease) in cash (1,012) 1,000 (3,500) Cash at beginning of year 25,500 24,500 28,000 ---------------------------------------------- Cash at end of year $ 24,488 $ 25,500 $ 24,500 ============================================== NONCASH INVESTING AND FINANCING ACTIVITIES Transfers of equipment from (to) Parent, net $ (23,643) $ 283,784 $ (384,914) ==============================================
See accompanying notes 4 10 Jack Gray Transport Municipal Solid Waste Division Notes to Financial Statements September 30, 1997 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Jack Gray Transport Municipal Solid Waste Division (the Division) is a division of Jack Gray Transport, Inc. (Jack Gray or Parent). The Division transports primarily municipal and solid waste at various locations throughout the United States under contracts ranging from five to twenty years. The accompanying financial statements present the assets, liabilities, and results of operations for the Division as if the Division had existed as an entity separate from Jack Gray. Costs related to support activities performed by Jack Gray are allocated to the Division (see Note 7). These financial statements are not necessarily indicative of the financial position and results of operations which would have occurred had the Division been an independent company. The assets, liabilities, income, and expenses reflected in the Division's financial statements are only part of those of a larger entity and are not subject to the constraints of law and customs applicable to legal entities. Consequently, they may be available to satisfy claims unrelated to and not reflected in the financial statements of the nonlegal entity. 2. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES CASH MANAGEMENT Jack Gray provides a centralized cash management function; accordingly, cash disbursements and receipts are settled through division equity. TIRES Tires attached to new motor carrier equipment are being depreciated over the estimated useful lives of the related equipment. Replacement tires are inventoried and charged to expense as used. 5 11 Jack Gray Transport Municipal Solid Waste Division Notes to Financial Statements (continued) 2. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is provided on the straight-line basis over the estimated useful lives of the respective assets: buildings and improvements - five to fifteen years, motor carrier equipment - four to twenty years, and other equipment, furniture, and fixtures - three to ten years. Replacement of the Company's tractors occurs principally through trade-in. The excess of the trade-in value over the net book value of the traded equipment is deferred and reflected as a reduction in the cost of the new equipment. ACCOUNTING ESTIMATES Accounting estimates are an integral part of financial statements prepared in conformity with generally accepted accounting principles. Judgments made by management affect the amounts and related disclosures of assets, liabilities, revenues, and expenses reported on the financial statements. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments include trade accounts receivable, accounts payable, and accrued liabilities. The fair values of all financial instruments were not materially different from their carrying values. 3. OTHER ASSETS Other assets consist of the following:
SEPTEMBER 30 DECEMBER 31 1997 1996 --------------------------- Contract start-up costs, net $ 366,120 $ 388,535 Retainage under long-term contract 2,561,867 2,733,435 --------------------------- $ 2,927,987 $ 3,121,970 ===========================
Start-up costs incurred to obtain a waste hauling contract, which began January 2, 1990, are being amortized over the 20-year contract term. 6 12 9 Jack Gray Transport Municipal Solid Waste Division Notes to Financial Statements (continued) 4. ACCRUED LIABILITIES Accrued liabilities consist of the following:
SEPTEMBER 30 DECEMBER 31 1997 1996 -------------------------- Salaries, wages, and benefits $ 270,300 $ 396,610 Accrued vacation 287,550 355,847 Accrued insurance 52,490 224,437 Accrued fuel taxes 98,431 77,067 Accrued disposal fees 230,643 -- Other 26,436 19,039 ------------------------- $ 965,850 $1,073,000 =========================
5. DIVISION EQUITY Division equity reflects the net assets of the Division and consists of the following:
SEPTEMBER 30 DECEMBER 31 1997 1996 ------------------------------- Beginning balance $ 29,619,852 $ 28,561,878 Net income 1,995,763 1,918,655 Net asset transfers to/from Parent (23,643) 283,784 Net cash distributions to Parent (2,253,641) (1,144,465) ------------------------------- Ending balance $ 29,338,331 $ 29,619,852 ===============================
6. INCOME TAXES The stockholder of Jack Gray has elected to be taxed as an S Corporation under the provisions of the Internal Revenue Code. Accordingly, Jack Gray is not subject to federal or state income taxes as the income of Jack Gray is included in the taxable income of its stockholder. As a result, no provision for income taxes has been made in the accompanying financial statements of the Division. 7 13 Jack Gray Transport Municipal Solid Waste Division Notes to Financial Statements (continued) 7. ALLOCATED COSTS Jack Gray provided certain general and administrative support services to the Division, including general management, tax, financial audit and reporting, benefits administration, insurance, information management, legal, accounts payable and receivable, and credit functions. Jack Gray has historically charged the Division for these services through an allocation based on a percent of net revenues. The allocated general and administrative support costs of $1,168,793, $1,418,645, and $1,307,357 for the nine months ended September 30, 1997, and the years ended December 31, 1996 and 1995, respectively, are reflected as allocated general and administrative expense in the accompanying financial statements. There is no debt or associated interest directly attributable to the Division. Interest expense related to the Parent's debt is allocated to the Division based on a percent of net revenues. Jack Gray allocated 41%, 38%, and 36% of the Parent's interest expense to the Division for the nine months ended September 30, 1997, and the years ended December 31, 1996 and 1995, respectively. 8. EMPLOYEE BENEFIT PLANS Substantially all of the Division's nonunion employees are covered by a discretionary, noncontributory, profit-sharing plan sponsored by Jack Gray. The Division is charged for its share of Jack Gray's contribution to the plan. The Division was charged approximately $56,000 and $72,500 for the years ended December 31, 1996 and 1995. Effective January 1, 1997, Jack Gray terminated this plan. Jack Gray also sponsors a qualified 401(k) plan in which the Division participates. The plan is available to substantially all nonunion employees and provides a 25% match of an employee's contribution up to 4% of the employee's salary. The Division's contribution was approximately $53,100, $20,300, and $18,600 for the nine-month period ended September 30, 1997, and the years ended December 31, 1996 and 1995, respectively. The Division participates in several union-sponsored pension plans. Contributions to such plans amounted to $74,600, $96,200, and $73,400 for the nine months ended September 30, 1997, and the years ended December 31, 1996 and 1995, respectively. 8 14 Jack Gray Transport Municipal Solid Waste Division Notes to Financial Statements (continued) 9. MAJOR CUSTOMERS During the nine months ended September 30, 1997, and the years ended December 31, 1996 and 1995, the same three customers accounted for approximately 92%, 95%, and 97% of net revenues, respectively. At September 30, 1997, and December 31, 1996 and 1995, these same three customers accounted for approximately 84%, 92%, and 99% of accounts receivable, respectively. 10. SALE OF DIVISION In September 1997, Jack Gray entered into an agreement to sell substantially all assets of this Division, excluding accounts receivable, for proceeds of approximately $30 million. 9 15 AASCHE TRANSPORTATION SERVICES, INC. PRO FORMA CONSOLIDATING BALANCE SHEET (UNAUDITED) The following unaudited pro forma consolidating balance sheet is based on certain amounts derived from the audited balance sheet of Jack Gray Transport Municipal Solid Waste Division ("MSW Division") as of September 30, 1997 and the unaudited consolidated balance sheet of Aasche Transportation Services, Inc. ("Aasche"), as of September 30, 1997, and assumes that the acquisition of the net assets of MSW Division occurred on September 30, 1997. The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this balance sheet. The pro forma balance sheet is not necessarily indicative of the purchase transaction which would have occurred had the acquisition taken place on September 30, 1997. AASCHE TRANSPORTATION SERVICES, INC. PRO FORMA CONSOLIDATING BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 1997 (IN THOUSANDS)
Adjustments MSW Increase Pro Division Aasche (Decrease) Forma -------- -------- ---------- -------- ASSETS Current assets: Cash and cash equivalents $ 24 $ 42 $ 228(1)(2)(3)(4)(5) $ 294 Trade receivables, net 6,157 5,572 (6,157)(5) 5,572 Prepaid expenses and other current assets 966 3,386 (545)(5) 3,807 -------- -------- -------- -------- Total current assets 7,147 9,000 (6,474) 9,673 Property and equipment, net 20,959 21,723 3,352 46,034 Excess of cost over net assets acquired, net -------- Debt issuance costs -- 7,411 4,236(5) 11,647 Deferred income taxes -- -- 1,800(4) 1,800 Other assets -- 3,022 -- 3,022 2,928 378 (428)(5) 2,878 -------- -------- -------- -------- TOTAL ASSETS $ 31,034 $ 41,534 $ 2,486 $ 75,054 ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 730 $ 962 $ (730)(5) $ 962 Accrued liabilities 966 2,398 55 (5) 3,419 Guaranteed obligation of Employee Stock Ownership Plan -- 203 -- 203 Line of credit -- 4,217 -- 4,217 Current maturities of long-term debt with unrelated parties -- 2,888 1,286(1) 4,174 Current maturities of long-term debt with related party -- 995 -- 995 Current maturities of capital lease obligations with unrelated parties -- 2,417 -- 2,417 Current maturities of capital lease obligations with related parties -- 1,149 -- 1,149 -------- -------- -------- -------- Total current liabilities 1,696 15,229 611 17,536 Long-term debt with unrelated parties, less current maturities -- 4,265 16,714(1) 20,979 Long-term debt with related party, less current maturities -- 1,675 -- 1,675 Capital lease obligations with unrelated parties, less current maturities -- 3,920 -- 3,920 Subordinated debt with unrelated parties -- -- 11,250(2) 11,250 Subordinated debt with related parties -- -- 2,125(2) 2,125 Deferred income taxes -- 3,677 -- 3,677 Minority Interest -- -- 500(3) 500 -------- -------- -------- -------- Total liabilities 1,696 28,766 31,200 61,662 Stockholders' equity: Common stock -- -- -- -- Additional paid-in capital -- 16,594 624(4) 17,218 Guarantee of Employee Stock Ownership Plan obligation -- (203) -- (203) Accumulated deficit -- (3,623) -- (3,623) Division equity 29,338 -- (29,338)(5) -- -------- -------- -------- -------- Total stockholders' equity 29,338 12,768 (28,714) 13,392 -------- -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,034 $ 41,534 $ 2,486 $ 75,054 ======== ======== ======== ========
16 AASCHE TRANSPORTATION SERVICES, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATING BALANCE SHEET The unaudited pro forma consolidating balance sheet gives effect to the acquisition of the net assets of MSW Division, as if the acquisition occurred on September 30, 1997. The actual effects of purchase accounting as of the effective acquistion date, January 30, 1998 differ substantially from the pro forma amounts because of changes in financial position and earnings of MSW Division since September 30, 1997. Pro Forma Adjustments (in thousands): (1) To record the borrowing of $18,000 under a senior credit term loan. (2) To record the borrowing of $13,375 under subordinated loans. (3) To record the issuance of $500 of MSW Division common stock. (4) To record debt issuance costs of $1,800, of which $1,176 was paid in cash and $624 relates to the value attributed to detachable warrants issued to certain subordinated debt investors. (5) To record consideration given to Jack Gray for the purchase of the net assets of MSW Division. 17 AASCHE TRANSPORTATION SERVICES, INC. PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED) The following unaudited pro forma consolidating statements of operation are based on certain amounts derived from the audited statements of income of Jack Gray Transport Municipal Solid Waste Division ("MSW Division") for the nine months ended September 30, 1997 and the year ended December 31, 1996 and the unaudited consolidated statement of operations of Aasche Transportation Services, Inc. ("Aasche"), for the nine months ended September 30, 1997 and the audited consolidated statement of operations for the year ended December 31, 1996, and assumes, in each case, that the acquisition of the net assets of MSW Division occurred on January 1, 1996. The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with these statements. The pro forma statements are not necessarily indicative of the results of operations which would have occurred had the acquisition taken place on January 1, 1996 or of future results of the consolidated operations of MSW Division and Aasche. AASCHE TRANSPORTATION SERVICES, INC. PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except per share and share data)
For the Nine Months Ended September 30, 1997 Adjustments MSW Increase Division Aasche (Decrease) Pro Forma ------------ ------ ------------ ---------- Net revenues $ 25,565 $ 49,769 - $ 75,334 Operating Expenses 22,977 47,508 $ (203)(1) 70,282 --------- --------- ----------- --------- Operating income 2,588 2,261 203 5,052 Other income (expense): Interest expense (656) (1,731) (1,721) (2) (4,108) Accretion of warrants - - (989) (3) (989) Amortization of debt discount - - (164) (5) (164) Minority Interest - - (52) (4) (52) Other 64 41 - 105 --------- --------- ----------- --------- Income (loss) before income tax (provision) benefit 1,996 571 (2,723) (156) Income tax (provision) benefit - (371) 291 (6) (80) --------- --------- ----------- --------- Net income (loss) $ 1,996 $ 200 $ (2,432) (236) ========= ========= =========== ========= Basic and diluted net income (loss) per common share $ 0.05 $ (0.06) ========= ========= Weighted average common shares outstanding 4,259,558 4,184,237 ========= =========
For the Year Ended December 31, 1996 Adjustments MSW Increase Division Aasche (Decrease) Pro Forma ------------ ------ ------------ ---------- Net revenues $ 30,616 $ 77,365 - $ 107,981 Operating Expenses 27,877 77,978 (165) (1) 105,690 --------- --------- ----------- --------- Operating income (loss) 2,739 (613) 165 2,291 Other income (expense) Interest expense (850) (3,464) (2,728) (2) (7,042) Accretion of warrants - - (857) (3) (857) Amortization of debt discount - - (306) (5) (306) Minority Interest - - (69) (4) (69) Other 30 136 - 166 --------- --------- ----------- --------- Income (loss) before income tax (provision) benefit 1,919 (3,941) (3,795) (5,817) Income tax (provision) benefit - 1,321 750 (6) 2,071 --------- --------- ----------- --------- Net income (loss) $ 1,919 $ (2,620) $ (3,045) (3,746) ========= ========= =========== ========= Basic and dilluted net income (loss) per common share $ (0.67) $ (0.95) ========= ========= Weighted average common shares outstanding 3,928,596 3,928,596 ========= =========
18 AASCHE TRANSPORTATION SERVICES, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS The unaudited pro forma consolidating statements of operations give effect to the acquisition of the new assets of MSW Division as if the acquisition on January 1, 1996. The actual effects of purchase accounting as of the effective acquisition date, January 30, 1998 differ substantially from the pro forma amounts because of changes in financial position and earnings of MSW Division since January 1, 1996. Pro Forma Adjustments (in thousands): (1) To record (a) amortization of purchased goodwill of $106 for the nine months ended September 30, 1997 and $141 for the year ended December 31, 1996 (b) amortization of debt issuance costs of $189 for the nine months ended September 30, 1997 and $298 for the year ended December 31, 1996 (c) management fee of $28 for the nine months ended September 30, 1997 and $38 for the year ended December 31, 1996 (d) reduction in general and administration expense of $555 for the nine months ended September 30, 1997 and $684 for the year ended December 31, 1996 and (e) additional depreciation related to step-up of property and equipment of $218 for the nine months ended September 30, 1997 and $340 for the year ended December 31, 1996. (2) To record (a) interest expense on the $18,000 senior term loan (at 8.69%) of $1,027 for the nine months ended September 30, 1997 and $1,550 for the year ended December 31, 1996 and (b) interest expense on the $13,375 subordinated loans (ranging from 8.25% to 15%) of $1,161 for the nine months ended September 30, 1997 and $1,730 for the year ended December 31, 1996. (3) To record accretion expense related to warrants to purchase the common stock of MSW Division of $989 for the nine months ended September 30, 1997 and $857 for the year ended December 31, 1996. (4) To record minority interest expense related to $500 common stock investment in MSW Division of $52 for the nine months ended September 30, 1997 and $306 for the year ended December 31, 1996. (5) To record amortization of debt discount related to detachable warrants issued to subordinated debt investors of $164 for the nine months ended September 30, 1997 and $306 for the year ended December 31, 1996. (6) To record (a) income tax benefit on the pro forma adjustments and (b) pro forma income tax provision on MSW Division operations, both recorded at an assumed 40% tax rate. EX-10.1 2 CREDIT AGREEMENT 1 Execution Form EXHIBIT 10.1 ================================================================================ CREDIT AGREEMENT dated as of January 30, 1998 by and among SPECIALTY TRANSPORTATION SERVICES, INC., as Borrower, THE LENDERS PARTIES HERETO FROM TIME TO TIME, and MELLON BANK, N.A., as Agent ================================================================================ 2 TABLE OF CONTENTS
SECTION TITLE PAGE ARTICLE I DEFINITIONS; CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.01 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.03 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.01 Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.02 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.03 Making of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.04 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.05 Conversion or Renewal of Interest Rate Options . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.06 Prepayments Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.07 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.08 Mandatory Prepayments and Mandatory Reductions of Committed Amounts . . . . . . . . . . . . 8 2.09 Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.10 Pro Rata Treatment; Payments Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.11 Additional Compensation in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 11 2.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.13 Change of Applicable Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.14 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE III THE LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.01 Letter of Credit Subfacility ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.02 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.03 Execution and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.04 Governmental Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.05 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.06 Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.07 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.08 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.09 Absence of Material Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.10 Accurate and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.11 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.12 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.13 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.15 Partnerships, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.16 Ownership and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.17 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.18 Regulatory Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.19 Absence of Other Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
-i- 3 4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.21 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.22 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.23 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.24 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.25 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.26 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.27 Contract Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.28 Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.29 Subordinated Debt Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE V CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.01 Conditions to Extensions of Credit on the Closing Date . . . . . . . . . . . . . . . . . . . . 29 5.02 Conditions to Extensions of Credit after the Closing Date . . . . . . . . . . . . . . . . . . . . 33 ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.01 Basic Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.02 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.03 Payment of Taxes and Other Potential Charges and Priority Claims . . . . . . . . . . . . . . . . 38 6.04 Preservation of Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.05 Governmental Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.06 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.07 Avoidance of Other Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.08 Financial Accounting Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.10 Continuation of or Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.11 Consolidated Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.13 Plan and Multiemployer Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.14 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.15 Appraisal of Qualified Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.16 Post-Closing Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE VII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.01 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 7.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 7.03 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 7.04 Guaranties, Indemnities, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.05 Loans, Advances and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.06 Dividends and Related Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 7.07 Sale-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.08 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.09 Mergers, Acquisitions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.10 Dispositions of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.11 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.12 Dealings with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 7.13 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.14 Issuance of Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 7.15 Limitations on Modification of Certain Agreements and Instruments . . . . . . . . . . . . . . . . 45 7.16 Limitation on Payments and Modification of Restricted Indebtedness . . . . . . . . . . . . . . . . 45 7.17 Limitation on Other Restrictions on Liens, Transfers or Other Dispositions . . . . . . . . . . . 45
-ii- 4 7.18 Limitation on Other Restrictions on Amendment of the Loan Documents, etc. . . . . . . . . . . . 46 ARTICLE VIII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 8.02 Consequences of an Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8.03 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.02 General Nature of Agent's Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.03 Exercise of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.04 General Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.05 Administration by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 9.06 Lender Not Relying on Agent or Other Lenders . . . . . . . . . . . . . . . . . . . . . . . . 52 9.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.08 Agent in its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.09 Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.10 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.11 Additional Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.12 Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.13 Funding by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.14 Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 10.01 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 10.02 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 10.03 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 10.04 No Implied Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 10.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 10.06 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 10.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 10.08 Prior Understandings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 10.09 Duration; Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 10.11 Limitation on Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 10.12 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 10.13 Sharing of Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 10.14 Successors and Assigns; Participations; Assignments . . . . . . . . . . . . . . . . . . . . 58 10.15 Governing Law; Submission to Jurisdiction: Waiver of Jury Trial; Limitation of Liability . . . 60
ANNEXES Annex A Definitions Annex B Pricing Grid EXHIBITS Exhibit A Form of Revolving Credit Note Exhibit B Form of Term Loan Note
-iii- 5 Exhibit C Form of Borrowing Base Certificate Exhibit D Form of Security Agreement Exhibit E-1 Forms of Fee Deed of Trust Exhibit E-2 Forms of Fee Mortgage Exhibit F-1 Forms of Leasehold Deed of Trust Exhibit F-2 Forms of Leasehold Mortgage Exhibit G Form of Compliance Certificate Exhibit H Form of Transfer Supplement SCHEDULES Schedule 4.01 Corporate Status Schedule 4.04 Governmental Approvals Schedule 4.05 Absence of Conflicts Schedule 4.08 Undisclosed Liabilities Schedule 4.17 Litigation Schedule 4.19 Absence of Other Conflicts Schedule 4.20 Insurance Schedule 4.24 Employee Benefits Schedule 4.25 Environmental Matters Schedule 4.26 Labor Matters Schedule 4.27 Contract Matters Schedule 5.01(b) Security Documents Schedule 6.09 Use of Proceeds Schedule 6.16 Post-Closing Matters Schedule 7.02 Liens Schedule 7.04 Guaranty Equivalents Schedule 7.05 Loans, Advances and Investments Schedule 7.08 Leases Schedule 7.12 Affiliate Transactions
-iv- 6 CREDIT AGREEMENT THIS AGREEMENT, dated as of January 30, 1998, by and among SPECIALTY TRANSPORTATION SERVICES, INC., an Illinois corporation (the "Borrower"), the lenders parties hereto from time to time (the "Lenders") and MELLON BANK, N.A., a national banking association, as agent for the Lenders hereunder (in such capacity, together with its successors in such capacity, the "Agent"). RECITALS: WHEREAS, the Borrower has requested the Agent and the Lenders to enter into this Agreement and extend credit as provided for herein; WHEREAS, the Lenders have agreed to enter into this Agreement and extend credit to the Borrower on the terms and conditions set forth herein; and NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION 1.01. CERTAIN DEFINITIONS. In addition to other words and terms defined elsewhere in this Agreement, as used herein the words and terms defined in Annex A shall have the meanings given them in Annex A, unless the context hereof otherwise clearly requires. 1.02. CONSTRUCTION. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole; "or" has the inclusive meaning represented by the phrase "and/or"; and "property" includes all properties and assets of any kind or nature, tangible or intangible, real, personal or mixed. References in this Agreement to "determination" (and similar terms) by the Agent or by any Lender include good faith estimates by the Agent or by any Lender (in the case of quantitative determinations) and good faith beliefs by the Agent or by any Lender (in the case of qualitative determinations). The words "hereof," "herein," "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. References herein to "out-of-pocket expenses" of a Person (and similar terms) include, but are not limited to, the fees of in-house counsel and other in-house professionals of such Person to the extent that such fees are routinely identified and specifically charged under such Person's normal cost accounting system. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. 1.03. ACCOUNTING PRINCIPLES. (a) As used herein, "GAAP" shall mean generally accepted accounting principles as such principles shall be in effect at the Relevant Date, consistently applied from and after the Closing Date, subject to the provisions of this Section 1.03. As used herein, "Relevant Date" shall mean the date a relevant computation or determination is to be made or the date of relevant financial statements, as the case may be. The Borrower will promptly notify the Agent of any proposed change in GAAP which, if enacted, could result in a material change (whether positive or negative) in the Borrower financial statements. 7 (b) Except as otherwise provided in this Agreement, all computations and determinations as to accounting or financial matters shall be made, and all financial statements to be delivered pursuant to this Agreement shall be prepared, in accordance with GAAP (including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP. (c) If any proposed change in GAAP after the date of this Agreement would be required to be applied to transactions then or thereafter in existence, and a violation of one or more provisions of Section 7.01 hereof would, in the opinion of the Borrower, likely occur upon the enactment of such proposed change which would not occur if no change in accounting principles were to take place, (i) The parties agree in such event to negotiate in good faith an amendment of this Agreement which shall approximate to the extent possible the economic effect of the original provisions of Section 7.01 after taking into account such change in GAAP; and (ii) If the parties are unable to negotiate such an amendment within 60 days, the Borrower shall have the option of (A) prepaying the Loan (pursuant to applicable provisions hereof) or (B) submitting the drafting of such an amendment to a firm of independent certified public accountants of nationally recognized standing acceptable to the parties, which shall complete its draft of such amendment within 60 days of submission; if the Borrower and the Required Lenders cannot agree, the firm shall be selected by binding arbitration in the City of Pittsburgh, Pennsylvania in accordance with the rules then obtaining of the American Arbitration Association. If the Borrower does not exercise either such option within said period, then as used in this Agreement, "GAAP" shall continue to have the meaning set forth in subsection (a) of this Section. (d) If any change in GAAP after the date of this Agreement is required to be applied to transactions or conditions then or thereafter in existence, and the Agent shall assert that the effect of such change is or shall likely be to distort materially the effect of any of the definitions of financial terms in Annex A hereto or any of the covenants of the Borrower in Section 7.01 hereof (the "Financial Provisions"), so that the intended economic effect of any of the Financial Provisions will not in fact be accomplished, (i) The Agent shall notify the Borrower of such assertion, specifying the change in GAAP which is objected to, and until otherwise determined as provided below, the specified change in GAAP shall not be made by the Borrower in its financial statements for the purpose of applying the Financial Provisions; and (ii) The parties shall follow the procedures set forth in paragraph (i) and the first sentence of paragraph (ii) of subsection (c) of this Section. If the parties are unable to agree on an amendment as provided in said paragraph (ii) and if the Borrower does not exercise either option set forth in the first sentence of said paragraph (iii) within the specified period, then as used in this Agreement "GAAP" shall continue to have the meaning set forth in subsection (a) of this Section, except that the specified change in GAAP which is objected to by the Agent shall not be made in applying the Financial Provisions. The parties agree that if the Borrower elects the option in clause (B) of the first sentence of said paragraph (iii), until such independent firm has been selected and completes drafting such amendment, the specified change in GAAP shall not be made in applying the Financial Provisions. (e) All expenses of compliance with this Section 1.03 shall be paid for by the Borrower. -2- 8 ARTICLE II THE LOANS 2.01. REVOLVING CREDIT LOANS. (a) REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees (such agreement being herein called such Lender's "Revolving Credit Commitment") to make loans (the "Revolving Credit Loans") to the Borrower at any time or from time to time on or after the date hereof and to but not including the Revolving Credit Maturity Date. A Lender shall have no obligation to make any Revolving Credit Loan to the extent that such Lender's Revolving Credit Exposure at any time would exceed such Lender's Revolving Credit Committed Amount at such time. Each Lender's "Revolving Credit Committed Amount" at any time shall be equal to the amount set forth as its "Initial Revolving Credit Committed Amount" below its name on the signature pages hereof (which amount is $5,000,000 for Mellon Bank, N.A.), as such amount may have been reduced under Section 2.01 at such time, and subject to transfer to another Lender as provided in Section 10.14. The sum of the Credit Facility Exposures of the Lenders shall not at any time exceed the Borrowing Base at such time. (b) NATURE OF CREDIT. Within the limits of time and amount set forth in this Section 2.01, and subject to the provisions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder. (c) REVOLVING CREDIT NOTES. The obligation of the Borrower to repay the unpaid principal amount of the Revolving Credit Loans made to it by each Lender and to pay interest thereon shall be evidenced in part by promissory notes of the Borrower, one to each Lender, dated the Closing Date (the "Revolving Credit Notes") in substantially the form attached hereto as Exhibit A, with the blanks appropriately filled, payable to the order of such Lender in a face amount equal to such Lender's Initial Revolving Credit Committed Amount. (d) MATURITY. To the extent not due and payable earlier, the Revolving Credit Loans shall be due and payable on the Revolving Credit Maturity Date. (e) REVOLVING CREDIT COMMITMENT FEE. The Borrower shall pay to the Agent for the account of each Lender a commitment fee (the "Revolving Credit Commitment Fee"), for each day from and including the date hereof to but not including the Revolving Credit Maturity Date, equal to the Revolving Credit Commitment Fee Percentage times an amount (not less than zero) equal to (i) such Lender's Revolving Credit Committed Amount on such day, minus (ii) such Lender's Revolving Credit Exposure on such day. The "Revolving Credit Commitment Fee Percentage" for any day shall mean the applicable rate per annum (based on a year of 360 days and actual days elapsed) set forth in the Pricing Grid opposite the Level in effect for such day. Such Revolving Credit Commitment Fee shall be due and payable for the preceding period for which such fee has not been paid: (x) on each Quarterly Payment Date, (y) on the date of each reduction of the Revolving Credit Committed Amounts (whether optional or mandatory) on the amount so reduced and (z) on the Revolving Credit Maturity Date. (f) REDUCTION OF THE REVOLVING CREDIT COMMITTED AMOUNTS. The Borrower may at any time or from time to time reduce Pro Rata the Revolving Credit Committed Amounts of the Lenders to an aggregate amount (which may be zero) not less than the sum of the Revolving Credit Exposures of the Lenders plus the Revolving Credit Exposures of the Lender not yet outstanding as to which notice has been given by the Borrower under Sections 2.03 and 3.01. Any reduction of the Revolving Credit Committed Amounts shall be in an aggregate amount which is an integral multiple of $500,000 not less than $500,000. Reduction of the Revolving Credit Committed Amounts shall be made by providing not less than three Business Days' notice (which notice shall be irrevocable) to such effect to the Agent. After the date specified in such notice the Revolving Credit Commitment Fee shall be calculated upon the Revolving Credit Committed Amounts as so reduced. -3- 9 2.02. TERM LOAN. (a) TERM LOAN COMMITMENTS. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender, severally and not jointly, agrees (such agreement being herein called such Lender's "Term Loan Commitment") to make a loan (a "Term Loan") to the Borrower on the Closing Date in such principal amount as may be requested by the Borrower but not exceeding such Lender's Term Loan Committed Amount. Each Lender's "Term Loan Committed Amount" at any time shall be equal to the amount set forth as its "Term Loan Committed Amount" below its name on the signature pages hereof (which amount is $18,000,000 for Mellon Bank, N.A.), subject to transfer to another Lender as provided in Section 10.14. (b) NATURE OF CREDIT. The Borrower may not reborrow amounts repaid with respect to Term Loans. (c) TERM LOAN NOTE. The obligation of the Borrower to repay the unpaid principal amount of the Term Loans made to it by each Lender and to pay interest thereon shall be evidenced in part by promissory notes of the Borrower, one to each Lender, dated the Closing Date (the "Term Loan Notes") in substantially the form attached hereto as Exhibit B, with the blanks appropriately filled, payable to the order of such Lender in a face amount equal to the principal amount of such Lender's Term Loan. (d) SCHEDULED AMORTIZATION; MATURITY. The Term Loans shall be due and payable on the dates and in the aggregate principal amounts set forth below:
DATE AGGREGATE PRINCIPAL AMOUNT September 30, 1998 $643,000 December 31, 1998 $643,000 Each Quarterly Payment Date in the years 1999 through 2002 (inclusive of the Term Loan Maturity Date) $643,000 Term Loan Maturity Date $6,426,000
To the extent not due and payable earlier, the Term Loans shall be due and payable on the Term Loan Maturity Date. 2.03. MAKING OF LOANS. Whenever the Borrower desires that the Lenders make Loans, the Borrower shall provide Standard Notice to the Agent setting forth the following information: (a) The date, which shall be a Business Day, on which such proposed Loans are to be made; (b) The aggregate principal amount of such proposed Loans, which shall be the sum of the principal amounts selected pursuant to clause (c) of this Section 2.03, and which, in the case of proposed Revolving Credit Loans, shall be an integral multiple of $500,000 not less than $500,000; provided, that such requirement with respect to an integral multiple shall not apply to Revolving Credit Loans made pursuant to Section 3.01(d)(i); (c) The interest rate Option or Options selected in accordance with Section 2.04(a) and the principal amounts selected in accordance with Section 2.04(d) of the Base Rate Portion and each Funding Segment of the Euro-Rate Portion, as the case may be, of such proposed Loans; and -4- 10 (d) With respect to each such Funding Segment of such proposed Loans, the Funding Period to apply to such Funding Segment, selected in accordance with Section 2.04(c). Standard Notice having been so provided, the Agent shall promptly notify each Lender of the information contained therein and of the amount of such Lender's Loan. Unless any applicable condition specified in Article V has not been satisfied, on the date specified in such Standard Notice each Lender shall make the proceeds of its Loan available to the Agent at the Agent's Office, no later than 11:00 a.m., Pittsburgh time, in funds immediately available at such Office. The Agent will make the funds so received available to the Borrower in funds immediately available at the Agent's Office. 2.04. INTEREST RATES. (a) OPTIONAL BASES OF BORROWING. The unpaid principal amount of the Loans shall bear interest for each day until due on one or more bases selected by the Borrower from among the interest rate Options set forth below. Subject to the provisions of this Agreement the Borrower may select different Options to apply simultaneously to different Portions of the Loans and may select different Funding Segments to apply simultaneously to different parts of the Euro-Rate Portion of the Loans. Each selection of an interest rate Option shall apply separately and without overlap to the Revolving Credit Loans, as a class, and the Term Loans, as a class. The aggregate number of Funding Segments applicable to the Euro-Rate Portion of the Loans at any time shall not exceed six. (i) BASE RATE OPTION: A rate per annum (computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed) for each day equal to the Base Rate for such day plus the Applicable Margin for such day. (ii) EURO-RATE OPTION: A rate per annum (based on a year of 360 days and actual days elapsed) for each day equal to the Euro-Rate for such day plus the Applicable Margin for such day. (b) APPLICABLE MARGINS. The "Applicable Margin" for each interest rate Option for each day shall mean the applicable percentage set forth in the Pricing Grid opposite the Level in effect for such day. (c) FUNDING PERIODS. At any time when the Borrower shall select, convert to or renew the Euro-Rate Option to apply to any part of the Revolving Credit Loans or the Term Loans, the Borrower shall specify one or more Funding Periods during which such Option shall apply, such Funding Periods being either one, two, three or six months ("Euro- Rate Funding Period"); provided, that: (i) Each Euro-Rate Funding Period shall begin on a London Business Day, and the term "month," when used in connection with a Euro-Rate Funding Period, shall be construed in accordance with prevailing practices in the interbank eurodollar market at the commencement of such Euro-Rate Funding Period, as determined by the Agent (which determination shall be conclusive absent manifest error); (ii) The Borrower may not select a Euro-Rate Funding Period that would, (A) in the case of the Revolving Credit Loans, end after the Revolving Credit Maturity Date, or (B) in the case of the Term Loans, end after the Term Loan Maturity Date; and (iii) The Borrower shall, in selecting any Funding Period, allow for scheduled mandatory prepayments and foreseeable mandatory prepayments of the Loans. (d) TRANSACTIONAL AMOUNTS. Each selection of, conversion from, conversion to or renewal of an interest rate Option in respect of any Loan, and each payment or prepayment of any Loan, -5- 11 shall be in a principal amount such that after giving effect thereto the aggregate principal amount of the Base Rate Portion of the Revolving Credit Loans and of the Term Loans, and the aggregate principal amount of each Funding Segment of the Euro-Rate Portion of the Revolving Credit Loans and of the Term Loans, respectively, shall be: (i) for the Base Rate Portion, any aggregate principal amount; and (ii) for each Funding Segment of the Euro-Rate Portion, $500,000 or an integral multiple thereof. (e) EURO-RATE UNASCERTAINABLE; IMPRACTICABILITY. If (i) on any date on which a Euro-Rate would otherwise be set the Agent shall have determined in good faith with respect to its borrowers generally (which determination shall be conclusive absent manifest error) that: (A) adequate and reasonable means do not exist for ascertaining such Euro-Rate, (B) a contingency has occurred which materially and adversely affects the interbank eurodollar market; or (C) the effective cost of funding a proposed Funding Segment of the Euro-Rate Portion from a Corresponding Source of Funds shall exceed the Euro-Rate applicable to such Funding Segment, or (ii) at any time any Lender shall have determined in good faith , with respect to its borrowers generally, (which determination shall be conclusive absent manifest error) that the making, maintenance or funding of any part of the Euro-Rate Portion has been made impracticable or unlawful by compliance by such Lender or its Euro-Rate Lending Office in good faith with any Law or guideline or interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law); then, and in any such event, the Agent or such Lender, as the case may be, may notify the Borrower of such determination (and any Lender giving such notice shall notify the Agent). Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given), the obligation of each of the Lenders to allow the Borrower to select, convert to or renew the Euro-Rate Option shall be suspended until the Agent or such Lender, as the case may be, shall have later notified the Borrower (and any Lender giving such notice shall notify the Agent) of the Agent's or such Lender's determination (which determination shall be conclusive absent manifest error) that the circumstance giving rise to such previous determination no longer exists. If any Lender notifies the Borrower of a determination under clause (ii) of this Section 2.04(e), the Euro-Rate Portions of the Loans of such Lender (the "Affected Lender") shall automatically be converted to the Base Rate Option as of the date specified in such notice (and accrued interest thereon shall be due and payable on such date). If at the time the Agent or a Lender makes a determination under clause (i) or (ii) of this Section 2.04(e) the Borrower previously has notified the Agent that it wishes to select, convert to or renew the Euro-Rate Option with respect to any proposed Loans but such Loans have not yet been made, such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option instead of the Euro-Rate Option with respect to such Loans or, in the case of a determination by a Lender, such Loans of such Lender. 2.05. CONVERSION OR RENEWAL OF INTEREST RATE OPTIONS. -6- 12 (a) CONVERSION OR RENEWAL. Subject to the provisions of Section 2.11(b), and if no Event of Default or Potential Default shall have occurred and be continuing or shall exist, the Borrower may convert any part of its Loans from any interest rate Option or Options to one or more different interest rate Options and may renew the Euro- Rate Option as to any Funding Segment of the Euro-Rate Portion: (i) At any time with respect to conversion from the Base Rate Option; or (ii) At the expiration of any Funding Period with respect to conversions from or renewals of the Euro- Rate Option as to the Funding Segment corresponding to such expiring Funding Period. If an Event of Default or Potential Default has occurred and is continuing at the expiration of a Funding Period, conversions from the Euro-Rate Option to the Base Rate Option shall be automatic as to the Funding Segment corresponding to such expiring Funding Period. Whenever the Borrower desires to convert or renew any interest rate Option or Options, the Borrower shall provide to the Agent Standard Notice setting forth the following information: (v) Whether such conversion or renewal is to apply to Revolving Credit Loans or Term Loans; (w) The date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (x) The principal amounts selected in accordance with Section 2.04(d) of the Base Rate Portion and each Funding Segment of the Euro-Rate Portion to be converted from or renewed; (y) The interest rate Option or Options selected in accordance with Section 2.04(a) and the principal amounts selected in accordance with Section 2.04(d) of the Base Rate Portion and each Funding Segment of the Euro-Rate Portion to be converted to; and (z) With respect to each Funding Segment to be converted to or renewed, the Funding Period selected in accordance with Section 2.04(c) to apply to such Funding Segment. Standard Notice having been so provided, after the date specified in such Standard Notice, interest shall be calculated upon the principal amount of the Loans as so converted or renewed. Interest on the principal amount of any part of the Loans converted or renewed (automatically or otherwise) shall be due and payable on the conversion or renewal date. (b) FAILURE TO CONVERT OR RENEW. Absent due notice from the Borrower of conversion or renewal in the circumstances described in Section 2.05(a)(ii), any part of the Euro-Rate Portion for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the expiring Funding Period. 2.06. PREPAYMENTS GENERALLY. Whenever the Borrower desires or is required to prepay any part of its Loans, it shall provide Standard Notice to the Agent setting forth the following information: (a) Whether such prepayment is to be applied to the Revolving Credit Loans or the Term Loans; (b) The date, which shall be a Business Day, on which the proposed prepayment is to be made; -7- 13 (c) The total principal amount of such prepayment, which shall be the sum of the principal amounts selected pursuant to clause (d) of this Section 2.06; and (d) The principal amounts selected in accordance with Section 2.04(d) of the Base Rate Portion and each part of each Funding Segment of the Euro-Rate Portion to be prepaid. Standard Notice having been so provided, on the date specified in such Standard Notice the principal amounts of the Base Rate Portion and each part of the Euro-Rate Portion specified in such notice, together with interest on each such principal amount to such date, shall be due and payable; provided, that the Borrower may revoke such Standard Notice in the case of an optional prepayment. Mandatory prepayments of the Term Loans shall be applied to reduce scheduled payments of the Term Loans set forth in Section 2.02(d) in the inverse order of their scheduled maturity. Optional prepayments of the Term Loans shall be applied first to the next scheduled maturity of Term Loans as set forth in Section 2.02(d) (so long as such scheduled maturity is with 90 days of such optional prepayment) and then to reduce scheduled payments of the Term Loans set forth in Section 2.02(d) in the inverse order of their scheduled maturity. For avoidance of doubt, scheduled amortization payment of the Term Loans are not "prepayments" as that term is used in this Section. 2.07. OPTIONAL PREPAYMENTS. The Borrower shall have the right at its option from time to time to prepay its Loans in whole or part without premium or penalty (subject, however, to Section 2.11(b)): (a) At any time with respect to any part of the Base Rate Portion; or (b) At the expiration of any Funding Period with respect to prepayment of the Euro-Rate Portion with respect to any part of the Funding Segment corresponding to such expiring Funding Period. Any such prepayment shall be made in accordance with Section 2.06. 2.08. MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF THE COMMITTED AMOUNTS. (a) REVOLVING CREDIT COMMITTED AMOUNTS. If on any date the aggregate Revolving Credit Exposures of the Lenders exceeds the aggregate Revolving Credit Committed Amounts, the Borrower shall prepay (and, to the extent required by Section 3.01(g), provide cash collateral with respect to) the Revolving Credit Exposures in an aggregate principal amount not less than the amount of such excess. Such amount shall be applied first to the principal amount of outstanding Letter of Credit Unreimbursed Draws, then to the principal amount of outstanding Revolving Credit Loans, and the balance shall be deposited into the Letter of Credit Collateral Account. Any such prepayments of (and cash collateralization with respect to) the Revolving Credit Exposures shall be immediately due and payable on such day, without presentment, demand, protest or notice of any kind. Subject to the foregoing provision on priority of application, such prepayments shall be allocated among the Portions of the Revolving Credit Loans and among Funding Segments of the Euro-Rate Portion of the Revolving Credit Loans, as the Borrower may designate or, absent such designation, as determined by the Agent. (b) BORROWING BASE. If on any date any Borrowing Base Certificate is required to be furnished pursuant to Section 2.14(e), the aggregate Credit Facility Exposures of the Lenders exceeds the Borrowing Base , the Borrower shall prepay (and, to the extent required by Section 3.01(g), provide cash collateral with respect to) the Credit Facility Exposures in an aggregate principal amount not less than the amount of such excess. Such amount shall be applied first to the unpaid principal amount of outstanding Letter of Credit Unreimbursed Draws, then to the unpaid principal amount of outstanding Revolving Credit Loans, then to the unpaid principal amount of outstanding Term Loans, and the balance shall be deposited into the Letter of Credit Collateral Account. Any such prepayments of the -8- 14 Term Loans shall be made in accordance with Section 2.06. Any such prepayments of (and cash collateralization with respect to) the Revolving Credit Exposures shall be made in accordance with Section 2.08(a). (c) REDUCTION EVENTS. (i) GENERALLY. "Reduction Event" shall mean any of the events defined as such in Section 2.08(c)(ii), (iii), (iv), (v) or (vi). If a Reduction Event shall occur, an amount not less than the corresponding Reduction Event Application Amount shall be applied first, to prepayment of the unpaid principal amount of outstanding Term Loans, if any, and then the balance, if any, shall be applied to reduction of the aggregate Revolving Credit Committed Amounts; provided, that the Borrower shall not be obligated to make any application pursuant to the foregoing clause in the event that (A) such Reduction Event is under Section 2.08(c)(vi) (relating to Excess Cash Flow) and (B) the Total Leverage Ratio is less than 3.0 at the end of the applicable fiscal quarter. Any such prepayment of the Term Loans shall be made in accordance with Section 2.06. Any such reduction of the Revolving Credit Committed Amounts shall be made in accordance with Section 2.01(f), and if such reduction causes the aggregate Revolving Credit Exposures of the Lenders to exceed the aggregate Revolving Credit Committed Amounts, the Borrower shall prepay (and, to the extent required by Section 3.01(g), provide cash collateral with respect to) such excess in accordance with Section 2.08(a), and to the extent possible, the Borrower shall make prepayment in accordance with Sections 2.06 and 3.02 not later than the effective date of such reduction so as to avoid such excess. Such prepayments of the Term Loans and reductions of the Revolving Credit Committed Amounts shall be made not later than the Reduction Event Date corresponding to such Reduction Event; provided, that (A) if the Reduction Event Application Amount in respect of such Reduction Event is less than $100,000, such prepayment and reduction shall not be required until the aggregate amount of all Reduction Event Application Amounts not applied are equal to at least $100,000; and (B) if application of this Section 2.08(c) would otherwise require prepayment of any Funding Segment of any Euro-Rate Portion on a day other than the last day of the corresponding Funding Period, then the Borrower shall not be required to make such prepayment until such last day, unless the Agent otherwise notifies the Borrower upon the instructions of the Required Lenders; provided, that (x) in no event may prepayments be deferred pursuant to this clause (B) for longer than six months, and (y) deferral of prepayments under this clause (B) shall not apply to Reduction Events described in Section 2.08(c)(vi) (relating to Excess Cash Flow). The Borrower shall give the Agent at least three Business Days' notice of each prepayment or reduction required to be made pursuant to this Section 2.08(c), and of each event which would give rise to such a prepayment or reduction but for application of the foregoing clauses (A) or (B). For purposes of Section 2.08(c)(vi) (relating to Excess Cash Flow), such notice of prepayment or reduction shall be accompanied by a certificate signed by a Responsible Officer of the Borrower setting forth in reasonable detail the calculation of Excess Cash Flow for such fiscal quarter. (ii) ASSET SALES. "Reduction Event" shall include the following (each, a "Reduction Event Asset Sale"): any sale, transfer, lease or other disposition by the Borrower of any property (including without limitation any capital stock or other equity interest held by the Borrower), but excluding sales, transfers, and other dispositions by the Borrower of property pursuant to Section 7.10, the gross cash proceeds received by the Borrower in respect of which, in the aggregate, do not exceed $100,000 in any fiscal year; provided; that any sale, transfer or other disposition of any property shall not be considered as giving rise to a Reduction Event if the Borrower notifies the Agent promptly after the receipt of the Net Proceeds thereof that such proceeds will be used by the Borrower to purchase similar property within three months after the Reduction Event, but only to the extent such proceeds are actually so used. The "Reduction Event Application Amount" corresponding to the foregoing -9- 15 Reduction Event shall be 100% of the Net Proceeds thereof. The "Reduction Event Date" corresponding to the foregoing Reduction Event shall be five Business Days after the Borrower receives the Net Proceeds from such event. (iii) EXTRAORDINARY INSURANCE PROCEEDS. "Reduction Event" shall include the following: receipt of (i) insurance proceeds in connection with one or more related events by the Borrower under any insurance policy covering losses with respect to tangible real or personal property or improvements, or (ii) any award or other compensation in connection with one or more related events of condemnation of property (or transfer or disposition in lieu of condemnation) of the Borrower; provided, that receipt of such proceeds, award or other compensation shall not be considered as giving rise to a Reduction Event if the Borrower notifies the Agent promptly after such receipt thereof that such proceeds, award or other compensation will be used by the Borrower to repair or replace the asset so affected within three months after the Reduction Event if such asset is personal property and within six months after the Reduction Event if such asset is real property, but only to the extent that such proceeds, award or other compensation are actually so used. The "Reduction Event Application Amount" corresponding to the foregoing Reduction Event shall be 100% of the Net Proceeds thereof. The "Reduction Event Date" corresponding to the foregoing Reduction Event shall be five Business Days after the Borrower receives the Net Proceeds from such event. (iv) EQUITY ISSUANCE. "Reduction Event" shall include the following: issuance of any equity securities by the Borrower. The "Reduction Event Application Amount" corresponding to the foregoing Reduction Event shall be 100% of the Net Proceeds thereof. The "Reduction Event Date" corresponding to the foregoing Reduction Event shall be five Business Days after the Borrower receives the Net Proceeds from such event. (v) DEBT INCURRENCE. "Reduction Event" shall include the following: incurrence of Indebtedness by the Borrower. The "Reduction Event Application Amount" corresponding to the foregoing Reduction Event shall be 100% of the Net Proceeds thereof. The "Reduction Event Date" corresponding to the foregoing Reduction Event shall be five Business Days after the Borrower receives the Net Proceeds from such event. (vi) EXCESS CASH FLOW. "Reduction Event" shall include the following: the Borrower having Excess Cash Flow during any fiscal quarter, commencing with and including the fiscal quarter ending June 30, 1998. The "Reduction Event Application Amount" corresponding to the foregoing Reduction Event shall be 50% of the Excess Cash Flow for such fiscal quarter. The "Reduction Event Date" corresponding to the foregoing Reduction Event shall be the earlier of (A) 5 days after the Borrower provides its financial statements for such fiscal quarter and (B) 35 days after the end of such fiscal quarter. 2.09. INTEREST PAYMENT DATES. Interest on the Base Rate Portion of any Loans shall be due and payable monthly in arrears on each Base Rate Payment Date. Interest on each Funding Segment of the Euro-Rate Portion of any Loans shall be due and payable on each Euro-Rate Payment Date. After maturity of any part of the Loans (by acceleration or otherwise), interest on such part of the Loans shall be due and payable on demand. 2.10. PRO RATA TREATMENT; PAYMENTS GENERALLY. (a) PRO RATA TREATMENT. Each borrowing and conversion and renewal of interest rate Options hereunder shall be made, and all payments made in respect of principal, interest and Revolving Credit Commitment Fees due from the Borrower hereunder or under the Notes shall be applied, Pro Rata from and to each Lender, except for (i) payments of interest involving an Affected Lender as provided in Section 2.04(e), and (ii) payments to a Lender subject to a withholding deduction under Section 2.12(c). The failure of any Lender to make a Loan shall not relieve any other Lender of its -10- 16 obligation to lend hereunder, but neither the Agent nor any Lender shall be responsible for the failure of any other Lender to make a Loan. (b) PAYMENTS GENERALLY. All payments and prepayments to be made by the Borrower in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrower hereunder or under any Loan Document shall be payable in Dollars at 11:00 a.m., Pittsburgh time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Lender subject to a withholding deduction under Section 2.12(c). Except for payments under Sections 2.11 and 10.06, such payments shall be made to the Agent at its Office in Dollars in funds immediately available at such Office, and payments under Sections 2.11 and 10.06 shall be made to the applicable Lender at such domestic account as it shall specify to the Borrower from time to time in funds immediately available at such account. Any payment or prepayment received by the Agent or such Lender after 11:00 a.m., Pittsburgh time, on any day shall be deemed to have been received on the next succeeding Business Day. The Agent shall distribute to the Lenders all such payments received by it from the Borrower as promptly as practicable after receipt by the Agent. (c) INTEREST ON OVERDUE AMOUNTS. To the extent permitted by law, after there shall have become due (by acceleration or otherwise) principal, interest, fees, indemnity, expenses or any other amounts due from the Borrower hereunder or under any other Loan Document, such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum which for each day shall be equal to the following: (i) In the case of any part of the Euro-Rate Portion of any Loans, (A) until the end of the applicable then-current Funding Period at a rate per annum (based on a year of 360 days and actual days elapsed) 2% above the then-current Euro-Rate Option (increasing, however, the Applicable Margin for such Euro-Rate Option to the applicable percentage set forth in the Pricing Grid for Level I), and (B) thereafter, in accordance with the following clause (ii); and (ii) In the case of any other amount due from the Borrower hereunder or under any Loan Document, at a rate per annum (based on a year of 365 or 366 days, as the case may be, and actual days elapsed) 2% above the Base Rate Option (increasing, however, the Applicable Margin for such Base Rate Option to the applicable percentage set forth in the Pricing Grid for Level I). To the extent permitted by law, interest accrued on any amount which has become due hereunder or under any Loan Document shall compound on a day-by-day basis, and hence shall be added daily to the overdue amount to which such interest relates. 2.11. ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES. (a) INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC. If any Law or guideline or interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority (whether or not having the force of law), adopted on or after the date hereof, (i) imposes, modifies or deems applicable any reserve, special deposit, insurance assessment or any other requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by, any Lender or its Applicable Lending Office (other than requirements expressly included herein in the determination of the Euro-Rate hereunder), -11- 17 (ii) imposes, modifies or deems applicable any capital adequacy or similar requirement against assets (funded or contingent) of, or credits or commitments to extend credit extended by, any Lender or its Applicable Lending Office, or applicable to the obligations of any Lender or its Applicable Lending Office under or in connection with any Loan Document, or (iii) imposes upon any Lender or its Applicable Lending Office any other condition or expense with respect to any Loan Document or its making, maintenance or funding of any Loan, Letter of Credit or Letter of Credit Participating Interest, and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon any Lender or its Applicable Lending Office or, in the case of clause (ii), any Person controlling a Lender, with respect to any Loan Document or the making, maintenance or funding of any Loan, Letter of Credit, or Letter of Credit Participating Interest (or, in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on capital of such Lender, Applicable Lending Office or controlling Person's capital, taking into consideration the policies of such Lender, Applicable Lending Office or controlling Person with respect to capital adequacy) by an amount which such Lender deems to be material (such Lender being deemed for this purpose to have made, maintained or funded each Funding Segment of the Euro-Rate Portion from a Corresponding Source of Funds), such Lender may from time to time notify the Borrower of the amount (determined in good faith by such Lender) necessary to compensate such Lender, Applicable Lending Office or controlling Person for such increase, reduction or imposition. A certificate of a Lender claiming compensation under this Section 2.11(a) and setting forth the additional amount to be paid to it and indicating in reasonable detail the computation thereof shall be conclusive absent manifest error. In making any such computation such Lender may take into account any special, supplemental or other nonrecurring items, may apply any reasonable averaging or attribution methods, and may make such computation prospectively or retrospectively. Such amount shall be due and payable by the Borrower to such Lender 10 Business Days after such certificate is given. The Borrower shall not be liable under this Section 2.11(a) to any Lender to compensate it or any controlling Person of such Lender for any cost, reduction or imposition incurred or suffered more than 90 days before receipt by the Borrower of a notice from such Lender referring to the event that gave rise to such cost, reduction or imposition. (b) FUNDING BREAKAGE. In the event that for any reason (i) the Borrower fails to borrow, convert or renew any part of any Loan which would, after such borrowing, conversion or renewal, have a Euro-Rate Portion after notice requesting such borrowing, conversion or renewal has been given by the Borrower (whether such failure results from failure to satisfy applicable conditions to such borrowing, conversion or renewal or otherwise), or (ii) any part of any Funding Segment of any Euro-Rate Portion becomes due (by acceleration or otherwise), or is paid, prepaid or converted to another interest rate Option (whether or not such payment, prepayment or conversion is mandatory or automatic and whether or not such payment or prepayment is then due), on a day other than the last day of the corresponding Funding Period, the Borrower shall indemnify each Lender on demand (following delivery by such Lender to the Borrower of the certificate referred to below) against any loss, liability, cost or expense of any kind or nature which such Lender may sustain or incur in connection with or as a result of such event. Such indemnification in any event shall include an amount equal to the excess, if any, of (x) the aggregate amount of interest which would have accrued on the amount of the Euro-Rate Portion not so borrowed, converted or renewed, or which so becomes due, or which is so paid, prepaid or converted, as the case may be, from and including the date on which such borrowing, conversion or renewal would have been made pursuant to such notice, or on which such part of such Funding Segment so becomes due, or on which such part of such Funding Segment is so paid, prepaid or converted, as the case may be, to the last day of the Funding Period applicable to such amount (or, in the case of a failure to borrow, convert or renew, the Funding Period that would have been applicable to such amount but for such failure), in each case at the applicable rate of interest for such Euro-Rate Portion provided for herein (excluding, however, the Applicable Margin included therein, if any), over (y) the aggregate amount of interest (as determined in good faith by such Lender) which would have accrued to such -12- 18 Lender on such amount for such period by placing such amount on deposit for such period with leading banks in the interbank market. A certificate of a Lender claiming compensation under this Section 2.11(b) and setting forth the additional amount to be paid to it and indicating in reasonable detail the computation thereof shall be conclusive absent manifest error. 2.12. TAXES. (a) PAYMENTS NET OF TAXES. All payments made by the Borrower under this Agreement or any other Loan Document shall be made free and clear of, and without reduction or withholding for, any and all present or future taxes, levies, imposts, duties, charges, fees, deductions or withholdings, and all liabilities with respect thereto, excluding (x) in the case of the Agent and each Lender, income taxes imposed on the Agent or such Lender by the United States, and income taxes and franchise taxes imposed on the Lender or such Lender by the jurisdiction under the laws of which the Agent or such Lender is organized or by any political subdivision thereof, and (y) in the case of each Lender, net income taxes and franchise taxes imposed on such Lender by the jurisdiction in which the Lender's Applicable Lending Office is located or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any Loan Document to the Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including without limitation deductions applicable to additional sums payable under this Section 2.12) the Agent or such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) OTHER TAXES. The Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution, delivery of, or otherwise with respect to , this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) INDEMNITY. The Borrower hereby indemnifies the Agent and each Lender for the full amount of all Taxes and Other Taxes (including without limitation any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.12 paid by the Agent or such Lender and any liability (including without limitation penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Such indemnification shall be made within 15 days after the date the Agent or such Lender makes demand therefor (which demand shall identify in reasonable detail the nature and the amount of Taxes and Other Taxes for which indemnification is being sought). (d) RECEIPTS, ETC. Within 30 days after the date of any payment of Taxes or Other Taxes, the Borrower will furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof. (e) SURVIVAL, ETC. Without prejudice to the survival of any other obligation of the Borrower under this Agreement or the other Loan Documents, the obligations of the Borrower contained in this Section 2.12 shall survive the payment in full of all other obligations of the Borrower under this Agreement and the other Loan Documents, termination of all commitments to extend credit under, and all Letters of Credit issued under, the Loan Documents, termination of this Agreement, and all other events and circumstances whatsoever. Nothing in this Section 2.12 or otherwise in this Agreement shall require the Agent or any Lender to disclose to the Borrower any of its tax returns (or any other information that it deems to be confidential or proprietary). -13- 19 (f) WITHHOLDING TAX EXEMPTION. (i) PROVISION OF FORMS. Each Lender organized under the laws of a jurisdiction outside the United States shall, on or prior to the date it becomes party to this Agreement, and from time to time thereafter if requested in writing by the Borrower or the Agent, provide the Borrower and the Agent each with an original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying such Lender's status for purposes of determining exemption from, or reduced rate applicable to, United States withholding taxes with respect to such Lender under this Agreement and the other Loan Documents; provided, that a Lender shall not be obligated to provide any such form after the date such Lender becomes party to this Agreement if such Lender is not legally able to do so. (ii) INDEMNIFICATION LIMITED IN CERTAIN CIRCUMSTANCES. The Borrower shall not be required to indemnify any Lender, or to pay any additional amounts to any Lender, in respect of United States withholding taxes (or any withholding tax imposed by a state of the United States that applies only when such United States withholding tax is imposed), pursuant to Section 2.12(a) or 2.12(c), to the extent that (A) the obligation to withhold amount with respect to United States withholding tax existed on the date such Lender became a party to this Agreement; provided, that this clause (A) shall not apply to a Lender that became a Lender as an result of an assignment made or other action taken at the request of the Borrower, or (B) the obligation to make such indemnification or to pay such additional amount would not have arisen but for a failure of such Lender to comply with the provisions of Section 2.12(f)(i). 2.13. CHANGE OF APPLICABLE LENDING OFFICE. In the event that a Lender becomes an Affected Lender under Section 2.04(e), or in the event that a Lender requests compensation from the Borrower pursuant to Section 2.11(a) or 2.12, then, at the request of the Borrower, such Lender will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Lender, such change will eliminate or mitigate a similar event which may thereafter accrue and is not otherwise materially disadvantageous to such Lender. 2.14. BORROWING BASE. (a) BORROWING BASE. The "Borrowing Base" at any time shall mean the sum, at the date of the most recent Borrowing Base Certificate required to be furnished pursuant to Section 2.14(e), of (i) 90% of the Net Value of Eligible Receivables, plus (ii) 80% of the Deemed Value of the New Qualified Collateral; plus (iii) 100% of the Orderly Liquidation Value of the Existing Qualified Collateral; plus (iv) for the 90 day period following the Closing Date, $3,500,000. (b) ELIGIBLE RECEIVABLES. "Eligible Receivable" at any time shall mean all rights to payments due and to become due to the Borrower which meet each of the following requirements at such time: (i) The account is not more than 90 days from the date of the invoice therefor; (ii) The account arose from the performance of services by the Borrower in the ordinary course of the Borrower's business and such services have been provided to the account debtor and the Borrower has possession of, or, if reasonably requested by the Agent, has made -14- 20 available to the Agent for review at the Borrower's office, invoices or other evidence satisfactory to the Agent that such services have been provided; (iii) The account is not subject to any prior assignment, claim, lien, or security interest, and the Borrower will not make any further assignment of the account or create any further security interest in the account, nor permit its rights in the account to be reached by attachment, levy, garnishment or other judicial process; (iv) The account is not subject to set-off (other than rights of set-off) accorded account debtors generally in the Code, which rights have not been exercised or threatened by the account debtor), credit, allowance or adjustment by the account debtor, except discounts allowed for prompt payment, and the account debtor has not complained as to his liability on the account and has not returned, or retained the right to return, any of the goods from the sale of which the account arose; (v) The account arose in the ordinary course of the Borrower's business and did not arise from the performance of services to a supplier, an employee or an Affiliate of the Borrower; (vi) The account is not due from an account debtor from whom 50% or more of the accounts have not been paid within 90 days from the date of the invoice therefor; (vii) The account does not constitute a finance charge or lease receivable; (viii) The account does not arise out of contracts with the United States or any department, agency, or instrumentality of the United States, unless the Borrower has executed any instruments and taken any steps required by the Agent in order that all monies due and to become due under such contracts shall be assigned to the Agent and notice thereof given to the government under the Federal Assignment of Claims Act or any similar State or local law (in addition, with respect to any account which arose out of any State or political subdivision thereof, department, agency, or instrumentality of the State or political subdivision (a "Local Government Account"), such Local Government Account shall not constitute a Qualified Account unless the Borrower shall have executed any instruments and taken any steps required by Agent in order that all monies due and to become due under such contracts shall be assigned to the Agent and any required notice thereof given to the local government under any applicable State or local law); (ix) The account does not arise with respect to an account debtor located in New Jersey or Minnesota (or any other state which enacts a similar filing requirement) if such Borrower has not filed a Notice of Business Activities Report with the New Jersey Division of Taxation or made the requisite filings with the appropriate authorities in Minnesota (or any other state), for the current year; (x) No notice of bankruptcy, insolvency or material adverse change in the business or financial condition of the account debtor has been received by or is known to the Borrower; and (xi) The Agent has not notified the Borrower that the Agent has determined, in its reasonable discretion, the account or account debtor is unsatisfactory. The Agent may require, in its reasonable discretion, that certain reserves be established against certain accounts receivable from time to time or to cover other contingencies; provided, that the Agent, upon the direction of the Required Lenders, from time to time may exclude any otherwise Eligible Receivables from the class of Eligible Receivables based on determinations as to the creditworthiness of the obligor, as to the aggregate amount of receivables owing by such obligor and its affiliates at the time -15- 21 of determination, or as to such other and further eligibility standards as the Required Lenders may elect to impose from time to time. The Agent shall give notice to the Borrower of the terms of any such exclusion. Except as otherwise expressly stated in such notice, all such exclusions shall be continuing and cumulative, and an exclusion as to any obligor shall apply in the aggregate to all receivables of such obligor and its affiliates. The Borrower shall, not later than one Business Day after the Agent effects any such exclusion, deliver to the Agent a revised Borrowing Base Certificate reflecting the Borrowing Base as redetermined in accordance with such exclusion. The making of a Revolving Credit Loan in reliance on a Borrowing Base Certificate shall not affect the Lenders' right later to exclude any receivables in accordance with this Section 2.14(b). No Eligible Receivable excluded under this Section 2.14(b) shall be included by the Borrower in any later Borrowing Base Certificate without written permission by the Agent. The "Net Value" of an Eligible Receivable shall be its face amount, net of any discount for prompt payment, net of any other amount representing payment of finance charges, late charges, or interest (however denominated), and net of any portion thereof which constitutes payment of sales, use or other taxes. (c) NEW QUALIFIED COLLATERAL. "New Qualified Collateral" at any time shall mean the Qualified Collateral of the Borrower that has not been appraised, and has not been included in the most recent appraisal report delivered by the Borrower to the Agent, pursuant to Section 6.15 at such time. The "Deemed Value" of any New Qualified Collateral shall mean the lesser of (a) the purchase price paid by the Borrower for such New Qualified Collateral or (b) the fair market value (as reasonably determined by the Agent) of such New Qualified Collateral. (d) EXISTING QUALIFIED COLLATERAL. "Existing Qualified Collateral" at any time shall mean the Qualified Collateral of the Borrower that has been appraised, and has been included in the most recent appraisal report delivered by the Borrower to the Agent, pursuant to Section 6.15 at such time. The "Orderly Liquidation Value" of any Existing Qualified Collateral at any time shall mean the orderly liquidation value of such Existing Qualified Collateral set forth in the most recent appraisal report delivered by the Borrower to the Agent pursuant to Section 6.15 at such time. (e) BORROWING BASE CERTIFICATES. On the Closing Date and from time to time thereafter as specified herein the Borrower shall furnish to the Agent a certificate ("Borrowing Base Certificate"), substantially in the form attached hereto as Exhibit C, appropriately completed, signed by a Responsible Officer of the Borrower and setting forth the Borrowing Base and the other information required therein. Borrowing Base Certificates shall be delivered to the Agent: (i) on the same Business Day that financial statements are delivered by the Borrower to the Agent pursuant to Section 6.01(b); and (ii) not later than two Business Days after request therefor by the Agent from time to time. To the extent the Borrower is required to deliver a Borrowing Base Certificate on a particular day, the Eligible Receivables, New Qualified Collateral and Existing Qualified Collateral reflected on such Borrowing Base Certificate; the Net Values, Deemed Value and Orderly Liquidation Value applicable thereto, as the case may be; and the calculation of the Borrowing Base thereunder, shall be determined as of a day (which shall be specified in the Borrowing Base Certificate) not earlier than the Business Day before the day the Borrower is required to deliver such Borrowing Base Certificate. The Borrowing Base set forth in any such Borrowing Base Certificate shall be effective until delivery of a subsequent Borrowing Base Certificate. -16- 22 ARTICLE III THE LETTERS OF CREDIT 3.01. LETTER OF CREDIT SUBFACILITY. (a) THE LETTER OF CREDIT SUBFACILITY. (i) GENERAL. Subject to the terms and conditions of this Agreement, and relying upon the representations and warranties herein set forth and upon the agreements of the Lenders set forth in Sections 3.01(c) and 3.01(d), the Issuing Bank agrees (such agreement being herein called the "Letter of Credit Commitment") to issue for the account of the Borrower letters of credit (each, as amended, modified or supplemented from time to time, a "Letter of Credit") at any time or from time to time on or after the date hereof. The Borrower shall not request any Letter of Credit to be issued except within the following limitations: (i) no Letter of Credit shall be issued later than 90 days before the Revolving Credit Maturity Date, (ii) no Letter of Credit shall be issued if the Agent shall have received the notice from the Required Lenders referred to in Section 3.01(b)(iii)(C), (iii) at the time any Letter of Credit is issued (and after giving effect to issuance of the requested Letter of Credit), the aggregate Revolving Credit Exposures of the Lenders shall not exceed the sum of the Revolving Credit Committed Amounts of the Lenders at such time, and (iv) on the date of issuance of any Letter of Credit (and after giving effect to such issuance) the aggregate Letter of Credit Exposure shall not exceed $3,000,000. (ii) TERMS OF LETTERS OF CREDIT. The Borrower shall not request any Letter of Credit to be issued except within the following limitations: each Letter of Credit (i) shall have an expiration date no later than the earlier of (A) 12 months after the date of issuance thereof, and (B) 10 days before the Revolving Credit Maturity Date, (ii) shall be denominated in Dollars, and (iii) shall be payable only against sight drafts (and not time drafts). (iii) PURPOSES OF LETTERS OF CREDIT. Each Letter of Credit shall be satisfactory in form and substance to the Issuing Bank. Each Letter of Credit shall be a trade or standby letter of credit used to support trade or financial obligations of the Borrower. The provisions of this Section 3.01(a)(iii) represent only an obligation of the Borrower to the Issuing Bank and the Lenders; the Issuing Bank shall not have any obligation to the Lenders to ascertain the purpose of any Letter of Credit, and the rights and obligations of the Lenders and the Issuing Bank among themselves shall not be impaired or affected by a breach of this Section 3.01(a)(iii). (iv) LETTER OF CREDIT FEE. The Borrower shall pay to the Agent for the account of each Lender a fee (the "Letter of Credit Fee") for each Letter of Credit for each day from and including the date of issuance thereof to and including the date of expiration or termination thereof, equal to (x) the Letter of Credit Undrawn Availability on such day, times (y) the Letter of Credit Fee Rate applicable to such Letter of Credit on such day, times (z) 1/360. Such Letter of Credit Fee shall be due and payable for the preceding period for which such fee has not been paid on each of the following dates: (i) each Quarterly Payment Date, and (ii) the Revolving Credit Maturity Date. The "Letter of Credit Fee Rate" applicable to a Letter of Credit on any day means 2% per annum. (v) ADMINISTRATION FEES. The Borrower shall pay to the Agent, for the sole account of the Issuing Bank, such other administration, maintenance, amendment, drawing and negotiation fees as may be customarily charged by the Issuing Bank from time to time in connection with letters of credit. (b) PROCEDURE FOR ISSUANCE AND AMENDMENT OF LETTERS OF CREDIT. (i) REQUEST FOR ISSUANCE. The Borrower may from time to time request, upon at least three Business Days' notice, the Issuing Bank to issue a Letter of Credit by (i) delivering to the Issuing Bank and the Agent a written request to such effect, specifying the date on which such Letter of Credit is to be issued, the expiration date thereof, and the stated amount thereof, and (ii) delivering to the -17- 23 Issuing Bank an application, in such form as the Issuing Bank may from time to time require (each, a "Letter of Credit Application"), completed to the satisfaction of the Issuing Bank, together with such other certificates, documents and other items as such Issuing Bank may request. If the Issuing Bank desires to issue such Letter of Credit, the Issuing Bank shall promptly notify the Agent (by telephone or otherwise), and furnish the Agent with the proposed form of Letter of Credit to be issued. The Agent shall determine, as of the close of business on the day before such proposed issuance, whether such proposed Letter of Credit complies with the limitations set forth in Sections 3.01(a)(i) and 3.01(a)(ii). Unless such limitations are not satisfied, or unless the Required Lenders have given notice to the Agent to cease issuing Letters of Credit pursuant to Section 3.01(b)(iii)(C), the Agent shall notify the relevant Issuing Bank (in writing or by telephone promptly confirmed in writing) that such Issuing Bank is authorized to issue such Letter of Credit. If the Issuing Bank issues a Letter of Credit, it shall deliver the original of such Letter of Credit to the beneficiary thereof or as the Borrower shall otherwise direct, and shall promptly notify the Agent thereof, and if the Agent so requests shall furnish a copy thereof to the Agent. (ii) EXTENSION OR INCREASE. The Borrower may from time to time request an Issuing Bank to extend the expiration date of an outstanding Letter of Credit issued by such Issuing Bank or to increase the Letter of Credit Undrawn Availability of such Letter of Credit. Such extension or increase shall for all purposes hereunder (including Sections 3.01(a), 3.01(b)(i) and 5.02) be treated as though the Borrower had requested issuance of a replacement Letter of Credit; provided, that the Issuing Bank may, if it elects, issue an amendment to the Letter of Credit providing for such an extension or increase in lieu of issuing a new Letter of Credit in substitution therefor. (iii) LIMITATIONS ON ISSUANCE, EXTENSION AND AMENDMENT. (A) As between the Borrower, on the one hand, and the Agent and the Lenders, on the other hand, the issuance or extension of any Letter of Credit (including any deemed issuance arising from increase or extension of a Letter of Credit as provided in Section 3.01(b)(ii)) is subject to the applicable conditions precedent set forth or referred to in this Section 3.01 and Articles V and VIII. In addition, each Issuing Bank shall be justified and fully protected in declining to issue or extend any Letter of Credit (including any deemed issuance) if the Issuing Bank has not received authorization to do so from the Agent as provided in Section 3.01(b)(i). (B) As between each Issuing Bank, on the one hand, and the Agent and the Lenders, on the other hand, such Issuing Bank shall be justified and fully protected in issuing any Letter of Credit (including any deemed issuance arising from increase or extension of a Letter of Credit as provided in Section 3.01(b)(ii)) after receiving authorization from the Agent as provided in Section 3.01(b)(i), notwithstanding any subsequent notices to the Issuing Bank, any knowledge of an Event of Default or Potential Default, any knowledge of failure of any applicable condition set forth or referred to in this Section 3.01 or Articles V or VIII to be satisfied, any other knowledge of the Issuing Bank, or any other event, condition or circumstance whatever. (C) As between the Agent, on the one hand, and the Lenders, on the other hand, the Agent shall not authorize issuance of any Letter of Credit pursuant to Section 3.01(b)(i) (including any deemed issuance arising from increase or extension of a Letter of Credit as provided in Section 3.01(b)(ii)) if the Agent shall have received, at least two Business Days before authorizing such issuance, from the Required Lenders an unrevoked written notice that any applicable condition set forth or referred to in this Section 3.01 or Article V or VIII will not be satisfied and expressly requesting that the Agent direct the Issuing Banks to cease to issue Letters of Credit. Unless the Agent has received such notice or has determined that the applicable limitations set forth in Sections 3.01(a)(i) and 3.01(a)(ii) are not satisfied, the Agent shall be justified and fully protected, as against the Lenders, in authorizing the Issuing Bank to issue such Letter of Credit, notwithstanding any subsequent notices to the Agent, any knowledge of an Event of Default or Potential Default, any knowledge of failure of any -18- 24 applicable condition set forth or referred to in this Section 3.01 or Article V or VIII to be satisfied, any other knowledge of the Agent, or any other event, condition or circumstance whatever. (iv) AMENDMENTS. The Borrower may from time to time, upon at least three Business Days' notice, request the Issuing Bank to amend, modify or supplement Letters of Credit. At the request of the Borrower, and subject to satisfaction of such conditions as the Issuing Bank may require, the Issuing Bank may amend, modify or supplement Letters of Credit, or waive compliance with any condition of issuance or payment, without the consent of, and without liability to, the Agent or any Lender; provided, that any such amendment, modification or supplement that extends the expiration date or increases the Letter of Credit Undrawn Availability of an outstanding Letter of Credit shall be subject to Section 3.01(b)(ii). (c) LETTER OF CREDIT PARTICIPATING INTERESTS. (i) GENERALLY. Concurrently with the issuance of each Letter of Credit, the Issuing Bank automatically shall be deemed, irrevocably and unconditionally, to have sold, assigned, transferred and conveyed to each other Lender, and each other Lender automatically shall be deemed, irrevocably and unconditionally, severally to have purchased, acquired, accepted and assumed from the Issuing Bank, without recourse to, or representation or warranty by, the Issuing Bank, an undivided interest, in a proportion equal to such Lender's Pro Rata share, in all of the Issuing Bank's rights and obligations in, to or under such Letter of Credit, the Letter of Credit Application, the Letter of Credit Reimbursement Obligations, and all collateral, guarantees and other rights from time to time directly or indirectly securing the foregoing (such interest of each Lender being referred to herein as a "Letter of Credit Participating Interest"). Amounts other than Letter of Credit Reimbursement Obligations and Letter of Credit Fees payable from time to time under or in connection with a Letter of Credit or a Letter of Credit Application shall be for the sole account of the Issuing Bank. On the date that any Purchasing Lender becomes a party to this Agreement in accordance with Section 10.14, Letter of Credit Participating Interests in any outstanding Letters of Credit held by the Lender from which such Purchasing Lender acquired its interest hereunder shall be proportionately reallocated between such Purchasing Lender and such transferor Lender (and, to the extent such transferor Lender is an Issuing Bank, the Purchasing Lender shall be deemed to have acquired a Letter of Credit Participating Interest from such transferor Lender to such extent). (ii) OBLIGATIONS ABSOLUTE. Notwithstanding any other provision hereof, each Lender hereby agrees that its obligation to participate in each Letter of Credit issued in accordance herewith, and its obligation to make the payments specified in Section 3.01(d), are each absolute, irrevocable and unconditional and shall not be affected by any event, condition or circumstance whatever. The failure of any Lender to make any such payment shall not relieve any other Lender of its funding obligation hereunder on the date due, but no Lender shall be responsible for the failure of any other Lender to meet its funding obligations hereunder. (d) LETTER OF CREDIT DRAWINGS AND REIMBURSEMENTS. (i) BORROWER'S REIMBURSEMENT OBLIGATION. The Borrower hereby agrees to reimburse the Issuing Bank, by making payment to the Agent for the account of the Issuing Bank in accordance with Section 2.10(b), on the date and in the amount of each payment made by the Issuing Bank under any Letter of Credit, upon notice (which may be by telephone) by the Issuing Bank to the Borrower of such payment, without further notice, protest or demand, all of which are hereby waived, and an action therefor shall thereupon immediately accrue. To the extent such payment is not timely made, the Borrower hereby agrees to pay to the Agent, for the account of the Issuing Bank, on demand, interest on any Letter of Credit Unreimbursed Draws for each day from and including the date of such payment by the Issuing Bank until reimbursed in full (before and after judgment), in accordance with Section 2.10(c), at the rate per annum set forth in Section 2.10(c)(ii). Unless the Borrower notifies the -19- 25 Agent that the Borrower intends to make immediate payment to the Agent, for the account of the Issuing Bank, in accordance with the preceding sentence, a notice of drawing by a beneficiary under a Letter of Credit shall be deemed to be a notice by the Borrower for Revolving Credit Loans under the Base Rate Option in an aggregate amount equal to the amount of such drawing. (ii) PAYMENT BY LENDERS ON ACCOUNT OF UNREIMBURSED DRAWS. If an Issuing Bank makes a payment under any Letter of Credit and is not reimbursed in full therefor on such payment date in accordance with Section 3.01(d)(i), such Issuing Bank will promptly notify the Agent thereof (which notice may be by telephone), and the Agent shall forthwith notify each Lender (which notice may be by telephone promptly confirmed in writing) thereof. No later than the Agent's close of business on the date such notice is given, each such Lender will pay to the Agent, for the account of such Issuing Bank, in immediately available funds, an amount equal to such Lender's Pro Rata share of the unreimbursed portion of such payment by such Issuing Bank. If and to the extent that any Lender fails to make such payment to the Agent for the account of such Issuing Bank on such date, such Lender shall pay such amount on demand, together with interest, for such Issuing Bank's own account, for each day from and including the date of such Issuing Bank's payment to and including the date of payment to the Issuing Bank (before and after judgment) at the following rates per annum: (x) for each day from and including the date of such payment by the Issuing Bank to and including the second Business Day thereafter, at the Federal Funds Effective Rate for such day, and (y) for each day thereafter, at the rate applicable to Letter of Credit Unreimbursed Draws under Section 3.01(d)(i) for such day. (iii) DISTRIBUTIONS TO PARTICIPANTS. If, at any time, after an Issuing Bank has made a Letter of Credit Unreimbursed Draw and has received from any Lender such Lender's share of such Letter of Credit Unreimbursed Draw, such Issuing Bank receives any payment or makes any application of funds on account of the Letter of Credit Reimbursement Obligation arising from such Letter of Credit Unreimbursed Draw, such Issuing Bank will pay to the Agent, for the account of such Lender, such Lender's Pro Rata share of such payment or application. (iv) RESCISSION. If any amount received by an Issuing Bank on account of any Letter of Credit Reimbursement Obligation shall be avoided, rescinded or otherwise returned or paid over by such Issuing Bank for any reason at any time, whether before or after the termination of this Agreement (or such Issuing Bank believes in good faith that such avoidance, rescission, return or payment is required, whether or not such matter has been adjudicated), each such Lender will, promptly upon notice from the Agent or such Issuing Bank, pay over to the Agent for the account of such Issuing Bank its Pro Rata share of such amount, together with its Pro Rata share of any interest or penalties payable with respect thereto. (v) EQUALIZATION. If any Lender receives any payment or makes any application on account of its Letter of Credit Participating Interest, such Lender shall forthwith pay over to the relevant Issuing Bank, in Dollars and in like kind of funds received or applied by it the amount in excess of such Lender's ratable share of the amount so received or applied. (e) OBLIGATIONS ABSOLUTE. The payment obligations of the Borrower under Section 3.01(d)(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of this Agreement, any Letter of Credit, any other Loan Document or any documents, instruments or agreements evidencing or otherwise relating to any obligation of the Borrower secured or supported by any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any other Person may have at any time against any beneficiary or transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting), the relevant Issuing -20- 26 Bank, any Lender, or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or any unrelated transaction; (iii) any draft, certificate, statement or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the Issuing Bank under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit, or payment by the Issuing Bank under the Letter of Credit in any other circumstances in which conditions to payment are not met, except any such payment resulting solely from the gross negligence or willful misconduct of the Issuing Bank; or (v) any other event, condition or circumstance whatever, whether or not similar to any of the foregoing. The Borrower bears the risk of, and neither the Issuing Bank, any of its directors, officers, employees or agents, nor any Lender, shall be liable or responsible for the use which may be made of any Letter of Credit, or acts or omissions of the beneficiary or any transferee in connection therewith. (f) FURTHER ASSURANCES. The Borrower hereby agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments reasonably requested by any Issuing Bank more fully to effect the purposes of this Agreement and the issuance of the Letters of Credit hereunder. The representations, warranties and covenants by the Borrower under, and rights and remedies of the Issuing Bank under, any Letter of Credit Application relating to any Letter of Credit are in addition to, and not in limitation or derogation of, representations, warranties and covenants by the Borrower under, and rights and remedies of the Issuing Bank and the Lenders under, this Agreement, the other Loan Documents, and applicable Law. In the event of any inconsistency between the terms of this Agreement and any Letter of Credit Application, this Agreement shall prevail. The terms of this Agreement shall be deemed to be incorporated by reference into each such agreement or instrument (whether or not such agreement or instrument so states). (g) CASH COLLATERAL FOR LETTERS OF CREDIT. To the extent that any provision of this Agreement or any other Loan Document requires a payment, prepayment or other application of funds to be made with respect to the Revolving Credit Loans, such provision shall be applied as follows: after payment in full of the outstanding Revolving Credit Loans (whether or not such payment would require the Borrower to pay any amount under Section 2.11(b)), and the payment in full of all outstanding Letter of Credit Unreimbursed Draws, then, to the extent of the excess, if any, of the aggregate Letter of Credit Exposure at such time over the balance in the Letter of Credit Collateral Account, an amount equal to the remainder of the amount so required to be paid by the Borrower shall immediately be paid by the Borrower to the Agent for deposit in the Letter of Credit Collateral Account. In addition, the Borrower agrees that, without limitation of the foregoing or of any other provisions of this Agreement or the Loan Documents requiring collateral for the Letters of Credit or other Obligations in whole or in part, and without limitation of other rights and remedies under this Agreement or the Loan Documents or at law or in equity, if the Revolving Credit Loans become due and payable pursuant to Section 8.02, the Borrower shall immediately pay to the Agent, for deposit in the Letter of Credit Collateral Account, an amount equal to the excess, if any, of the aggregate Letter of Credit Exposure at such time over the balance in the Letter of Credit Collateral Account. The Agent shall release funds in the Letter of Credit Collateral Account to the Issuing Bank for payment of Letter of Credit Reimbursement Obligations constituting Letter of Credit Unreimbursed Draws, as and when the same become due and payable if and to the extent the Borrower fails to pay the same. -21- 27 (h) CERTAIN PROVISIONS RELATING TO THE ISSUING BANK. (i) GENERAL. The Issuing Bank shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Issuing Bank shall be read into this Agreement or any Loan Document or shall otherwise exist. The duties and responsibilities of the Issuing Bank to the Agent or the other Lenders under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Issuing Bank shall have no fiduciary relationship in respect of the Agent or any Lender or any other Person. The Issuing Bank shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct. The Issuing Bank shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower, (ii) the business, operations, condition (financial or other) or prospects of the Borrower or any other Person, or (iii) the existence of any Event of Default or Potential Default. The Issuing Bank shall not be under any obligation, either initially or on a continuing basis, to provide the Agent or any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement to be so furnished. (ii) ADMINISTRATION. The Issuing Bank may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the proper party or parties, and the Issuing Bank shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. The Issuing Bank may consult with legal counsel (including, without limitation, in-house counsel for the Issuing Bank or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Issuing Bank shall not be liable for any action taken or omitted to be taken in good faith in accordance with the advice of such counsel, accountants or experts. Whenever the Issuing Bank shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or the Agent or any Lender, such matter may be established by a certificate of the Borrower or the Agent or such Lender, as the case may be, and such Issuing Bank may conclusively rely upon such certificate. (iii) INDEMNIFICATION OF ISSUING BANK BY LENDERS. Each Lender hereby agrees to reimburse and indemnify the Issuing Bank and each of its respective directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so), Pro Rata, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the fees and disbursements of counsel (other than in-house counsel) for the Issuing Bank or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Issuing Bank or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Issuing Bank, in its capacity as such, or such other Person, as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction secured or financed in whole or in part, directly or indirectly, with any Letter of Credit or the proceeds thereof, provided, that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting from the gross negligence or willful misconduct of the Issuing Bank or such other Person. -22- 28 ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower hereby represents and warrants to the Agent and each Lender as follows: 4.01. CORPORATE STATUS. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Borrower has corporate power and authority to own its property and to transact the business in which it is engaged or presently proposes to engage. The Borrower is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions listed on Schedule 4.01(which schedule lists all jurisdictions in which the Borrower has operations or owns property) and in all other jurisdictions in which the failure to be so qualified could have a Material Adverse Effect. Schedule 4.01 states as of the date hereof the jurisdiction of incorporation of the Borrower, and the jurisdictions in which the Borrower is qualified to do business as a foreign corporation. 4.02. CORPORATE POWER AND AUTHORIZATION. The Borrower has corporate power and authority to execute, deliver, perform, and take all actions contemplated by, each Loan Document to which it is a party, and all such action has been duly and validly authorized by all necessary corporate proceedings on its part. Without limitation of the foregoing, the Borrower has the corporate power and authority to borrow pursuant to the Loan Documents to the fullest extent permitted hereby and thereby from time to time, and has taken all necessary corporate action to authorize such borrowings. 4.03. EXECUTION AND BINDING EFFECT. This Agreement and each other Loan Document to which the Borrower is a party and which is executed and delivered or required to be executed and delivered on or before the date of which this representation and warranty is made, or deemed made, has been duly and validly executed and delivered by the Borrower. This Agreement and each such other Loan Document constitutes, and each other Loan Document when executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. 4.04. GOVERNMENTAL APPROVALS AND FILINGS. No approval, order, consent, authorization, certificate, license, permit or validation of, or exemption or other action by, or filing, recording or registration with, or notice to, any Governmental Authority (collectively, "Governmental Action") is or will be necessary in connection with execution and delivery of any Loan Document, consummation of the transactions herein or therein contemplated (including but not limited to the Acquisition), 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, for (x) filings and recordings in respect of the Liens in favor of the Agent for the benefit of the Lenders and the Agent securing the Obligations, and (y) matters set forth in Schedule 4.04. Each Governmental Action referred to in such Schedule 4.04 has been duly obtained or made, as the case may be, and is in full force and effect, and there is no action, suit, proceeding or investigation pending or (to the Borrower's knowledge after due inquiry) threatened which seeks or may result in the reversal, rescission, termination, modification or suspension of any such Governmental Action. No Governmental Action referred to in such Schedule 4.04 requires any further act to be performed or condition to be satisfied by any Person as a condition to continued effectiveness thereof, except as set forth in such Schedule 4.04. With respect to the each of the matters set forth in such Schedule 4.04, the Agent and each Lender has received a true, correct and complete copy of such Governmental Action (including each amendment, modification or supplement thereto). 4.05. ABSENCE OF CONFLICTS. Neither the execution and delivery of any Loan Document, nor consummation of the transactions herein or therein contemplated (including but not limited to the Acquisition), nor performance of or compliance with the terms and conditions hereof or thereof, does or will -23- 29 (a) violate or conflict with any Law, or (b) violate, conflict with or result in a breach of any term or condition of, or constitute a default under, or result in (or give rise to any right, contingent or otherwise, of any Person to cause) any termination, cancellation, prepayment or acceleration of performance of, or result in the creation or imposition of (or give rise to any obligation, contingent or otherwise, to create or impose) any Lien upon any of property of the Borrower (except for any Lien in favor of the Agent for the benefit of the Lenders and the Agent securing the Obligations) pursuant to, or otherwise result in (or give rise to any right, contingent or otherwise, of any Person to cause) any change in any right, power, privilege, duty or obligation of the Borrower under or in connection with, (i) the articles of incorporation or by-laws (or other constituent documents) of the Borrower, (ii) any agreement or instrument creating, evidencing or securing any Indebtedness or Guaranty Equivalent to which the Borrower is a party or by which any of them or any of its properties (now owned or hereafter acquired) may be subject or bound, or (iii) any other agreement or instrument or arrangement to which the Borrower is a party or by which any of them or any of its properties (now owned or hereafter acquired) may be subject or bound, except, in the case of the foregoing clause (b)(iii), for (x) matters as to which a consent, waiver, amendment or agreement has been duly obtained and is in full force and effect, and (y) matters that, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 4.05 sets forth each consent, waiver, amendment or agreement which has been obtained by or on behalf of the Borrower in respect of any matter which would, absent such consent, waiver, amendment or agreement, be within the scope of the foregoing clause (y), and the Agent has received a true, correct and complete copy of each such consent, waiver, amendment or agreement and of each of the underlying agreements or instruments to which it relates. 4.06. AUDITED FISCAL YEAR FINANCIAL STATEMENTS. The Borrower has heretofore furnished to the Agent balance sheets of the Target Business as of December 31, 1995 and December 31, 1996, and the related statements of income, cash flow and changes in stockholders' equity for the fiscal years then ended, as examined and reported on by Ernst & Young, LLP, independent certified public accountants retained by Investor in connection with this transaction and the Acquisition, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Target Business as of the end of each such fiscal year and the results of its operations and its cash flow for the fiscal years then ended, all in conformity with GAAP. 4.07. AUDITED INTERIM FINANCIAL STATEMENTS. The Borrower has heretofore furnished to the Agent balance sheets of the Target Business as of the end of the nine month period ending September 30, 1997, together with the related statements of income, cash flow and changes in stockholders' equity for the period then ended, as examined and reported on by Ernst & Young, LLP, independent certified public accountants retained by Investor in connection with this transaction and the Acquisition, who delivered an unqualified opinion in respect thereof ("September 1997 Financial Statements"). Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Target Business as of the end of the period then ended and the results of its operations and its cash flow for the period then ended, all in conformity with GAAP. -24- 30 4.08. ABSENCE OF UNDISCLOSED LIABILITIES. The Borrower has no liability or obligation of any nature whatsoever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments, except (a) as disclosed in the financial statements referred to in Sections 4.06 and 4.07, (b) matters that, individually or in the aggregate, could not have a Material Adverse Effect, (c) as disclosed in Schedule 4.08, and (d) liabilities, obligations, commitments and losses incurred after September 30, 1997 in the ordinary course of business and consistent with past practices. 4.09. ABSENCE OF MATERIAL ADVERSE CHANGES. Since September 30, 1997, there has been no material adverse change in the business, operations, condition (financial or otherwise), or prospects of the Borrower or the Target Business. 4.10. ACCURATE AND COMPLETE DISCLOSURE. All information heretofore, contemporaneously or hereafter provided by or on behalf of the Borrower to the Agent or any Lender pursuant to or in connection with any Loan Document or any transaction contemplated hereby or thereby (including but not limited to the Acquisition) is or will be (as the case may be) true and accurate in all material respects on the date as of which such information is dated (or, if not dated, when received by the Agent or such Lender, as the case may be) and does not or will not (as the case may be) omit to state any material fact necessary to make such information not misleading at such time in light of the circumstances in which it was provided. The Borrower has disclosed to the Agent and each Lender in writing every fact or circumstance known to the Borrower which has, or which could have, a Material Adverse Effect. 4.11. PROJECTIONS. The Borrower has furnished to the Agent and each Lender projections prepared by the Borrower demonstrating the projected financial condition and results of operations of the Borrower after giving effect to the transactions contemplated by the Loan Documents (including but not limited to the Acquisition), for the period commencing on January 1, 1998 and ending on December 31, 2007, which projections are accompanied by a written statement of the assumptions and estimates underlying such projections. Such projections were prepared on the basis of such assumptions and estimates. Such projections, assumptions and estimates, as of the date of preparation thereof and as of the date hereof, are reasonable, are made in good faith, are consistent with the Loan Documents, and represent the Borrower's best judgment as to such matters. Nothing has come to the attention to the Borrower which would lead the Borrower to believe that such projections will not be attained or exceeded. Nothing contained in this Section shall constitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. 4.12. SOLVENCY. On and as of the Closing Date, after consummation of the transactions contemplated by the Loan Documents (including but not limited to the Acquisition) and after giving effect to all Loans and other obligations and liabilities being incurred on such date in connection herewith and therewith, and on the date of each subsequent Loan, Letter of Credit or other extension of credit hereunder and after giving effect to application of the proceeds hereof in accordance with the terms of the Loan Documents, the Borrower is and will be Solvent. 4.13. MARGIN REGULATIONS. No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock," as such term is used in Regulations G and U of the Board of Governors of the Federal Reserve System, as amended from time to time, or to extend credit to others for the purpose of buying or carrying any "margin stock". The Borrower is not engaged in the business of extending credit to others for the purpose of buying or carrying "margin stock". The Borrower does not own "margin stock." Neither the making of any Loan nor any use of proceeds of any such Loan will violate or conflict with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, as amended from time to time. -25- 31 4.14. SUBSIDIARIES. The Borrower has never had a Subsidiary. The Borrower does not own or hold any rights to acquire any shares of stock or any other security or equity interest in any other Person. 4.15. PARTNERSHIPS, ETC. The Borrower is not a partner (general or limited) of any partnership, a party to any joint venture or owns (beneficially or of record) any equity or similar interest in any Person (including but not limited to any interest pursuant to which the Borrower has or may in any circumstance have an obligation to make capital contributions to, or be generally liable for or on account of the liabilities, acts or omissions of such other Person). 4.16. OWNERSHIP AND CONTROL. As of the Closing Date and immediately thereafter, the authorized capital stock of the Borrower will consist of 10,000,000 shares of Common Stock, 5,000,000 shares of which shall be issued and outstanding and 2,000,000 shares of which shall be reserved for issuance upon exercise of the Warrants under the Subordinated Debt Agreement. As of the Closing Date, the Borrower will not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, nor will it have outstanding any rights or options to subscribe for or to purchase its capital stock, except as specifically contemplated by Subordinated Debt Agreement. As of the Closing Date, the Borrower will not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock, except as set forth in Subordinated Debt Agreement. As of the Closing Date, all of the outstanding shares of the Borrower's capital stock will be validly issued, fully paid and nonassessable. There are no statutory or contractual stockholders' preemptive rights with respect to the issuance of the Purchased Securities under the Subordinated Debt Agreement. The Borrower has not violated any applicable federal or state securities laws in connection with the offer, sale and issuance of any of its capital stock, and the offer, sale and issuance of the Purchased Securities and Purchased Notes under the Subordinated Debt Agreement do not require registration under the Securities Act or any applicable state securities laws. There are no agreements between the Borrower's stockholders with respect to the voting or transfer of the Borrower's capital stock, except for the Voting Trust Agreement. 4.17. LITIGATION. There is no pending or (to the Borrower's knowledge after due inquiry) threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower or, insofar as the Target Business is concerned, JGT, except for (a) matters set forth in Schedule 4.17, (b) matters described in the financial statements referred to in Section 4.06, and (c) matters that, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. 4.18. REGULATORY RESTRICTIONS. The Borrower is not (a) an "investment company" or a company "controlled" by an investment company within the meaning of the Investment Company Act of 1940, as amended, (b) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (c) subject to any other Law which purports to restrict or regulate the ability to borrow money or obtain credit. 4.19. ABSENCE OF OTHER CONFLICTS. The Borrower or, insofar as the Target Business is concerned, JGT is not in violation of or conflict with, or is subject to any contingent liability on account of any violation of or conflict with: (a) any Law, (b) its articles of incorporation or by-laws (or other constituent documents), or (c) any agreement or instrument or arrangement to which it is party or by which it or any of its properties (now owned or hereafter acquired) may be subject or bound, -26- 32 except for (i) matters set forth in Schedule 4.19 and (ii) matters that, individually or in the aggregate, could not have a Material Adverse Effect. 4.20. INSURANCE. The Borrower maintains with financially sound and reputable insurers acceptable to the Agent and not related to or affiliated with the Borrower insurance with respect to its properties and business and against at least such liabilities, casualties and contingencies and in at least such types and amounts as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. Schedule 4.20 sets forth a list of all insurance currently maintained by or in respect of the Borrower, setting forth the identity of the insurance carrier, the type of coverage, the amount of coverage and the deductible. 4.21. TITLE TO PROPERTY. The Borrower has good and marketable title in fee simple to all real property owned or purported to be owned by it and good title to all other property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 4.06 or submitted pursuant to Section 6.01(a), as the case may be (except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet or, after the Closing Date, as otherwise permitted by the Loan Documents), in each case free and clear of all Liens, other than Permitted Liens. 4.22. INTELLECTUAL PROPERTY. The Borrower owns, or is licensed or otherwise has the right to use, all the patents, trademarks, service marks, names (trade, service, fictitious or otherwise), copyrights, technology (including but not limited to computer programs and software), processes, data bases and other rights, free from burdensome restrictions, necessary to own and operate its properties and to carry on its business as presently conducted and presently planned to be conducted without conflict with the rights of others. 4.23. TAXES. All tax and information returns required to be filed by or on behalf of either of the Borrower and, insofar as the Target Business is concerned, JGT have been properly prepared, executed and filed. All taxes, assessments, fees and other governmental charges upon the Borrower or JGT, insofar as the Target Business is concerned, or upon any of their properties, incomes, sales or franchises which are due and payable have been paid other than those not yet delinquent and payable without premium or penalty, and except for those being diligently contested in good faith by appropriate proceedings, and in each case adequate reserves and provisions for taxes have been made on the books of the Borrower. The reserves and provisions for taxes on the books of the Borrower are adequate for all open years and for its current fiscal period. The Borrower does not know of any proposed additional assessment or basis for any material assessment for additional taxes (whether or not reserved against). The federal, state and local income tax liabilities of the Borrower and, insofar as the Target Business is concerned, JGT have been finally determined by the Internal Revenue Service and other relevant taxing authorities, or the time for audit has expired, for all fiscal periods ending on or prior to December 31, 1996 and all such liabilities (including all deficiencies assessed following audit) have been satisfied. 4.24. EMPLOYEE BENEFITS. A copy of the most recent Annual Report (5500 Series Form) including all attachments thereto as filed with the Internal Revenue Service for each Plan has been provided to the Agent and each Lender and fairly presents the funding status of each Plan. There has been no material deterioration in any Plan's funding status since the date of such Annual Report. Schedule 4.24 sets forth as of the date hereof a list of all Plans and Multiemployer Plans, and all information available to the Borrower with respect to the direct, indirect or potential withdrawal liability to any Multiemployer Plan of the Borrower, JGT or any Controlled Group Member. Except as set forth in Schedule 4.24, the Borrower has no liability (contingent or otherwise) for or in connection with, and none of its respective properties is subject to a Lien in connection with, any Pension-Related Event. The Borrower has no liability (contingent or otherwise) for or in connection with, any Postretirement Benefits. The amount of unfunded benefit liabilities (as defined in Section 4001(a)(16) of ERISA), as certified to by the Plan's actuary, for all Plans do not exceed $100,000 in the aggregate. -27- 33 4.25. ENVIRONMENTAL MATTERS. (a) The Borrower and its Environmental Affiliates (including with respect to the Target Business, JGT) is and has been in full compliance with all applicable Environmental Laws, except for (i) matters set forth in Schedule 4.25 and (ii) matters which, individually or in the aggregate, could not have a Material Adverse Effect. There are (to the Borrower's knowledge after due inquiry) no circumstances that may prevent or interfere with such full compliance in the future. (b) The Borrower and its Environmental Affiliates (including with respect to the Target Business, JGT) have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated, except for (i) matters set forth in Schedule 4.25 and (ii) matters which, individually or in the aggregate, could not have a Material Adverse Effect. (c) There is no Environmental Claim pending or (to the knowledge of the Borrower after due inquiry) threatened, and there are no past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by the Borrower or its Environmental Affiliates (including with respect to the Target Business, JGT)) that could form the basis of any Environmental Claim, against the Borrower or its Environmental Affiliates (including with respect to the Target Business, JGT), except for (i) matters set forth in Schedule 4.25, and (ii) matters which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. (d) No facility or property now or previously owned, operated or leased by the Borrower or its Environmental Affiliates (including with respect to the Target Business, JGT) is an Environmental Cleanup Site. The Borrower and its Environmental Affiliates (including with respect to the Target Business, JGT) have not directly transported or directly arranged for the transportation of any Environmental Concern Materials to any Environmental Cleanup Site. No Lien exists, and no condition exists which could result in the filing of a Lien, against any property of the Borrower or its Environmental Affiliates (including with respect to the Target Business, JGT), under any Environmental Law. 4.26. LABOR MATTERS. The Target, insofar as the Target Business is concerned, has been, and the Borrower is, in compliance in all material respects with those provisions of National Labor Relations Act, the Code, ERISA, the Age Discrimination in Employment Act and all other labor and employment laws, and the regulations and published interpretations thereunder which are applicable to the Target Business. There are no controversies, labor disputes, work stoppages or strikes pending or threatened or anticipated, between the Borrower and any of its employees, other than employee grievances arising in the ordinary course of business which, if adversely decided, individually or in the aggregate, could not have a Material Adverse Effect. Schedule 4.26 sets forth a complete list of all collective bargaining agreements to which JGT, insofar as the Target Business is concerned, or the Borrower was or is a party. Other than as set forth in Schedule 4.26, JGT, insofar as the Target Business is concerned, and the Borrower are in full compliance with the terms and conditions of each collective bargaining agreement. Other than as set forth in Schedule 4.26, there are no efforts underway by any union to organize any of the employees of JGT, insofar as the Target Business is concerned, or the Borrower. 4.27. CONTRACT MATTERS. (a) CONTRACTS, AGREEMENTS ARRANGEMENTS, ETC. Schedule 4.27 contains a list of the following material contracts to which the Borrower is a party which are not described in any other Schedule: -28- 34 (i) contracts for the employment of any officer, employee, director or consultant; (ii) contracts for the purchase, sale, production or supply by the Company, whether on a continuing basis or otherwise, of goods or services of any type which have a pay-out of $25,000 or more per year; and (iii) agreement, contract or commitment for any charitable or political contribution; Except as may be disclosed on Schedule 4.27, each of the agreements, contracts, commitments, leases and other instruments, documents and undertakings listed on Schedule 4.27 is valid and enforceable in accordance with its terms and, as applicable, has been validly assigned by JGT to the Borrower, the parties thereto are in compliance with the provisions thereof, no party is in default in the performance, observance or fulfillment of any material obligation, covenant or condition contained therein, the written forms thereof contain the entire agreement of the parties with regard to the subject matter thereof and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder; furthermore, except as may be disclosed on the Schedule 4.27, no such agreement, contract, commitment, lease or other instrument, document or undertaking, in the reasonable opinion of the Borrower, contains any contractual requirement with which there is a reasonable likelihood the Borrower or any other party thereto will be unable to comply. 4.28. ACQUISITION DOCUMENTS. The Borrower has provided or caused to be provided to the Agent a true, correct and complete copy of the Acquisition Agreement and the other Acquisition Documents. The Acquisition Documents have not been amended, modified or supplemented, nor have any of the provisions thereof been waived. The Acquisition Agreement has been duly executed and delivered by the Executive and, by mesne conveyances, duly assigned and assumed by the Borrower and is in full force and effect. Each of the representations and warranties of each party to the Acquisition Agreement, contained in the Acquisition Agreement and the other Acquisition Documents, is true and correct, and, to the extent made by the Borrower, the Agent and each Lender shall be entitled to rely on such representations and warranties with the same force and effect as if they were set forth in this Agreement in full and made to the Agent and each Lender directly. The provisions of the Acquisition Documents, including but not limited to all representations, warranties and covenants of the parties thereto, are legal, valid and binding obligations of the Borrower and all such other parties, respectively, enforceable in accordance with the terms thereof. 4.29. SUBORDINATED DEBT DOCUMENTS. The Borrower has provided or caused to be provided to the Agent a true, correct and complete copy of the Subordinated Debt Agreement and the other Subordinated Debt Documents. The Subordinated Debt Documents have not been amended, modified or supplemented, nor have any of the provisions thereof been waived. The Subordinated Debt Agreement has been duly executed and delivered by the Borrower and is in full force and effect. Each of the representations and warranties of the Borrower and each other party thereto, contained in the Subordinated Debt Agreement and the other Subordinated Debt Documents, is true and correct, and, to the extent made by the Borrower, the Agent and each Lender shall be entitled to rely on such representations and warranties with the same force and effect as if they were set forth in this Agreement in full and made to the Agent and each Lender directly. The provisions of the Subordinated Debt Documents, including but not limited to all representations, warranties and covenants of the parties thereto, are legal, valid and binding obligations of the Borrower and all such other parties, respectively, enforceable in accordance with the terms thereof. -29- 35 ARTICLE V CONDITIONS OF LENDING 5.01. CONDITIONS TO EXTENSIONS OF CREDIT ON THE CLOSING DATE. The obligation of each Lender to make any Loan and the obligation of the Issuing Bank to issue any Letter of Credit on the Closing Date is subject to performance by the Borrower of its obligations to be performed under the Loan Documents on or before the date such Loan is made or such Letter of Credit is issued, to satisfaction of any conditions precedent set forth elsewhere in the Loan Documents and to satisfaction of the following further conditions precedent: (a) AGREEMENT; NOTES. The Agent shall have received this Agreement, a Revolving Credit Note and a Term Loan Note, duly executed on behalf of the Borrower, each conforming to the requirements hereof. (b) SECURITY DOCUMENTS. The Agent shall have received: (i) a Security Agreement, duly executed by the Borrower, in substantially the form attached hereto as Exhibit D (as amended, modified or supplemented from time to time, the "Security Agreement"); (ii) Fee Deeds of Trust and Fee Mortgages, identified as such in Schedule 5.01(b), each duly executed by the Borrower, in substantially the form attached hereto as Exhibit E-1 and Exhibit E-2, respectively (as amended, modified or supplemented from time to time, the "Fee Deeds of Trust" and the "Fee Mortgages," respectively); (iii) [Intentionally Omitted] (iv) with respect to the Collateral referred to in the Security Agreement, financing statements in proper form for filing under the Uniform Commercial Code in all jurisdictions listed on Schedule 3.03 of the Security Agreement; (v) search reports from contemporaneous searches of the Uniform Commercial Code, real property, tax, judgment and litigation dockets and records and other appropriate registers for such jurisdictions as shall have been requested by the Agent, which reports shall have revealed no filings or recordings in effect with respect to the Collateral purported to be covered by the Security Documents, except Permitted Liens; (vi) with respect to the Collateral referred to in the Fee Mortgages and the Fee Deeds of Trust, (A) one or more mortgagee's title insurance policies (or marked up unconditional binders for such insurance) dated the Closing Date, (B) an as-built survey of the site of each property or estate constituting Collateral thereunder, certified to the Agent and such title insurance company in a manner satisfactory to the Agent, each Lender and such title insurance company, dated a date satisfactory to each of them by an independent professional licensed land surveyor and (C) fixture filings in proper form for filing under the Uniform Commercial Code in all jurisdictions listed on Schedule 5.01(b); (vii) [Intentionally Omitted] (viii) with respect to the assignment of each Contract listed on Schedule 3.07 to the Security Agreement, consents from each Person listed on such Schedule 3.07 to the assignment of the Contracts with the Borrower to which such Person is a party; -30- 36 (ix) with respect to the deposit accounts listed on Schedule 3.10 to the Security Agreement, Deposit Account Letter Agreements, each duly executed by the Borrower and the lending institution party thereto; (x) with respect to the Motor Vehicles listed on Schedule 3.08 to the Security Agreement and not listed or referred to on Schedule 6.16 hereto, the certificates of title to such Motor Vehicles, each duly noted with the security interest in favor of the Agent; and (xi). evidence that all other action necessary or, in the opinion of the Agent or any Lender, desirable to create, perfect and protect the Liens created or purported to be created by the above Security Documents have been taken. (c) CAPITALIZATION; ACQUISITION. The corporate and capital structure of the Borrower, and the terms, conditions, amounts and holders of all equity, debt and other indebtedness, obligations and liabilities of the Borrower, shall be satisfactory to the Agent and each Lender. The Agent shall have received true and correct copies (in each case certified as to authenticity on such date on behalf of the Borrower) of the following: (i) a Purchase Agreement, in form and substance satisfactory to the Agent and each Lender, duly executed by the Borrower and JGT (the "Acquisition Agreement"), together with all material documents executed and delivered in connection therewith (collectively, the "Acquisition Documents"); (ii) a Subordinated Note and Equity Purchase Agreement, in form and substance satisfactory to the Agent and each Lender, duly executed by the Borrower and the Subordinated Debt Lender (the "Subordinated Debt Agreement"), together with all material documents executed and delivered in connection therewith (collectively, the "Subordinated Debt Documents"); (iii) a Stockholders' Agreement, in form and substance satisfactory to the Agent and each Lender, duly executed by the Borrower and the Investor (the "Stockholders' Agreement"); (iv) a Voting Trust Agreement, in form and substance satisfactory to the Agent and each Lender, duly executed by the Borrower, the Investor, the Executive and a voting trustee satisfactory to the Agent (the "Voting Trust Agreement"), under which, among other things, the Executive irrevocably (subject only to pledge arrangements with the Investor satisfactory to the Agent) obtains the sole and exclusive right and power to direct such voting trustee how to vote at least a majority of all outstanding capital stock of the Borrower in any and all instances in which a vote of holders of such stock is taken (or is required by law or the Borrower's charter to be taken), including, without limitation, the right to designate, elect and remove at least a majority of the members of the Borrower's Board of Directors; (v) a Tax Sharing Agreement, in form and substance satisfactory to the Agent, duly executed by the Borrower and the Investor (the "Tax Sharing Agreement"); (vi) a Management Agreement, in form and substance satisfactory to the Agent, duly executed by the Borrower and the Investor ("Management Agreement"); (vii) a Subordination Agreement, in form and substance satisfactory to the Agent, duly executed by the Borrower, the Investor, the Subordinated Debt Lender and the Lenders (the "Subordination Agreement"); and (viii) an Employment Agreement, in form and substance satisfactory to the Agent, duly executed by the Borrower and the Executive (the "Employment Agreement"). -31- 37 All of the conditions precedent specified in the Acquisition Documents and the Subordinated Debt Documents shall have been and shall continue to be satisfied in all material respects. (d) GOVERNMENTAL APPROVALS AND FILINGS. The Agent shall have received true and correct copies (in each case certified as to authenticity on such date on behalf of the Borrower) of all items referred to in Schedule 4.04 and such items shall be satisfactory in form and substance to the Agent and each Lender and shall be in full force and effect. (e) CORPORATE PROCEEDINGS. The Agent shall have received certificates by the Secretary or Assistant Secretary of the Borrower dated as of the Closing Date as to (i) true copies of the articles of incorporation and by- laws (or other constituent documents) of the Borrower in effect on such date, (ii) true copies of all corporate action taken by the Borrower relative to this Agreement and the other Loan Documents, and (iii) the incumbency and signature of the respective officers of the Borrower executing this Agreement and the other Loan Documents to which the Borrower is a party thereto, together with satisfactory evidence of the incumbency of such Secretary or Assistant Secretary. The Agent shall have received certificates from the appropriate Secretaries of State or other applicable Governmental Authorities dated not more than 30 days before the Closing Date showing the good standing of the Borrower in its state of incorporation and each state in which the Borrower does business. (f) INSURANCE. (i) The Agent shall have received a report, addressed to the Agent, satisfactory in form and substance to the Agent, as to insurance matters pertaining to the Borrower. The Agent shall have received evidence satisfactory to it that the insurance policies required by this Agreement and the other Loan Documents have been obtained, containing the endorsements required hereby and thereby. (ii) The Agent shall have received satisfactory evidence of a life insurance policy with a financially sound and reputable insurer acceptable to the Agent insuring the life of the Executive in the amount of $5,000,000 and naming the Borrower as the beneficiary, together with satisfactory evidence of the assignment of such policy to the Agent as Collateral. (g) ENVIRONMENTAL MATTERS. The Agent shall have received a report, addressed to the Agent, satisfactory in form and substance to the Agent, as to such environmental matters pertaining to the Borrower and its respective Environmental Affiliates as any Lender may request (including but not limited to a Phase I environmental risk report for all real property constituting Collateral). (h) CONTRACT MATTERS. The Agent shall have received copies of each contract under which the Target Business has received more than $25,000 in revenue in either of the prior two fiscal years. Each of the contracts listed on Schedule 3.07 of the Security Agreement shall be in full force and effect. The Employment Contract between the Borrower and the Company shall be in form and substance satisfactory to the Agent and shall be in full force and effect. (i) FINANCIAL STATEMENTS, PROJECTIONS. The Agent shall have received copies of the financial statements and projections referred to in Article IV. (j) LEGAL OPINION OF COUNSEL. The Agent shall have received an opinion addressed to the Agent and each Lender, dated the Closing Date, of Sachnoff & Weaver, Ltd., counsel to the Borrower, in form and substance satisfactory to the Agent. (k) OFFICERS' CERTIFICATES. The Agent shall have received certificates from such officers of the Borrower as to such matters as the Agent may request. (l) FEES, EXPENSES, ETC. All fees and other compensation required to be paid to the Agent or the Lenders pursuant hereto or pursuant to any other written agreement on or prior to the -32- 38 Closing Date shall have been paid or received, including but not limited to those referred to in the Commitment Letter and the Fee Letter, each dated December 31, 1997. (m) EXISTING INDEBTEDNESS. JGT shall have paid and discharged all of the existing Indebtedness, including but not limited to all principal, interest, fees and other amounts outstanding or otherwise payable and all commitments to lend, under the Existing Credit Agreement or any "Loan Document" referred to therein, other than three letters of credit acceptable to the Agent. (n) EXISTING LIENS. The Agent shall have received for filing UCC termination statements, mortgage satisfactions or other appropriate documents for each Lien that is an encumbrance on the assets acquired pursuant to the Acquisition Agreement (other than Permitted Liens). The Agent shall have received a general release of Liens from Mellon Bank, N.A., as agent under the Existing Credit Agreement. (o) BORROWING BASE. The Agent shall have received a Borrowing Base Certificate, signed by a Responsible Officer of the Borrower, dated as of the Closing Date. (p) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date. (q) NO DEFAULTS. No Event of Default or Potential Default shall have occurred and be continuing on the Closing Date or after giving effect to the Acquisition and the Loans requested to be made, and the Letters of Credit requested to be issued, on the Closing Date. (r) NO VIOLATIONS OF LAW, ETC. Neither the making or use of the Loans, nor the issuing or use of the Letters of Credit, shall cause any Lender to violate or conflict with any Law. (s) NO MATERIAL ADVERSE CHANGE. There shall not have occurred, or be threatened, a material adverse change in the business, operations, assets or condition (financial or otherwise) or prospects of the Borrower since September 30, 1997. There shall not have occurred, or be threatened, any other event, act or condition which could have a Material Adverse Effect. (t) LITIGATION. There shall not be pending or (to the knowledge of the Borrower after due inquiry, threatened) any action, suit, proceeding or investigation by or before any Governmental Authority which, if adversely decided, could have a Material Adverse Effect or which seeks to challenge, prevent or declare illegal any of the transactions contemplated by this Agreement or any other Loan Document. (u) ACQUISITION CLOSING; SUBORDINATED DEBT CLOSING. Contemporaneously with the making of the first Loans hereunder, the closings under the Acquisition Agreement and the Subordinated Debt Agreement shall occur, and the Borrower shall acquire the Target Business. (v) METRO CONTRACT AMENDMENT. Change Order No. 23 to Metro Contract No. 900848 shall have been entered into by JGT (or to Borrower) and Metro, it being understood by the Agent and the Lenders that the provisions of Section 4 of such Change Order No. 23 would be applicable to the Agent and the Lenders in connection with the exercise of remedies with respect to Collateral and that such provisions will limit the Agent's and the Lenders' ability to remove the equipment referred to in such Section 4 during the 180 day period referred to therein and shall entitle the Agent and the Lenders to the payments referred to therein during such period. (w) ADDITIONAL MATTERS. The Agent shall have received such other certificates, opinions, documents and instruments as may be requested by any Lender. All corporate and other proceedings, and all documents, instruments and other matters in connection with the transactions -33- 39 contemplated by this Agreement and the other Loan Documents shall be satisfactory in form and substance to the Agent and each Lender. 5.02. CONDITIONS TO EXTENSIONS OF CREDIT AFTER THE CLOSING DATE. The obligation of each Lender to make any Loan and the obligation of the Issuing Bank to issue any Letter of Credit after the Closing Date is subject to performance by the Borrower of its obligations to be performed under the other Loan Documents on or before the date such Loan is made or such Letter of Credit is issued, to satisfaction of any conditions precedent set forth elsewhere in the Loan Documents and to satisfaction of the following further conditions precedent: (a) NOTICE. The Agent shall have received an appropriate notice of such Loan or Letter of Credit given by the Borrower as provided in Article II or III. (b) BORROWING BASE. The Agent shall have received a Borrowing Base Certificate, signed by a Responsible Officer of the Borrower, dated as of such date. (c) REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties made by the Borrower in this Agreement (other than in the penultimate sentence of Section 4.11) and in each other Loan Document shall be true and correct in all material respects on and as of such date as if made on and as of such date, both before and after giving effect to the Loans requested to be made, and the Letters of Credit requested to be issued, on such date. (d) NO DEFAULTS. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made, and the Letters of Credit requested to be issued, on such date. (e) NO VIOLATIONS OF LAW, ETC. Neither the making or use of the Loans, nor the issuing or use of the Letters of Credit, shall cause any Lender to violate or conflict with any Law. (f) NO MATERIAL ADVERSE CHANGE. There shall not have occurred, or be threatened, a material adverse change in the business, operations, assets or condition (financial or otherwise) or prospects of the Borrower since September 30, 1997. There shall not have occurred, or be threatened, any other event, act or condition which could have a Material Adverse Effect. Each request by the Borrower for any Loan or any Letter of Credit shall constitute a representation and warranty by the Borrower that the conditions set forth in this Section 5.02 have been satisfied as of the date of such request. Failure of the Agent to receive notice from the Borrower to the contrary before such Loan is made shall constitute a further representation and warranty by the Borrower that the conditions referred to in this Section 5.02 have been satisfied as of the date such Loan is made or such Letter of Credit is issued. ARTICLE VI AFFIRMATIVE COVENANTS The Borrower hereby covenants to the Agent and each Lender as follows: 6.01. BASIC REPORTING REQUIREMENTS. (a) ANNUAL AUDIT REPORTS. As soon as practicable, and in any event within 90 days after the close of each fiscal year of the Borrower, the Borrower shall furnish to the Agent, statements of income, cash flow and changes in stockholders' equity of the Borrower for such fiscal year and a balance sheet of the Borrower as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year. Such -34- 40 financial statements shall be accompanied by an opinion of independent certified public accountants of recognized national standing selected by the Borrower and reasonably satisfactory to the Required Lenders. Such opinion shall be free of exceptions or qualifications not acceptable to the Required Lenders and, in any event, shall be free of any exception or qualification which is of "going concern" or like nature or which relates to a limited scope of examination. Such opinion, in any event, shall contain a written statement of such accountants substantially to the effect that (i) such accountants examined such financial statements in accordance with generally accepted auditing standards and accordingly made such tests of accounting records and such other auditing procedures as such accountants considered necessary in the circumstances and (ii) in the opinion of such accountants such financial statements present fairly the financial position of the Borrower as of the end of such fiscal year and the results of its operations and its cash flow and changes in stockholders' equity for such fiscal year, in conformity with GAAP. (b) MONTHLY UNAUDITED REPORTS. As soon as practicable, and in any event within 30 days after the close of each calendar month of each fiscal year of the Borrower, the Borrower shall furnish to the Agent unaudited statements of income, cash flow and changes in stockholders' equity of the Borrower for such calendar month and for the period from the beginning of such fiscal year to the end of such calendar month and an unaudited balance sheet of the Borrower as of the close of such calendar month, all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods or as of the same date during the preceding fiscal year (except for the balance sheet, which shall set forth in comparative form the corresponding balance sheet as of the prior fiscal year end); provided, that no monthly unaudited financial statements shall be required pursuant to this Section 6.01(b) for the last month in any fiscal year. Such financial statements shall be certified by a Responsible Officer of the Borrower as presenting fairly the financial position of the Borrower as of the end of such calendar month and the results of its operations and its cash flow and changes in stockholders' equity for such fiscal year, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) ACCOUNTANTS' CERTIFICATE. Each set of financial statements delivered pursuant to Section 6.01(a) shall be accompanied by (i) a certificate or report dated the date of such statements and balance sheet by the independent certified public accountants who opined on such financial statements stating in substance that they have reviewed this Agreement and that in making the examination necessary for their certification of such statements and balance sheet they did not become aware of any Event of Default or Potential Default, or if they did become so aware, such certificate or report shall state the nature and period of existence thereof, and (ii) a certificate or report dated as of the date of such financial statements by such accountants stating in reasonable detail the information and calculations necessary to establish compliance with the financial covenants set forth in Section 6.01 as of the end of such fiscal year. (d) COMPLIANCE CERTIFICATES. The Borrower shall deliver to the Agent a Compliance Certificate, in substantially the form attached hereto as Exhibit G, duly completed and signed by a Responsible Officer of the Borrower concurrently with the delivery of the financial statements referred to in subsection (b) of this Section 6.01. (e) PROJECTIONS. (i) On the Closing Date (with respect to the then-current fiscal year of the Borrower), and as soon as practicable and in any event within 30 days after the close of each subsequent fiscal year of the Borrower, the Borrower shall furnish to the Agent a certificate signed by a Responsible Officer on behalf of the Borrower containing a projection of the revenues, expenditures (capital or otherwise) and results of operations and cash position of the Borrower as of the end of each month in the forthcoming fiscal year, together with a statement of the assumptions and estimates upon which such projections are based. Such projections, estimates and assumptions, as of the date of preparation thereof, shall be reasonable, made in good faith, -35- 41 shall be consistent with the Loan Documents, and shall represent the Borrower's best judgment as to such matters. (ii) As soon as practicable, and in any event within 30 days after the end of each month after the Closing Date, the Borrower shall furnish to the Agent a certificate signed by a Responsible Officer of the Borrower containing the unaudited statements of revenues, expenditures (capital or otherwise) and results of operations and cash position of the Borrower for such month and for the period from the beginning of the Borrower's fiscal year to the end of such month, together with management commentary thereon, all in reasonable detail, setting forth in comparative form the corresponding figures projected for the same period or as of the same date as set forth in the most recent projections referred to in subsection (i) of this Section 6.01(e), and shall contain an analysis of significant variances from such projections. Such report shall be certified by a Responsible Officer of the Borrower as presenting fairly the financial position of the Borrower as of the end of such month and the results of its operations and its cash flow for the periods covered thereby, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (f) [Intentionally Omitted] (g) COMMERCIAL FINANCE REPORTS. At such times as the Agent shall specify from time to time the Borrower shall furnish to the Agent a report of a Responsible Officer of the Borrower setting forth such matters pertaining to the working capital of the Borrower and in such detail as the Agent may specify from time to time, which may include, among other things, information as to receivables (which may include, among other things, a breakout of aging and collections, identification of each receivable, obligor, due date and original invoice date, identification of write-offs and changes made in reserves for bad debts, and identification of any extension of the maturity of, refinancing or other material change in the terms of any receivables), payables (which may include, among other things, a breakout of aging and payments), sales, credits collections, backlog, and forecasts. (h) CERTAIN OTHER REPORTS AND INFORMATION. Promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent a copy of (i) all regular or special reports, registration statements and amendments to the foregoing which the Borrower or the Investor 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 the Borrower or the Investor 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, the Borrower. (i) FURTHER INFORMATION. The Borrower will promptly furnish to the Agent such other information and in such form as the Agent may reasonably request from time to time, including but not limited to financial and operating information of the Borrower prepared on a terminal by terminal or a contract by contract basis. (j) NOTICE OF CERTAIN EVENTS. Promptly upon becoming aware of any of the following, the Borrower shall give the Agent notice thereof, together with a written statement of a Responsible Officer of the Borrower setting forth the details thereof and any action with respect thereto taken or proposed to be taken by the Borrower: (i) Any Event of Default or Potential Default. (ii) Any material adverse change in the business, operations or condition (financial or otherwise) or prospects of the Borrower. -36- 42 (iii) Any pending or threatened action, suit, proceeding or investigation by or before any Governmental Authority against or affecting the Borrower, involving an amount of $250,000 or more or seeking specific performance or injunctive relief. (iv) Any material violation, breach or default by the Borrower of or under any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of the Borrower. (v) 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 or Guaranty Equivalent of the Borrower (including but not limited to Subordinated Debt Documents, and any negotiations pertaining to any of the foregoing). (vi) Any Pension-Related Event. Such notice shall be accompanied by: (A) a copy of any notice, request, return, petition or other document received by the Borrower or any Controlled Group Member from any Person, or which has been or is to be filed with or provided to any Person (including without limitation the Internal Revenue Service, PBGC or any Plan participant, beneficiary, alternate payee or employer representative), in connection with such Pension-Related Event, and (B) in the case of any Pension-Related Event with respect to a Plan, the most recent Annual Report (5500 Series), with attachments thereto, and the most recent actuarial valuation report, for such Plan. (vii) Any Environmental Claim pending or threatened against the Borrower or any of its Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased the Borrower or any of its Environmental Affiliates) that could form the basis of such Environmental Claim, which Environmental Claim, if adversely resolved, individually or in the aggregate, could have a Material Adverse Effect. (k) NOTICES UNDER OTHER AGREEMENTS. Concurrently with the Borrower's delivery or receipt thereof, the Borrower shall provide the Agent with copies of any reports, certificates or notices furnished by the Borrower to any other party to any agreement or instrument material to the business, operations, condition (financial or otherwise) or prospects of the Borrower or any agreement or instrument creating, evidencing or securing any Indebtedness or Guaranty Equivalent of the Borrower (including but not limited to the Subordinated Debt Documents). (l) VISITATION; VERIFICATION. The Borrower shall permit such Persons as the Agent or any Lender may designate from time to time to visit and inspect any of the properties of the Borrower, to examine their respective books and records and take copies and extracts therefrom and to discuss their respective affairs with their respective directors, officers, employees and independent accountants at such times and as often as the Agent or any Lender may reasonably request. The Borrower hereby authorizes such officers, employees and independent accountants to discuss with the Agent or any Lender the affairs of the Borrower. The Agent and the Lenders shall have the right to examine and verify accounts, inventory and other properties and liabilities of the Borrower from time to time, and the Borrower shall cooperate with the Agent and the Lenders in such verification. (m) ENVIRONMENTAL AUDIT. The Agent shall have the right from time to time to designate such Persons ("Environmental Auditors") as the Agent may select to visit, inspect and have access to any of the properties, products or wastes of the Borrower and, to the extent possible, its respective Environmental Affiliates, for the purpose of investigating whether there may be a basis for any Environmental Claim or any condition which could result in any liability, cost or expense to the -37- 43 Agent or any Lender. Such investigation may include, among other things, above and below ground testing for the presence of Environmental Concern Materials and such other tests as may be necessary or advisable in the opinion of the Agent. With respect to any such investigation, Agent shall use reasonable efforts to attempt to minimize to the extent practicable the disruption of the business and operations of the Borrower or any Environmental Affiliates. The Agent shall generally advise the Borrower in advance as to the method, means and timing of such investigation. The Agent will use reasonable efforts to have any invasive testing performed by professional believed by the Agent to be properly qualified and to have customary insurance coverage. The Borrower will supply to the Environmental Auditors such historical and operational information, including the results of all samples sent for analysis, correspondence with Governmental Authorities and environmental audits or reviews regarding properties, products and wastes of the Borrower or its respective Environmental Affiliates as are within its possession, custody or control, or which are available to it, and will make available for meetings with the Environmental Auditors appropriate personnel employed by or consultants retained by the Borrower having knowledge of such matters. 6.02. INSURANCE. (a) The Borrower shall (i) maintain with financially sound and reputable insurers acceptable to the Agent 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 but not limited to business interruption, product and other liability, casualty, workers' compensation and umbrella insurance), which insurance, in any event, shall be reasonably satisfactory from time to time to the Required Lenders, (ii) provide that such insurance cannot terminate, expire, be canceled or amended in any material respect without 30 days' prior notice to the Agent, (iii) furnish to each Lender 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 such Lender may request, and (iv) provide such other insurance and endorsements as are required by this Agreement and the other Loan Documents. (b) The Borrower shall provide a life insurance policy with a financially sound and reputable insurer acceptable to the Agent insuring the life of the Executive in the amount of $5,000,000 and naming the Borrower as the beneficiary, which policy shall be effectively assigned to the Agent as Collateral for payment of the obligations. The proceeds of such policy will, unless the maturity of the Loans has been accelerated, be applied to payment of the Term Loans in the inverse order of their scheduled maturities, any excess to be applied to permanently reduce the Revolving Credit Committed Amount. 6.03. PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND PRIORITY CLAIMS. The Borrower shall pay or discharge (a) 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; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Borrower in a case under Title 11 (Bankruptcy) of the United States Code, as amended; -38- 44 provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced the Borrower 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, could not have a material Adverse Effect. 6.04. PRESERVATION OF CORPORATE STATUS. The Borrower shall maintain its status as a corporation duly organized, validly existing and in good standing under the laws of its 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 nature of its business or both make such qualification necessary or advisable , except for matters that, individually or in the aggregate, could not have a Material Adverse Effect. 6.05. GOVERNMENTAL APPROVALS AND FILINGS. The Borrower shall keep and maintain in full force and effect all Governmental Actions necessary in connection with execution and delivery of any Loan Document, consummation of the transactions hereon 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. 6.06. MAINTENANCE OF PROPERTIES. The Borrower shall maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it 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. 6.07. AVOIDANCE OF OTHER CONFLICTS. The Borrower 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 (a) any Law, (b) its articles of incorporation of by-laws (or other constituent documents), or (c) any agreement or instrument to which it is party or by which it or any of its 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. 6.08. FINANCIAL ACCOUNTING PRACTICES. The Borrower 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 (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with GAAP and (ii) to maintain accountability for assets, (c) access to assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. 6.09. USE OF PROCEEDS. The Borrower shall apply the proceeds of (a) the Revolving Credit Loans, only for working capital, general corporate purposes and reimbursement of costs set forth in Schedule 6.09 incurred by the Investor in connection with the transactions contemplated by the Acquisition Agreement, the Subordinated Debt Agreement and this Agreement; and (b) the Term Loans, to finance the Acquisition. The Borrower shall not use the proceeds of any Loans hereunder directly or -39- 45 indirectly for any unlawful purpose, in any manner inconsistent with Section 4.13, or inconsistent with any other provision of any Loan Document. 6.10. CONTINUATION OF OR CHANGE IN BUSINESS. The Borrower shall continue to engage in the Target Business substantially as conducted and operated during the present and preceding fiscal year, and the Borrower shall not engage in any other business, other than the dry bulk commodity freight business. 6.11. CONSOLIDATED TAX RETURN. The Borrower 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. The Borrower shall not amend, or consent to an amendment of, the Tax Sharing Agreement. 6.12. FISCAL YEAR. The Borrower shall not change its fiscal year or fiscal quarter. 6.13. PLAN AND MULTIEMPLOYER PLANS. (a) REQUIRED CONTRIBUTIONS. The Borrower shall, and shall cause each of its Controlled Group Members to, make contributions to each Plan maintained by the Borrower and its Controlled Group Members, respectively, when due in accordance with the minimum funding requirements under ERISA and the Code applicable to such Plan and pay PBGC premiums as and when due for such Plan. (b) CERTIFICATE AS TO UNFUNDED BENEFITS FOR TITLE IV PLANS AND CERTIFICATE OF POSTRETIREMENT BENEFIT OBLIGATIONS. As soon as such liability has been determined, or within 65 days after Borrower receives a request for such liability determination from the Agent, the Borrower shall deliver or cause to be delivered to the Agent (i) with respect to each Plan subject to Title IV of ERISA and maintained by the Borrower 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 the Agent and each Lender. The Borrower shall notify the Agent 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. (c) NOTICE OF PLAN. 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), the Borrower shall give written notice to the Agent of such action. Upon receipt of such notice, Schedule 4.24 shall be deemed to be automatically amended to include such Plan. (d) NOTICE OF MULTIEMPLOYER PLAN. Within not more than 60 days after the Borrower or any Controlled Group Member becomes obligated to contribute to any Multiemployer Plan, the Borrower shall give written notice thereof to the Agent. Upon receipt of such notice, Schedule 4.24 shall be deemed to be automatically amended to include such Multiemployer Plan. (e) REQUIRED CONTRIBUTIONS TO MULTIEMPLOYER PLANS. The Borrower 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, however nothing herein shall be interpreted as preventing the Borrower from contesting in good faith any said obligation and/or the contributions required thereunder. 6.14. INTEREST RATE PROTECTION. Within 60 days after the Closing Date, the Borrower shall enter into one or more Interest Rate Hedging Agreements on such terms as shall be reasonably satisfactory to the Agent and which (when taken together with the Borrower's obligations under the Term Loan) have the economic effect of fixing the Borrower's effective interest cost on at least 50% of the scheduled outstanding principal amount of Term Loans for a period of at least three years following -40- 46 the Closing Date. The Borrower shall thereafter select interest rate Options with respect to the Term Loans that match, in time and amount, as closely as may be the terms of the rate hedge represented by such Interest Rate Hedging Agreements. 6.15. APPRAISAL OF QUALIFIED COLLATERAL. As soon as practicable, and in any event within 120 days after the close of each fiscal year of the Borrower, the Borrower shall furnish to the Agent an appraisal report satisfactory to the Agent, which report shall set forth the value (including but not limited to the orderly liquidation value) of the Qualified Collateral of the Borrower as of the last day of such fiscal year as determined by an appraisal firm acceptable to the Agent. 6.16. POST-CLOSING MATTERS. The Borrower will take all actions set forth on Schedule 6.16 within the time period and in the manner set forth in Section 6.16. ARTICLE VII NEGATIVE COVENANTS The Borrower hereby covenants to the Agent and each Lender as follows: 7.01. FINANCIAL COVENANTS. (a) TOTAL LEVERAGE RATIO. As of the last day of each fiscal quarter, beginning June 30, 1998, the Total Leverage Ratio for the applicable Calculation Period shall not exceed: (i) 4.0 for June 30, 1998 and September 30, 1998; (ii) 3.5 from and including December 31, 1998 to and including September 30, 1999; and (iii) 3.0 thereafter. (b) TANGIBLE NET WORTH. Tangible Net Worth shall not at any time from and after June 30, 1998 be less than an amount equal to (i) the greater of $1 and 90% of the Borrower's Tangible Net Worth on June 30, 1998 plus (ii) 80% of the sum of the Net Income (not to be reduced by losses) for each fiscal quarter during the period from July 1, 1998 through and including the date (the "Interim Date") which is the earlier to occur of the last day of the then most recently completed fiscal quarter and the last day of the fiscal quarter in which the Tangible Net Worth of the Borrower first reaches $650,000 plus (iii) if the Interim Date has occurred, 50% of the sum of the Net Income (not to be reduced by losses) for each fiscal quarter during the period from the day after the Interim Date through and including the last day of the then most recently completed fiscal quarter. (c) FIXED CHARGE COVERAGE RATIO. As of the last day of each fiscal quarter, beginning June 30, 1998, the Fixed Charge Coverage Ratio for the applicable Calculation Period shall not be less than 1.25. (d) INTEREST COVERAGE RATIO. As of the last day of each fiscal quarter, beginning June 30, 1998, the Interest Coverage Ratio for the applicable Calculation Period shall not be less than: 3.0 to and including September 30, 1999; (ii) 3.5 from and including December 31, 1999 to and including September 30, 2000; (iii) 4.0 from and including December 31, 2000 to and including September 30, 2001; and (iv) 4.5 thereafter. 7.02. LIENS. The Borrower shall not at any time create, incur, assume or suffer to exist any Lien on any of its property (now owned or hereafter acquired), or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except for the following ("Permitted Liens"): (a) Liens pursuant to the Security Documents in favor of the Agent for the benefit of the Lenders and the Agent to secure the Obligations; -41- 47 (b) Liens pursuant to the Subordinated Debt Documents (as in effect on the Closing Date) in favor of the Subordinated Debt Lender to secure the Subordinated Debt, subject to the Subordination Agreement. (c) Liens existing on the date hereof securing obligations existing on the date hereof, as such Liens and obligations are listed in Schedule 7.02 (and Liens securing successor obligations incurred to refinance predecessor obligations allowed under this subsection (b); 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 successor obligation does not extend to any property other than that subject to the Lien securing the predecessor obligation immediately before such refinancing); (d) Liens (whether or not assumed) existing on property at the time of purchase thereof by the Borrower or to secure payment of the purchase price thereof, provided, that: (i) such Lien is created before or substantially simultaneously with the purchase of such property in the ordinary course of business by the Borrower; (ii) such Lien is confined solely to the property so purchased, improvements thereto and proceeds thereof; (iii) the aggregate amount secured by all such Liens on any particular property at the time purchased by the Borrower, 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 (iv) the obligation secured by such Lien is Indebtedness permitted under Section 7.03(c); (e) Liens arising from taxes, assessments, charges or claims described in Section 6.03 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 6.03; (f) Deposits or pledges of cash or securities in the ordinary course of business to secure (i) workmen's compensation, unemployment insurance or other social security obligations, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds, or (iv) other obligations of a like nature incurred in the ordinary course of business; (g) 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, the Borrower; and (h) With respect to the real property owned by the Borrower, (i) those matters set forth in the title insurance policies insuring the lien of the Fee Mortgages, the Fee Deeds of Trust, the Leasehold Mortgages (if any) and the Leasehold Deeds of Trust (if any); (ii) 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, in the case of any such lien on the real property, in accordance with the terms of the Fee Mortgages, the Feed Deeds of Trust, Leasehold Mortgages or Leasehold Deeds of Trust applicable thereto, if any; and (iii) -42- 48 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 the Borrower and which do not detract materially from the value of the property to which they attach or impair materially the use thereof by the Borrower. "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 7.02 shall be construed to limit any other restriction on Liens imposed by the Security Documents or otherwise in the Loan Documents. 7.03. INDEBTEDNESS. The Borrower shall not at any time create, incur, assume or suffer to exist any Indebtedness, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (a) Indebtedness to the Lenders and the Agent pursuant to this Agreement and the other Loan Documents; (b) Indebtedness to the Subordinated Debt Lender incurred on the Closing Date pursuant to the Subordinated Debt Documents (as in effect on the Closing Date); provided; that the aggregate principal amount of the notes constituting Subordinated Debt shall not exceed $8,000,000; (c) Indebtedness secured by Liens permitted by Section 7.02(d); provided, that the aggregate principal amount of such Indebtedness shall not exceed $250,000; (d) Accounts payable to trade creditors arising out of purchases of goods or services in the ordinary course of business; provided that (i) such account payable is payable not later than 90 days after the original invoice date according to the original terms 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 such reserves or other appropriate provisions as may be required by GAAP shall have been made with respect therefor); (e) Indebtedness under Interest Rate Hedging Agreements; (f) Capitalized Lease Obligations, to the extent permitted by Sections 7.08(b) and 7.13 hereof; (g) Permitted Aasche Subordinated Debt Refinancing Indebtedness, but only if at the time of incurrence thereof (i) the Voting Trust Agreement has been amended in a manner satisfactory to the Agent to remove the rights of the Subordinated Debt Lender thereunder and replace such right with rights of the Agent or another party satisfactory to the Agent, (ii) all Liens granted under the Subordinated Debt Documents are released and (iii) all shares of capital stock of the Borrower held by the Subordinated Debt Lender or otherwise subject to any "Put" rights under the Subordinated Debt Documents or any similar right (x) have been purchased by Aasche or (y) are the subject of an irrevocable waiver of the rights of the holders of such shares to put or otherwise require purchase or redemption of such shares by the Borrower or (z) in the case of the Purchased Shares (as defined in the Subordinated Debt Agreement) only, are the subject of arrangements reasonably satisfactory in form and substance to the Agent under which the Investor arranges for and provides, at its expense and for the benefit of the Agent, a letter of credit or comparable assurance from a financial institution reasonably satisfactory to the Agent that the Investor will, and will have access to sufficient funds to, under any circumstance make common equity contributions to the Borrower at such times and in such amounts as will be sufficient to enable the Borrower to comply with all "Put" rights applicable any Purchased Shares; and. -43- 49 (h) the Asche Tractor Debt. 7.04. GUARANTIES, INDEMNITIES, ETC The Borrower shall not 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: (a) Guaranty Equivalents existing on the date hereof and listed in Schedule 7.04 hereto (and extensions, renewals and refinancings thereof and of the associated Assured Obligations on terms no more burdensome to the Borrower than those existing immediately before such extension, renewal or refinancing); (b) 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 (c) Indemnities by the Borrower of the liabilities of its directors or officers, in their capacities as such, pursuant to provisions presently contained in their articles of incorporation or by-laws (or other constituent documents) or as permitted by Law. 7.05. LOANS, ADVANCES AND INVESTMENTS. The Borrower shall not at any time make or suffer to exist or remain outstanding any loan or advance to, or 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: (a) Loans and investments existing on the date hereof and listed in Schedule 7.05 (and extensions, renewals and refinancings thereof on terms no less favorable than those existing immediately before such extension, renewal or refinancing); (b) Receivables owing to the Borrower arising from sales of inventory under usual and customary terms in the ordinary course of business; and loans and advances extended by the Borrower to subcontractors or suppliers (excluding subcontractors or suppliers who are Affiliates of the Borrower) under usual and customary terms in the ordinary course of business; (c) Advances to officers and employees of the Borrower to meet expenses incurred by such officers and employees in the ordinary course of business and in aggregate amounts at any time outstanding not exceeding $250,000; and (d) Cash Equivalent Investments. 7.06. DIVIDENDS AND RELATED DISTRIBUTIONS. The Borrower shall not declare or make any Stock Payment, or agree, become or remain liable (contingently or otherwise) to do so. 7.07. SALE-LEASEBACKS. The Borrower shall not at any time enter into or suffer to remain in effect any transaction to which the Borrower is a party involving the sale, transfer or other disposition by the Borrower 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. 7.08. LEASES. The Borrower shall not 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, except: -44- 50 (a) Leases of the Borrower existing on the date hereof and listed in Schedule 7.08; and (b) Leases, each of which may be either an operating lease or a Capitalized Lease, of equipment used by the lessee in the ordinary course of business, provided, that such leases are on an Approved Lease Form and provided, further, that such leases, in the aggregate, will not and do not result in the payment or accrual (whether on account of Rental Expense, Interest Expense, principal component of Capitalized Leases or otherwise) by the Borrower during any fiscal year of more than an amount equal to (i) $1,500,000 for 1998, $2,500,000 for 1999, $3,750,000 for 2000, $4,500,000 for 2001 and $5,500,000 for 2002 minus (ii) the positive difference, if any, between (x) the aggregate net amount of residual value "guaranteed" by the Borrower under all equipment leases which terminate in such fiscal year minus (y) the aggregate net amount of the fair market value at lease termination of all equipment covered by such terminating leases. 7.09. MERGERS, ACQUISITIONS, ETC. The Borrower shall not (v) merge with or into or consolidate with any other Person, (w) liquidate, wind-up, dissolve or divide, (x) acquire all or any substantial portion of the properties of any going concern or going line of business, or (y) acquire all or any substantial portion of the properties of any other Person other than in the ordinary course of business,, or (z) agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except as set forth in the Acquisition Documents. 7.10. DISPOSITIONS OF PROPERTIES. The Borrower shall not 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 the Borrower 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 the Borrower; provided, that the Borrower will report such disposition to the Agent in writing, subject to mandatory prepayment in accordance with Section 2.08(c). 7.11. SUBSIDIARIES. The Borrower shall not establish or acquire any Subsidiary. 7.12. DEALINGS WITH AFFILIATES. The Borrower shall not 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 existence or amend any contract, agreement or arrangement with) any Affiliate of the Borrower, directly or indirectly, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (a) Existence and performance of contracts, agreements and arrangements in existence as of the date hereof or proposed as of the date hereof and in any event set forth in Schedule 7.12; and (b) Officers and employees of the Borrower may be compensated for services rendered in such capacity to the Borrower, provided that (i) such compensation is in good faith and on terms no less favorable to the Borrower than those that could have been obtained in a comparable transaction on an arm's-length basis from an unrelated Person (ii) the board of directors of such Borrower (including a majority of the directors having no direct or indirect interest in such transaction) approve such compensation and (iii) such compensation to any officer or employee in any fiscal year shall not exceed $175,000. 7.13. CAPITAL EXPENDITURES. The Borrower shall not make any Capital Expenditures on or after the date hereof, except for Capital Expenditures not in excess of $2,000,000 in any fiscal year and except for Capital Expenditures funded entirely with the proceeds of the sale or other disposition of equipment in accordance with Section 7.10 hereof. -45- 51 7.14. ISSUANCE OF EQUITY. The Borrower shall not issue any equity securities to the extent that such issuance would result in a Change of Control. 7.15. LIMITATIONS ON MODIFICATION OF CERTAIN AGREEMENTS AND INSTRUMENTS. The Borrower shall not amend, modify or supplement its articles of incorporation or by-laws (or similar constituent documents). 7.16. LIMITATION ON PAYMENTS AND MODIFICATION OF RESTRICTED INDEBTEDNESS. The Borrower shall not 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 Restricted Indebtedness, or, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except as follows: (a) The Borrower may pay principal of Subordinated Debt at the regularly scheduled maturity thereof, and may pay interest thereon when due, all to the extent consistent with the subordination provisions of such Subordinated Debt and the Subordination Agreement; (b) The Borrower may amend, modify or supplement the terms of Restricted Indebtedness to extend the maturity or reduce the amount of any payment of principal thereof, or to reduce the rate or extend the date for payment of interest thereon, or to reduce the amount or extend the date for payment by the Borrower of any other amount payable in connection therewith, or to release any Lien provided or required to be provided by the Borrower to secure such Restricted Indebtedness, or to eliminate, waive or render less restrictive on the Borrower any covenant, term or condition (other than the subordination provisions) applicable to the Borrower; and (c) The Borrower may use the proceeds of Permitted Aasche Subordinated Debt Refinancing Indebtedness to make the payments contemplated by the definition of that term. 7.17. LIMITATION ON OTHER RESTRICTIONS ON LIENS, TRANSFERS OR DISPOSITIONS. The Borrower shall not enter into, become or remain subject to any agreement or instrument to which the Borrower 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 (i) prohibit, restrict or limit the grant or continuance of any Lien upon any of its properties (now owed or hereafter acquired) or (ii) 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: (a) The Loan Documents: (b) The Subordinated Debt Documents; and (c) (i) Restrictions pursuant to non-assignment provisions of any executory contract or of any lease by the Borrower as lessee, and (ii) restrictions on granting Liens on property subject to a Permitted Lien for the benefit of the holder of such Permitted Lien to the extent in existence on the date hereof. 7.18. LIMITATION ON OTHER RESTRICTIONS ON AMENDMENT OF THE LOAN DOCUMENTS, ETC. The Borrower shall not enter into, become or remain subject to any agreement or instrument to which the Borrower 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 any of the Loan Documents, except for the Loan Documents. -46- 52 ARTICLE VIII DEFAULTS 8.01. EVENTS OF DEFAULT. An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (for any reason, whether voluntary, involuntary or effected or required by Law): (a) The Borrower shall fail to pay when due principal of any Loan. (b) The Borrower shall fail to pay when due interest on any Loan, any fees, indemnity or expenses, or any other amount due hereunder or under any other Loan Document and such failure shall have continued for a period of five Business Days. (c) Any representation or warranty made or deemed made by the Borrower in or pursuant to or in connection with any Loan Document, or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by any the Borrower to the Agent or any Lender pursuant to or in connection with any Loan Document, shall prove to have been false or misleading in any material respect as of the time when made or deemed made (including by omission of material information necessary to make such representation, warranty or statement not misleading). (d) The Borrower shall default in the performance or observance of any covenant contained in Article VII or any of the covenants contained in Sections 2.08, 2.14, 6.01(j)(i), 6.09, 6.10, 6.12 or 6.14. (e) The Borrower shall default in the performance or observance of any other covenant, agreement or duty under this Agreement or any other Loan Document and (i) in the case of a default under Section 6.01 (other than as referred to in subsection (j)(i) thereof) such default shall have continued for a period of 10 days and (ii) in the case of any other default such default shall have continued for a period of 30 days. (f) A Cross-Default Event shall occur with respect to a Cross-Default Obligation; provided, that if such an event would have occurred with respect to a Cross-Default Obligation but for the grant of a waiver or similar indulgence, a Cross-Default Event shall nevertheless be deemed to have occurred if the Borrower directly or indirectly gave or agreed to give any consideration for such waiver or indulgence (including but not limited to a reduction in maturity, an increase in rates or the granting of collateral, but excluding reimbursement of out-of-pocket expenses and counsel fees). As used herein, (i) "Cross-Default Event" means (A) the Borrower shall fail to make any payment when due under any Cross-Default Obligation and such failure shall have continued beyond any period of grace with respect thereto, or (B) a default, event of default, termination event or other similar event or condition (however described) shall occur or exist in respect of the Borrower under any agreement or instrument relating to any Cross-Default Obligation which has resulted in such Cross-Default Obligation becoming, or being capable of being declared, due and payable under such agreement or instrument before it would otherwise have been due and payable (or, in the case of an Interest Rate Hedging Agreement, which has resulted in such transaction becoming, or becoming capable of being, subject to early termination), or (C) an Event of Default under, and as defined in, the Subordinated Debt Agreement; and (ii) "Cross-Default Obligation" means (A) any obligation (or set of related obligations), as principal or as guarantor or other surety, in respect of Indebtedness (including but not limited to obligations in respect of Indebtedness pursuant to the -47- 53 Subordinated Debt Documents) in excess of $100,000 in the aggregate at any one time, and (B) any obligation under or in connection with any Interest Rate Hedging Agreement; (g) One or more judgments for the payment of money shall have been entered against the Borrower, which judgment or judgments exceed $250,000 in the aggregate at any one time, and such judgment or judgments shall have remained undischarged and unstayed for a period of 30 consecutive days. (h) One or more writs or warrants of attachment, garnishment, execution, distraint or similar process exceeding in value the aggregate amount of $250,000 shall have been issued against the Borrower or any of its properties and shall have remained undischarged and unstayed for a period of 30 consecutive days. (i) Any Governmental Action now or hereafter made by or with any Governmental Authority in connection with any Loan Document is not obtained or shall have ceased to be in full force and effect or shall have been modified or amended or shall have been held to be illegal or invalid, and such event or condition could have a Material Adverse Effect. (j) Any Security Document shall cease to be in full force and effect, or any Lien created or purported to be created in any Collateral pursuant to any Security Document shall fail to be valid, enforceable and, with respect to any portion of the Collateral with an aggregate value at any one time in excess of $50,000, perfected Lien in favor of the Agent for the benefit of the Lenders and the Agent securing the Obligations, having the priority purported to be given such Lien under such Security Document. (k) Any Loan Document or term or provision thereof shall cease to be in full force and effect (except in accordance with the express terms of such Loan Document), or the Borrower shall, or shall purport to, terminate (except in accordance with the terms of such Loan Document), repudiate, declare voidable or void or otherwise contest, any Loan Document or term or provision thereof or any obligation or liability of the Borrower thereunder. (l) Any term or provision of the subordination provisions contained in the Subordinated Debt Documents shall cease to be in full force and effect, or the Borrower, any holder of any Subordinated Debt (or any trustee or agent on behalf of such holders) shall, or shall purport to, terminate, repudiate, declare voidable or void or otherwise contest any term or provision of such subordination provisions. (m) The Required Lenders shall have determined in good faith (which determination shall be conclusive) that an event or condition has occurred which could have a Material Adverse Effect. (n) Any one or more Pension-Related Events referred to in subsection (a)(ii), (b) or (e) of the definition of "Pension-Related Event" shall have occurred; or any one or more other one or more other Pension- Related Events shall have occurred and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such other Pension-Related Events, individually or in the aggregate, could have a Material Adverse Effect. (o) Any one or more of the events or conditions set forth in the following clauses (i) or (ii) shall have occurred in respect of the Borrower or any of its Environmental Affiliates, and the Required Lenders shall determine in good faith (which determination shall be conclusive) that such events or conditions, individually or in the aggregate, could have a Material Adverse Effect: (i) any past or present violation of any Environmental Law by such Person, (ii) existence of any pending or threatened Environmental Claim against any such Person, or existence of any -48- 54 past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against any such Person. (p) A Change of Control or a Change of Management shall have occurred. (q) There shall occur a violation or termination of the Voting Trust Agreement, or any party to the Voting Trust Agreement shall attempt to repudiate or otherwise contest its obligations, or the rights of the Executive, thereunder. (r) A proceeding shall have been instituted in respect of the Borrower (i) seeking to have an order for relief entered in respect of such Person, or seeking a declaration or entailing a finding that such Person is insolvent or a similar declaration or finding, or seeking dissolution, winding-up, charter revocation or forfeiture, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to such Person, its assets or its debts under any Law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, termination of legal entities or any other similar Law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, liquidator, assignee, sequestrator or other custodian for such Person or for all or any substantial part of its property and such proceeding shall result in the entry, making or grant of any such order for relief, declaration, finding, relief or appointment, or such proceeding shall remain undismissed and unstayed for a period of 45 consecutive days. (s) The Borrower shall become insolvent; shall fail to pay, become unable to pay, or state that it is or will be unable to pay, its debts as they become due; shall voluntarily suspend transaction of its or his business; shall make a general assignment for the benefit of creditors; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 8.01(r)(i), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such order for relief, declaration, finding or relief described therein; shall institute (or fail to controvert in a timely and appropriate manner) a proceeding described in Section 8.01(r)(ii), or (whether or not any such proceeding has been instituted) shall consent to or acquiesce in any such appointment or to the taking of possession by any such custodian of all or any substantial part of its or his property; shall dissolve, wind-up, revoke or forfeit its charter (or other constituent documents) or liquidate itself or any substantial part of its property; or shall take any action in furtherance of any of the foregoing. 8.02. CONSEQUENCES OF AN EVENT OF DEFAULT. (a) If an Event of Default specified in subsections (a) through (q) of Section 8.01 shall occur and be continuing or shall exist, then, in addition to all other rights and remedies which the Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Lenders shall be under no further obligation to make Loans hereunder, the Issuing Bank may cease to issue Letters of Credit hereunder, and the Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, from time to time do any or all of the following: (i) Declare the Commitments terminated, whereupon the Commitments will terminate and any fees hereunder shall be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. -49- 55 (ii) Declare the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations (including the obligation to cash collateralize outstanding Letters of Credit) to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. (b) If an Event of Default specified in subsection (r) or (s) of Section 8.01 shall occur or exist, then, in addition to all other rights and remedies which the Agent or any Lender may have hereunder or under any other Loan Document, at law, in equity or otherwise, the Commitments shall automatically terminate and the Lenders shall be under no further obligation to make Loans, the Issuing Bank may cease to issue Letters of Credit hereunder and the unpaid principal amount of the Loans, interest accrued thereon and all other Obligations (including the obligation to cash collateralize outstanding Letters of Credit) shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and an action therefor shall immediately accrue. 8.03. APPLICATION OF PROCEEDS. Subject to Section 3.01(g), after the occurrence of an Event of Default and acceleration of the Loans, any distributions made on account of Obligations under the Security Agreement and all other payments received on account of Obligations shall be applied by the Agent to payment of the Obligations in the following order: First, to payment of that portion of the Obligations constituting fees, indemnities and other amounts due to the Agent in its capacity as such under the Loan Documents; Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts due to the Issuing Bank in its capacities as such, other than principal of and interest on Letter of Credit Reimbursement Obligations and accrued and unpaid Letter of Credit Fees; Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on Loans, accrued and unpaid interest on Letter of Credit Unreimbursed Draws, and accrued and unpaid Letter of Credit Fees and Revolving Credit Commitment Fees, ratably amongst the Lenders and the Issuing Bank in proportion to the respective amounts described in this clause "Third" due to them; Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and Letter of Credit Unreimbursed Draws, ratably amongst the Lenders and the Issuing Bank in proportion to the respective amounts described in this clause "Fourth" due to them; Fifth, to payment of all other Obligations, ratably amongst the Agent and the Lenders in proportion to the respective amounts described in this clause "Fifth" due to them; and Finally, the balance, if any, after all of the Obligations have been paid in full in cash, all Commitments have terminated, and all Letters of Credit shall have terminated, to the Borrower or as otherwise required by law. ARTICLE IX THE AGENT 9.01. APPOINTMENT. Each Lender hereby irrevocably appoints Mellon Bank, N.A. to act as Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, -50- 56 as are expressly delegated to or required of the Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Mellon Bank, N.A., hereby agrees to act as Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 9.10. Each Lender hereby irrevocably authorizes the Agent to execute and deliver each of the Loan Documents and to accept delivery of such of the other Loan Documents as may not require execution by the Agent. Each Lender hereby agrees that the rights and remedies granted to the Agent under the Loan Documents shall be exercised exclusively by the Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein. 9.02. GENERAL NATURE OF AGENT'S DUTIES. Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: (a) The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and no implied duties or responsibilities on the part of the Agent shall be read into this Agreement or any Loan Document or shall otherwise exist. (b) The duties and responsibilities of the Agent under this Agreement and the other Loan Documents shall be mechanical and administrative in nature, and the Agent shall not have a fiduciary relationship in respect of any Lender. (c) The Agent is and shall be solely the agent of the Lenders. The Agent does not assume, and shall not at any time be deemed to have, any relationship of agency or trust with or for, or any other duty or responsibility to, the Borrower or any other Person (except only for its relationship as agent for, and its express duties and responsibilities to, the Lenders as provided in this Agreement and the other Loan Documents). (d) The Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Agent believes in good faith that taking such action may conflict with any Law or any provision of this Agreement or any other Loan Document, or may require the Agent to qualify to do business in any jurisdiction where it is not then so qualified. 9.03. EXERCISE OF POWERS. The Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, the Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case the Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Lenders. The Agent shall not have any liability to any Person as a result of (x) the Agent acting or refraining from acting in accordance with the directions of the Required Lenders (or other applicable Person or set of Persons), (y) the Agent refraining from acting in the absence of instructions to act from the Required Lenders (or other applicable Person or set of Persons), whether or not the Agent has discretionary power to take such action, or (z) the Agent taking discretionary action it is authorized to take under this Section (subject, in the case of this clause (z), to the provisions of Section 9.04(a)). 9.04. GENERAL EXCULPATORY PROVISIONS. Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: -51- 57 (a) The Agent shall not be liable for any action taken or omitted to be taken by it under or in connection with this Agreement or any other Loan Document, unless caused by its own gross negligence or willful misconduct. (b) The Agent shall not be responsible for (i) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (ii) any recital, representation, warranty, document, certificate, report or statement in, provided for in, or received under or in connection with, this Agreement or any other Loan Document, (iii) any failure of the Borrower or any Lender to perform any of its respective obligations under this Agreement or any other Loan Document, (iv) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time, or (v) caring for, protecting, insuring, or paying any taxes, charges or assessments with respect to any Collateral. (c) The Agent shall not be under any obligation to ascertain, inquire or give any notice relating to (i) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of the Borrower, (ii) the business, operations, condition (financial or otherwise) or prospects of the Borrower or any other Person, or (iii) except to the extent set forth in Section 9.05(f), the existence of any Event of Default or Potential Default. (d) The Agent shall not be under any obligation, either initially or on a continuing basis, to provide any Lender with any notices, reports or information of any nature, whether in its possession presently or hereafter, except for such notices, reports and other information expressly required by this Agreement or any other Loan Document to be furnished by the Agent to such Lender. 9.05. ADMINISTRATION BY THE AGENT. (a) The Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the proper party or parties, and the Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. (b) The Agent may consult with legal counsel (including, without limitation, in-house counsel for the Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. (c) The Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or such Lender, as the case may be, and the Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). (d) The Agent may fail or refuse to take any action unless it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Agent by reason of taking or continuing to take any such action. -52- 58 (e) The Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in fact selected by it with reasonable care. (f) The Agent shall not be deemed to have any knowledge or notice of the occurrence of any Event of Default or Potential Default unless the Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Event of Default or Potential Default, and stating that such notice is a "notice of default". If the Agent receives such a notice, the Agent shall give prompt notice thereof to each Lender. 9.06. LENDER NOT RELYING ON AGENT OR OTHER LENDERS. Each Lender acknowledges as follows: (a) Neither the Agent nor any other Lender has made any representations or warranties to it, and no act taken hereafter by the Agent or any other Lender shall be deemed to constitute any representation or warranty by the Agent or such other Lender to it. (b) It has, independently and without reliance upon the Agent or any other Lender, and based upon such documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the other Loan Documents. (c) It will, independently and without reliance upon the Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, make its own decisions to take or not take action under or in connection with this Agreement and the other Loan Documents. 9.07. INDEMNIFICATION. Each Lender agrees to reimburse and indemnify the Agent and its directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so), Pro Rata, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the fees and disbursements of counsel for the Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such other Person, as finally determined by a court of competent jurisdiction. 9.08. AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its Commitments and the Obligations owing to it, the Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lenders," "Issuing Bank," "holders of Notes" and like terms shall include the Agent in its individual capacity as such. The Agent and its affiliates may, without liability to account, make Loans to, issue Letters of Credit to, accept deposits from, acquire debt or equity interests in, enter into Interest Rate Hedging Agreements with, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, subsidiary or affiliate of the Borrower, as though the Agent were not the Agent hereunder. 9.09. HOLDERS OF NOTES. The Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until a Transfer Supplement with respect to the assignment or transfer thereof shall have been filed with the Agent in accordance with Section 10.14. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor. -53- 59 9.10. SUCCESSOR AGENT. The Agent may resign at any time by giving 10 days' prior written notice thereof to the Lenders and the Borrower. The Agent may be removed by the Required Lenders at any time by giving 10 days' prior written notice thereof to the Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Each successor Agent shall be a commercial bank or trust company organized under the laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Agent, such Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If and so long as no successor Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Agent shall be given to each Lender, and all payments to be made to the Agent shall be made directly to the Borrower or Lender for whose account such payment is made. 9.11. ADDITIONAL AGENTS. If the Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lenders, the Agent and the Borrower shall execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable, in the opinion of the Agent, to constitute another commercial bank or trust company, or one or more other Persons approved by the Agent, to act as co-Agent or agent with respect to any part of the Collateral, with such powers of the Agent as may be provided in such supplemental agreement, and to vest in such bank, trust company or Person as such co-Agent or separate agent, as the case may be, any properties, rights, powers, privileges and duties of the Agent under this Agreement or any other Loan Document. 9.12. CALCULATIONS. The Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower. 9.13. FUNDING BY AGENT. Unless the Agent shall have been notified in writing by any Lender not later than the close of business on the day before the day on which Loans are requested by the Borrower to be made that such Lender will not make its ratable share of such Loans, the Agent may assume that such Lender will make its ratable share of the Loans, and in reliance upon such assumption the Agent may (but in no circumstances shall be required to) make available to the Borrower a corresponding amount. If and to the extent that any Lender fails to make such payment to the Agent on such date, such Lender shall pay such amount on demand (or, if such Lender fails to pay such amount on demand, the Borrower shall pay such amount on demand), together with interest, for the Agent's own account, for each day from and including the date of the Agent's payment to and including the date of repayment to the Agent (before and after judgment) at the rate or rates per annum applicable to such Loans. All payments to the Agent under this Section shall be made to the Agent at its Office in Dollars in funds immediately available at such Office, without set-off, withholding, counterclaim or other deduction of any nature. 9.14. AGENT'S FEE. In the event that Mellon Bank, N.A. shall assign a portion of it Loans or commitments hereunder to any Person which is not an Affiliate of Mellon Bank, N.A., the -54- 60 Borrower agrees to pay to the Agent, for its individual account, an Agent's fee of $25,000 per year, payable in advance beginning on the date of such assignment. ARTICLE X MISCELLANEOUS 10.01. HOLIDAYS. Whenever any payment or action to be made or taken hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. 10.02. RECORDS. The unpaid principal amount of the Loans owing to each Lender, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, each Lender's Revolving Credit Committed Amount and Term Loan Committed Amount, and the accrued and unpaid fees owing to the Agent and any Lender shall at all times be ascertained from the records of the Agent, which shall be conclusive absent manifest error. The unpaid Letter of Credit Reimbursement Obligations, the unpaid interest accrued thereon, and the interest rate or rates applicable thereto shall at all times be ascertained from the records of the Issuing Bank, which shall be conclusive absent manifest error. 10.03. AMENDMENTS AND WAIVERS. Neither this Agreement nor any Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section. The Agent and the Borrower may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to, or waiving any provisions, releasing any Collateral, or changing in any manner the rights and duties of the Borrower, the Agent or any Lender. Any such amendment, modification or supplement made by Borrower and the Agent in accordance with the provisions of this Section shall be binding upon the Borrower, each Lender and the Agent. The Agent shall enter into such amendments, modifications or supplements from time to time as directed by the Required Lenders, and only as so directed, provided, that no such_amendment, modification_or supplement may be made which will: (a) Increase the Revolving Credit Committed Amount or the Term Loan Committed Amount of any Lender over the amount thereof then in effect, or extend the Revolving Credit Maturity Date or the Term Loan Maturity Date, without the written consent of each Lender affected thereby; (b) Reduce the principal amount of or extend the time for any scheduled payment of principal of any Loan, or reduce the rate of interest or extent the time for payment of interest borne by any Loan or Letter of Credit Reimbursement Obligation (other than as a result of waiving the applicability of any increase in interest rates applicable to overdue amounts), or extend the time for payment of or reduce the amount of any Revolving Credit Commitment Fee or Letter of Credit Fee, without the written consent of each Lender affected thereby; (c) Reduce any Letter of Credit Unreimbursed Draw, or extend the time for repayment by the Borrower or any Letter of Credit Unreimbursed Draw, without the written consent of each Lender; (d) Change the definition of "Required Lenders" or amend this Section 10.03, without the written consent of all the Lenders; (e) Amend or waive any of the provisions of Article IX, or impose additional duties upon the Agent or otherwise adversely affect the rights, interests or obligations of the Agent, without the written consent of the Agent; -55- 61 (f) Amend or waive any of the provisions of Section 3.01, or impose any additional duties upon the Issuing Bank, or otherwise adversely affect the rights, interests or obligations of the Issuing Bank without the written consent of the Issuing Bank; (g) Alter the priority of distributions set forth in Section 8.03, without the written consent of each Lender affected thereby; or (h) Release any material portion of the Collateral, without the written consent of Supermajority Lenders; and provided further, that Transfer Supplements may be entered into in the manner provided in Section 10.14. Any such amendment, modification or supplement must be in writing and shall be effective only to the extent set forth in such writing. Any Event of Default or Potential Default waived or consented to in any such amendment, modification or supplement shall be deemed to be cured and not continuing to the extent and for the period set forth in such waiver or consent, but no such waiver or consent shall extend to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. 10.04. NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of dealing and no delay or failure of the Agent or any Lender in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Agent and the Lenders under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have hereunder or thereunder, at law, in equity or otherwise. 10.05. NOTICES. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "notices") under this Agreement or any Loan Document shall be in writing and shall be sent by nationally-recognized overnight courier, by telex or facsimile on a Business Day (with confirmation in writing sent by overnight courier for delivery the next Business Day), or by personal hand-delivery. All notices shall be sent to the applicable party at the address stated on the signature pages hereof or in accordance with the last unrevoked written direction from such party to the other parties hereto, in all cases with postage or other charges prepaid. Any such properly given notice to the Agent or any Lender shall be effective when received. Any such properly given notice to the Borrower shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telex or facsimile communication, or one Business Day after delivery to a nationally- recognized overnight courier. (b) Any Lender giving any notice to the Borrower or any other party to a Loan Document shall simultaneously send a copy thereof to the Agent, and the Agent shall promptly notify the other Lenders of the receipt by it of any such notice. (c) The Agent and each Lender may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any Loan Document) purportedly made by or on behalf of the Borrower, and neither the Agent nor any Lender shall have any duty to verify the identity or authority of any Person giving such notice. 10.06. EXPENSES; INDEMNITY. -56- 62 (a) EXPENSES. The Borrower agrees to pay or cause to be paid and to save the Agent and each of the Lenders harmless against liability for the payment of all reasonable out-of-pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs) incurred by the Agent or any Lender from time to time arising from or relating to (i) the negotiation, preparation, execution, delivery, administration and performance of this Agreement and the other Loan Documents, (ii) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any Loan Document, and (iii) the enforcement or preservation of rights under this Agreement or any Loan Document (including but not limited to any such costs or expenses arising from or relating to (A) the creation, perfection or protection of the Agent's Lien on any Collateral, (B) the protection, collection, lease, sale, taking possession of, preservation of, or realization on, any Collateral, including without limitation advances for storage, insurance premiums, transportation charges, taxes, filing fees and the like, (C) collection or enforcement of an outstanding Loan or any other amount owing hereunder or thereunder by the Agent or any Lender, and (D) any litigation, proceeding, dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the Loan Documents). (b) INDEMNITY. The Borrower hereby agrees to reimburse and indemnify each of the Indemnified Parties from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnified Party in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan (and without in any way limiting the generality of the foregoing, including any violation or breach of any Environmental Law or any other Law by the Borrower or any Environmental Affiliate of the Borrower; any Environmental Claim arising out of the management, use, control, ownership or operation of property by any of such Persons, including all on-site and off-site activities involving Environmental Concern Materials; any grant of Collateral; or any exercise by the Agent or any Lender of any of its rights or remedies under this Agreement or any other Loan Document); but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of such Indemnified Party, as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Borrower under this subsection (b), or any other indemnification obligation of the Borrower hereunder or under any other Loan Document, are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. 10.07. SEVERABILITY. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. 10.08. PRIOR UNDERSTANDINGS. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto and thereto relating to the transactions provided for herein and therein, including the Commitment Letter dated December 31, 1997; provided, however, that the Borrower's obligations to make the payments contemplated by the Fee Letter referred to in such commitment letter shall survive execution of this Agreement. -57- 63 10.09. DURATION; SURVIVAL. All representations and warranties of the Borrower contained herein or in any other in the Loan Document or made in connection herewith or therewith shall survive the making of, and shall not be waived by the execution and delivery, of this Agreement or any other Loan Document, any investigation by or knowledge of the Agent or any Lender, the making of any Loan, or any other event or condition whatever. All covenants and agreements of the Borrower contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as the Borrower may borrow hereunder and until payment in full of all Obligations. Without limitation, all obligations of the Borrower hereunder or under any other Loan Document to make payments to or indemnify the Agent or any Lender shall survive the payment in full of all other Obligations, termination of the Borrower's right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Lender to make payments to or indemnify the Agent shall survive the payment in full by the Borrower of all Obligations, termination of the Borrower's right to borrow hereunder, and all other events or conditions whatever. 10.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. 10.11. LIMITATION ON PAYMENTS. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrower shall not be required to make any payment to or for the account of any Lender, and each Lender shall refund any payment made by the Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Lender. 10.12. SET-OFF. The Borrower hereby agrees that if any Obligation of the Borrower shall be due and payable (by acceleration or otherwise), the Agent and each Lender shall have the right, without notice to the Borrower, to set-off against and to appropriate and apply to such Obligation any obligation of any nature owing to the Borrower by the Agent or such Lender, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit) now or hereafter maintained by the Borrower with the Agent or such Lender. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not the Agent or such Lender or any other Person shall have given notice or made any demand to the Borrower or any other Person, whether such obligation owed to the Borrower is contingent, absolute, matured or unmatured (it being agreed that the Agent or such Lender may deem such obligation to be then due and payable at the time of such setoff), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to the Agent or any Lender or any other Person. The Borrower hereby agrees that, to the fullest extent permitted by law, any Participant and any branch, subsidiary or affiliate of the Agent or any Lender or any Participant shall have the same rights of set-off as a Lender as provided in this Section 10.12 (regardless of whether such Participant, branch, subsidiary or affiliate would otherwise be deemed in privity with or a direct creditor of the Borrower). The rights provided by this Section 10.12 are in addition to all other rights of set-off and banker's lien and all other rights and remedies which the Agent or any Lender (or any such Participant, branch, subsidiary or affiliate) may otherwise have under this Agreement, any other Loan Document, at law or in equity, or otherwise, and nothing in this Agreement or any Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or bankers' lien of any such Person. 10.13. SHARING OF COLLECTIONS. The Lenders hereby agree among themselves that if any Lender shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans, interest thereon, or any other Obligation contemplated by this Agreement or the other Loan Documents to be made by the Borrower ratably to all Lenders in greater proportion than any such amount received by any other Lender, then the Lender receiving such -58- 64 proportionately greater payment shall notify each other Lender and the Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section so that, in effect, all such excess amounts will be shared ratably among all of the Lenders. The Lender receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Lenders a participation in the applicable Obligations owed to such other Lenders in such amount as shall result in a ratable sharing by all Lenders of such excess amount (and to such extent the receiving Lender shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Lender making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other amounts, if any, required by Law to be paid by the Lender making such purchase. The Borrower hereby consents to and confirms the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Lender hereunder. 10.14. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS. (a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, all future holders of the Notes, the Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder or interests herein without the prior written consent of all the Lenders and the Agent, and any purported assignment without such consent shall be void. (b) PARTICIPATIONS. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans owing to it and any Note held by it); provided, that (i) any such Lender's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents, and (iv) such Participant shall by accepting such Participation be bound by the provisions of Section 10.13. The Borrower agrees that any such Participant shall be entitled to the benefits of Sections 2.11, 2.12, 10.06 and 10.12 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) ASSIGNMENTS. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of its Commitments and Loans owing to it and any Note held by it) to any Lender, any affiliate of a Lender or to one or more additional commercial banks or other Persons (each a "Purchasing Lender"); provided, that -59- 65 (i) if a Lender makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, such transferor Lender shall retain, after such assignment, a minimum principal amount of $5,000,000 of the Commitments and Loans then outstanding, and such assignment shall be in a minimum aggregate principal amount of $5,000,000 of the Commitments and Loans then outstanding, (ii) each such assignment shall be of a constant, and not a varying, percentage of each Commitment of the transferor Lender and of all of the transferor Lender's rights and obligations under this Agreement and the other Loan Documents, and (iii) each such assignment shall be made pursuant to a Transfer Supplement in substantially the form attached hereto as Exhibit H, duly completed (a "Transfer Supplement"). In order to effect any such assignment, the transferor Lender and the Purchasing Lender shall execute and deliver to the Agent a duly completed Transfer Supplement (including the consents required by clause (i) of the preceding sentence) with respect to such assignment, together with any Note or Notes subject to such assignment (the "Transferor Lender Notes") and a processing and recording fee of $3,500; and, upon receipt thereof, the Agent shall accept such Transfer Supplement. Upon receipt of the Purchase Price Receipt Notice pursuant to such Transfer Supplement, the Agent shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the close of business at the Agent's Office on the Transfer Effective Date specified in such Transfer Supplement (x) the Purchasing Lender shall be a party hereto and, to the extent provided in such Transfer Supplement, shall have the rights and obligations of a Lender hereunder, and (y) the transferor Lender thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Transfer Supplement covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party to this Agreement) from and after the Transfer Effective Date. On or prior to the Transfer Effective Date specified in an Transfer Supplement, the Borrower, at its expense, shall execute and deliver to the Agent (for delivery to the Purchasing Lender) new Notes evidencing such Purchasing Lender's assigned Commitments or Loans and (for delivery to the transferor Lender) replacement Notes in the principal amount of the Loans or Commitments retained by the transferor Lender (such Notes to be in exchange for, but not in payment of, those Notes then held by such transferor Lender). Each such Note shall be dated the date and be substantially in the form of the predecessor Note. The Agent shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest and accrued fees shall be paid to the Purchasing Lender at the same time or times provided in the predecessor Notes and this Agreement. (d) REGISTER. The Agent shall maintain at its office a copy of each Transfer Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive absent manifest error and the Borrower, the Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of the Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) FINANCIAL AND OTHER INFORMATION. The Borrower authorizes the Agent and each Lender to disclose to any Participant or Purchasing Lender (each, a "transferee") and any prospective transferee any and all financial and other information in such Person's possession concerning the Borrower and affiliates which has been or may be delivered to such Person by or on behalf of the -60- 66 Borrower in connection with this Agreement or any other Loan Document or such Person's credit evaluation of the Borrower and affiliates. At the request of any Lender, the Borrower, at the Borrower's expense, shall provide to each prospective transferee the conformed copies of documents referred to in Section 4 of the form of Transfer Supplement. (f) ASSIGNMENTS TO FEDERAL RESERVE BANK. Any Lender may at any time assign all or any portion of its rights under this Agreement, including without limitation any Loans owing to it, and any Note held by it to a Federal Reserve Bank. No such assignment shall relieve the transferor Lender from its obligations hereunder. 10.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; LIMITATION OF LIABILITY. (a) GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH OTHER LOAN DOCUMENTS) SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) CERTAIN WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN ALLEGHENY COUNTY, PENNSYLVANIA, SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND TO THE FULLEST EXTENT PERMITTED BY LAW AGREES THAT IT WILL NOT BRING ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM); (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER THE BORROWER; (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 10.05, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. -61- 67 (c) LIMITATION OF LIABILITY. TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE BY THE BORROWER AGAINST THE AGENT, ANY LENDER OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF ANY OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ATTEST: SPECIALTY TRANSPORTATION SERVICES, INC., as Borrower By /s/ Leon Monachos By /s/ Gary I. Goldberg ------------------------------------------------- ----------------------------------------------------------- Title: VP-Finance Title: President Address for Notices: 5979 McCasland Avenue Portage, IN 46367 Attn: Gary I. Goldberg Telephone: (219) 764-3636 Facsimile: (219) 771-4929
-62- 68 MELLON BANK, N.A., individually and as Agent By /s/ David A. George --------------------- Name: Title: Initial Revolving Credit Committed Amount: $5,000,000 Term Loan Committed Amount: $18,000,000 Commitment Percentage: 100% Address for Notices: Three Mellon Bank Center Pittsburgh, PA 15259 Attn: Loan Administration Telephone: Telecopier: cc: Mellon Bank, N.A. Middle Market Banking Department Two Mellon Bank Center Pittsburgh, PA 15259 Domestic Lending Office: Three Mellon Bank Center Pittsburgh, PA 15259 Euro-Rate Lending Office: Three Mellon Bank Center Pittsburgh, PA 15259
-63- 69 ANNEX A TO CREDIT AGREEMENT DEFINITIONS "Acquisition" shall mean the acquisition by the Borrower of the Target Business from JGT pursuant to the Acquisition Agreement. "Acquisition Agreement" shall have the meaning set forth in Section 5.01(c). "Acquisition Documents" shall have the meaning set forth in Section 5.01(c). "Affected Lender" shall have the meaning set forth in Section 2.04(e). "Affiliate" of a Person (the "Specified Person") shall mean (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person, (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the Specified Person or of a Person who is an Affiliate of the Specified Person within the meaning of the preceding clause (a), and (c) for each individual who is an Affiliate of the Specified Person within the meaning of the foregoing clauses (a) or (b), any other individual related to such Affiliate by consanguinity within the third degree or in a step or adoptive relationship within such third degree or related by affinity with such Affiliate or any such individual. For purposes of the preceding sentence, "control" of a Person means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise and (b) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation, 5% or more of any class of equity interest). "Applicable Lending Office" means, with respect to any Lender, (i) in the case of the Base Rate Portion of its Loans, its Domestic Lending Office and (ii) in the case of the Euro-Rate Portion of its Loans, its Euro- Rate Lending Office. "Applicable Margin" shall have the meaning set forth in Section 2.04(b). "Approved Lease Form" shall mean a form of lease which is satisfactory to the Agent and which, in any event, (i) does not provide for any obligation of the Borrower with respect to residual value (or the equivalent) of greater than 40% of original cost for tractors, 25% of original cost for trailers, a percentage of original cost reasonably satisfactory to the Agent in the case of tippers or 20% of original cost for other equipment and (ii) which has no event of default comprising a cross default (as opposed to a cross acceleration) and which has no representations, warranties, covenants or events of default or prepayment that relate to any other Person or that relate to the Borrower's operations or condition (financial or otherwise) generally (as opposed to those that relate solely to leased equipment). For avoidance of doubt, (x) defaults with respect to particular equipment under a master equipment lease agreement to which the Borrower is a party shall not be deemed to be cross defaults with respect to other equipment under the same master lease agreement and (y) adding additional schedules in form theretofore approved by the Agent to a master lease agreement theretofore approved by the Agent shall not require separate approval of the Agent. "Asche Tractor Debt" shall mean a non-interest bearing payable of the Borrower to Asche Transfer, Inc. in an amount not exceeding $408,250 on account of the deferred purchase price in the Asche Tractor Debt Transaction, as to which no payments will or may be made to Asche Transfer, Inc. or any other Person until such time as the Borrower's Tangible Net Worth is equal to an amount equal to $650,000 plus 50% of the sum of Net Income (not to be reduced by 70 losses) for each fiscal quarter during the period from the Closing Date through and including the last day of the then most recently completed fiscal quarter, and as to which no such payment will or may be made if the making of such payment would result in an Event of Default or would reduce the Borrower's Tangible Net Worth below an amount equal to $650,000 plus 50% of the sum of Net Income (not to be reduced by losses) for each fiscal quarter (or, in the case of the first quarter of 1998, part thereof) during the period from the Closing Date through and including the last day of the then most recently completed fiscal quarter. "Asche Tractor Debt Transaction" shall mean the purchase by the Borrower from Asche Transfer, Inc., of 12 power units (tractors) for an aggregate purchase price not exceeding $408,250 and the assumption by the Borrower of purchase money indebtedness of Asche Transfer, Inc. relating thereto in an amount not exceeding $11,775, which purchase price shall be deferred in full by incurrence of the Asche Tractor Debt. "Assured Obligation" shall have the meaning set forth in the definition of "Guaranty Equivalent." "Base Rate" for any day shall mean the greater of (a) the Prime Rate for such day or (b) .50% plus the Federal Funds Effective Rate for such day. "Base Rate Option" shall have the meaning set forth in Section 2.04(a). "Base Rate Payment Date" shall mean the first day of each calendar month. "Base Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at such time (i) under the Base Rate Option or (ii) in accordance with Section 2.10(c)(ii). If no Loan or Loans is specified, "Base Rate Portion" shall refer to the Base Rate Portion of all Loans outstanding at such time. "Borrowing Base" shall have the meaning set forth in Section 2.14. "Borrowing Base Certificate" shall have the meaning set forth in Section 2.14(e). "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 the city in which is located the Agent's Office. "Calculation Period" for the last day of any fiscal quarter shall mean (a) for June 30, 1998, September 30, 1998 and December 31, 1998, the period from the Closing Date through such date and (b) for each last day of a fiscal quarter thereafter, the period of four consecutive fiscal quarters ending on such last day. "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 as a liability on the balance sheet of such Person at such time as lessee under a Capitalized Lease. -2- 71 "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. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" shall mean that at any time the Executive shall not have the sole right to vote, pursuant to the Voting Trust Agreement, at least 51% of the shares of the capital stock of the Borrower (assuming for purposes of such calculation that all then-outstanding options, warrants, conversion rights or other rights held by any Person other than the Executive 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 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). Notwithstanding the foregoing, a "Change of Control" shall not have occurred if, after a "Voting Change Event" (as defined in the Voting Trust Agreement) has occurred, the Subordinated Debt Lender shall have the right to vote all shares of the capital stock of the Borrower. "Change of Management" shall mean at any time the Executive shall, for any reason (voluntarily or involuntarily, including without limitation death, disability or termination from employment with the Borrower) cease to serve as chief executive officer and chief operating officer of the Borrower, having duties and responsibilities substantially similar to those held by him on the date hereof. "Closing Date" shall mean January 30, 1998. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Collateral" shall have the meaning set forth in the Security Agreement. "Commitments" of a Lender shall mean the Revolving Credit Commitment and the Term Loan Commitment of such Lender. "Commitment Percentage" of a Lender at any time shall mean the Commitment Percentage for such Lender set forth below its name on the signature page hereof, subject to transfer to another Lender as provided in Section 10.14. "Compliance Certificate" shall have the meaning set forth in Section 6.01(d). -3- 72 "Controlled Group Member" shall mean each trade or business (whether or not incorporated) which together with the Borrower 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 Code. "Corresponding Source of Funds" shall mean, in the case of any Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a Euro-Rate Lending Office or by a Lender through a Euro-Rate Lending Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Funding Period corresponding to such Funding Segment having maturities approximately equal to such Euro-Rate Funding Period and in an aggregate amount approximately equal to such Lender's Pro Rata share of such Funding Segment. "Credit Facility Exposure" for any Lender at any time shall mean the sum at such time of the aggregate outstanding principal amount of such Lender's Term Loans plus such Lender's Revolving Credit Exposure. "Cross Default Event" shall have the meaning set forth in Section 8.01(f)(i). "Cross Default Obligation" shall have the meaning set forth in Section 8.01(f)(ii). "Deemed Value" shall have the meaning set forth in Section 2.14(c). "Dollar," "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Domestic Lending Office" shall mean, as to each Lender, its office located at its address set forth on the signature pages hereto, or such other office as such Lender may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent. "EBIT" for any period, with respect to the Borrower, shall mean (a) Net Income for such period, plus (b) Interest Expense for such period, plus (c) charges against income for foreign, federal, state and local income taxes for such period, minus (d) extraordinary gains to the extent included in determining such Net Income for such period, all as determined in accordance with GAAP. "EBITDA" for any period, with respect to the Borrower, shall mean (a) EBIT for such period, plus (b) depreciation expense for such period, plus (c) amortization expense for such period, all as determined in accordance with GAAP. "Eligible Receivables" shall have the meaning set forth in Section 2.14(b). "Employment Agreement" shall have the meaning set forth in Section 5.01(c)(viii). "Environmental Affiliate" shall mean, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" shall mean any Governmental Action pursuant to or required under any Environmental Law. "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, investigation, notice, claim, complaint, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any Governmental Authority, citizens' group or present or former employee of such Person) alleging, -4- 73 asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" shall mean any location which is listed or proposed for listing on the National Priorities List, on CERCLIS or on any similar state list of sites requiring investigation or cleanup, or which is the subject of any pending or threatened action, suit, proceeding or investigation related to or arising from any alleged violation of any Environmental Law. "Environmental Concern Materials" shall mean (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product of any substance specified in or regulated or otherwise affected by any Environmental Law (including but not limited to any "hazardous substance" as defined in CERCLA or any similar state Law), (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polychlorinated biphenyls, radon and urea formaldehyde. "Environmental Law" shall mean any Law, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the manufacture, use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. Without limitation, "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "Euro-Rate" for any day, as used herein, shall mean for each Funding Segment of the Euro-Rate Portion corresponding to a proposed or existing Euro-Rate Funding Period the rate per annum determined by the Agent by dividing (the resulting quotient to be rounded upward to the nearest 1/100 of 1%) (a) the rate of interest (which shall be the same for each day in such Euro-Rate Funding Period) determined in good faith by the Agent in accordance with its usual procedures (which determination shall be conclusive) to be the average of the rates per annum for deposits in Dollars offered to major money center banks in the London interbank market at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such Euro-Rate Funding Period for delivery on the first day of such Euro-Rate Funding Period in amounts comparable to such Funding Segment and having maturities comparable to such Funding Period by (b) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. "Euro-Rate Funding Period" shall have the meaning set forth in Section 2.04(c). "Euro-Rate Lending Office" shall mean, as to each Lender, its office, branch or affiliate located at its address set forth on the signature pages hereto, or such other office, branch or -5- 74 affiliate of such Lender as it may hereafter designate as its Euro-Rate Lending Office by notice to the Borrower and the Agent. "Euro-Rate Option" shall have the meaning set forth in Section 2.04(a). "Euro-Rate Payment Date" shall mean (a) the last day of the applicable Funding Period and (b) if the applicable Funding Period exceeds 30 days, also at intervals of 30 days after the first day of such Funding Period. "Euro-Rate Portion" of any Loan or Loans shall mean at any time the portion, including the whole, of such Loan or Loans bearing interest at any time under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate under Section 2.10(c)(i). If no Loan or Loans is specified, "Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans outstanding at such time. "Euro-Rate Reserve Percentage" for any day shall mean the percentage (expressed as a decimal, rounded upward to the nearest 1/100 of 1%), as determined in good faith by the Agent (which determination shall be conclusive), which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities") of a member bank in such System. The Euro-Rate shall be adjusted automatically as of the effective date of each change in the Euro-Rate Reserve Percentage. The Euro-Rate Option shall be calculated in accordance with the foregoing whether or not any Lender is actually required to hold reserves in connection with its eurocurrency funding or, if required to hold such reserves, is required to hold reserves at the "Euro-Rate Reserve Percentage" as herein defined. "Event of Default" shall mean any of the Events of Default described in Section 8.01. "Excess Cash Flow" for any period, with respect to the Borrower, shall mean (a) EBITDA for such period, minus (b) Interest Expense for such period, minus (c) charges against income for foreign, federal, state and local taxes for such period, minus (d) the aggregate principal amount of the Term Loans paid during such period, minus (e) Capital Expenditures for such period, all as determined in accordance with GAAP. "Executive" shall mean Gary I. Goldberg, an individual currently residing at 7418 Oak Avenue, Gary IN 46403. "Existing Credit Agreement" shall mean that certain Loan Agreement, dated December 1, 1995, between Mellon Bank, N.A. and Jack Gray Transport, Inc. "Existing Qualified Collateral" shall have the meaning set forth in Section 2.14(d). "Federal Funds Effective Rate" for any day shall mean the rate per annum (rounded upward to the nearest 1/100 of 1%) determined by the Agent (which determination shall be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by Federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, that if such Federal Reserve Bank (or its successor) does not announce such rate on any day, the "Federal Funds -6- 75 Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. "Fee Deeds of Trust" shall have the meaning set forth in Section 5.01(b). "Fee Mortgages" shall have the meaning set forth in Section 5.01(b). "Fixed Charges" for any period, with respect to the Borrower, shall mean the (a) Interest Expense for such period, plus (b) scheduled principal payments with respect to any outstanding Indebtedness for such period, plus (c) charges against income for foreign, federal, state and local taxes for such period, plus (or minus) (d) any net increase (or decrease) in deferred taxes for such period, plus (e) dividends paid in respect of preferred stock or common stock during such period, plus (f) Rental Expense for such period, plus (g) management fees paid to the Investor and to the Subordinated Debt Lender for such period, all as determined in accordance with GAAP. "Fixed Charges Coverage Ratio" for any period shall mean (a) (i) EBITDA for such period, plus (ii) Rental Expense for such period, minus (iii) Capital Expenditures for such period, divided by (b) Fixed Charges for such period, all as determined in accordance with GAAP. "Funding Periods" shall have the meaning set forth in Section 2.04(c). "Funding Segment" of the Euro-Rate Portion of the Revolving Credit Loans or the Term Loans at any time shall mean the entire principal amount of such Portion to which at the time in question there is applicable a particular Funding Period beginning on a particular day and ending on a particular day. (By definition, each such Portion is at all times composed of an integral number of discrete Funding Segments and the sum of the principal amounts of all Funding Segments of any such Portion at any time equals the principal amount of such Portion at such time.) "GAAP" shall have the meaning set forth in Section 1.03. "Governmental Action" shall have the meaning set forth in Section 4.04. "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 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 -7- 76 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): (a) 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; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) 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; (d) 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 of the holder of such Lien or the lessor under such Capitalized Lease to repossession or sale of such property); (e) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (f) all obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; (g) 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 (h) 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; provided, however, that for purposes of Section 7.01 hereof the Asche Tractor Debt shall be deemed not to be Indebtedness. "Indemnified Parties" shall mean the Agent, the Lenders, their respective affiliates, and the directors, officer, employees, attorneys and agents of each of the foregoing. "Initial Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a). "Interest Coverage Ratio" for any period shall mean (a) EBITDA for such period, divided by (b) Interest Expense for such period. "Interest Expense" for any period shall mean the total interest expense of the Borrower for such period which the Borrower was obligated to pay determined in accordance with GAAP. "Interest Rate Hedging Agreement" shall mean an interest rate swap, cap or collar agreement. "Investor" shall mean Aasche Transportation Services, Inc. "Issuing Bank" shall mean Mellon Bank, N.A. "JGT" shall mean Jack Gray Transport, Inc. "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. "Leasehold Mortgages," if any, shall have the meaning set forth in Section 6.16. "Leasehold Deeds of Trust," if any, shall have the meaning set forth in Section 6.16. -8- 77 "Lender" shall mean any of the Lenders listed on the signature pages hereof, subject to the provisions of Section 10.14 pertaining to Persons becoming or ceasing to be Lenders. "Letter of Credit" shall mean any letter of credit outstanding under this Agreement from time to time. "Letter of Credit Application" shall have the meaning given that term in Section 3.01(b)(i). "Letter of Credit Collateral Account" shall have the meaning given that term in the Security Agreement. "Letter of Credit Commitment" shall have the meaning given that term in Section 3.01(a)(i). "Letter of Credit Exposure" at any time shall mean the sum of (a) the aggregate Letter of Credit Unreimbursed Draws at such time and (b) the aggregate Letter of Credit Undrawn Availability at such time. "Letter of Credit Fee" shall have the meaning given that term in Section 3.01(a)(iv). "Letter of Credit Fee Rate" shall have the meaning given that term in Section 3.01(a)(iv). "Letter of Credit Participating Interest" shall have the meaning given that term in Section 3.01(c)(i). "Letter of Credit Reimbursement Obligation" with respect to a Letter of Credit means the obligation of the Borrower to reimburse the Issuing Bank for Letter of Credit Unreimbursed Draws, together with interest thereon. "Letter of Credit Undrawn Availability" with respect to a Letter of Credit at any time shall mean the maximum amount available to be drawn under such Letter of Credit at such time or thereafter, regardless of the existence or satisfaction of any conditions or limitations on drawing. "Letter of Credit Unreimbursed Draws" with respect to a Letter of Credit at any time shall mean the aggregate amount at such time of all payments made by the issuer under such Letter of Credit, to the extent not repaid by the Borrower. "Level," "Level I," "Level II," and "Level III" shall have the meanings set forth in Annex B. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" shall mean any loan by a Lender to the Borrower under this Agreement, and "Loans" shall mean all Loans made by the Lenders under this Agreement. "Loan Documents" shall mean this Agreement, the Notes, the Transfer Supplements and the Security Documents, and all other agreements and instruments extending, renewing, refinancing or refunding any indebtedness, obligation or liability arising under any of the -9- 78 foregoing, in each case as the same may be amended, modified or supplemented from time to time hereafter. "London Business Day" shall mean a day for dealing in deposits in Dollars by and among banks in the London interbank market and which is a Business Day. "Management Agreement" shall have the meaning set forth in Section 5.01(c). "Material Adverse Effect" shall mean: (a) a material adverse effect on the business, operations, condition (financial or otherwise) or prospects of the Borrower, (b) a material adverse effect on the ability of the Borrower to perform or comply with any of the terms and conditions of any Loan Document, or (c) an adverse effect on the legality, validity, binding effect, enforceability or admissibility into evidence of any Loan Document, or the ability of the Agent or any Lender to enforce any rights or remedies under or in connection with any Loan Document. "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 the Borrower or any Controlled Group Member has or had an obligation to contribute. "Net Income" for any period shall mean the net earnings (or loss) after taxes of the Borrower for such period determined in accordance with GAAP. "Net Proceeds" shall mean, with respect to any Reduction Event, an amount equal to the gross cash proceeds received by the Borrower in respect of such Reduction Event, less (a) any fees, costs and expenses reasonably incurred by such Person in respect of such Reduction Event and (b) if such Reduction Event is a Reduction Event Asset Sale, (i) payments made to retire obligations (other than to the Borrower) that are secured by the properties that are the subject of such Reduction Event Asset Sale, and (ii) any taxes actually paid or estimated in good faith by a senior financial officer of the Borrower (giving effect to the overall tax position of the Borrower) by such Person in respect of such Reduction Event Asset Sale. "Net Value" shall have the meaning set forth in Section 2.14(b). "New Qualified Collateral" shall have the meaning set forth in Section 2.14(c). "Note" or "Notes" shall mean the Revolving Credit Note(s) or the Term Loan Note(s), as the case may be, of the Borrower executed and delivered under this Agreement, together with all extensions, renewals, refinancings or refundings of any thereof in whole or part. "Obligations" shall mean all indebtedness, obligations and liabilities of the Borrower to any Lender or the Agent from time to time arising under or in connection with or related to or evidenced by or secured by or under color of this Agreement or any other Loan Document, and all extensions, renewals or refinancings thereof, whether such indebtedness, obligations or liabilities are direct or indirect, otherwise secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising. Without limitation of the foregoing, such indebtedness, obligations and liabilities include the principal amount of Loans, interest, fees, indemnities or expenses under this Agreement or any other Loan Document, and all extensions, renewals and refinancings thereof, whether or not such Loans were made in compliance with the terms and conditions of this Agreement or in excess of the obligation of the Lenders to lend. Obligations shall remain Obligations notwithstanding any assignment or transfer or any subsequent assignment or transfer of any of the Obligations or any interest therein. -10- 79 "Office," when used in connection with the Agent, shall mean its office located at Three Mellon Bank Center, Pittsburgh, Pennsylvania 15259, or at such other office or offices of the Agent or any branch, subsidiary or affiliate thereof as may be designated in writing from time to time by the Agent to the Borrower. "Option" shall mean the Base Rate Option or the Euro-Rate Option, as the case may be. "Orderly Liquidation Value" shall have the meaning set forth in Section 2.14(d). "Other Taxes" shall have the meaning set forth in Section 2.12(b). "Participants" shall have the meaning set forth in Section 10.14(b). "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. "Pension-Related Event" shall mean any of the following events or conditions: (a) Any action is taken by any Person (i) to terminate, or which would result in the termination of, a Plan, either pursuant to its terms or by operation of law (including, without limitation, any amendment of a Plan which would result in a termination under Section 4041(e) of ERISA), or (ii) to have a trustee appointed for a Plan pursuant to Section 4042 of ERISA; (b) PBGC notifies any Person of its determination that an event described in Section 4042 of ERISA has occurred with respect to a Plan, that a Plan should be terminated, or that a trustee should be appointed for a Plan; (c) Any Reportable Event occurs with respect to a Plan; (d) Any action occurs or is taken which could result in the Borrower becoming subject to liability for a complete or partial withdrawal by any Person from a Multiemployer Plan (including, without limitation, seller liability incurred under Section 4204(a)(2) of ERISA), or the Borrower or any Controlled Group Member receives from any Person a notice or demand for payment on account of any such alleged or asserted liability; or (e) (i) There occurs any failure to meet the minimum funding standard under Section 302 of ERISA or Section 412 of the Code with respect to a Plan, or any tax return is filed showing any tax payable under Section 4971(a) of the Code with respect to any such failure, or the Borrower or any Controlled Group Member receives a notice of deficiency from the Internal Revenue Service with respect to any alleged or asserted such failure, or (ii) any request is made by any Person for a variance from the minimum funding standard, or an extension of the period for amortizing unfunded liabilities, with respect to a Plan. "Permitted Aasche Subordinated Debt Refinancing Indebtedness" shall mean Indebtedness payable to Aasche (and to no other Person) which meets, to the satisfaction of the Agent, all of the following requirements: (i) all of the proceeds of the issuance of such Indebtedness are cash in an amount not less than the principal amount of such Indebtedness and are used to pay in full (including any premium and accrued interest) all Subordinated Debt and to -11- 80 purchase all warrants granted to the Subordinated Debt Lender on the Closing Date and all shares of stock, if any, which shall have been theretofore issued upon exercise of such warrants and all shares of stock which have been or are being "put" to the Borrower at the time of such payment; (ii) no pledge of any of the Borrower's capital stock may be made to any Person after the incurrence of such Indebtedness; (iii) neither the final maturity nor any interim maturity of any portion of such Indebtedness shall be earlier than June 30, 2003; (iv) such Indebtedness shall be unsecured, shall be evidenced solely by a promissory note and shall not have the benefit of any covenants or events of default; (v) such Indebtedness shall be subordinated to the Obligations to the same extent that the Subordinated Indebtedness is as of the Closing Date; (v) the interest rate on such Indebtedness for each day shall not exceed the interest rate payable on the Subordinated Debt, and interest on such Indebtedness shall accrue, but not be payable or paid, until the Obligations shall have been paid in full; and (vi) all documentation with respect to such Indebtedness shall be in form and substance reasonably satisfactory to the Agent. "Permitted Liens" shall have the meaning set forth in Section 7.02. "Person" shall mean an individual, corporation, partnership, trust, limited liability company, unincorporated association, joint venture, joint-stock company, Governmental Authority or any other entity. "Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of ERISA by reason of Section 4021 of ERISA, of which the Borrower 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 the Borrower or any Controlled Group Member. "Portion" shall mean the Base Rate Portion or the Euro-Rate Portion, as the case may be. "Postretirement Benefits" shall mean any benefits, other than retirement income, provided by the Borrower 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. "Postretirement Benefit Obligation" shall mean that portion of the actuarial present value of all Postretirement Benefits expected to be provided by the Borrower 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 the Borrower 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. "Potential Default" shall mean any event or condition which with notice, passage of time (as such) or a determination by the Lender, or any combination of the foregoing, would constitute an Event of Default. "Pricing Grid" shall mean the pricing grid set forth in Annex B. "Prime Rate" as used herein, shall mean the interest rate per annum announced from time to time by Mellon Bank, N.A. as its prime rate, such rate to change automatically effective as of the effectiveness of each announced change in such prime rate. -12- 81 "Pro Rata" shall mean from or to each Lender in proportion to its Commitment Percentage. "Purchasing Lender" shall have the meaning set forth in Section 10.14(c). "Qualified Collateral" shall mean trucks, tractors, trailers, tippers and loaders owned by the Borrower and used in the Borrower's business, and other equipment owned by the Borrower and used in the Borrower's business, which meet the specifications established by the Agent in its reasonable discretion from time to time. In no event, however, shall the Qualified Collateral be deemed to include any of the Borrower's (a) motor vehicles or equipment that is not in good condition or usable in the ordinary course of the Borrower's business; (b) motor vehicles or equipment with respect to which the Agent (on behalf of itself and the Lenders) does not have a first and valid, fully perfected security interest and possession of the motor vehicle certificates of title therefor; or (c) motor vehicles or equipment which is not, at the time it is submitted by the Borrower for advances of Loans, listed and described on the most recent Borrowing Base Certificate. "Quarterly Payment Date" shall mean the last day of each March, June, September and December after the date hereof. "Reduction Event," "Reduction Event Application Amount," "Reduction Event Date" and "Reduction Event Asset Sale" shall have the meanings given those terms in Section 2.08(b). "Register" shall have the meaning set forth in Section 10.14(d). "Relevant Date" shall have the meaning set forth in Section 1.03(a). "Rental Expense" for any period shall mean aggregate rent and lease payments made by the Borrower pursuant to operating leases for such period determined in accordance with GAAP. "Reportable Event" means (i) a reportable event described in Section 4043 of ERISA and regulations thereunder, (ii) a withdrawal by a substantial employer from a Plan to which more than one employer contributes, as referred to in Section 4063(b) of ERISA, (iii) a cessation of operations at a facility causing more than 20% of Plan participants to be separated from employment, as referred to in Section 4068(f) of ERISA, or (iv) a failure to make a required installment or other payment with respect to a Plan when due in accordance with Section 412 of the Code or Section 302 of ERISA which causes the total unpaid balance of missed installments and payments (including unpaid interest) to exceed $750,000. "Required Lenders" shall mean, as of any date, Lenders which have made Loans constituting, in the aggregate, at least 51% in principal amount of Loans outstanding on such date or, if no Loans are outstanding on such date, Lenders which have Commitments constituting, in the aggregate, at least 51% of the total Commitments of all the Lenders. "Responsible Officer" of any Person shall mean the President, Chief Financial Officer, Treasurer or any Vice President of such Person. "Restricted Indebtedness" shall mean Indebtedness incurred by the Borrower pursuant to the Subordinated Debt Agreement and the other Subordinated Debt Documents. "Revolving Credit Commitment" shall have the meaning set forth in Section 2.01(a). "Revolving Credit Commitment Fee" shall have the meaning set forth in Section 2.01(e). -13- 82 "Revolving Credit Commitment Fee Percentage" shall have the meaning set forth in Section 2.01(a). "Revolving Credit Committed Amount" shall have the meaning set forth in Section 2.01(a). "Revolving Credit Exposure" of any Lender at any time shall mean the sum at such time of the aggregate outstanding principal amount of such Lender's Revolving Credit Loans plus such Lender's Pro Rata share of the aggregate Letter of Credit Exposure. "Revolving Credit Loans" shall have the meaning set forth in Section 2.01(a). "Revolving Credit Maturity Date" shall mean December 31, 2000. "Revolving Credit Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.01(c), any promissory note issued in substitution therefor pursuant to Sections 2.11(b) or 10.14(c), together with all extensions, renewals, refinancings or refundings thereof in whole or part. "Security Agreement" shall have the meaning set forth in Section 5.01(b). "Security Documents" shall mean the Security Agreement, the Fee Mortgages, the Fee Deeds of Trust, the Leasehold Mortgages, the Leasehold Deeds of Trust and any other agreements or instruments from time to time to time granting or purporting to grant the Agent a Lien in any property for the benefit of the Lenders and the Agent to secure the Obligations, or constituting a Guaranty Equivalent for the Obligations, or subordinating to the Obligations, in each case as the same may be amended from time to time. "September 1997 Financial Statements" shall have the meaning set forth in Section 4.07. "Solvent" means, with respect to any Person at any time, that at such time (a) the sum of the debts and liabilities (including, without limitation, contingent liabilities) of such Person is not greater than all of the assets of such Person at a fair valuation, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person has not incurred, will not incur, does not intend to incur, and does not believe that it will incur, debts or liabilities (including, without limitation, contingent liabilities) beyond such person's ability to pay as such debts and liabilities mature, (d) such Person is not engaged in, and is not about to engage in, a business or a transaction for which such person's property constitutes or would constitute unreasonably small capital, and (e) such Person is not otherwise insolvent as defined in, or otherwise in a condition which could in any circumstances then or subsequently render any transfer, conveyance, obligation or act then made, incurred or performed by it avoidable or fraudulent pursuant to, any Law that may be applicable to such Person pertaining to bankruptcy, insolvency or creditors' rights (including but not limited to the Bankruptcy Code of 1978, as amended, and, to the extent applicable to such Person, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act, or any other applicable Law pertaining to fraudulent conveyances or fraudulent transfers or preferences). "Standard Notice" shall mean an irrevocable notice provided to the Agent on a Business Day which is (a) On the same Business Day in the case of selection of, conversion to or renewal of the Base Rate Option or prepayment of any Base Rate Portion; and -14- 83 (b) At least three London Business Days in advance in the case of selection of the Euro-Rate Option or prepayment of any Euro-Rate Portion. Standard Notice must be provided no later than 10:00 a.m., Pittsburgh time, on the last day permitted for such notice. "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. "Stockholders' Agreement" shall have the meaning set forth in Section 5.01(c). "Subordinated Debt" shall mean Indebtedness of the Borrower pursuant to the Subordinated Debt Agreement and the other Subordinated Debt Documents. "Subordinated Debt Agreement" shall have the meaning set forth in Section 5.01(c). "Subordinated Debt Documents" shall have the meaning set forth in Section 5.01(c). "Subordinated Debt Lender" shall mean American Capital Strategies, Ltd. "Subordination Agreement" shall have the meaning set forth in Section 5.01(c). "Subsidiary" of a Person at any time shall mean any corporation of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote for the election of one or more directors (regardless of any contingency which does or may suspend or dilute the voting rights of such class) is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person, and any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person. "Supermajority Lenders" shall mean, as of any date, Lenders which have made Loans constituting, in the aggregate, at least 75% in principal amount of Loans outstanding on such date or, if no Loans are outstanding on such date, Lenders which have Commitments constituting, in the aggregate, at least 75% of the total Commitments of all the Lenders. "Tangible Net Worth" at any time shall mean the total amount of stockholders' equity of the Borrower at such time determined in accordance with GAAP, except that there shall be deducted therefrom the book value of all intangible assets and deferred charges of the Borrower at such time determined in accordance with GAAP and except that there shall be added thereto the outstanding amount of the Asche Tractor Debt. "Target Business" shall mean the municipal and solid waste transport business of JGT to be acquired by the Borrower pursuant to the Acquisition Agreement. "Taxes" shall have the meaning set forth in Section 2.12. "Term Loan" shall have the meaning set forth in Section 2.02, and "Term Loans" shall mean the Term Loans of the Lenders collectively. -15- 84 "Term Loan Commitment" shall have the meaning set forth in Section 2.04(a). "Term Loan Committed Amount" shall have the meaning set forth in Section 2.02(a). "Term Loan Maturity Date" shall mean December 31, 2002. "Term Loan Note" shall mean the promissory note of the Borrower executed and delivered under Section 2.02(c), or any promissory note issued in substitution therefor pursuant to Sections 2.11(b) or 10.14(c), together with all extensions, renewals, refinancings or refundings thereof in whole or part. "Total Leverage Ratio" for any period shall mean (a) the sum of (i) aggregate Indebtedness of the Borrower on the last day of such period plus (ii) an amount equal to Rental Expense for such period multiplied by four, divided by (b) the sum of EBITDA for such period plus Rental Expense for such period, all as determined in accordance with GAAP; provided, that in calculating the Total Leverage Ratio as of June 30, 1998, September 30, 1998 and December 31, 1998, EBITDA and Rental Expense for the applicable Calculation Period shall be multiplied by the reciprocal of a fraction, the numerator of which fraction is the number of months then completed after the Closing Date and the denominator of which fraction is 12.. "Transfer Effective Date" shall have the meaning set forth in the applicable Transfer Supplement. "Transfer Supplement" shall have the meaning set forth in Section 10.14(c). "Voting Trust Agreement" shall have the meaning set forth in Section 5.01(c). -16- 85 ANNEX B TO CREDIT AGREEMENT PRICING GRID
- ----------------------------------------------------------------------------------------------------------------------------- REVOLVING CREDIT REVOLVING CREDIT TERM LOAN EURO- TERM LOAN BASE REVOLVING CREDIT LOAN LEVEL LOAN EURO-RATE LOAN BASE RATE RATE RATE COMMITMENT FEE PERCENTAGE - ----------------------------------------------------------------------------------------------------------------------------- Level I 2.75 0 3.00 0.25 0.500 - ----------------------------------------------------------------------------------------------------------------------------- Level II 2.25 0 2.50 0 0.375 - ----------------------------------------------------------------------------------------------------------------------------- Level III 1.75 0 2.00 0 0.250 - -----------------------------------------------------------------------------------------------------------------------------
"Level" shall mean, on any date, whichever of Level 1, Level II or Level III applies on such date. For the period from the Closing Date to and including the date which is one year after the Closing Date, the Borrower shall be deemed to be in Level I Status. Thereafter, subject to the other provisions of this definition, (i) following the end of each fiscal quarter of the Borrower, the Borrower shall prepare and deliver to the Agent in accordance with Section 6.01(d) a Compliance Certificate, duly completed and signed by a Responsible Officer, computing the Total Leverage Ratio as of the last day of such fiscal quarter, and (ii) the Level corresponding to the Total Leverage Ratio shall take effect on the first day of the month following the month in which the Agent receives such Compliance Certificate, and such Level shall continue in effect until reset (in accordance with this definition). In the event that a Compliance Certificate is not received when it is required to be delivered under Section 6.01(d), then, without limiting any other rights and remedies of the Agent and the Lenders, the Borrower shall be deemed to be in Level I for the period from and including the first day of the month following the month in which such Compliance Certificate was required to be delivered to and including the fifth day after the date on which such Compliance Certificate is received by the Agent. Notwithstanding anything to the contrary in this definition, the Borrower shall be deemed to be in Level I each day on which an Event of Default has occurred and is continuing. "Level I" shall mean, on any date, the Total Leverage Ratio for such date is greater than 2.75. "Level II" shall mean, on any date, the Total Leverage Ratio for such date is less than or equal to 2.75, but greater than or equal to 2.00. "Level III" shall mean, on any date, the Total Leverage Ratio for such date is less than 2.00. EX-10.2 3 SUB. NOTE & EQUITY PURCH. AGREE. 1 EXHIBIT 10.2 _______________________________________________________ SUBORDINATED NOTE AND EQUITY PURCHASE AGREEMENT between SPECIALTY TRANSPORTATION SERVICES, INC., AND AMERICAN CAPITAL STRATEGIES, LTD. January 30, 1998 _______________________________________________________ 2 SUBORDINATED NOTE AND EQUITY PURCHASE AGREEMENT $5,500,000 PRINCIPAL AMOUNT SENIOR SUBORDINATED NOTES DUE 2006 OF SPECIALTY TRANSPORTATION SERVICES, INC. $2,500,000 PRINCIPAL AMOUNT JUNIOR SUBORDINATED NOTES DUE 2006 OF SPECIALTY TRANSPORTATION SERVICES, INC. 500,000 SHARES OF COMMON STOCK OF SPECIALTY TRANSPORTATION SERVICES, INC. PRIMARY WARRANTS TO PURCHASE 500,000 SHARES OF COMMON STOCK OF SPECIALTY TRANSPORTATION SERVICES, INC. CONDITIONAL WARRANTS TO PURCHASE COMMON STOCK OF SPECIALTY TRANSPORTATION SERVICES, INC. THIS SUBORDINATED NOTE AND EQUITY PURCHASE AGREEMENT, dated as of January 30, 1998, is between SPECIALTY TRANSPORTATION SERVICES, INC., an Illinois corporation (the "Company"), and AMERICAN CAPITAL STRATEGIES LTD., a Delaware corporation ("ACS" or the "Purchaser"). Capitalized terms used and not defined elsewhere in this Agreement are defined in Article 1, below. RECITALS A. Gary I. Goldberg ("Executive") and Jack Gray Transport, Inc., an Indiana corporation ("JGT") have entered into that certain Asset Purchase Agreement dated September 24, 1997, as amended by amendment dated as of January 2, 1998 (the "Asset Purchase Agreement"). B. Goldberg assigned certain of his rights and interests in the Asset Purchase Agreement to Aasche Transportation Services, Inc., a Delaware corporation ("Investor"), pursuant to a certain Assignment of Asset Purchase Agreement dated as of September 29, 1997 (the "Assignment") which Assignment was consented to by JGT by a consent dated as of October 15, 1997. C. Aasche assigned all of its rights and interests in the Asset Purchase Agreement to the Company pursuant to a certain Assignment of Asset Purchase Agreement dated as of January 30,1998 ("Aasche Assignment") which Assignment was consented to by JGT by a consent dated as of January 30, 1998, pursuant to which the Company shall acquire from JGT (the "Acquisition") the municipal solid and special waste 3 segment of JGT (the "Business"). (The Asset Purchase Agreement, the Assignment and the Aasche Assignment are hereinafter referred to collectively as the Acquisition Agreement). D. In order to induce the Purchaser to purchase the Notes and Common Stock to be issued pursuant to this Agreement, the Company has agreed to issue to the Purchaser primary stock purchase warrants exercisable for 500,000 shares of Common Stock and conditional stock purchase warrants exercisable for additional shares of Common Stock, in each case subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, the parties hereto, in consideration of the premises and their mutual covenants and agreements herein set forth and intending to be legally bound hereby, covenant and agree as follows: ARTICLE 1 DEFINITIONS 1.1 Certain Definitions. In addition to other words and terms defined elsewhere in this Agreement, the following words and terms shall have the meanings set forth below: "Acquisition" shall have the meaning assigned to such term in the recitals hereto. "Acquisition Agreement" shall have the meaning assigned to such term in the recitals hereto. "ACS" shall have the meaning assigned to such term in the preamble hereto. "ACSCIC" shall mean ACS Capital Investments Corporation, a subsidiary of ACS. "Additional Senior Indebtedness" shall have the meaning set forth in Section 6.2(a)(2). "Affiliate" shall mean with respect to any Person, any other Person which is directly or indirectly controlling, controlled by or under common control with such Person or entity or any of its Subsidiaries, and the term "control" (including the terms "controlled by" and "under common control with") means having, directly or indirectly, the power to direct or cause the direction of the management and policies of a Person, whether through ownership of 2 4 voting securities or by contract or otherwise. Without limiting the foregoing, the ownership of five percent (5%) of the voting securities of a Person shall be deemed to constitute control and notwithstanding anything to the contrary herein, neither Purchaser nor any of its Affiliates shall be deemed to be Affiliates of the Company by virtue of the transactions contemplated in this Agreement. "Agreement" shall mean this Subordinated Note and Equity Purchase Agreement and all other agreements, instruments and documents attached hereto or delivered by the Company in connection herewith as any or all of the foregoing may be supplemented or amended from time to time. "Approved Lease Form" shall mean a form of lease which is satisfactory to the Purchaser and which, in any event, (i) does not provide for any obligation of the Company with respect to residual value (or the equivalent) of greater than 40% of original cost for tractors, 25% of original cost for trailers, a percentage of original cost reasonably satisfactory to the Purchaser in the case of toppers or 20% of original cost for other equipment and (ii) which has no event of default comprising a cross default (as opposed to a cross acceleration) and which has no representations, warranties, covenants or events of default or prepayment that relate to any other Person or that relate to the Company's operations or condition (financial or otherwise) generally (as opposed to those that relate solely to leased equipment). For avoidance of doubt, (x) defaults with respect to particular equipment under a master equipment lease agreement to which the Company is a party shall not be deemed to be cross defaults with respect to other equipment under the same master lease agreement and (y) adding additional schedules in form theretofore approved by the Purchaser to a master lease agreement theretofore approved by the Purchaser shall not require separate approval of the Purchaser. "Asche Tractor Debt" shall mean a non-interest bearing note payable of the Borrower to Asche Transfer, Inc. in an amount not exceeding $408,250 on account of the deferred purchase price in the Asche Tractor Debt Transaction, as to which no payments will or may be made to Asche Transfer, Inc. or any other Person until such time as the Borrower's Tangible Net Worth is equal to an amount equal to $650,000 plus 50% of the sum of Net Income (not to be reduced by losses) for each fiscal quarter during the period from the Closing Date through and including the last day of the then most recently completed fiscal quarter, and as to which no 3 5 such payment will or may be made if the making of such payment would result in an Event of Default or would reduce the Borrower's Tangible Net Worth below an amount equal to $650,000 plus 50% of the sum of Net Income (not to be reduced by losses) for each fiscal quarter during the period from the Closing Date through and including the last day of the then most recently completed fiscal quarter. "Asche Tractor Debt Transaction" shall mean the purchase by the Borrower from Asche Transfer, Inc., of 12 power units (tractors) for an aggregate purchase price not exceeding $408,250 and the assumption by the Borrower of purchase money indebtedness of Asche Transfer, Inc. relating thereto in an amount not exceeding $11,775, which purchase price shall be deferred in full by incurrence of the Asche Tractor Debt. "Banks" shall mean, collectively, Mellon Bank, N.A. and its successors and assigns pursuant to the Credit Agreement. "Business" shall have the meaning assigned to such term in the recitals hereto. "Business Day" shall mean any day other than a Saturday, Sunday or public holiday under the laws of the State of Maryland or other day on which banking institutions are authorized or obligated to close in the State of Maryland. "Calculation Period" for the last day of any fiscal quarter shall mean (a) for June 30, 1998, September 30, 1998 and December 31, 1998, the period from the Closing Date through such date and (b) for each last day of a fiscal quarter thereafter, the period of four consecutive fiscal quarters ending on such last day. "Call" shall have the meaning assigned to such term in Section 10.1 hereof. "Call Closing" shall have the meaning assigned to such term in Section 10.7 hereof. "Call Notice" shall have the meaning assigned to such term in Section 10.1 hereof. "Call Price" shall have the meaning assigned to such term in Section 10.2 hereof. "Capital Expenditures" of any Person shall mean, for any period, all expenditures (whether paid in cash 4 6 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 Leases" shall mean, with respect to any Person, leases of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP (as defined in Section 1.2, below), either would be required to be classified and accounted for as capital leases on a balance sheet of such Person or otherwise be disclosed as such in a note to such balance sheet. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9604, et seq.), as amended, and rules and regulations issued thereunder. "Change of Control" shall have the meaning assigned to such term in Section 9.6 hereof. "Charter Documents" with respect to any entity, shall mean the certificate of incorporation, articles of incorporation or similar evidences of corporate establishment of such entity, together with all amendments or supplements thereto. "Closing" shall mean the closing of the separate purchases and sales of the Purchased Securities and the Notes pursuant to this Agreement. "Closing Date" shall mean the date and time for delivery and payment of the Securities as finally determined pursuant to Section 2.4 hereof. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Collateral" shall mean the property from time to time subject to or purported to be subject to the Liens of the Security Documents. "Commitment Fees" shall mean the aggregate commitment fees equal to $78,334 which have became due and payable and paid by the Company to ACSCIC prior to the date hereof. "Common Stock" shall mean the Company's common stock, $.01 par value. 5 7 "Company" shall have the meaning assigned to such term in the preamble hereto. "Conditional Warrant" shall have the meaning assigned to such term in Section 2.2 hereof. "Contractual Obligations" shall mean, for any Person, any provisions of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of property is bound. "Controlled Group" shall mean the "controlled group of corporations" as that term is defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which JGT is a part as of the date hereof or the Company is a part now or from time to time. "Credit Agreement" shall mean the loan agreement among the Company and the Banks described in Section 3.1(i) hereof and the collateral documents entered into in connection therewith, each as in effect on the Closing Date, as the same may be amended from time to time in accordance with the Subordination Agreement. "Default" shall mean any event or condition that, but for the giving of notice or the lapse of time (as such), or both, would constitute an Event of Default. "Dividend" shall mean any distribution with respect to capital stock whether in cash, securities (including common and preferred stock) or other property but excluding any such distribution payable in the form of securities of the same class of capital stock with respect to which such distribution is made. "EBIT" for any period, with respect to the Company, shall mean (a) Net Income for such period, plus (b) Interest Expense for such period, plus (c) charges against income for foreign, federal, state and local income taxes for such period, minus (d) extraordinary gains to the extent included in determining such Net Income for such period, all as determined in accordance with GAAP. "EBITDA" for any period, with respect to the Company, shall mean (a) EBIT for such period, plus (b) depreciation expense for such period, plus (c) amortization expense for such period, all as determined in accordance with GAAP. "Employment Agreement" shall have the meaning set forth in Section 3.1(h). 6 8 "Environmental Laws" shall mean any laws which address, are related to, or are otherwise concerned with environmental, health, or safety issues, including any laws relating to any emissions, releases or discharges of Pollutants into ambient air, surface water, ground water or land or otherwise relating to the manufacture processing, distribution, use, treatment, storage, disposal, transport, handling, clean-up or control of Pollutants or any exposure or impact on worker health and safety. "Environmental Liabilities" shall mean any obligations or liabilities (including any claims, suits or other assertions of obligations or liabilities) that are: (a) related to environmental, health or safety issues (including on-site or off-site contamination by Pollutants of surface or subsurface soil or water, and occupational safety and health); and (b) based upon or related to (i) any provision of past, present or future United States Environmental Law (including CERCLA and RCRA) or common law, or (ii) any judgment, order, writ, decree, permit or injunction imposed by any court, administrative agency, tribunal or otherwise. The term "Environmental Liabilities" includes: (1) fines, penalties, judgments, awards, settlements, losses, actual damages, out-of-pocket costs, fees (including reasonable attorneys' and consultants' fees), expenses and disbursements; (2) defense and other responses to any administrative or judicial action (including claims, notice letters, complaints, and other assertions of liability); and (3) financial responsibility for (1) cleanup costs and injunctive relief, including any Removal, Remedial or other Response actions, and natural resource damages, and (2) any other necessary compliance or remedial measures. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may from time to time be amended, and the rules and regulations of any governmental agency or authority, as from time to time in effect, promulgated thereunder. "ERISA Affiliate" shall mean, with respect to any Person, any (i) corporation which is a member of the same Controlled Group as such Person; (ii) partnership, trade or business under common control (within the meaning of Section 414(c) of the Code) with such Person and (iii) solely for purposes of liability under Section 412(c)(11) of the Code, for the lien created under Section 412(n) of the Code or for a tax imposed for failure to meet minimum funding standards 7 9 under Section 4971 of the Code, member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as such Person, any corporation described in clause (i) above or any partnership, trade or business described in clause (ii) above. "Event of Default" shall mean any of the Events of Default described in Section 7.1 hereof. "Executive" shall mean Gary I. Goldberg. "Exercise Date" shall have the respective meanings assigned to such term in Sections 9.1 and 10.1 hereof. "Fair Market Value" shall have the meaning assigned to such term in Section 9.2 hereof. "Financing Statements" shall have the meaning assigned to such term in Section 3.1(f) hereof. "Fixed Charges" shall mean for any period, with respect to the Company, the (a) Interest Expense for such period, plus (b) scheduled principal payments with respect to any outstanding Indebtedness for such period, plus (c) charges against income for foreign, federal, state and local taxes for such period, plus (or minus) (d) any net increase (or decrease) in deferred taxes for such period, plus (e) dividends paid in respect of preferred stock or common stock during such period, plus (f) Rental Expense for such period, plus (g) management fees paid to the Investor and the Purchaser, all as determined in accordance with GAAP. "Fixed Charges Coverage Ratio" shall mean for any period (a) (i) EBITDA for such period, plus (ii) Rental Expense for such period, minus (iii) Capital Expenditures for such period, divided by (b) Fixed Charges for such period, all as determined in accordance with GAAP. "Fully Diluted Basis" shall have the meaning assigned to such term in Section 9.2 hereof. "GAAP" shall have the meaning assigned to such term in Section 1.2 hereof. "Governmental Authority" shall have the meaning assigned to such term in Section 4.1(j) hereof. "Guaranty" shall mean any guaranty of the payment or performance of any Indebtedness or other obligation and any other arrangement whereby credit is extended to one obligor on the basis of any promise of another Person, whether that promise is expressed in terms of an obligation to pay the Indebtedness of such obligor, or to purchase an obligation owed by such obligor, or to purchase goods and services from 8 10 such obligor pursuant to a take-or-pay contract, or to maintain the capital, working capital, solvency or general financial condition of such obligor, whether or not any such arrangement is listed in the balance sheet of such other Person, firm or corporation, or referred to in a footnote thereto, but shall not include endorsements of items for collection in the ordinary course of business. For the purpose of all computations made under this Agreement, the amount of a Guaranty in respect of any obligation shall be deemed to be equal to the maximum aggregate amount of such obligation or, if the Guaranty is limited to less than the full amount of such obligation, the maximum aggregate potential liability under the terms of the Guaranty. "Guaranty of Accuracy" shall have the meaning assigned to such term in Section 3.1(h) hereof. "Indebtedness" shall mean, for any Person, (i) all obligations for borrowed money, (ii) all obligations arising from installment purchases of property or representing the deferred purchase price of property or services in respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business on terms customary in the trade), (iii) all issued by such person, or arising out of letters of credit issued for such Person's account, (iv) all obligations, whether or not assumed, secured by any Lien or payable out of the proceeds or production from any property or assets now or hereafter owned or acquired by such Person, (v) all obligations for which such Person is obligated pursuant to a Guaranty, (vi) the capitalized portion of lease obligations under Capitalized Leases, (vii) all obligations for which such Person is obligated pursuant to any Interest Rate Protection Agreements or derivative agreements or arrangements; provided, however, that for purposes of section 6.3, the Asche Tractor Debt shall be deemed not to be Indebtedness. "Interest Coverage Ratio" shall mean for any period (a) EBITDA for such period, divided by (b) Interest Expense for such period. "Interest Expense" shall mean for any period the total interest expense of the Company for such period which the Company was obligated to pay as determined in accordance with GAAP. "Interest Rate Protection Agreement" shall mean any interest rate swap, interest rate cap, interest rate collar or other interest rate hedging agreement or arrangement. "Investment" as applied to any Person shall mean the amount paid or agreed to be paid or loaned, advanced or 9 11 contributed to other Persons, and in any event shall include (i) any direct or indirect purchase or other acquisition of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) and (ii) any capital contribution to any other Person. "Investor" shall mean Aasche Transportation Services, Inc. "Issuer" shall have the meaning assigned to such term in Section 5.2 hereof. "JGT" shall have the meaning assigned to such term in the recitals hereto. "Junior Subordinated Note" shall have the meaning assigned to such term in Section 3.1(d) hereof. "Latest Balance Sheet" shall have the meaning set forth in Section 4.1(g). "Laws" shall mean all U.S. and foreign federal, state or local statutes, laws, rules, regulations, ordinances, codes, requirements, standards, guidelines, policies, rules of common law, and the like, now or hereafter in effect, including any judicial or administrative interpretations thereof, and any judicial or administrative orders, consent decrees or judgments. "Leased Properties" shall have the meaning assigned to such term in Section 4.1(r) hereof. "Lien" shall mean any security interest, pledge, bailment, mortgage, deed of trust, conditional sales and title retention agreement (including any lease in the nature thereof), charge, encumbrance or other similar arrangement or interest in real or personal property, whether such interest is based on common law, statute or contract. "Life Insurance" shall have the meaning assigned to such term in Section 3.1(g) hereof. "Manage" and "Management" shall mean generation, production, handling, distribution, processing, use, storage, treatment, operation, transportation, recycling, reuse and/or disposal, as those terms are defined in CERCLA, RCRA and other Environmental Laws (including as those terms are further defined, construed, or otherwise used in rules, regulations, standards, guidelines and publications issued pursuant to, or otherwise in implementation of, such Environmental Laws). 10 12 "Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Company taken as a whole. "Multiemployer Plan" shall mean a multiemployer plan (within the meaning of Section 3(37) of ERISA) that has been or is maintained for the benefit of the employees of JGT working in the Business, employees of the Company or employees of any their ERISA Affiliates working in the Business. "Net Income" shall mean for any period the net earnings (or loss) after taxes of the Borrower for such period determined in accordance with GAAP. "Net Worth" shall mean, as of any date, the amount of the Company's shareholders equity determined from its balance sheet as of such date prepared in accordance with GAAP. "Notes" shall mean the notes described in Section 2.1 hereof. "Organic Change" shall have the meaning assigned to such term in Section 10.4 hereof. "Organic Change Value" shall have the meaning assigned to such term in Section 10.3 hereof. "Owned Properties" have the meaning assigned to such term in Section 4.1(r). "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA, or any other governmental agency, department or instrumentality succeeding to the functions thereof. "Permitted Liens" shall have the meaning assigned to such term in Section 6.2(b) hereof. "Person" shall mean any individual, partnership, limited partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or governmental entity or department, agency or political subdivision thereof. "Piggyback Registrations" shall have the meaning assigned to such term in Section 11.1(a) hereof. "Plan" shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA), other than a Multiemployer Plan, established or maintained by JGT, with regard to the Business, the Company or any of their ERISA Affiliates in relation to the Business. 11 13 "Pledge Agreement" shall have the meaning assigned to such term in Section 3.1(k) hereof. "Pollutant" shall include any "hazardous substance" and any "pollutant or contaminant" as those terms are defined in CERCLA; any "hazardous waste" as that term is defined in RCRA; and any "hazardous material" as that term is defined in the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), as amended (including as those terms are further defined, construed, or otherwise used in rules and regulations issued pursuant to, or otherwise in implementation of, said Environmental Laws); and including without limitation any petroleum product or byproduct, solvent, flammable or explosive material, radioactive material, asbestos, polychlorinated biphenyls (PCBs), dioxins, dibenzofurans, heavy metals, and radon gas; and including any other substance or material that is reasonably determined under Environmental Law to present a threat, hazard or risk to human health or the environment. "Price Protection Period" shall have the meaning assigned to such term in Section 10.3 hereof. "Primary Warrant" shall have the meaning assigned to such term in Section 2.2 hereof. "Prime Rate" shall mean the rate of interest which under current practice is listed as such under the heading "Money Rates" in the Eastern Edition of the Wall Street Journal, and if a range of rates is listed, the highest such rate; should such practice change, such other indication of the prevailing prime rate of interest as may reasonably be chosen by the Purchaser. "Processing Fees" shall mean the aggregate processing fees and commitment fees equal to $330,000 payable by the Company to ACSCIC upon the execution and delivery of this Agreement by the Company to the Purchaser. "Properties and Facilities" shall have the meaning collectively of all Owned Properties and Leased Properties, including the improvements thereon. "Proprietary Rights" shall mean all patents, patent applications, trademarks, trade names, service marks, copyrights, inventions, production methods, formulas, know-how and trade secrets. "Purchase Documents" shall mean this Agreement, the Notes, the Purchased Securities, the Stockholders Agreement and the Security Documents and all certificates, instruments and other documents delivered pursuant hereto or contemplated hereby. 12 14 "Purchased Securities" shall have the meaning assigned to such term in Section 2.2 hereof. "Purchaser" shall have the respective meanings assigned to such term in the preamble hereto and in Section 5.3 hereof. "Put" shall have the meaning assigned to such term in Section 9.1 hereof. "Put Closing" shall have the meaning assigned to such term in Section 9.3. "Put Notice" shall have the meaning assigned to such term in Section 9.1 hereof. "Put Price" shall have the meaning assigned to such term in Section 9.2 hereof. "RCRA" shall mean the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as amended, and all rules and regulations issued thereunder. "Registrable Securities" means (i) any Common Stock purchased pursuant hereto, (ii) any Common Stock or any stock acquired upon exercise or conversion of any securities containing options or rights to acquire any shares of Common Stock, in either case, acquired pursuant to Article 8 hereof, (iii) any Common Stock issued upon exercise of the Warrants, and (iv) any Common Stock issued or issuable with respect to the securities referred to in clauses (i), (ii) and (iii) 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 Registrable Securities, such securities will cease to be Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force). "Removal," "Remedial" and "Response" actions shall have the include the types of activities covered by CERCLA, RCRA, and other comparable Environmental Laws, and whether the activities are those which might be taken by a government entity or those which a government entity or any other person might seek to require of waste generators, handlers, distributors, processors, users, storers, treaters, owners, operators, transporters, recyclers, reusers, disposers, or other persons under "removal," "remedial," or other "response" actions. "Rental Expense" shall mean for any period the aggregate rent and lease payments made by the Company 13 15 pursuant to operating leases for the same period determined in accordance with GAAP. "Reportable Event" shall mean any of the events which are reportable under Section 4043 of ERISA and the regulations promulgated thereunder, other than an occurrence for which the 30-day notice contained in 29 C.F.R. Section 2615.3(a) is waived. "Restricted Securities" shall have the meaning assigned to such term in Section 5.1 hereof. "SEC" shall mean the Securities and Exchange Commission and any governmental body or agency succeeding to the functions thereof. "Securities" shall have the meaning assigned to such term in Section 2.2 hereof. "Securities Act" shall mean the Securities Act of 1933, as amended. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Security Agreement" shall have the meaning assigned to such term in Section 3.1(f) hereof. "Security Documents" shall mean the Security Agreement, the Financing Statements, the Guaranties of Accuracy, the Pledge Agreement, the Mortgages, landlord waivers and consents and all other documents, instruments and other materials necessary to create or perfect the security interests created pursuant thereto. "Senior Debt" shall mean all obligations and liabilities of the Borrower to the Banks under the Credit Agreement. "Senior Notes" shall mean the revolving and term notes of the Company issued under the Credit Agreement as in effect on the Closing Date, together with such amendments, modifications or extensions thereof in whole or in part to the extent permitted by the Subordination Agreement. "Specified Senior Indebtedness" shall have the meaning set forth in Section 6.2(a)(ii). "Stockholders Agreement" shall have the meaning assigned to such term in Section 3.1 hereof. "Stock Purchase" shall mean any redemption, acquisition or other retirement of the capital stock of the Company (including preferred stock) or of warrants, rights or 14 16 other options to purchase such stock, other than upon conversion thereof into, or exchange thereof for, other shares of capital stock. "Subordination Agreement" shall have the meaning assigned to such term in Section 3.1(h) hereof. "Subject Securities" shall have the meaning assigned to such term in Section 9.1 hereof. "Subsidiary" of any corporation shall mean any other corporation of which the outstanding capital stock possessing a majority of voting power in the election of directors (otherwise than as the result of a default) is owned or controlled by such corporation directly or indirectly through Subsidiaries. "Tangible Net Worth" shall mean at any time the total amount of stockholders' equity of the Company at such time determined in accordance with GAAP, except that there shall be deducted therefrom the book value of all intangible assets and deferred charges and prepaid expenses of the Company at such time determined in accordance with GAAP, and except that there shall be added thereto the outstanding amount of Asche Tractor Debt. "Termination Event" shall mean (i) a Reportable Event with respect to any Plan of JGT, the Company or any of their ERISA Affiliates, or (ii) the withdrawal of JGT, the Company or any of their Affiliates from a Plan during a plan year in which it was a "substantial employer" as defined in Section 3001(a)(2) of ERISA or the cessation of operations which results in the termination of employment of 20% of Plan participants who are employees of JGT, the Company or any of their ERISA Affiliates or (iii) the occurrence of an obligation of JGT, with regard to the Business, the Company or any of their ERISA Affiliates arising under Section 4041 of ERISA to provide affected parties with a written notice of an intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA, or (iv) the PBGC's institution of proceedings to terminate a Plan of JGT, the Company or any of their ERISA Affiliates, or (v) any event or condition which would reasonably be expected to constitute grounds under Section 4041A or 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan of JGT, the Company or any of their ERISA Affiliates, or (vi) the partial or complete withdrawal (as defined in Section 4203 and 4205 of ERISA) of JGT, the Company or any of their ERISA Affiliates from a Multiemployer Plan, or (vii) the existence in a Multiemployer Plan of a material potential withdrawal liability of JGT, the Company or any of their ERISA Affiliates, or (viii) the occurrence of any nonexempt "prohibited transaction" with respect to any Plan under 15 17 Section 406 of ERISA or Section 4975 of the Code or (ix) as of the last day of any Plan year, the present value of the benefit liabilities (determined in accordance with Statement of Financial Accounting Standards No. 35) of any Plan of JGT, the Company or any of their ERISA Affiliates, as determined by the Plan's independent actuaries, exceeds the aggregate value as of such date, as determined by such actuaries, of all assets of such Plan by more than $100,000 as to all Plans in the aggregate. "Total Leverage Ratio" shall mean for any period (a) the sum of (i) aggregate Indebtedness of the Company on the last day of such period plus (ii) an amount equal to Rental Expense for such period multiplied by four, divided by (b) the sum of EBITDA for such period plus Rental Expense for such period, all as determined in accordance with GAAP; provided, that in calculating the Total Leverage Ratio as of June 30, 1998, September 30, 1998 and December 31, 1998, EBITDA and Rental Expense for the applicable Calculation Period shall be multiplied by the reciprocal of a fraction, the numerator of which fraction is the number of months then completed after the Closing Date and the denominator of which fraction is 12. "Transaction Documents" shall have the meaning assigned to such term in Section 4.1(d) hereof. "Transactions" shall mean the Acquisition and the incurrence of debt and the issuance of equity in connection therewith, as contemplated by this Agreement, the Notes, the Stockholders Agreement, the Acquisition Agreement, the Credit Agreement as in effect on the date hereof, the Senior Notes as in effect on the date hereof, the Stockholders Agreement and all other agreements contemplated hereby and thereby. "Underlying Common Stock" shall mean (i) the Common Stock issued or issuable upon exercise of the Warrants, (ii) the Common Stock purchased pursuant hereto and (iii) any equity securities issued or issuable with respect to the securities referred to in clause (i) and (ii) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. Any Person who holds a Warrant will be deemed to be the holder of the Underlying Common Stock obtainable upon exercise of the Warrant and regardless of any restriction on the exercise of the Warrant for purposes of the preemptive or other rights specifically provided for in this Agreement. Notwithstanding the foregoing, a Warrant shall not entitle the holder thereof to any voting rights or other rights as a stockholder of the Company. "UST" shall mean an underground storage tank, including as that term is defined, construed and otherwise 16 18 used in RCRA and in rules, regulations, standards, guidelines and publications issued pursuant to RCRA and comparable state and local laws. "Valuation Date" shall have the meaning assigned to such term in Section 9.2 hereof. "Voting Trust Agreement" shall have the meaning set forth in Section 3.1(e). "Warrant" shall have the meaning assigned to such term in Section 2.2 hereof. 1.2 Accounting Principles. The character or amount of any asset, liability, capital account or reserve and of any item of income or expense to be determined, and any consolidation or other accounting computation to be made, and the construction of any definition containing a financial term, pursuant to this Agreement shall be determined or made in accordance with generally accepted accounting principles in the United States of America consistently applied ("GAAP") from and after the Closing Date. 1.3 Other Definitional Provisions; Construction. Whenever the context so requires, neuter gender includes the masculine and feminine, the singular number includes the plural and vice versa. The words "hereof" "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not in any particular provision of this agreement, and references to section, article, annex, schedule, exhibit and like references are references to this Agreement unless otherwise specified. A Default or Event of Default shall "continue" or be "continuing" until such Default or Event of Default has been either cured as permitted hereunder or waived by Purchaser. References in this Agreement to any Persons shall include such Persons, successors and permitted assigns. Other terms contained in this Agreement (which are not otherwise specifically defined herein) shall have meanings provided in Article 9 of the Maryland Uniform Commercial Code on the date hereof to the extent the same are used or defined therein. ARTICLE 2 ISSUE AND SALE OF SECURITIES 2.1 Authorization and Issuance of the Notes. The Company has duly authorized the issuance and sale to the Purchasers of (i) $5,500,000 in aggregate principal amount of the Company's Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes"), and (ii) $2,500,000 in aggregate principal amount of the Company's Junior Subordinated Notes due 2006 (the "Junior Subordinated Notes" and with the Senior 17 19 Subordinated Notes, the "Notes," such term to include any notes issued in substitution therefor pursuant to Sections 5.4 and 5.5 hereof), to be substantially in the form of the Notes attached hereto as Exhibit A-1 and Exhibit A-2, respectively. 2.2 Authorization and Issuance of the Purchased Securities. The Company has duly authorized the issuance and sale to the Purchasers of (i) 500,000 shares of Common Stock (the "Purchased Shares"), (ii) the primary warrants substantially in the form of the warrant attached hereto as Exhibit B-1, evidencing the Purchaser's rights to acquire 500,000 shares of Common Stock (the "Primary Warrants"), and (iii) the conditional warrant substantially in the form of the warrant attached hereto as Exhibit B-2 (the "Conditional Warrant" and with the Primary Warrant, the "Warrants") evidencing the Purchaser's right to acquire additional shares of Common Stock under certain circumstances. The Warrants and the Purchased Shares are sometimes referred to herein collectively as the "Purchased Securities," and the Purchased Securities and the Notes are sometimes referred to herein collectively as the "Securities." 2.3 Sale and Purchase. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, at the Closing, the Company shall sell to the Purchaser, and the Purchaser shall purchase from the Company, (i) the Notes, (ii) the Warrants and (iii) Purchased Shares. 2.4 The Closing. Delivery of and payment for the Securities (the "Closing") shall be made at the offices of Reed Smith Shaw & McClay, 435 6th Avenue, Pittsburgh, PA 15219, commencing at 9:00 a.m., local time, on January 30, 1998, or at such place or on such other date as may be mutually agreeable to the Company and the Purchaser. The date and time of the Closing as finally determined pursuant to this Section 2.4 are referred to herein as the "Closing Date." Delivery of the Securities shall be made to the Purchaser against payment of the full purchase price therefor, less any unpaid Commitment Fees, any unpaid Processing Fees and any other amounts payable pursuant to Section 3.1(o) hereof, by wire transfer of immediately available funds to or at the direction of the Company in the manner agreed to by the Company and the Purchaser. The Notes shall be issued in such name or names and in such permitted denomination or denominations as the Purchaser may request in writing not less than two Business Days before the Closing Date; in the absence of such request from the Purchaser, a single Senior Subordinated Note and a single Junior Subordinated Note to be issued in the Purchaser's name. The Purchased Securities shall be registered in such name or names as the Purchaser may request in writing not less than two Business Days before the Closing Date; in the absence of 18 20 such a request from the Purchaser, the Purchased Securities will be registered in the Purchaser's name. ARTICLE 3 CONDITIONS AND AGREEMENTS 3.1 Conditions to Purchase of Securities. The obligation of the Purchaser to purchase and pay for the Securities is subject to the satisfaction prior to or at the Closing of the following conditions: (a) Representations True. The representations and warranties contained in Article 4 hereof shall be true and correct in all material respects at and as of the Closing Date as though then made, except where such representations and warranties speak as of a different date and except to the extent of changes caused by the transactions expressly contemplated or permitted herein. The representations and warranties of the Company contained in the Credit Agreement, and the respective representations and warranties of the Company, Goldberg and JGT in the Acquisition Agreement, shall be true and correct in all material respects at and as of the Closing Date, except where such representations and warranties speak as of a different date. (b) No Material Adverse Change. Since January 2, 1998, there shall have been no Material Adverse Change in the business or financial condition of the Company or the Business. (c) Acquisition Agreement. The Acquisition Agreement will be in full force and effect as of the Closing Date and will not have been amended or modified. The conditions contained in Article 5 of the Acquisition Agreement and the covenants of JGT contained in Article 7 of the Acquisition Agreement will have been satisfied, performed or complied with (as the case may be) in all material respects without reliance on any waiver by the Company, JGT or Goldberg, and all of the transactions contemplated by the Acquisition Agreement shall have been consummated. (d) Security Documents. The Company and the Purchasers shall have entered into a security agreement in form and substance as set forth in Exhibit E attached hereto (the "Security Agreement"), and mortgages substantially in the form and substance as set forth in Exhibit F attached hereto. The Company shall have executed and delivered to the Purchaser such financing statements ("Financing Statements") as shall be reasonably necessary in order to perfect and maintain the continued perfection of the security interests created by the Security Agreement. 19 21 (e) Equity Investment. The Company shall have sold to the Investor 4,500,000 shares of Common Stock at an aggregate purchase price of $4,500,000, and will have received payment in full pursuant to Stockholders Agreement in form and substance as set forth in Exhibit G attached hereto (the "Stockholders Agreement"). The Investor will have executed a Voting Trust Agreement with the Company as set forth in Exhibit H hereto (the "Voting Trust Agreement") and a pledge agreement with regard to its shares of Common Stock securing its obligations under the Guaranty of Accuracy and the obligations of the Company hereunder in form and substance as set forth in Exhibit I hereto (the "Pledge Agreement") (f) Audited Financial Statements. The Purchaser shall have received from Ernst & Young LLP (i) audited balance sheets of the Business as of December 31, 1995, December 31, 1996 and September 30, 1997 and (ii) audited statements of operations, shareholders' equity and cash flows for the years ended December 31, 1995, December 31, 1996 and the nine-month period ended September 30, 1997, in each case setting forth in comparative form the corresponding figures for the preceding year or nine-month period, as the case may be, together with appropriate notes and including an opinion of such accountants without material exceptions or qualifications, all of which shall be reasonably satisfactory to the Purchaser. (g) Life Insurance. The Company shall have delivered to the Purchaser a life insurance policy insuring the life of the Executive in the amount of $5,000,000, naming the Company as the beneficiary (the "Life Insurance"), and the Company shall have pledged its interest in such policy pursuant to forms or instruments approved by the issuer of such policy. (h) Employment Agreement. The Company shall have entered into an employment agreement with the Executive with a minimum term of five years, which shall be reasonably acceptable to Purchaser, and such employment agreements shall be in full force and effect (the "Employment Agreement"). Employment Agreement will provide that Executive will agree to devote his full time and attention to the management of the Company and that he will reside in the vicinity of Portage, Indiana, and it will contain customary non-compete and non-disclosure provisions. The Company shall have entered into non-competition and non-disclosure agreements, satisfactory to the Purchaser, with key employees of the Company. (i) Credit Agreement. The Company and the Banks will have entered into the Credit Agreement providing for loans to the Company in the aggregate original principal 20 22 amount not greater than $23,000,000 in form and substance reasonably satisfactory to the Purchaser, and the Credit Agreement will be in full force and effect as of the Closing Date and will not have been amended or modified. The Banks, the Company and the Purchaser shall have entered into a subordination agreement in form and substance reasonably satisfactory to the Purchaser and the Banks (the "Subordination Agreement"). (j) Title Insurance. The Company will have delivered title insurance policies in amount, form and substance reasonably satisfactory to the Purchaser, issued by an insurer of national reputation satisfactory to the Purchaser, insuring that the lien in the Owned Properties is a valid lien subject only to the Permitted Liens. (k) Guaranty of Accuracy. The Executive and the Investor shall have entered into a Guaranty of Accuracy with regard to the representations and warranties of the Company set forth herein in form and substance as set forth in Exhibit G attached hereto (the "Guaranty of Accuracy"). (l) Environmental Reports. The Purchaser shall have received Phase I and other environmental review reports covering all of the Properties and Facilities in form and substance reasonably satisfactory to the Purchaser regarding JGT's compliance with Environmental Laws. (m) Closing Documents. The Company will have delivered to the Purchaser all of the following documents in form and substance reasonably satisfactory to each Purchaser: (i) one or more Senior Subordinated Notes and Junior Subordinated Notes (as designated by the Purchaser pursuant to Section 2.4), duly completed and executed by the Company; (ii) one or more Primary Warrants and Conditional Warrants (as designated by the Purchaser pursuant to Section 2.4), duly completed and executed by the Company; (iii) one or more stock certificates (as designated by the Purchaser, pursuant to Section 2.4) evidencing the shares of Common Stock purchased pursuant hereto, duly completed and executed by the Company; (iv) a certificate of the secretary or the assistant secretary of the Company, certifying the names and true signatures of the officers of the Company authorized to sign this 21 23 Agreement and the other documents to be delivered by the Company hereunder; (v) certificate dated the Closing Date from an officer of the Company stating that the conditions specified in Section 3.1(a) through (p) have been fully satisfied; (vi) certified copies of the resolutions duly adopted by the Company's board of directors authorizing the execution, delivery and performance of this Agreement and each of the other agreements, instruments and documents contemplated hereby to which the Company is a party, and the consummation of all other transactions contemplated by this Agreement; (vii) certified copies of the resolutions duly authorized by the Investor's board of directors authorizing the investment by the Investor in the Company and authorizing the execution, the delivery and performance of the Pledge Agreement, the Guaranty of Accuracy and the Stockholders' Agreement and each of the other agreements instruments and documents contemplated hereby to which the Investor is a party; (viii) certified copies of the Charter Documents and Bylaws of the Company, each as in effect at the Closing; (ix) certified copies of the Charter Documents and Bylaws of the Investor, each as in effect at the Closing; (x) copies of the Acquisition Documents, the Credit Agreement, the Senior Notes, with all exhibits and schedules thereto and all collateral or related agreements, instruments or documents entered into or delivered in connection therewith, each as in effect at the Closing; (xi) the opinion, dated the Closing Date, of Sachnoff & Weaver, Ltd., counsel to the Company and Investor, in form and substance reasonably satisfactory to the Purchaser with respect to the matters set forth in Exhibit K attached hereto; (xii) evidence reasonably satisfactory to the Purchaser of all insurance maintained by the Company pursuant to Section 4.1(o), and the 22 24 Purchaser shall be reasonably satisfied with the type and extent of such coverage; (xiii) evidence reasonably satisfactory to the Purchaser of all labor contracts to which the Company is a party, and the Purchaser shall be reasonably satisfied with the terms and conditions of such labor contracts; (xiv) a list of (A) the names of the directors of the Company as of the Closing, (B) the names and titles of the officers of the Company as of the Closing, and (C) after giving effect to the Transactions, the name of each of the stockholders and holders of other equity interests of the Company setting forth the number, type and class of shares or securities held; (xv) certificates of good standing dated not more than 10 days prior to the Closing Date for the Company issued by the jurisdictions listed on the Qualifications Schedule (as described in Section 4.1(a) hereof); (xvi) landlord consents and waivers in form and substance reasonably satisfactory to Purchaser with respect to each of the Leased Premises; and (xvii) such other documents relating to the transactions contemplated by this Agreement as the Purchaser or its special counsel may reasonably request. (n) Purchaser's Fees and Expenses. (i) Commitment Fees and Processing Fees. On or prior to the Closing Date, the Company shall have paid the Commitment Fees and the Processing Fees to the Purchaser (and the Company hereby authorizes the Purchaser to deduct from the aggregate proceeds from the sale of the Notes and the Purchased Securities by the Company, the unpaid amount of such Commitment Fees or such Processing Fees); and (ii) Other Fees and Expenses. On the Closing Date, the Company shall have paid the fees and expenses of the Purchaser, payable by the Company pursuant to Section 12.4 hereof (and the Company hereby authorizes the Purchaser to deduct from the aggregate proceeds of the sale 23 25 of the Notes and the Purchased Securities by the Company, all such payable amounts). (o) Legal Investment. On the Closing Date, the Purchaser's purchase of the Notes and the Purchased Securities shall not be prohibited by any applicable law, rule or regulation of any governmental authority (including, without limitation, Regulations G, T, U or X of the Board of Governors of the Federal Reserve System) as a result of the promulgation or enactment thereof or any changes therein, or change in the interpretation thereof by any governmental authority, subsequent to the date of this Agreement. (p) Proceedings. All corporate and other proceedings taken or required to be taken in connection with the transactions contemplated hereby to be consummated at or prior the Closing and all documents incident thereto will be reasonably satisfactory in form and substance to the Purchaser and its special counsel. (q) Waiver. Any condition specified in this Section 3.1 may be waived if consented to by each Purchaser; provided that no such waiver will be effective against any Purchaser unless it is set forth in a writing executed by such Purchaser. 3.2 Taxes. Any and all payments by the Company hereunder or under the Notes or other Purchase Documents which are made to or for the benefit of the Purchaser shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings and penalties, interests and all other liabilities with respect thereto (collectively, "Taxes"), excluding, taxes imposed on Purchaser's income or capital and franchise taxes imposed on it by the jurisdiction under the laws of which it is organized or any political subdivision thereof (all such nonexcluded Taxes being hereinafter referred to as "Covered Taxes"). If the Company shall be required by law to deduct any Covered Taxes from or in respect of any sum payable hereunder or under any Note or other Purchase Document to or for the benefit of the Purchaser, the sum payable shall be increased as may be necessary so that after making all required deductions of Covered Taxes (including deductions of Covered Taxes applicable to additional sums payable under this paragraph), the Purchaser receives an amount equal to the sum it would have received had no such deductions been made. The Company shall make such deductions and the Company shall pay the full amount so deducted to the relevant taxation authority or other authority in accordance with 24 26 applicable law. In addition, the Company agrees to pay any present or future stamp, documentary, excise, privilege, intangible or similar levies that arise at any time or from time to time from any payment made under any and all Purchase Documents or from the execution or delivery by the Company or from the filing or recording or maintenance of, or otherwise with respect to the exercise by the Purchaser of its rights under any and all Purchase Documents (collectively, "Other Taxes"). The Company will indemnify the Purchaser for the full amount of Covered Taxes imposed on or with respect to amounts payable hereunder and Other Taxes, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payment of this indemnification shall made within 30 days from the date the Purchaser provides the Company with a certificate certifying and setting forth in reasonable detail the calculation thereof as to the amount and type of such Taxes. Any such certificates submitted by the Purchaser in good faith to the Company shall, absent manifest error, be final, conclusive and binding on all parties. The obligation of the Company under this Section 3.2 shall survive the payment of the Notes and the termination of this Agreement. Within 30 days after the Company having received a receipt for payment of Covered Taxes or Other Taxes, the Company shall furnish to the Purchaser, the original or certified copy of a receipt evidencing payment thereof. 3.3 Maximum Lawful Rate. This Agreement, the Notes and the Other Purchase Documents are hereby limited by this Section 3.3. In no contingency, whether by reason of acceleration of the maturity of the amounts due hereunder or otherwise, shall interest and fees contracted for, charged, received, paid or agreed to be paid to the Purchaser exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, interest and fees would otherwise be payable to the Purchaser in excess of the maximum amount permissible under applicable law, the interest and fees shall be reduced to the maximum amount permitted under applicable law. If from any circumstance, the Purchaser shall have received anything of value deemed interest by applicable law in excess of the maximum lawful amount, an amount equal to any excess of interest shall be applied to the reduction of the principal amount of the Notes, in such manner as may be determined by the Purchaser, and not to the payment of fees or interest, or if such excessive interest exceeds the unpaid balance of the principal amount of the Notes, such excess shall be refunded to the Company. 25 27 3.4 Capital Adequacy. If, after the date hereof, either the introduction of or any change of the interpretation of any law or the compliance by the Purchaser with any guideline or request from any governmental authority (whether or not having the force of law) has or would have the affect of reducing the rate of return on the capital or assets of the Purchaser as a consequence of, as determined by the Purchaser in its sole discretion, the existence of the Purchaser's obligations under this Agreement or any other Purchase Documents, then, upon demand by the Purchaser, the Company immediately shall pay to the Purchaser, from time as specified by the Purchaser, additional amounts sufficient to compensate the Purchaser in light of such circumstances. The obligations of the Company under this Section 3.4 shall survive the payments of the Notes and the termination of this Agreement. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4.1 Representations and Warranties of the Company. As a material inducement to the Purchaser to enter into this Agreement and purchase the Notes and the Purchased Securities, the Company hereby represents and warrants to each Purchaser as follows: (a) Organization and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois and is qualified to do business in the jurisdictions listed on the attached "Qualifications Schedule," which list includes every jurisdiction where the Borrower has operations or where such registration is required under applicable law and, in the latter case, where the failure to be so qualified would result in a Material Adverse Effect. The Company has the requisite corporate power and authority to execute, deliver and carry out its obligations under the Transaction Documents. The Company has all requisite corporate power and authority 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. The copies of the Company's Charter Documents and Bylaws which have been furnished to the Purchaser reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. Other than the Charter Documents, the Employment Agreement, the Voting Trust Agreement, this Agreement and the Stockholders Agreement, there are no contracts, understandings or 26 28 agreements by and among any of the directors, officers or stockholders of the Company related to the management, operation or governance of the Company. (b) Capital Stock and Related Matters. (i) As of the Closing and immediately thereafter, the authorized capital stock of the Company will consist of 10,000,000 shares of Common Stock, 5,000,000 shares of which shall be issued and outstanding and not fewer than 3,333,334 shares of which shall be reserved for issuance upon exercise of the Warrants. As of the Closing, the Company will not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, nor will 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, except as specifically contemplated by this Agreement. As of the Closing, the Company will not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock, except as set forth herein. As of the Closing, all of the outstanding shares of the Company's capital stock will be validly issued, fully paid and nonassessable. (ii) There are no statutory or contractual stockholders' preemptive rights with respect to the issuance of the Purchased Securities hereunder. The Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the Securities hereunder do not require registration under the Securities Act or any applicable state securities laws. There are no agreements between the Company's stockholders with respect to the voting or transfer of the Company's capital stock, except for the Stockholders Agreement. (c) Subsidiaries. The Company does not own or hold any rights to acquire any shares of stock or any other security or interest in any other Person, and the Company has never had any Subsidiary. (d) Authorization; No Breach. The execution, delivery and performance of this Agreement, the Notes the Purchased Securities, the Security 27 29 Documents, the Stockholders Agreement, the Acquisition Documents, the Credit Agreement, the Senior Notes, all other agreements contemplated hereby and thereby to which the Company is a party (collectively, the "Transaction Documents"), and the consummation of the Transaction have been duly authorized by the Company. The Transactions Documents have been duly and validly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms. The execution and delivery by the Company of the Transaction Documents and the consummation of the Transactions do not and will not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) except as created pursuant to the Credit Agreement and the Security Documents, result in the creation of any lien, security interest, change or encumbrance upon any of the Company's capital stock or assets pursuant to, (iv) give any third party the right to accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to the Charter Documents or Bylaws of the Company, or any law, statute, rule or regulation to which the Company is subject, or any material agreement, instrument, order, judgment or decree to which the Company is a party or to which it or its assets are subject. (e) Governmental Approval. Except as specifically provided by the Transaction Documents, no registration with or consent or approval of, or other action by, any Federal, state or other governmental agency, authority or regulatory body is or will be required in connection with the consummation of the Transactions by the Company. (f) Business. The Company is primarily engaged in the business of providing municipal solid and special waste transportation. (g) Financial Matters. The Company has heretofore furnished to the Purchaser financial statements of the Business for the years ending December 31, 1995, and December 31, 1996, and for the nine month period ended September 30, 1997 (the "Latest Balance Sheet"), which financial statements fairly present, in all material respects, the Business' financial condition and results of operations as of the dates, and for the periods, set forth therein. Such financial statements and the notes thereto, together with the schedules to this Agreement, disclose all material liabilities, direct or contingent, of the 28 30 Company as of the dates thereof. The financial statements referred to in this paragraph have been prepared in accordance with GAAP. Other than the obligations of the Company listed on the Latest Balance Sheet or on the attached "Obligations Schedule," the Company has no material liabilities or obligations of any kind, whether liquidated or contingent, known or unknown; for such purposes, the term "liabilities" shall include, without limitation, any direct or indirect indebtedness, Guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation or responsibility, known or unknown, fixed or unfixed, choate or inchoate, or secured or unsecured. (h) No Material Adverse Change. Since September 30, 1997, there has been no event or occurrence that could have a Material Adverse Effect. (i) Litigation. Except as described in the "Litigation Schedule," there are no actions, suits or proceedings at law or in equity or by or before any arbitrator or any governmental instrumentality or other agency or regulatory authority now pending or, to the knowledge of the Company, threatened against or affecting JGT, with regard to the Business, the Investor, the Company or the officers or directors of the Investor or the Company. (j) Compliance with Laws. JGT, with regard to the Business, has been and the Company is in compliance in all material respects with, and neither are in default under, any Laws; neither JGT, with regard to the Business, nor the Company is subject to any judgment, order, writ, injunction, or decree that materially and adversely affects, or might in the future reasonably be expected to materially and adversely affect, the Company, the Business or the operations, foreseeable prospects, properties, assets or condition of either (financial or otherwise). Neither JGT, with regard to the Business, nor is the Company is in, and the consummation of the Transactions will not cause any, default concerning any judgment, order, writ, injunction or decree of any federal, state, or municipal court or other governmental department, commission, board, bureau, agency or instrumentality, governmental or quasi-governmental (collectively "Governmental Authorities"), and there is no investigation pending or, to the Company's knowledge, threatened against or affecting JGT, with respect to the Business, or the Company by any state or federal governmental agency, department or instrumentality. During the ten years preceding the date hereof, no person who is currently an officer or director of the Company or the Investor (i) has been 29 31 arrested for or convicted of a felony or crime related of fraud or moral turpitude, (ii) has been the subject of a bankruptcy proceeding, or (iii) has been an officer, director or partner of an entity which has been the subject of a bankruptcy proceeding (other than Investor). JGT, with regard to the Business, had, and the Company has all necessary permits, licenses, franchises, approvals, certifications, registrations, consents and any other authorization which may be issuable by any Governmental Authorities necessary or advisable for the operation of the Business except for such permits, licenses, etc. which if not obtained would not have a Material Adverse Effect, and the "Permits Schedule" attached hereto is a complete and accurate listing of the same. (k) Environmental Protection. Except as specified in "Environmental Schedule" and after giving effect to the Transactions: (a) the Business and the methods and means employed by JGT and the Company in the operation thereof (including all operations and conditions at or in the Properties and Facilities, and the assets owned, leased, managed, used, held, controlled or operated by JGT, with regard to the Business, or the Company, materially comply with all applicable Environmental Laws; (b) with respect to the Properties and Facilities, and except as disclosed in the Environmental Schedule, the Company has obtained, possesses, and is in full compliance with and JGT had obtained, possessed and was in full compliance with, all permits, licenses, reviews, certifications, approvals, registrations, consents, and any other authorizations required under any Environmental Laws; and (c) neither JGT nor the Company has received (i) any claim or notice of violation, lien, complaint, suit, order or other claim or notice to the effect that it is or may be liable to any Person as a result of (A) the environmental condition of any of their respective properties or any other property related to the Business, or (B) the release or threatened release of any Pollutant, or (ii) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9604), or comparable state laws, and none of the operations of JGT, with regard to the Business, or the Company were or are the subject of any government investigation evaluating whether any remedial action is needed to respond to a release or threatened release of any Pollutant at JGT's or the Company's properties or at any other location, including any location to which the JGT or the Company have transported, or arranged for the transportation of, any Pollutant; (d) with respect to the Properties and Facilities, and except as disclosed in the 30 32 Environmental Schedule, neither JGT, the Company, nor any prior owner or operator has incurred in the past, or is now subject to, any Environmental Liabilities; (e) except as disclosed in the Environmental Schedule, there are no liens, covenants, deed restrictions, notice or registration requirements, or other limitations applicable to the Properties and Facilities, based upon any Environmental Laws or other legal obligations; (f) there are no USTs located in, at, on, or under the Properties and Facilities other than the USTs identified in the Environmental Schedule as USTs; and each of those USTs is in full compliance with all Environmental Laws and other legal obligations; and (g) except as disclosed in the Environmental Schedule, there are no PCBs, lead paint, asbestos (of any type or form), or materials, articles or products containing PCBs, lead paint or asbestos, located in, at, on, under, a part of, or otherwise related to the Properties and Facilities (including, without limitation, any building, structure, or other improvement that is a part of the Properties and Facilities), and all of the PCBs, lead paint, asbestos, and materials, articles and products containing PCBs, lead paint or asbestos identified in the Environmental Schedule are in full compliance with all Environmental Laws and other legal obligations. (l) Legal Investments. The Company is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T, U or X issued by the Board of Governors of the Federal Reserve System), and no proceeds of the sale of the Notes and the Purchased Securities will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (m) Taxes. JGT, in connection with the Business, the Investor and the Company have each filed or caused to be filed all Federal, state and local tax returns which are required to be filed by either of them, and each has paid or caused to be paid all Taxes shown to be due and payable on such returns or on any assessments received by each of them, other than any Taxes or assessments, the validity of which JGT, the Investor or the Company, is contesting in good faith by appropriate proceedings, and with respect to which the Company shall have set aside on its books adequate reserves. (n) Labor and Employment. JGT, with regard to the Business, has been and the Company is in compliance in all material respects with those provisions of National Labor Relations Act, the Code, 31 33 ERISA, the Age Discrimination in Employment Act and all other labor and employment laws, and the regulations and published interpretations thereunder which are applicable to the Business. There are no controversies, labor disputes, work stoppages or strikes pending or, to the knowledge of the Company, threatened or anticipated, between the Company and any of its employees, other than employee grievances arising in the ordinary course of business which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. The "Collective Bargaining Schedule" attached hereto sets forth a complete list of all collective bargaining agreements to which JGT, with regard to the Business, or the Company is or was a party. Other than as set forth in the Collective Bargaining Schedule, JGT and the Company are in full compliance in all material respects with the terms of each such agreement. Other than as disclosed on the Collective Bargaining Schedule, there are to the knowledge of the Company, no efforts underway by any union to organize any of the employees of JGT, with regard to the Business, or the Company. (o) ERISA. JGT, the Company or their ERISA Affiliates do not maintain or contribute to any Plan or Multiemployer Plan other than a Plan or Multiemployer Plan listed on the "Plan Schedule" attached hereto. Each Plan which is intended to be a qualified plan under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified and each trust related to any such Plan has been determined to be exempt from federal income tax under Subsection 501(a) of the Code, in each case. Except as otherwise disclosed on the Plan Schedule, JGT, the Company and their ERISA Affiliates have not maintained or contributed and do not maintain or contribute to any employee welfare benefit plan within the meaning of Subsection 3(1) of ERISA which provides medical benefits to retirees from the Business, other than any continuation or conversion coverage which any such retiree may have purchased at his own expense. Each Plan has been administered in all material respects in accordance with its terms and the terms of ERISA, the Code and all other statutes and regulations applicable thereto. JGT, the Company and their ERISA Affiliates has not breached in any material respect any of the responsibilities, obligations or duties imposed on them by ERISA or regulations promulgated thereunder with respect to any Plan. No accumulated funding deficiency (as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code) exists in respect to any Plan. JGT, the Company and none of their ERISA Affiliates, or any fiduciary of any Plan has engaged in a nonexempt 32 34 "prohibited transaction" described in Section 406 of ERISA or Section 4975 of the Code with respect to any Plan. No Termination Event has occurred which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Schedule B to the most recent annual report filed with the Internal Revenue Service with respect to each Plan has been furnished to the Purchaser and is complete and accurate; since the date of each such Schedule B, there has been no material adverse change in the funding status or financial condition of the Benefit Plan relating to such Schedule B. JGT, the Company and their ERISA Affiliates have not incurred any liability to the PBGC with regard to any Plan or Multiemployer Plan which remains outstanding other than for premium payments not yet due. JGT, the Company and their ERISA Affiliates, have not (i) failed to make a required contribution or payment to a Multiemployer Plan, or (ii) made partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer Plan for which JGT, the Company or their ERISA Affiliates, has failed to make a required installment under Subsection 412(m) of the Code or any other payment required under Section 412 of the Code on or before the due date for such installment or other payment. JGT, the Company and their ERISA Affiliates, are not required to provide security to a Plan under Section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the plan year. The present value of the benefit liabilities (determined in accordance with Statement of Financial Accounting Standards No. 35) of each Plan as of the last day of the year for such Plan, as determined by such Plan's independent actuaries, does not exceed the aggregate value, as determined by such actuaries, of all assets under such Plan by more than $100,000 in the aggregate. (p) Investment Company Act: Public Utility Holding Company Act. The Company is not (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended or (b) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. (q) Personal Property. (i) The "Equipment Schedule" attached hereto contains a true and correct list of all machinery, vehicles and equipment owned by the Company having a value in excess of $1,000 per item. The Company has good and marketable title 33 35 to all of its machinery, vehicles and equipment (whether or not disclosed in the Equipment Schedule), free and clear of all liens, claims charges, security interests and other encumbrances of any kind or nature, except Permitted Liens. (ii) The Equipment Schedule contains a true and correct description of all leases for machinery, vehicles, equipment or other items of personal property used or employed by the Company. Each of the leases disclosed in the Equipment Schedule is in full force and effect and there are no defaults or events of default, real or claimed, or events which with notice or lapse of time or both would constitute defaults thereunder. The assignment to the Company by JGT of such Leases did not and does not violate the terms of any such lease or all necessary consents have been obtained with regard thereto. (r) Real Property. The "Real Property Schedule" attached hereto contains a true and correct description of all real properties owned, leased, used, managed, controlled or operated by the Company, identifying the nature of the Company's interest therein. True and correct copies of all leases, contracts or similar documents concerning such real property referenced in the Real Property Schedule have been provided to Purchaser. The Company has good and marketable title to all of the real property shown on the Real Property Schedule as being owned by it ("Owned Properties") free and clear of any mortgage, liens, pledges, security interests, charges, claims, restrictions and other encumbrances and material defects of title of any nature whatsoever, except for Permitted Liens. Each of the documents disclosed in said Schedule pertaining to properties listed on such Schedule which are not owned by the Company (collectively, "Leased Properties") is in full force and effect and there are not any existing defaults or events of default, real or claimed, or events which with notice or lapse of time or both would constitute defaults. Each of such documents and the Company's interest in the Leased Properties is free and clear of any mortgages or liens, and is not subject to any deeds of trust, assignments, subleases, or rights of any third parties other than the lessor thereof or any mortgagee of the lessor. The assignment to the Company by JGT of such documents does not violate the terms of such documents or all necessary consents have been obtained with regard thereto. 34 36 (s) Contracts, Agreements Arrangements, etc. The "Contracts Schedule" attached hereto contains a list of the following material contracts to which the Company is a party which are not described in any other Schedule: (i) contracts for the employment of any officer, employee, director or consultant; (ii) contracts for the purchase, sale, production or supply by the Company, whether on a continuing basis or otherwise, of goods or services of any type which have a pay-out of Twenty-Five Thousand and 00/100 Dollars ($25,000) or more per year; and (iii) agreement, contract or commitment for any charitable or political contribution; Except as may be disclosed on the Contracts Schedule, each of the agreements, contracts, commitments, leases and other instruments, documents and undertakings listed on the Schedules hereto is valid and enforceable in accordance with its terms and, as applicable, has been validly assigned by JGT to the Company, the parties thereto are in compliance with the provisions thereof, no party is in default in the performance, observance or fulfillment of any material obligation, covenant or condition contained therein, the written forms thereof contain the entire agreement of the parties with regard to the subject matter thereof and no event has occurred which with or without the giving of notice or lapse of time, or both, would constitute a default thereunder; furthermore, except as may be disclosed on the Schedules, no such agreement, contract, commitment, lease or other instrument, document or undertaking, in the reasonable opinion of the Company, contains any contractual requirement with which there is a reasonable likelihood the Company or any other party thereto will be unable to comply. (t) Intellectual Property; Licenses. The Company possesses adequate assets, licenses, patents, patent applications, copyrights, trademarks, trademark applications and tradenames to continue to conduct its business as heretofore conducted or as currently proposed to be conducted after giving effect to the Transactions. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing which taken in isolation or when considered with all other such revocations or terminations could have a Material Adverse Effect. The Company does not have notice or 35 37 knowledge of any facts or any past, present or threatened occurrence that could preclude or impair the Company's ability to retain or obtain any authorization necessary for the operation of its respective business. (u) Solvency. The Company is not insolvent and the execution and delivery of this Agreement and the other Transaction Documents pursuant and the consummation of the Transactions will not render the Company insolvent. The fair value and present fair saleable value of the assets of the Company exceeds its liabilities. The Company understands that in this context "insolvent" means that the present fair saleable value of the total assets of the Company is less than the amount of the total liabilities of the Company. The Company also understands that the term "liabilities" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent (with contingent liabilities valued based on the Company's good faith estimate of the probability of occurrence). The Company will be able to pay its debts as they become absolute and mature. The consummation of the Transactions will not leave the Company with property remaining in its hands constituting unreasonably small capital with which to conduct its business. (v) Broker's or Finder's Commissions. No broker's or finder's or placement fee or commission will be payable to any broker or agent engaged by the Company or any of its officers, directors or agents with respect to the issue of the Notes, the Warrants or the transactions contemplated by this Agreement, including without limitation the Transactions, except for fees payable to Mellon Private Practice Group and, other than amounts payable by the Investor for which the Company has no liability. The Company agrees to indemnify the Purchaser and hold it harmless from and against any claim, demand or liability for broker's or finder's or placement fees or similar commissions, whether or not payable by the Company, alleged to have been incurred in connection with such transactions, other than any broker's or finder's fees payable to Persons engaged by the Purchaser without the knowledge of the Company. (w) Complete Disclosure. All statements and other factual information furnished by or on behalf of the Company or the Investor to the Purchaser for purposes of or in connection with this Agreement or the Transactions were, true and accurate in all material respects on the date as of which such information was furnished and not incomplete by omitting to state any fact necessary to make such information not misleading 36 38 at such time in light of the circumstances under which such information was provided. 4.2 Absolute Reliance. All representations and warranties contained in this Agreement and any financial statements, instruments, certificates, schedules or other documents delivered in connection herewith, will survive the execution and delivery of this Agreement, regardless of any investigation made by the Purchaser or on the Purchaser's behalf which representations and warranties shall continue in full force and effect until such time as the Notes, and all amounts associated or due in connection therewith have been paid in full and the Purchaser has sold all Warrants, Underlying Common Stock and Common Stock acquired pursuant to this Agreement. ARTICLE 5 TRANSFER OF SECURITIES 5.1 Restricted Securities. The Purchaser acknowledges that (i) the Notes issued hereunder and (ii) the Purchased Securities issued hereunder (collectively, the "Restricted Securities") are "restricted securities" as such term is defined in Rule 144 of the SEC. Restricted Securities are transferable only pursuant to (a) public offerings registered under the Securities Act, (b) Rule 144 of the SEC (or any similar rule then in force) if such rule is available and (c) subject to the conditions specified in Section 5.2 below, any other legally available means of transfer. 5.2 Transfer of Restricted Securities. The Purchaser will not sell or transfer all or any part of the Restricted Securities unless or until, as the case may be, (i) it shall have given written notice to the issuer of such Restricted Securities (in such capacity, the "Issuer") describing such sale or transfer, (ii) shall have furnished to the Issuer an opinion, reasonably satisfactory to counsel for the Issuer, of counsel skilled in securities matters (selected by the Purchaser and reasonably satisfactory to the Issuer) to the effect that the proposed sale or transfer may be made without registration under the Securities Act, (iii) it shall (A) cause each transferee of its rights under the Restricted Securities or any interest therein to enter into a written agreement pursuant to which such transferee shall agree to be bound by the restrictions on transferability set forth in this Section 5.2, and Section 5.3 hereof and, in the case of the Notes, Section 5.4 hereof, and (B) promptly deliver 37 39 a copy of such agreement to the Issuer and provide the Issuer the address of such transferee; provided, however, that the foregoing clauses (i) through (iii) shall not apply with respect to any such sale or transfer of the Restricted Securities in an underwritten public offering of the Restricted Securities pursuant to an effective registration statement under the Securities Act, if such sale or transfer is made in accordance with the plan of distribution set forth therein; and provided, further, that the foregoing clauses (i) through (iii) shall not apply with respect to any such sale or transfer of the Restricted Securities by the Purchaser to any of its Affiliates. In addition, if the holder of the Restricted Securities delivers to the Issuer satisfactory opinion of such counsel that no subsequent transfer of such Restricted Securities will require registration under the Securities Act, the Issuer will promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act legend described in Section 5.3 hereof. 5.3 Legends; Purchaser. The Purchaser, hereby represents and warrants to the Company that it is an Accredited Investor within the meaning of Rule 501(a) under the Securities Act and is acquiring the Notes and the Purchased Securities for investment for its own account, with no present intention of dividing its participation with others (except for a potential transfer or transfers of the Notes or the Purchased Securities to an Affiliate of the Purchaser) or reselling or otherwise distributing the same in violation of the Securities Act or any applicable state securities laws. The Issuer may place an appropriate legend on the Restricted Securities owned by the Purchaser concerning the restrictions set forth in this Article 5. The Issuer may refuse to transfer the Restricted Securities on its books should the Purchaser attempt to transfer the Restricted Securities otherwise than in compliance with this Article 5. Upon the permitted assignment or transfer by the Purchaser or any of its successors or assignees of all or any part of the Restricted Securities, the term "Purchaser" as used in this Article 5 shall thereafter mean, to the extent thereof, the then holder or holders of such Restricted Securities or portion thereof; provided, however, that the term "Purchaser" shall not be applicable to any such Person or Persons which shall acquire such securities in a registered public offering of the Restricted Securities or in any sale pursuant to Rule 144 of the SEC. 38 40 5.4 Transfer of Notes. Subject to Section 5.2 above, a holder of a Note may transfer such Note to a new holder, or may exchange such Note for notes of different denominations (but in no event of denominations of less than $100,000 in original principal amount), by surrendering such Note to the Company duly endorsed for transfer or accompanied by a duly executed instrument of transfer naming the new holder (or the current holder if submitted for exchange only), together with written instructions for the issuance of one or more new Notes specifying the respective principal amounts of each new Note and the name of each new holder and each address therefor. The Company shall simultaneously deliver to such holder or its designee such new Notes and shall mark the surrendered Notes as canceled. In lieu of the foregoing procedures, a holder may assign a Note (in full but not in part) to a new holder by sending written notice to the Company of such assignment specifying the new holder's name and address; in such case, the Company shall promptly acknowledge such assignment in writing to both the old and new holder. The Company shall not be required to recognize any subsequent holder of a Note unless and until (i) such holder has complied with the requirements of Section 5.2 and (ii) the Company has received reasonable assurance that all applicable transfer taxes have been paid. 5.5 Replacement of Lost Purchased Securities. Upon receipt of evidence reasonably satisfactory to the Company of the mutilation, destruction, loss or theft of any Purchased Securities and the ownership thereof, the Company shall, upon the written request of the holder of such Purchased Securities, execute and deliver in replacement thereof new Purchased Securities in the same form, in the same original amount and dated the same date as the Purchased Securities so mutilated, destroyed, lost or stolen; and such Note so mutilated, destroyed, lost or stolen shall then be deemed no longer outstanding hereunder. If the Purchased Securities being replaced has been mutilated, it shall be surrendered to the Company; if such replaced Purchased Securities have been destroyed, lost or stolen, such holder shall furnish the Company with an indemnity in writing to save it harmless in respect of such replaced Purchased Securities. 5.6 No Other Representations Affected. Nothing contained in this Article 5 shall limit the full force or effect of any representation, agreement or warranty made herein or in connection herewith to the Purchaser. 39 41 ARTICLE 6 COVENANTS 6.1 Affirmative Covenants. The Company covenants that, so long as all or any of the principal amount of the Notes or any interest hereof shall remain outstanding, and so long as any of the Warrants are outstanding: (a) Existence. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence. (b) Businesses and Properties; Compliance with Laws. At all times (i) do or cause to be done all things necessary to preserve, renew and keep in full force and effect in all material respects the rights, licenses, registrations, permits, franchises, patents, copyrights, trademarks and trade names, and any other authorizations which may be material to the conduct of its business, (ii) comply in all material respects with all laws and regulations applicable to the operation of such business, including but not limited to, all Environmental Laws, whether now in effect or hereafter enacted and with all other applicable laws and regulations, (iii) take all action which may be required to obtain, preserve, renew and extend all franchises, registrations, certifications, approvals, consents, licenses, permits and other authorizations which may be material to the operation of such business, (iv) maintain, preserve and protect all property which may be material to the conduct of such business, and (v) except for obsolete or worn out equipment, keep its property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted in all material respects at all times. (c) Insurance. Maintain insurance required by the Purchase Documents, including but not limited to, the Life Insurance, coverage on its insurable properties, including all inventory, equipment and real property, against the perils of fire, theft, burglary, public liability, worker's compensation and business interruption and such other risks as are customary with companies similarly situated and in the same or similar business under policies issued by financially sound and reputable insurers in such amounts as are customary with companies similarly situated and in the same or similar business. The Company shall pay all insurance 40 42 premiums payable by it and shall deliver the policy or policies of such insurance (or certificates of insurance with copies of such policies) to the Lender. All insurance policies of the Company shall contain endorsements, in form and substance reasonably satisfactory to the Purchaser, providing that the insurance shall not be cancelable except upon 30 days' prior notice to the Purchaser. The holders of the Notes shall be shown as an additional named insured party under all such insurance policies. (d) Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to liens or charges upon such properties or any part thereof; provided, however, that the Company shall not be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Company shall have set aside on its books adequate reserves with respect thereto. (e) Financial Statements; Reports. Furnish to each Purchaser: (i) Annual Statements. Within ninety (90) days after the end of each fiscal year, a balance sheet and statements of operations, stockholders' equity and cash flows of the Company showing the financial condition of the Company as of the close of such year and the results of operations during such year, all the foregoing financial statements to be audited by a firm of independent certified public accountants of recognized national standing acceptable to the Purchaser including, without limitation, Ernst & Young L.L.P., and accompanied by an opinion of such accountants without material exceptions or qualifications. Additionally, such financial statements shall be accompanied by a certificate of such accountants (which shall not contain any qualification, exception or scope limitation not acceptable to Purchaser) stating that in the course of its regular audit of the Business of the Company, which audit was conducted in accordance with GAAP, no Default or Event of Default relating to financial and accounting matters has come to their attention, or if any Default or Event of 41 43 Default exists, a statement as to the nature thereof. (ii) Monthly Statements. Within 30 days after the end of each month other than the last month of the fiscal year, a balance sheet and income statement showing the financial condition and results of operations of the Company as of the end of each such month and for the then elapsed portion of the current fiscal year, together with comparisons to the corresponding periods in the preceding year and the budget for such periods, accompanied by a certificate of an officer that such financial statements have been prepared in accordance with GAAP. (iii) Certificate of Compliance. Each financial statement furnished to the Purchaser pursuant to subsections (i) and (ii) of this Section 6.1(e) shall be accompanied by a written certificate signed by the Company's chief financial officer (A) to the effect that no Default or Event of Default has occurred during the period covered by such statements or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by the Company to remedy the same, and (B) in the form of Exhibit L showing the Company's compliance with the covenants set forth in Sections 6.3. (iv) Accountant Reports. Promptly upon the receipt thereof, copies of all reports, if any, submitted to the Company by independent certified public accountants in connection with each annual, interim or special audit or review of the financial statements of the Company or any of its Subsidiaries made by such accountants, including but not limited to, any comment letter submitted by such accountants to management in connection with any annual review. (v) Projections. As soon as available, but in no event later than January 30 of each year, a projection of the Company's balance sheet and income, retained earnings and cash flow statements for such year and the following two years and comparable budgeted figures for the prior year and within 10 days after any material update or amendment of any such projection, a copy of such update or amendment, including a description of and reasons for such 42 44 update or amendment. Each such projection, update or amendment shall be accompanied by a written certificate signed by the Company's chief financial officer to the effect that it has been prepared on the basis of the Company's historical financial statements and records, together with the assumptions set forth in such projection and that it reflects expectations, after reasonable analysis, of the Company's management as to the matters set forth therein. (vi) Additional Information. Promptly, from time to time, such other information regarding the compliance by the Company with the terms of this Agreement and the other Purchase Documents or the affairs, operations or condition (financial or otherwise) of the Company as the Purchaser may reasonably request and which is capable of being obtained, produced or generated by the Company without unreasonable cost or burden or of which the Company has knowledge. (f) Litigation and Other Notices. Give the Purchaser prompt written notice of the following: (i) Orders; Injunctions. The issuance by any court or governmental agency or authority of any injunction, order, decision or other restraint prohibiting, or having the effect of prohibiting, the making of any loan to the Company or the initiation of any litigation or similar proceeding seeking any such injunction, order or other restraint. (ii) Litigation. The filing or commencement of any action, suit or proceeding against the Company whether at law or in equity or by or before any court or any Federal, state, municipal or other governmental agency or authority and which, if adversely determined against the Company, could resulted in uninsured liability in excess of $250,000 in the aggregate, specific performance or injunctive relief. (iii) Environmental Matters. (i) Any release or threatened release of any Pollutant required to be reported to any Federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (ii) any remedial action taken by the Company or any other person in response to any Pollutant in, at, on, under, a part of, or about the Company's 43 45 properties or any other property, (iii) any violation by the Company of any Environmental Law, and (iv) any notice, claim or other information that the Company might be subject to an Environmental Liability, in each case, which could result in a Material Adverse Effect. (iv) Default. Any Default or Event of Default, specifying the nature and extend thereof and the action (if any) which is proposed to be taken with respect thereto. (v) Material Adverse Effect. Any development in the business or affairs of the Company which could have a Material Adverse Effect. (vi) Board Meetings. Written notice of each regular meeting of the Company's Board of Directors at least fourteen (14) days in advance of such meeting and prior written notice of each special meeting of the board of directors at least seven (7) days in advance of such meeting, but in any case such notice shall be delivered no later than the date on which the members of the Board of Directors are notified of such meeting. In addition, the Company will send the Purchaser copies of all reports and materials provided to members of the Board of Directors at meetings or otherwise. (vii) Tax and Securities Filings. Within ten (10) Business Days of filing, copies of all material filings made by the Company with the Internal Revenue Service or the SEC. (g) ERISA. Comply in all material respects with the applicable provisions of ERISA and the provisions of the Code relating thereto and furnish to the Purchaser (i) as soon as possible, and in any event within 30 days after the Company knows or has reason to know thereof, notice of (A) the establishment by the Company of any Plan, (B) the commencement by the Company of contributions to a Multiemployer Plan, (C) any failure by the Company or any of its ERISA Affiliates to make contributions required by Section 302 of ERISA (whether or not such requirement is waived pursuant to Section 303 of ERISA), or (D) the occurrence of any Reportable Event with respect to any Plan or Multiemployer Plan, together with a statement of an officer setting forth details as to such Reportable Event and the action which the Company proposes to take with respects thereto, together with a copy of the notice of such Reportable Event given to 44 46 the PBGC, and (ii) promptly after receipt thereof, a copy of any notice the Company may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Multiemployer Plan, or to appoint a trustee to administer any Plan or Multiemployer Plan and (iii) promptly after receipt thereof, a copy of any notice of withdrawal liability from any Multiemployer Plan. (h) Maintaining Records; Access to Premises and Inspections. Maintain financial records in accordance with GAAP. Upon reasonable notice, at all reasonable times and as often as any Purchaser may reasonably request (and at any time after the occurrence and during the continuation of a Default or Event of Default), permit any authorized representative designated by the Purchaser to visit and inspect the properties and financial records of the Company and to make extracts from such financial records, all at the Company's expense, and permit any authorized representative designated by the Purchaser to discuss the affairs, finances and conditions of the Company with the Company's chief financial officer and such other officers as the Company shall deem appropriate, and the Company's independent public accountants. (i) Board of Directors. Regular meetings of the Board of Directors will be held at least once each calendar quarter at the principal executive offices of the Company. The Executive shall be a member of the Board of Directors and shall have the right to designate a majority of the members of the Board of Directors without the consultation with or approval of any Person including, without limitation, the Purchaser; provided, however, Purchaser shall have the right to designate a proportion of the Board of Directors equal to the Purchaser's proportional ownership of the Common Stock on a Fully Diluted Basis (with any partial board seats rounded up to the nearest whole seat). At the option of Purchaser, in lieu of voting board positions, the Purchaser may designate a Board of Directors observer, without voting rights. Any Purchaser-designated members or observers shall be entitled to the same compensation as other non-employee members of the Board of Directors and, in any case, to receive reimbursement for out-of-pocket expenses incurred in connection with attendance at Board, committee and stockholder meetings. (j) Future Financings. The Company shall give to ACS a right of first refusal to provide not less than one-third in principal amount of any future financings of senior or subordinated indebtedness other than leasing transactions and the Additional Senior 45 47 Indebtedness. ACS shall have thirty (30) days following written notice of the terms of such financing to provide written notice to the Company of whether it intends to provide its portion of such financing on such terms. In the event that ACS declines such opportunity, the Company may take up to ninety (90) days to consummate such financing on terms no more favorable to the lender than the terms declined by ACS. (k) Management Fee. The Company will pay to ACSCIC or its designee an annual management fee, in arrears, of $37,500. 6.2 Negative Covenants. The Company covenants that, so long as all or any part of the principal amount of the Notes or any interest thereon shall remain outstanding: (a) Indebtedness. The Company shall not create, incur, assume, guarantee or be or remain liable for, contingently or otherwise, or suffer to exist any Indebtedness, except: (i) Indebtedness under this Agreement; (ii) the Senior Debt and any renewals, refinancings or extensions thereof plus the other Indebtedness which constitutes "Senior Debt" under the Subordination Agreement collectively, without duplication, "Specified Senior Indebtedness" in aggregate principal amount of $3,000,000 ("Additional Senior Indebtedness") (such Additional Senior Indebtedness, such Senior Debt and such renewals, refinancings and extensions being herein collectively referred to collectively, without duplication, as the "Specified Senior Indebtedness"); provided all such renewals, refinancings or extensions shall be on terms reasonably acceptable to the Purchaser and (A) no revolving credit facility shall be in excess of $8,000,000 and (B) there shall not be a term loan facility or facilities in excess of the original $21,000,000 principal amount of the Senior Debt as reduced by the amounts of principal payments made thereunder after the date hereof plus (C) the aggregate amount of Specified Senior Indebtedness shall not exceed $26,000,000 as reduced by the amounts of principal payments made the Senior Debt term loan facility; 46 48 (iii) Capitalized Lease Obligations, to the extent permitted by Sections 6.2(d) and 6.2(e); (iv) Indebtedness secured by Liens permitted by Section 6.2(b)(iv); provided, that the aggregate principal amount of such Indebtedness shall not exceed $250,000; and (v) Indebtedness incurred in the ordinary course of business with respect to customer deposits, trade payables and other unsecured current liabilities not the result of borrowing and not evidenced by any note or other evidence of indebtedness; and (vi) the Aasche Tractor Debt. Any Indebtedness entered into after the date hereof shall contain provisions specifically granting the Purchaser notice and cure rights in the event of any defaults thereunder. (b) Negative Pledge; Liens. The Company shall not create, incur, assume or suffer to exist any Lien of any kind on any of its properties or assets of any kind, except the following (collectively, "Permitted Liens"): (i) Liens created in connection with the Senior Debt and Specified Senior Debt but only to the extent such Senior Debt and Specified Senior Debt is permitted under the Subordination Agreement; (ii) Liens for or priority claims imposed by law which are incidental to the conduct of business or the ownership of properties and assets (including mechanic's warehousemen's, attorneys' and statutory landlords' liens) and deposits, pledges or liens to secure statutory obligations, surety or appeal bonds or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided, however, that in each case, the obligation secured is not overdue, or, if overdue, is being contested in good faith and adequate reserves have been set up by the Company as the case may be; provided, further, that the lien and security interest provided in the Security Documents or any portion thereof created or intended to be 47 49 created thereby is not, in the opinion of the Purchaser, unreasonably jeopardized thereby; (iii) Liens securing the payments of taxes, assessments and governmental charges or levies incurred in the ordinary course of business either (a) not delinquent, or (b) being contested in good faith by appropriate legal or administrative proceedings and as to have set aside on its books adequate reserves, and so long as during the period of any such contest, the Company shall suffer no loss of any privilege of doing business or any other right, power or privilege necessary or material to the operation of its business; and (iv) Liens (whether or not assumed) existing on property at the time of purchase thereof by the Company 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 the Borrower; (b) such Lien is confided 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 the Borrower, 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 thereof whether or not assumed); (d) the obligation secured by such Lien is Indebtedness permitted under Section 6.1(a)(iv); and (e) to the extent they constitute Liens, protective filings on property leased under leases permitted under this Agreement. (v) Extensions, renewals and replacements of liens referred to in clauses (i) through (iv) of this Section 6.2(b), provided, however, that any such extension, renewal or replacement Lien shall be limited to the property or assets covered by the Lien extended, 48 50 renewed or replaced and that the obligations secured by any such extension, renewal or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed or replaced. (c) Contingent Liabilities. The Company shall not become liable for any Guaranties, except for the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business. (d) Leases. The Company shall not become or be liable for any leases other than: (i) leases, each of which may be either an operating lease or a Capitalized Lease, equipment used by the lessee in the ordinary course of business, provided, that such leases are on an Approved Lease Form and provided, further, that such leases, in the aggregate, will not and do not result in the payment or accrual (whether on account of Rental Expense, Interest Expense, principal component of Capitalized Leases or otherwise) by the Company during any fiscal year of more than an amount equal to (i) $1,500,000 for 1998, $2,500,000 for 1999, $3,750,000 for 2000, $4,500,000 for 2001, $5,500,000 for 2002, $6,500,000 for 2003, $6,500,000 for 2004, and $6,500,000 for 2005 minus (ii) the positive difference, if any, between (x) the aggregate net amount of residual value "guaranteed" by the Company under all equipment leases which terminate in such fiscal year minus (y) the aggregate net amount of the fair market value at lease termination of all equipment covered by such terminating leases and (ii) leases for other than equipment. (e) Capital Expenditures. The Company shall not make capital expenditures in any fiscal year to the extent that during such fiscal year the aggregate amount of capital expenditures in such fiscal year would exceed $2,000,000 plus the amount of net proceeds realized by the Company under clause 6.2(f)(ii) herein. (f) Mergers, etc. The Company shall not merge into or consolidate or combine with any other Person, or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all or any material part of the property or assets of any Person other than purchases or other acquisitions of inventory, materials, leases, property and equipment in the ordinary course of business. Except as expressly permitted by the Security Documents, the Company shall not sell, transfer or otherwise dispose of any of its 49 51 assets, including the Collateral, except for the sale of obsolete or worn out equipment disposed of in the ordinary course of business and for sales permitted under the Credit Agreement, provided that no such sale or series of sales permitted under the Credit Agreement shall, in any one year, involve Collateral with a value in excess of twenty percent of the value of all Collateral without the consent of the Purchaser, except for (i) sales, transfers and other dispositions of equipment which is obsolete or no longer useful in the business for no consideration other than cash, in the ordinary course of business, the gross proceeds of which do not exceed $100,000 in any fiscal year, (ii) sales, transfers and other dispositions of any property if the full net proceeds of such are used within three months to purchase similar replacement property, and (iii) sales, transfers and other dispositions under this clause (iii) of any property which are a "Reduction Event" under the Credit Agreement, provided that the aggregate amount of such sales, transfers and dispositions in any fiscal year shall not exceed twenty-five percent of the value of the Collateral. (g) Affiliate Transactions. The Company shall not make any loan or advance to any director, officer or employee of the Company or any Affiliate, or enter into or be a party to any transaction or arrangement with any Affiliate of the Company, including, without limitation, the purchase from, sale to or exchange of property with, any merger or consolidation with or into, or the rendering of any service by or for, any Affiliate, except as disclosed on the "Affiliate Transaction Schedule" or pursuant to the reasonable requirements of the Company's business and upon fair and reasonable terms no less favorable to the Company than would be obtained in a comparable arm's-length transaction with a Person other than an Affiliate provided, however, in any case, the aggregate compensation, loans and advances (other than reducing travel advances in the ordinary course of business) to any single employee, officer or director in any fiscal year shall not exceed $175,000. For so long as no Default or Event of Default has occurred and is continuing hereunder, the Company shall be entitled to pay an annual management fee to Investor not to exceed $480,000, such amount to be payable in arrears, pursuant to a management services agreement, the terms of which are reasonably acceptable to Purchaser (the "Aasche Management Fee"). (h) Dividends and Stock Purchases. Except as otherwise permitted by Section 6.2(g), the Company shall not directly or indirectly: declare or pay any 50 52 Dividends or make any distribution of any kind on its outstanding capital stock or any other payment of any kind to any of its stockholders or its Affiliates (including any redemption, purchase or acquisition of, whether in cash or in property, securities or a combination thereof, any partnership interests or capital accounts or warrants, options or any of its other securities), or set aside any sum for any such purpose, except that it may declare or pay any Dividend payable solely in shares of its Common Stock; provided, however, that this Section 6.2(h) shall not apply to Stock Purchases pursuant to Article 9 hereof. (i) Advances, Investments and Loans. The Company shall not purchase, or hold beneficially any stock, other securities or evidences of Indebtedness of, or make or permit to exist any loan, Guaranty or advance to, or make any investment or acquire any interest whatsoever in, any other Person (including, but not limited to, the formation or acquisition of any Subsidiaries), except (i) securities issued or directly and fully guaranteed or insured by the United States or America or any agency or instrumentality thereof having maturities of not more than six months from the date of acquisition; (ii) United States dollar denominated time deposits, certificates of deposit and bankers acceptances of any Bank or any bank whose short-term debt rating from Standard & Poor's Ratings Group, a division of The McGraw- Hill Companies, Inc. ("S&P"), is at least A-1 or the equivalent or from Moody's Purchasers Service, Inc. ("Moody's") is at least P-1 or the equivalent with maturities of not more than six months from the date of acquisition; (iii) commercial paper with a rating of at least A-1 or the equivalent by S&P or at least P-1 or the equivalent by Moody's maturing within six months after the date of acquisition; (iv) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; 51 53 (v) Investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above; (vi) deposit accounts maintained in accordance with any loan agreement evidencing the Senior Debt; (vii) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (viii) receivables owing to the Company created or acquired in the ordinary course of business and payable on customary trade terms of the Company; (ix) deposits made in the ordinary course of business consistent with past practices to secure the performance of leases or in connection with bidding on contracts and performance bonds and deposits in connection with customer contracts in the ordinary course of business; and (x) advances to employees in the ordinary course of business for business expenses; provided, however, that the aggregate amount of such advances at any time outstanding shall not exceed $250,000. In determining the amount of Investments, acquisitions, loans, advances and Guaranties, permitted pursuant to this Section 6.2(i), Investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), loans and advances shall be taken at the principal amount thereof then remaining unpaid, and Guaranties shall be taken at the amount of obligations guaranteed thereby. (j) Use of Proceeds. The Company shall not use any proceeds from the sale of the Notes hereunder, directly or indirectly, for the purposes of purchasing or carrying any "margin securities" within the meaning of Regulations G, T, U or X promulgated by the Board of Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit 52 54 secured, directly or indirectly, in whole or in part by collateral that includes any "margin securities." (k) Stock Issuances. The Company shall not issue any capital stock or other equity interests or any options or warrants to purchase, or securities convertible into capital or equity interests, except the issuance of Common Stock upon exercise of the Warrants or otherwise in connection with the Transactions or the issuance of Common Stock which places no further obligations of the Company after such issuance. (l) Amendment of Charter Documents. The Company shall not amend, terminate, modify or waive or agree to the amendment, modification or waiver of any material term or provision of its Charter Documents or Bylaws, or the Stockholders Agreement. (m) Subsidiaries. The Company shall not establish or acquire any Subsidiary. (n) Establishment of New or Changed Business Locations. The Company shall not move any of its existing business locations, as identified on the Properties Schedule, or establish new business locations without providing not less than thirty (30) days advance written notice to the Purchaser. In connection therewith, the Company shall execute and deliver such additional Security Documents as the Purchaser may reasonably request and shall pay all costs associated with the preparation and filing thereof. (o) Changed or Additional Business Names. The Company shall not change its corporate name or establish new or additional trade names without providing thirty (30) days advance written notice to Purchaser. In connection therewith, the Company shall execute and deliver such additional Security Documents as the Purchaser may reasonably request and shall pay all costs associated with the preparation and filing thereof. (p) Business. The Company shall not engage, directly, in any business other than the long distance hauling of waste. (q) Fiscal Year; Accounting. The Company shall not change its fiscal year or method of accounting (other than immaterial changes in methods), except as required by GAAP. 53 55 (r) Brokerage Fees. The Company shall not incur aggregate brokerage and consulting fees in excess of $50,000 in any fiscal year, other than insurance brokerage, legal and accounting fees in the ordinary course of business or otherwise in connection with transactions permitted herein and the Aasche Management Fee and fees paid hereunder and other than the Contract dated April 7, 1993 between JGT and H.H.H., Inc. (subject to the provisions of Section 1.1(g) of the Acquisition Agreement). 6.3 Financial Covenants. The Company covenants that, so long as all or any part of the principal amount of the Notes or any interest thereon shall remain outstanding: (a) Total Leverage Ratio. As of the last day of each fiscal quarter, beginning June 30, 1998, the Total Leverage Ratio for the applicable Calculation Period shall not exceed: (i) 4.5 for June 30, 1998 and September 30, 1998, (ii) 4.0 from and including December 31, 1998 to and including September 30, 1999; (iii) 3.5 from and including December 1999 to and including December 31, 2002; and (iv) 3.0 thereafter. (b) Tangible Net Worth. Tangible Net Worth shall not at any time from and after June 30, 1998 be less than an amount equal to (i) the greater of (A) $1 and (B) 90% of the Borrower's Tangible Net Worth on June 30, 1998, minus, in either case, $100,000 plus (ii) 72% of the sum of the Net Income (not to be reduced by losses) for each fiscal quarter during the period from July 1, 1998 through and including the date (the "Interim Date") which is the earlier to occur of the last day of the then most recently completed fiscal quarter and the last day of the fiscal quarter in which the Tangible Net Worth of the Borrower first reaches $550,000 plus (iii) (A) if the Interim Date has occurred and through December 31, 2002, 45% of the sum of the Net Income (not to be reduced by losses) or (B) after December 31, 2002, $100,000 plus 50% of the sum of the Net Income (not to be reduced by losses) for each fiscal quarter during the period from the day after the Interim Date through and including the last day of the then most recently completed fiscal quarter. (c) Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter, beginning June 30, 1998, the Fixed Charge Coverage Ratio for the applicable Calculation Period shall not be less than (i) 1.10 through and including December 31, 2002 and (ii) 1.25 thereafter. 54 56 (d) Interest Coverage Ratio. As of the last day of each fiscal quarter, beginning June 30, 1998, the Interest Coverage Ratio for the applicable Calculation Period shall not be less than: (i) 2.5 to and including September 30, 1999; (ii) 3.0 from and including December 31, 1999 to and including September 30, 2000; (iii) 3.5 from and including December 31, 2000 to and including September 30, 2001; (iv) 4.0 from and including December 31, 2002, and (v) 4.5 thereafter. ARTICLE 7 DEFAULT 7.1 Events of Default. An Event of Default shall mean the occurrence of one or more of the following described events: (a) the Company shall default in the payment of interest or principal of any of the Notes when due, whether at maturity, upon any scheduled payment date or by acceleration or otherwise, and, only with respect to interest, such default shall continue uncured for more than five (5) Business Days; (b) the Company shall default (i) in the payment of principal of or interest on any Indebtedness in an aggregate principal amount of $250,000 or more beyond any period of grace provided with respect thereto, or (ii) in the performance of any other covenant, agreement, term or condition contained in any agreement under which any Indebtedness in an aggregate principal amount of $250,000 or more is created, beyond any applicable grace or cure period; provided, however, that with regard to the Senior Debt, any Event of Default shall occur under this Section 7.1(b) only if the result of such default shall be an acceleration of the Senior Debt; (c) any representation or warranty herein made by the Company, or any certificate or financial statement furnished pursuant to the provisions hereof, shall prove to have been false or misleading in any material respect as of the time made or furnished or deemed made or furnished; (d) the Company shall default in the performance of any covenant, condition or provision of Section 6.1(h), 6.2 or 6.3 hereof, or Article 8, 9 or 10 hereof; 55 57 (e) the Company shall default in the performance of any other covenant, condition or provision of this Agreement, the Security Documents, or the Notes, or in the performance of any covenant, condition or provision of the Stockholders Agreement, and such default shall not be remedied for a period of 30 days after the occurrence of such default regardless of whether the Purchaser has provided to the Company notice thereof; (f) a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of 45 days or such court shall enter a decree or order granting the relief sought in such proceeding; (g) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or for any substantial part of its property, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action in furtherance of any of the foregoing; (h) both the following events shall occur; (i) a Reportable Event, the occurrence of which could cause the imposition of a lien under Section 4068 of ERISA, shall have occurred with respect to any Plan; and (ii) the aggregate amount of the then "current liability" (as defined in Section 412(l)(7) of the Internal Revenue Code of 1986, as amended) of all accrued benefits under such Plan exceeds the then current value of the assets allocable to such benefits by more than $100,000 at such time; or (i) a final judgment which, with other undischarged final judgments against the Company, exceeds an aggregate of $250,000 (excluding judgments to the extent the Company is fully insured or the 56 58 deductible or retention limit does not exceed $250,000 and with respect to which the insurer has assumed responsibility in writing), shall have been entered against the Company if, within 30 days after the entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal, or if, within 30 days after the expiration of any such stay, such judgment shall not have been discharged; or (j) a Change in Control shall occur. 7.2 Consequences of Event of Default. The provisions of this Section 7.2 are expressly subject to Section 7.3 hereof. (a) Bankruptcy. If an Event of Default specified in paragraphs (f) or (g) of Section 7.1 shall occur, the unpaid balance of the Notes and interest accrued thereof and all other liabilities of the Company to the holders thereof hereunder and thereunder shall be immediately due and payable, without presentment, demand, protest or (except as expressly required hereby notice of any kind, all of which are hereby expressly waived). (b) Other Defaults. If any other Event of Default shall occur, holder of a majority of the outstanding principal balance of the Senior Subordinated Notes and the Junior Subordinated Notes may at their option, by written notice to the Company, declare the entire unpaid balance of the respective Notes and interest accrued thereon and all other liabilities of the Company hereunder and thereunder to be forthwith due and payable, and the same shall thereupon become immediately due and payable, without presentment, demand, protect or (except as expressly required hereby) notice of any kind, all of which are hereby expressly waived. (c) Premium. In the event of any acceleration of any of the Notes pursuant to this Section 7.2, the Company shall also pay to holders of the Notes the prepayment premium which would otherwise be payable upon any prepayment of the Notes. 7.3 Subordination. This Agreement (including, without limitation, exercise of the rights set forth in Section 7.2 hereof) and the Notes and the Security Documents are subordinated in the right of a payment to the prior payment in full of all principal, premium and interest due on the Senior Debt in accordance with the Subordination Agreement. In the event of any liquidation, dissolution or winding up of the Company, receivership, insolvency, bankruptcy or reorganization, 57 59 all principal, premium and interest owing on the Senior Debt shall first be paid in full before any payment is made upon the indebtedness evidenced by the Notes. ARTICLE 8 PREEMPTIVE RIGHTS 8.1 Limited Preemptive Rights. If after the date of this Agreement, the Company authorizes the issuance and sale of any shares of capital stock or any securities containing options or rights to acquire any shares of capital stock (other than in connection with the issuance of such securities in exchange for the securities or assets of another Person as a part of an acquisition of a business as a going concern) at any time that any Purchaser holds any Primary Warrants or any Underlying Common Stock the Company will offer to sell to each Purchaser a portion of such securities equal to the percentage determined by dividing (i) the number of shares of Common Stock which would be owned upon exercise of the Primary Warrants then owned by the Purchaser plus the Common Stock then held by the Purchaser by (ii) the number of shares of Common Stock outstanding (on a fully diluted basis but not including the Conditional Warrants). For purposes of clause (ii) above, a share of Common Stock acquirable upon exercise or conversion of options or rights to acquire any shares of Common Stock shall be deemed outstanding only if the applicable conversion price, exercise price or other acquisition price is equal to or less than the then current fair market value of a share of Common Stock. The Purchaser will be entitled to purchase such stock or securities at the same price and on the same terms as such stock or securities are to be offered to any other Person. The Purchaser must exercise its purchase rights within thirty (30) days after receipt of written notice from the Company describing in reasonable detail the stock or securities being so offered, the purchase price thereof, the payment terms and the Purchaser's percentage allotment. Upon the expiration of such period of thirty (30) days, the Company will be free to sell such stock or securities which the Purchaser has not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to the Purchaser. Any stock or securities offered or sold by the Company after such 90-day period must be reoffered to the Purchaser pursuant to the terms of this Section 8.1. Any stock or securities purchased by the Purchaser from the Company pursuant to this Section 8.1 shall, upon such purchase and thereafter be deemed to be Securities and 58 60 Restricted Securities for all purposes of this Agreement. 8.2 Exceptions. The provisions of Section ____ shall not apply to issuances of Common Stock upon exercise of the Warrants. The provisions of Section 8.1 shall terminate upon the consummation of an underwritten public offering of the Company's Common Stock registered under the Securities Act with an investment banking firm of national reputation as managing underwriter. ARTICLE 9 PUT AND OTHER LIQUIDITY RIGHTS 9.1 Put. At any time and from time to time after the first to occur of (such date being the "Put Event") (i) the fifth anniversary of the Closing Date, or (ii) any Change of Control, or (iii) the repayment in full of the Notes or (iv) the repayment in full of the Senior Debt, any or all of the holders (individually a "Holder" and collectively, the "Holders") of Warrants, the Underlying Common Stock or any Common Stock or stock or securities containing options or rights to acquire any shares of Common Stock in either case acquired pursuant to Article 8 hereof (collectively, the "Subject Securities") will have the right (the "Put"), exercisable by delivery of written notice (the "Put Notice") to the Company and to Investor, (i) to require the Company to purchase or (ii) to require the Investor to purchase, for the Put Price (as defined below) payable in accordance with Section 9.3 any part or all of the Subject Securities then owned by the Holders (the Subject Securities described in each Put Notice are referred to collectively as the "Put Shares"). The Company will promptly (and in any event within 10 days) after receipt of a Put Notice give written notice (the "Company Notice") to each of the other Holders. Each such Holder will have the right to exercise its Put in connection with the initial Put Notice within 10 days following the delivery of the Company Notice. All Put Notices delivered by such other Holders will be deemed to have been delivered as of the date of the first such Put Notice, and such date is referred to in this Article 9 as the "Exercise Date." The right of each Holder to exercise its put will be an individual and separate right and the exercise of the Put by any Holder will not be conditioned upon the exercise by any other Holder of its Put. 59 61 9.2 Determination of Put Price. The "Put Price" of each share of Common Stock or Underlying Common Stock will be an amount equal to the quotient determined by dividing (i) 100% of the Fair Market Value, by (ii) the aggregate number of outstanding shares of the Company's Common Stock on a Fully Diluted Basis as of the Exercise Date; provided that the Put Price to be paid to a Holder of a Warrant, an option or any other right to acquire Common Stock shall be reduced by the exercise price of such Warrant, option or right. For purposes of this Agreement, "Fully Diluted Basis" shall include Common Stock acquirable upon exercise of conversion of warrants (including assuming the exercise of the Conditional Warrants at such time), stock options, convertible securities and similar rights to acquire Common Stock directly or indirectly, regardless of any legal or contractual restriction of such exercise, but shall be deemed outstanding only if the applicable conversion price, exercise price or other acquisition price is equal to or less than the Put Price per share calculated including such Common Stock as outstanding. "Fair Market Value" means the aggregate fair market value of all of the common equity interests of the Company on a control premium basis assuming the sale of the Company as a going concern to a willing buyer on an orderly basis (and with sufficient time to market effectively such going concern and for a prospective buyer to inquire into the business, affairs and condition of the Company and to adequately arrange for the consummation of such purchase) on the Exercise Date (whether such sale takes the form of a sale of stock, a sale of assets, a merger or a consolidation), without any discount for minority interest or lack of liquidity. Fair Market Value shall also include the value of any additional consideration received by principal owners of the Company in connection with any transaction in excess of compensation at the time of such transaction, as a result of such Person's position as a principal owner, such as consulting or employment contracts. The Fair Market Value shall be determined by an appraisal performed at the Company's expense by any of (i) Houlihan, Lokey, Howard & Zukin, (ii) Duff & Phelps or (iii) Willamette Management Associates, or any successor to such firms, as the Company shall elect (the "Appraiser"). The Appraiser will take into account any prior proposals or offers to purchase all or a portion of the outstanding Common Stock, regardless of whether such purchase was consummated, including, without limitation, the proposed price, the form of consideration, the date of the proposal or offer and the financial capability of the offeror. A representative of the holders of the Put Shares (as designated by holders of a majority of the Put Shares) 60 62 (the "Representative") will be given reasonable advance notice of and will be entitled to attend any due diligence meetings between management of the Company and the Appraiser. The Representative shall have access to all information given by the Company to the Appraiser and shall have an opportunity to present its views to the Appraiser. 9.3 Put Closing. Each closing (a "Put Closing") of the purchase and sale of Put Shares pursuant to a Put will take place on a date selected by the Company which will be not later than the 45th day following the Valuation Date. At the option of each Holder, payment of the Put Price for all Subject Securities tendered at the Put Closing by such Holder will be paid: (i) by the Company at the Put Closing by cashier's or certified check or by wire transfer of immediately available funds to accounts designated by the Holder; or (ii) by the Company at the Put Closing by an increase in the principal amount of the Senior Subordinated Notes in the amount of the Put Price; or (iii) by Investor at the Put Closing by delivery to the Holder of fully registered shares of the publicly-traded common stock of Investor with an aggregate value (based on the average closing price of such common stock for the 20 trading days preceding the Put Closing) equal to the Put Price. 9.4 Termination of Put. Except for any rights arising out of the failure of the Company to perform any of its duties or obligations under or relating to this Article 9, the rights of the Purchaser pursuant to this Article 9 will terminate upon the consummation of an underwritten public offering of the Company's Common Stock registered under the Securities Act with an investment banking firm of national reputation as managing underwriter. 9.5 Withdrawal of Put Notice. At any time on or prior to the 15th day following the Valuation Date, any Holder participating in the Put may by written notice to the Company withdraw its Put Notice, whereupon such Holder will have no right to receive the Put Price and no obligation to tender its Subject Securities; provided that notwithstanding the provisions of Section 9.2, such Holder will pay a pro rate share (based upon the proportion that the number of Put Shares described in such Holder's Put Notice bears to the aggregate Put Shares as of the Exercise Date) of the appraisal costs incurred by the Company in accordance with Section ___ except that the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal 61 63 or accounting duties) in connection with such appraisal. No such withdrawal will be deemed to be an exercise of a Put as to such withdrawing Holder or otherwise affect the rights of such Holder to exercise its Put at a later date or dates so long as its share of such appraisal costs has been paid in full. 9.6 Change of Control. For purposes of this Agreement, "Change of Control" shall mean the occurrence of any of the following: (a) (i) any transaction or series of related transactions resulting in the sale or issuance of securities or any rights to securities of the Company by the Company representing in the aggregate more than 30 percent of the issued and outstanding Common Stock and Underlying Common Stock on a Fully Diluted Basis other than to the Purchaser or Investor, or (ii) any transaction or series of related transactions resulting in the sale, transfer, assignment or other conveyance or disposition of any securities or any rights to securities of the Company by any holder or holders thereof other than the Purchaser representing in the aggregate more than 30 percent of the issued and outstanding Common Stock and Underlying Common Stock on a Fully Diluted Basis and the receipt of any consideration in connection therewith. (b) a merger, consolidation, reorganization, recapitalization or share exchange in which the stockholders of the Company immediately prior to such transaction receive, in exchange for securities of the Company owned by them, cash, property or securities of the resulting or surviving entity and as a result thereof Persons who were holders of Common Stock and Underlying Common Stock hold less than 50 percent of the capital stock, calculated on a Fully Diluted Basis, of the resulting corporation entitled to vote in the election of directors; (c) a sale, transfer or other disposition of assets representing in the aggregate more than one-third of the assets of the Company; or (d) any sale or issuance or series of sales or issuances of the Common Stock or any other voting security (or security convertible into, exchangeable for, or exercisable for any other voting security) of the Company within a 12-month period which results in a transfer of more than 50 percent of the issued and outstanding shares of capital stock of the Company or a transfer of more than 50 percent of the voting power of the Company; 62 64 (e) the consummation of an initial public offering of securities by the Company other than an offering of securities for an employee benefit plan on SEC Form S-8 or a successor form; or (f) other than as a result of his death or disability, for the period of five years following the date hereof, the ceasing by the Executive to be employed by the Company as its chief executive officer or the failure by the Executive to devote his full working time and attention to the business of the Company. 9.7 Unlocking Rights. In the event that at any time after the date three years from the date hereof, the Company shall receive a bona fide third-party offer to purchase all or substantially all of the Common Stock or the assets of the Company or to merge with the Company in a manner with no conditions which are unlikely to be satisfied prior to the proposed closing thereof that would cause the Company's stockholders to receive cash or publicly-traded securities in exchange for their Common Stock, and the Company's Board of Directors should not vote to accept such offer or a stockholder other than the Purchaser shall fail to accept such offer in a way that makes such offer unavailable to the Purchaser and the Purchaser has indicated during a contemporaneous time that it would accept such offer, the Purchaser shall have the right to put all, but not less than all, of its Warrants and Underlying Common Stock to the Company in accordance with Section 9.1, except that the Fair Market Value per share shall be deemed to be equal to the amount of such offer; provided however, in the event that the Credit Agreement restricts the Company from complying with this Section 9.7, the Company shall use its best efforts to obtain the necessary waiver or elimination of such restrictions including, without limitation refinancing the Indebtedness under the Credit Agreement. ARTICLE 10 CALL 10.1 Call Rights. At any time after the later of the repayment in full of the Notes (including any prepayment premium and all amounts then due Purchaser hereunder), the Company will have the right (the "Call"), exercisable by delivery of thirty (30) days advance written notice (the "Call Notice") to the Purchaser, to purchase all but not less than all of the Warrants, and if the Call Notice is given at any time 63 65 through the fifth anniversary of the Closing, any Underlying Common Stock obtained upon exercise of warrants (collectively, the "Call Shares") purchased upon exercise of Warrants for the Call Price (as defined below). The date of delivery of the Call Notice by the Company is referred to in this Article 10 as the "Call Exercise Date." 10.2 Call Price. The "Call Price" (i) of each share of Common Stock (including Underlying Common Stock) will be the Put Price as determined in accordance with Section 9.2 and (ii) of each Warrant to purchase a share of Common Stock will be the Put Price determined in accordance with Section 9.2 less the applicable exercise price for such Warrant and for such purposes, Conditional Warrants shall be deemed to represent the number of shares of Common Stock as if they were exercised on the Call Exercise Date. 10.3 Look-Back Period. If within the Price Protection Period (as defined in Section 10.5 below), an Organic Change (as defined in Section 10.4 below) occurs and the Organic Change Value (as defined in Section _ _ below) exceeds the Fair Market Value used in the determination of the Call Price for such exercise of the Call, the Holders will be entitled to receive from the Company the benefit of such higher valuation for the Call Shares sold or to be sold to the Company pursuant to such Call. Upon consummation of any Organic Change, the Company shall promptly deliver a portion of the amount and type of consideration received in such Organic Change (in proportion to the amounts of each type of consideration received in the Organic Change) to each Holder in an amount equal to the excess of (a) the amount which such Holder would have received upon sale of the Call Shares under the Call if the Fair Market Value used for purposes of the Call was the Organic Change Value over (b) the amount which such Holder received from the Company upon sale of the Call Shares under the Call. 10.4 Organic Change. For purposes of this Article 10, "Organic Change" shall mean the occurrence of any of the following: (a) more than 30% of the Common Stock, on a diluted basis, is sold by the Company or a stockholder or group of stockholders to a third party or third parties which are not an Affiliate of the Company or any existing stockholders as part of a single transaction or series of transactions; or 64 66 (b) the filing by the Company of a registration statement with the SEC providing for a public offering of the Common Stock. 10.5 Price Protection Period. For purposes of this Article 10, "Price Protection Period" shall mean the 12-month period following the Call Closing Date. 10.6 Organic Change Value. For purposes of this Article 10, "Organic Change Value" shall mean the Fair Market Value (determined as provided in Section 9.2) determined immediately prior to the Organic Change with respect to which such determination is made after taking into account the aggregate fair market value of all dividends and distributions declared or paid by the Company to its shareholders from and after the date of the Exercise Date to and including the date of the consummation of the Organic Change. 10.7 Call Closing. The closing (the "Call Closing") of the purchase and sale of Call Shares will take place on a date selected by the Company and will not be earlier than the 30th day following the Call Notice. Payment of the Call Price for all Call Shares tendered at the Call Closing will be paid by the Company at the Call Closing by cashier's or certified check or by wire transfer of immediate available funds to accounts designated by the Holders. No Holder will be obligated to tender any Call Shares unless the Company has adequate funds available to make payment therefor in the manner provided herein. 10.8 Termination of Call. The rights of the Company pursuant to this Article 10 will terminate upon the earlier to occur of (i) the consummation of an underwritten public offering of the Company's Common Stock registered under the Securities Act with an investment banking firm of national reputation as managing underwriter, and (ii) the failure of the Company to promptly pay the Call Price in full in accordance with Section 10.7 following any delivery of a Call Notice. ARTICLE 11 REGISTRATION RIGHTS 11.1 Piggyback Registrations. 65 67 (a) Right to Piggyback. Except in connection with the filing of a Form S-8, whenever the Company proposes to register any of its equity securities under the Securities Act and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company will give prompt written notice (in any event within five Business Days after its receipt of notice of any exercise of demand registration rights other than under this Agreement) to all holders of Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. Each such holder of Registrable Securities desiring to have Registrable Securities registered under this Section 11.1 shall advise the Company in writing within fifteen (15) days after the date of receipt of such notice from the Company, setting forth the amount of such Registrable Securities for which registration is requested. The Company shall thereupon include in such filing the number of Registrable Securities for which registration is so requested, and shall use its best efforts to effect registration under the Securities Act of such Registrable Securities. (b) Piggyback Expenses. The registration expenses of the holders of Registrable Securities will be paid by the Company in all Piggyback Registrations to the extent provided in Section 11.6. (c) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company will include in such registration: (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (d) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such 66 68 registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the holders initially requesting such registration, the Company will include in such registration (i) first, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (ii) second, other securities requested to be included in such registration. (e) Selection of Underwriters. If any Piggyback Registration is an underwritten offering, the selection of investment banker(s) and manager(s) for the offering must be approved by the holders of a majority of the Registrable Securities included in such Piggyback Registration. Such approval will not be unreasonably withheld. (f) Other Registrations. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to this Section 11.1, and if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least 180 days has elapsed from the effective date of such previous registration. 11.2 Demand Registrations Rights. (a) Demand Rights. If, at any time after the Company has filed and has had declared effective any registration statement under the Securities Act or the Securities Exchange Act of 1934, as amended, except with respect to registration statements filed on Form S-8 or any successor form, the Company receives a written request by the holders of a majority of the Registrable Securities to effect the registration under the Securities Act of such shares, of the Company shall follow the procedures described in this Section 11.2. Within five (5) days of its receipt of such request, the Company shall give written notice of such proposed registration (a "Demand Registration") to all holders of Registrable Securities, and thereupon, the Company shall, as expeditiously as possible, use its best reasonable efforts to effect the registration on a form of general use under the Securities Act of the shares it has been requested to register in such initial 67 69 request and in any response to such notice given to the Company within twenty (20) days after the Company's giving of such notice. The aforesaid right to demand registration shall be limited to three demands for all (and not each) of the Holders of Registrable Securities, provided that if less than seventy-five percent (75%) of the Registrable Securities proposed to be sold or sold, such offering shall be considered a Piggyback Registration rather than a Demand Registration in a particular Demand Registration shall be sold. (b) Other Stock. The Company may include in any registration under this Section 11.2 any other shares of Common Stock (including issued and outstanding shares of stock as to which the holders thereof have contracted with the Corporation for "piggyback" registration rights) so long as the inclusion in such registration of such shares will not, in the opinion of the managing underwriter of the shares of the Stockholder or Stockholders first demanding registration (if the offering is underwritten), interfere with the successful marketing in accordance with the intended method of sale or other disposition of all the stock sought to be registered by such demanding Stockholder or Stockholders pursuant to this Section 11.2. 11.3 S-3 Demand Registration Rights. In addition to the registration rights provided in Sections 11.1 and 11.2 above, if at any time the Company is eligible to use Form S-3 (or any successor form) for registration of secondary sales of Registrable Securities, any Holder of Registrable Securities may request in writing that the Company register shares of Registrable Securities on such form. Upon receipt of such request, the Company will promptly notify all holders of Registrable Securities in writing of the receipt of such request and each such Holder may elect (by written notice sent to the Company within thirty (30) days of receipt of the Company's notice) to have its Registrable Securities included in such registration pursuant to this Section 11.3. Thereupon, the Company will, as soon as practicable, use its best efforts to effect the registration on Form S-3 of all Registrable Securities that the Company has so been requested to register by such Holder for sale. The Company will use its best efforts to qualify and maintain its qualification for eligibility to use Form S-3 for such purposes. 11.4 Holdback Agreements. 68 70 (a) Each holder of Registrable Securities agrees not to effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 90-day period (or such longer period, not to exceed 90 additional days, as the managing underwriter shall require) beginning on the effective date of any underwritten Piggyback Registration in which Registrable Securities are included or Demand Registration (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree. (b) The Company agrees (i) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 90-day period beginning on the effective date of or any underwritten Piggyback Registration or Demand Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) to use best efforts to cause each holder of at least 10% (on a fully-diluted basis) of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree. 11.5 Registration Procedures. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof (including the registration of Warrants held by a holder of Registrable Securities requesting registration as to which the Company has received reasonable assurances that only Registrable Securities will be distributed to the public), and pursuant thereto the Company will as expeditiously as possible: 69 71 (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use reasonable efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel); (b) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (c) use reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdictions, (iii) consent to general service of process in each such jurisdiction or (iv) undertake such actions in any jurisdiction other than the states of the United States of America and the District of Columbia); (d) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; 70 72 (e) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its best efforts to secure designation of all such Registrable Securities covered by such registration statements as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; (f) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (g) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, effecting a stock split or a combination of shares); (h) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; 71 73 (j) permit any holder of Registrable Securities which holder, in its reasonable judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included; and (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order. If any such registration or comparable statement refers to any holder by name or otherwise as the holder of any securities of the Company and if its sole and exclusive judgment such holder is or might be deemed to be a controlling person of the Company, such holder shall have the right to require (i) the insertion therein of language, in form and substance satisfactory to such holder and presented to the Company in writing, to the effect that the holding by such holder of such securities is not to be construed as a recommendation by such holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such holder will assist in meeting any future financial requirements of the Company, (ii) in the event that such reference to such holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such holder; provided that with respect to this clause (ii) such holder shall furnish to the Company an opinion of counsel to such effect, which opinion and counsel shall be reasonably satisfactory to the Company. 11.6 Registration Expenses. All expenses incident to the Company's performance of or compliance with this Article 11, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses, excluding underwriting discounts and commissions, being herein 72 74 called "Registration Expenses"), will be borne by the Company. The Company will bear the reasonable fees and expenses of one counsel for the Holders of Registrable Securities participating in any Piggyback Registration or Demand Registration. All underwriting discounts and commissions will be borne by the seller of the securities sold pursuant to the registration. 11.7 Indemnification. (a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading 73 75 but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without the indemnifying party's consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest exists between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 11.8 Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up agreements, and other documents required under the terms of such underwriting arrangements; provided that no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters other than representations and warranties 74 76 regarding such holder and such holder's intended method of distribution. ARTICLE 12 MISCELLANEOUS 12.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that (i) the Company may not assign or transfer its rights hereunder or any interest herein or delegate its duties hereunder without the prior written consent of the Purchaser, (ii) the Purchaser shall have the right to assign its rights hereunder and under the Restricted Securities and the Subject Securities owned by it and its interests herein and therein, (A) in the case of the Notes, only to a holder of at least $100,000 in original principal amount, and (B) in all cases, in accordance with Article 5 hereof, and thereupon, any purchaser of such Restricted Securities or Subject Securities shall be considered the Purchaser hereunder. 12.2 Modifications, Amendments or Waivers. The provisions of this Agreement may be modified, amended or waived, but only by a written instrument signed by each of the Company and the Purchaser and to the extent such modification, amendment or waiver relates to any Notes, by prior written consent of holders of a majority of the then outstanding principal amount of such Notes; provided, that no such action will change (i) the rate at which or the manner in which interest accrues on any Notes or the times at which such interest becomes payable or (ii) any provision relating to the scheduled payments or prepayments of principal on the Notes without the written consent of all the holders of the principal amount of any Notes. 12.3 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies which it or they would otherwise have. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision or condition of this Agreement must be in writing and 75 77 shall be effective only to the extent in such writing specifically set forth. 12.4 Reimbursement of Expenses. The Company upon demand shall pay or reimburse the Purchaser for all reasonable fees and expenses incurred or payable by the Purchaser (including, without limitation, fees and expenses of special counsel for the Purchaser), from time to time (i) arising in connection with the negotiation, preparation and execution of this Agreement, the Notes and all other instruments and documents to be delivered hereunder or thereunder or arising in connection with the transactions contemplated hereunder or thereunder, (ii) relating to any amendments, waivers or consents pursuant to the provisions hereof or thereof, and (iii) arising in connection with the enforcement of this Agreement or collection of the Notes. 12.5 Holidays. Whenever any payment or action to be made or taken hereunder or under the Notes shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. 12.6 Notices. All notices and other communications given to or made upon any party hereto in connection with this Agreement shall, except as otherwise expressly herein provided, be in writing and mailed via certified mail, sent by Federal Express or other similar express delivery service for next day delivery, telefaxed (with a confirming copy sent by such an express delivery service for next day delivery) or hand delivered to the respective parties, as follows: to the Company: Specialty Transportation Services, Inc. 5979 McCasland Avenue Portage, IN 46368 Attn: President Telefax: (219) 764-4747 with a copy to: Sachnoff & Weaver, Ltd. 30 South Wacker Drive Suite 2900 Chicago, Illinois 60606 Attention: Joel R. Schaider Telefax: (312) 207-6400 76 78 to ACS: American Capital Strategies Ltd. 3 Bethesda Metro Center, Suite 860 Bethesda, Maryland 20814 Attn: President Telefax: (301)654-6714 with a copy to: Arnold & Porter 555 12th Street, N.W. Washington, D.C. 20004 Attn: Samuel A. Flax, Esq. Telefax: (202)942-5999 or in accordance with any subsequent written direction delivered in accordance with this section from the recipient party to the sending party. All such notices and other communications shall, except as otherwise expressly herein provided, be effective upon delivery if delivered by hand; in the case of certified mail, three Business Days after the date sent; in the case of telefax, when received; or in the case of express delivery service, the day after delivery of the notice to such service with charges prepaid. 12.7 Survival. All representations, warranties, covenants and agreements of the Company contained herein or made in writing in connection herewith shall survive the execution and delivery of this Agreement and the purchase of the Notes and the Purchased Securities and shall continue in full force and effect so long as any Note or any other Restricted Securities are outstanding and until payment in full of all of the Company's obligations hereunder or thereunder. 12.8 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE DEEMED TO BE CONTRACTS UNDER THE LAWS OF THE STATE OF MARYLAND AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF SAID STATE, EXCEPT FOR ITS RULES RELATING TO THE CONFLICT OF LAWS. 12.9 JURISDICTION. THE PURCHASER MAY ENFORCE ANY CLAIM ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN THE STATE OF MARYLAND, FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO ANY SUCH CLAIM, EACH OF THE 77 79 PARTIES HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF SAID COURTS BY MAILING A COPY THEREOF, BY CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 12.6 HEREOF AND AGREES THAT SUCH SERVICE, TO THE FULLEST EXTENT PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (II) SHALL BE TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT. NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF ANY PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR PRECLUDE ANY PURCHASER FROM BRINGING AN ACTION IN RESPECT HEREOF IN ANY OTHER STATE OR PLACE HAVING JURISDICTION OVER SUCH ACTION. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT LOCATED IN THE STATE OF MARYLAND AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 12.10 JURY TRIAL WAIVER. THE COMPANY HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREES THAT ANY SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 12.11 Herein, etc. Words such as "herein," "hereunder," "hereof" and the like shall be deemed to refer to this Agreement as a whole and not to any particular document or Article, Section or other portion of a document. 12.12 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 in any jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating any other provision of this Agreement. 12.13 Headings. Article, section and subsection headings in this Agreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 78 80 12.14 Indemnity. The Company hereby agrees to indemnify, defend and hold harmless the Purchaser and its officers, directors, employees, agents and representatives, and their respective successors and assigns in connection with any losses, claims, damages, liabilities and expenses, including reasonable attorneys' fees, to which the Purchaser may become subject (other than as a result of the gross negligence or willful misconduct of any such Person), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or by reason of any investigation, litigation or other proceedings related to or resulting from any act of, or omission by, the Company or its Affiliates or any officer, director, employee, agent or representative of the Company or its Affiliates with respect to the Transactions, the Notes, Charter Documents, the Bylaws or any agreements entered into in connection with any such agreements, instruments or documents and to reimburse the Purchaser and each such Person and Affiliate, upon demand, for any legal or other expenses incurred in connection with investigating or defending any such loss, claim, damage, liability, expense or action. To the extent that the foregoing undertakings may be unenforceable for any reason, the Company agrees to make the maximum contribution to the payment and satisfaction of indemnified liabilities set forth in this Section which is permissible under applicable law. 12.15 Environmental Indemnity. The Company, and its successors and assigns, hereby agree to defend, indemnify and hold harmless, Purchaser and its Affiliates (including their partners, subsidiaries, customers, guests, and invitees, and the successors and assigns of all of the foregoing, and their respective officers, employees and agents) from and against any and all Environmental Liabilities, whenever and by whomever asserted, to the extent that such Environmental Liabilities are based upon, or otherwise relate to: (i) any condition at any time in, at, on, under, a part of, involving or otherwise related to the Properties and Facilities (including any of the properties, materials, articles, products, or other things included in or otherwise a part of the Properties and Facilities); (ii) any action or failure to act of any Person, including any prior owner or operator of the Properties and Facilities (including any of the properties, materials, articles, products, or other things included in or otherwise a part of the Properties and Facilities), involving or otherwise related to the Properties and Facilities or operations of the Company; (iii) the Management of any Pollutant, material, article or product (including Management of any material, article or product containing a 79 81 Pollutant) in any physical state and at any time, involving or otherwise related to the Properties and Facilities or any property covered by clause (iv) (including Management either from the Properties and Facilities or from any property covered by clause (iv), and Management to, at, involving or otherwise related to the Properties and Facilities or any property covered by clause (iv)); (iv) conditions, and actions or failures to act, in, at, on, under, a part of, involving or otherwise related to any property other than the Properties and Facilities, which property was, at or prior to the Closing Date, (I) acquired, held, sold, owned, operated, leased, managed, or divested by, or otherwise associated with, (A) JGT, (B) any of JGT's Affiliates, or (C) any predecessor or successor organization of those identified in (A) or (B); or (II) engaged in any tolling, contract manufacturing or processing, or other similar activities for, with, or on behalf of JGT; (v) any violation of or noncompliance with or the assertion of any lien under the Environmental Laws, (vi) the presence of any toxic or hazardous substances, wastes or contaminants on, at or from the past and present Properties and Facilities, including, without limitation, human exposure thereto; (vii) any spill, release, discharge or emission affecting the past and present Properties and Facilities, whether or not the same originates or emanates from such Properties and Facilities or any contiguous real estate, including, without limitation, any loss of value of such Properties and Facilities as a result thereof; or (viii) a misrepresentation in any representation or warranty or breach of or failure to perform any covenant made by the Company in this Agreement. This indemnity and agreement to defend and hold harmless shall survive any termination or satisfaction of the Notes or the sale, assignment or foreclosure thereof or the sale, transfer or conveyance of all or part of the past and present Properties and Facilities or the sale, transfer or conveyance of all or part of the Underlying Common Stock or any other circumstances which might otherwise constitute a legal or equitable release or discharge, in whole or in part, of the Company under the Notes or the Underlying Common Stock. Notwithstanding the above, this Environmental Indemnity provision does not apply to the extent that any such Environmental Liability is a result of the willful misconduct or gross negligence of Purchaser or its successors and permitted assigns. 12.16 Counterparts. This Agreement may be executed in any number of counterparts and by either party hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, 80 82 but all such counterparts shall together constitute one and the same instrument. 12.17 Integration. This Agreement, the Security Documents, the Notes, the Purchase Documents the Purchased Securities, the Stockholders' Agreement, the Charter Documents and the Bylaws set forth the entire understanding of the parties hereto with respect to all matters contemplated hereby and supersede all previous agreements and understandings among them concerning such matters including without limitation, the letter agreement dated as of December 30, 1997. No statements or agreements, oral or written, made prior to or at the signing hereof, shall vary, waive or modify the written terms hereof. 12.18 Special Release of Liens. In the event that at any time the Company's sole remaining obligations hereunder shall be (i) the obligations under Article 9 with respect to the Purchased Shares and (ii) contingent indemnification obligations with respect to which no claims of reimbursements have been made, then upon the request and at the expense of the Company, the Purchaser shall promptly take such actions as are reasonably requested by the Company to release all of the Purchaser's Liens on the Collateral and to cause the Purchaser's rights under the Voting Trust to be terminated, and for all such purposes all obligations under this Agreement which are secured by the Security Documents shall be deemed to be satisfied. 81 83 SIGNATURE PAGE TO SUBORDINATED NOTE AND EQUITY PURCHASE AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. SPECIALTY TRANSPORTATION SERVICES, INC. By: /s/ Gary I. Goldberg ------------------------- Name: Gary I. Goldberg ---------------------- Title: President ---------------------- AMERICAN CAPITAL STRATEGIES LTD. By: /s/ Malon Wilkus ------------------------- Name: Malon Wilkus Title: President 82 84 Joinder by AASCHE Transportation Services, Inc. The undersigned, AASCHE Transportation Services, Inc., hereby joins in the attached Subordinated Note and Equity Purchase Agreement signifying its agreement to Article 9 thereof. AASCHE Transportation Services, Inc. By: /s/ Leon Monachos ------------------------------- Name: Leon Monachos ---------------------- Title: CFO ---------------------- 83 85
EXHIBITS - --------- EXHIBIT A-1 Form of Senior Subordinated Note Due 2008 EXHIBIT A-2 Form of Junior Subordinated Note Due 2008 EXHIBIT B-1 Form of Primary Warrant EXHIBIT B-2 Form of Conditional Warrant EXHIBIT C Form of Security Agreement EXHIBIT D Form of Mortgages EXHIBIT E Form of Stockholders Agreement EXHIBIT F Certificate of Incorporation EXHIBIT G Form of Guaranty of Accuracy EXHIBIT H Voting Trust Agreement EXHIBIT I Stock Pledge Agreement EXHIBIT J Form of Sachnoff & Weaver, Ltd. Opinion EXHIBIT K Compliance Certificate
Schedules - --------- "Qualification Schedule" (Section 4.1(a)) "Obligations Schedule" (Section 4.1(g)) "Litigation Schedule" (Section 4.1(i)) "Permits Schedule" (Section 4.1(j)) "Environmental Schedule (Section 4.1(k)) "Collective Bargaining Schedule" (Section 4.1(n)) "Plan Schedule" (Section 4.1(o)) "Equipment Schedule" (Section 4.1(q)) "Real Property Schedule" (Section 4.1(r)) "Contracts Schedule" (Section 4.1(s)) "Properties Schedule" (Section 4.1(p)) "Other Transactions Schedule" (Section 6.2(g))
84 EX-10.3 4 14% SR. UNSECURED TERM NOTE 1 EXHIBIT 10.3 ==================================================================== $1,000,000 14% SENIOR UNSECURED TERM NOTE BY AASCHE TRANSPORTATION SERVICES, INC. IN FAVOR OF AIM FINANCIAL CORPORATION JANUARY 30, 1998 ==================================================================== 2 INDEX ARTICLE I DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . 1 SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Accounting Terms . . . . . . . . . . . . . . . . . 7 SECTION 1.03. Interpretation . . . . . . . . . . . . . . . . . . 7 ARTICLE II THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.01. The Loan . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.02. Evidence of Loan . . . . . . . . . . . . . . . . . 8 SECTION 2.03. Interest . . . . . . . . . . . . . . . . . . . . . 8 SECTION 2.04. Interest on Overdue Amounts . . . . . . . . . . . . 8 SECTION 2.05. Payments . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE III CONDITIONS TO THE LOAN . . . . . . . . . . . . . . . . . . . 11 SECTION 3.01. Initial Conditions to Loan . . . . . . . . . . . . 11 SECTION 3.02. General Conditions . . . . . . . . . . . . . . . . 12 ARTICLE IV REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 13 SECTION 4.01. Organization; Corporate Powers . . . . . . . . . . 13 SECTION 4.02. Authorization . . . . . . . . . . . . . . . . . . . 13 SECTION 4.03. Governmental Approval . . . . . . . . . . . . . . . 14 SECTION 4.04. Enforceability . . . . . . . . . . . . . . . . . . 14 SECTION 4.05. Financial Matters . . . . . . . . . . . . . . . . . 14 SECTION 4.06. No Material Adverse Change . . . . . . . . . . . . 14 SECTION 4.07. Subsidiaries . . . . . . . . . . . . . . . . . . . 14 SECTION 4.08. Litigation . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.09. Compliance with Laws . . . . . . . . . . . . . . . 14 SECTION 4.10. Environmental Protection . . . . . . . . . . . . . 15 SECTION 4.11. Agreements . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.12. Federal Reserve Regulations . . . . . . . . . . . . 15 SECTION 4.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 4.14. Labor and Employment . . . . . . . . . . . . . . . 16 SECTION 4.15. Investment Company Act; Public Utility Holding Company Act . . . . . . . . . . . . . . . . 16 SECTION 4.16. Capitalization . . . . . . . . . . . . . . . . . . 16 SECTION 4.17. Properties . . . . . . . . . . . . . . . . . . . . 16 SECTION 4.18. Intellectual Property; Licenses . . . . . . . . . . 16 SECTION 4.19. Solvency . . . . . . . . . . . . . . . . . . . . . 17 SECTION 4.20. Complete Disclosure . . . . . . . . . . . . . . . . 17 ARTICLE V AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 17 SECTION 5.01. Existence . . . . . . . . . . . . . . . . . . . . . 17 SECTION 5.02. Businesses and Properties; Compliance with Laws . . 17 SECTION 5.03. Insurance . . . . . . . . . . . . . . . . . . . . . 18
-i- 3 SECTION 5.04. Obligations and Taxes . . . . . . . . . . . . . . . 18 SECTION 5.05. Financial Statements; Reports . . . . . . . . . . . 19 SECTION 5.06. Litigation and Other Notices . . . . . . . . . . . 20 SECTION 5.07. ERISA . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 5.08. Maintaining Records; Access to Premises and Inspections . . . . . . . . . . . . . . . . . . 21 SECTION 5.09. Use of Proceeds . . . . . . . . . . . . . . . . . . 21 ARTICLE VI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 21 SECTION 6.01. Indebtedness . . . . . . . . . . . . . . . . . . . 21 SECTION 6.02. Negative Pledge . . . . . . . . . . . . . . . . . . 22 SECTION 6.03. Sale of Assets . . . . . . . . . . . . . . . . . . 22 SECTION 6.04. Consolidations, Mergers or Purchases of Assets . . 22 SECTION 6.05. Restricted Payments . . . . . . . . . . . . . . . . 23 SECTION 6.06. Investments, Loans and Advances . . . . . . . . . . 23 SECTION 6.07. Transactions with Affiliates . . . . . . . . . . . 23 SECTION 6.08. Line of Business . . . . . . . . . . . . . . . . . 23 SECTION 6.09. Fiscal Year, Accounting . . . . . . . . . . . . . . 23 SECTION 6.10. Limitations on Sale of Assets, Distributions . . . 23 SECTION 6.11. Issuance of Equity Interests . . . . . . . . . . . 24 SECTION 6.12. Certain Documents . . . . . . . . . . . . . . . . . 24 SECTION 6.13. Operating Leases . . . . . . . . . . . . . . . . . 24 ARTICLE VII FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . 24 SECTION 7.1. Tangible Net Worth . . . . . . . . . . . . . . . . 24 SECTION 7.2. Minimal Annual Net Income . . . . . . . . . . . . . 24 SECTION 7.3. Leverage Ratio . . . . . . . . . . . . . . . . . . 24 ARTICLE VIII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 8.01. Events of Default . . . . . . . . . . . . . . . . . 24 SECTION 8.02. Remedies Upon Default . . . . . . . . . . . . . . . 26 ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . . . 28 SECTION 9.03. Successors and Assigns . . . . . . . . . . . . . . 28 SECTION 9.04. Expenses of the Holder; Indemnity . . . . . . . . . 28 SECTION 9.05. Right of Setoff . . . . . . . . . . . . . . . . . . 29 SECTION 9.06. APPLICABLE LAW . . . . . . . . . . . . . . . . . . 29 SECTION 9.07. Waivers . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 9.08. Amendments . . . . . . . . . . . . . . . . . . . . 29 SECTION 9.09. Severability . . . . . . . . . . . . . . . . . . . 30 SECTION 9.10. Counterparts . . . . . . . . . . . . . . . . . . . 30 SECTION 9.11. Headings . . . . . . . . . . . . . . . . . . . . . 30 SECTION 9.12. CONSENT TO JURISDICTION . . . . . . . . . . . . . . 30 SECTION 9.13. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 30
-ii- 4 SECTION 9.14. Interest Limitation . . . . . . . . . . . . . . . . 30 SECTION 9.15. Loan Documents . . . . . . . . . . . . . . . . . . 31
-iii- 5 SCHEDULES 4.07 Subsidiaries 4.10 Environmental Protection 4.16 Capitalization 6.01 Indebtedness 6.02 Liens
-iv- 6 SENIOR UNSECURED TERM NOTE THIS SENIOR UNSECURED TERM NOTE (as from time to time amended, modified, restated, supplemented and in effect, this "NOTE") is made as of January 30, 1998, by AASCHE TRANSPORTATION SERVICES, INC., a Delaware corporation (the "OBLIGOR"), in favor of AIM FINANCIAL CORPORATION, an Illinois corporation, and its successors and assigns (the "HOLDER"). RECITALS A. The Obligor has requested that the Holder extend credit in the form of a term loan in the principal amount of $1,000,000, for the purposes and subject to the terms and conditions hereinafter set forth. B. The Holder is willing to make such term loan available to the Obligor and the Obligor is willing to accept such term loan from the Holder, subject to the terms and conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of the matters set forth in the Recitals and the covenants and provisions herein set forth, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.01. DEFINED TERMS. As used in this Note, the following terms shall have the meanings specified below: "AFFILIATE" shall mean, with respect to any Person, any other Person (including any member of the immediate family of any such natural Person) which directly or indirectly beneficially owns or controls 10% or more of the total voting power of shares of capital stock of such Person having the right to vote for directors under ordinary circumstances, any Person controlling, controlled by or under common control with any such Person (within the meaning of Rule 405 under the Securities Act of 1933), and any shareholder, director or executive officer of any such Person. "BOARD" shall mean the Board of Governors of the Federal Reserve System of the United States. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or legal holiday in the State of Illinois on which commercial banks are open for business in Chicago, Illinois. "CHANGE OF CONTROL" shall mean any of the following: (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange 7 Commission under the Securities Exchange Act of 1934, as amended) of 20% or more of the issued and outstanding shares of capital Stock of Obligor having the right to vote for the election of directors of Obligor under ordinary circumstances; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of Obligor (together with any new directors whose election by the board of directors of Obligor or whose nomination for election by the stockholders of Obligor was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose elections or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office, (c) Obligor shall cease to own and control all of the economic and, except as provided in the Voting Trust Agreement as of the Closing Date, voting rights associated with all of the outstanding capital Stock of STS or (d) any member of Obligor's senior management (including those Persons for which key man life insurance is required to be maintained pursuant hereto) as of the Closing Date shall cease to constitute a member of Obligor's senior management, whether by reason of termination of employment, death, disability or otherwise. "CLOSING DATE" shall mean January 30, 1998. "DEFAULT" shall mean any event that with notice or lapse of time or both would constitute an Event of Default. "DEFAULT RATE" shall mean the Default Rate specified in SECTION 2.04. "DESIGNATED RATE" shall mean a fixed rate per annum equal to 14%. "DOLLARS" and the symbol "$" shall mean the lawful currency of the United States of America. "ENVIRONMENTAL LAWS" shall mean all laws relating to environmental, health or safety matters, including those relating to fines, orders, injunctions, penalties, damages, contribution, cost recovery, compensation, losses or injuries resulting from the release or threatened release of Hazardous Materials and to the generation, use, storage, transportation, or disposal of Hazardous Materials, in any manner applicable to the Obligor or its Subsidiaries or their respective properties, each as heretofore and hereafter amended or supplemented, and any analogous future or present local, state or federal statutes, rules and regulations promulgated thereunder or pursuant thereto, and any other present or future law, ordinance, rule, regulation, permit or permit condition, order or directive addressing environmental, health or safety issues. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" shall mean any corporation, trade or business that is treated as a single employer with the Obligor pursuant to Section 4001(b)(1) of ERISA. "EVENT OF DEFAULT" shall mean the Events of Default specified in SECTION 8.01. -2- 8 "FINANCIAL OFFICER" shall mean the President, Chief Executive Officer or Chief Financial Officer of the Obligor. "FISCAL YEAR" or "FISCAL YEAR" shall mean each twelve-month period ending on December 31. "GUARANTY" shall mean any obligation, contingent or otherwise, of any Person guarantying or having the economic effect of guarantying any Indebtedness of any other Person in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (b) to purchase property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness, or (c) to maintain working capital, equity capital or other financial condition of the primary obligor so as to enable the primary obligor to pay such Indebtedness (including any obligation to make capital contributions, loans or other payments pursuant to a keep well guaranty or similar instrument); provided, however, that the term "Guaranty" shall not include a guaranty of payments under operating leases or endorsements for collection or deposit, in each case in the ordinary course of business. "HAZARDOUS MATERIALS" shall mean (a) any chemical, material or substance defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "restricted hazardous waste," "toxic pollutants," "contaminants," "pollutants," "toxic substances" or words of similar import under any applicable local, state or federal law or under the regulations adopted or publications promulgated pursuant thereto, including Environmental Laws, (b) any oil, petroleum or petroleum derived substances, any drilling fluids, produced waters or other wastes associated with the exploration, development or production of crude oil, any flammable substances or explosives, any radioactive materials, any hazardous wastes or substances, any toxic wastes or substances or any other materials or pollutants which (i) pose a hazard to any property of the Obligor or any of its Subsidiaries or to Persons on or about such properties, or (ii) cause such properties to be in violation of any Environmental Laws, (c) asbestos in any form which is or could become friable, radon gas, urea formaldehyde foam insulation, or transformers or other electrical equipment which contain any oil or dielectric fluid containing polychlorinated biphenyls, and (d) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority. "HOLDER" shall mean the Holder defined in the preamble of this Note. "INDEBTEDNESS" shall mean, with respect to any Person, without duplication (a) all obligations of such Person for borrowed money, or with respect to deposits with such Person or advances to such Person of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than trade payables and accrued expenses incurred in the ordinary course of business not yet due and payable or not yet -3- 9 more than 60 days in arrears or with respect to which such Person is contesting in good faith the amount or validity thereof), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all obligations of such Person under leases that are classified as capital leases under generally accepted accounting principles, (h) all Guaranties of such Person, (i) all obligations of such Person under any Interest Rate Protection Agreement, (j) all obligations of such Person under or with respect to letters of credit and bankers acceptances and (k) all obligations of the foregoing nature which are secured by property or other assets of the Obligor, regardless of whether the Obligor has expressly assumed such obligations; provided, however, that the term "Indebtedness" shall not include payments under operating leases in the ordinary course of business. "INTEREST PAYMENT DATE" shall mean the first Business Day of each calendar month. "INTEREST RATE PROTECTION AGREEMENT" shall mean any interest rate swap, cap, collar or similar interest rate hedging strategy or agreement now existing or hereafter entered into by any Person. "LASALLE DOCUMENTS" shall have the meaning set forth on SCHEDULE 6.01 as of the Closing Date. "LEVERAGE RATIO" shall mean the ratio of all Indebtedness of the Obligor to Tangible Net Worth. "LIEN" shall mean, with respect to any asset, any lien, mortgage, security interest, charge or encumbrance of any kind, including the rights of a vendor, lessor, or similar party under any conditional sale agreement or other title retention agreement or lease substantially equivalent thereto, any production or advance payment and any other right of or arrangement with any creditor to have his claim satisfied out of any property or assets, or the proceeds therefrom, prior to the general creditors of the owner thereof. "LOAN" shall mean the term loan made by the Holder to the Obligor under this Note. "LOAN ACCOUNT" shall mean that certain account of Holder, account number 1110014515031 in the name of Holder at The First National Bank of Chicago in Chicago, Illinois. "LOAN DOCUMENTS" shall mean collectively this Note, the Warrant and the reports, schedules, exhibits, certificates, financial statements and other agreements and instruments executed and/or delivered in connection herewith or therewith. "MANAGEMENT AGREEMENT" shall mean that certain Management Agreement dated as of the Closing Date between the Obligor and STS. "MARGIN STOCK" shall have the meaning assigned such term in Regulation U. -4- 10 "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse effect upon the business, operations, prospects, properties, assets, liabilities, operating results, cash flows or condition (financial or otherwise) of the Obligor, (b) a material impairment of the ability of the Obligor to perform the obligations, or the impairment of the validity or enforceability of, or material impairment of the rights or remedies of, or benefits to, the Holder, under any Loan Document or (c) a material impairment of the ability of STS to perform its payment obligations under the Management Agreement as required by this Note. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan (within the meaning of Section 3(37) of ERISA) that is maintained for employees of the Obligor or any ERISA Affiliate. "OBLIGATIONS" shall mean all obligations, liabilities and indebtedness of every nature of the Obligor from time to time owed to the Holder under this Note and the other Loan Documents including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable hereunder or thereunder. "OBLIGOR" shall mean the Obligor defined in the preamble of this Note. "PENSION PLAN" shall mean any Plan and any Multiemployer Plan that is subject to the provisions of Section 302 of ERISA or Title IV of ERISA. "PERMITTED LIENS" shall mean the Liens permitted by SECTION 6.02. "PERSON" shall mean and includes natural persons, corporations (business, municipal or not-for-profit), limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts and other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. "PLAN" shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA), other than a Multiemployer Plan, that is maintained for employees of the Obligor or any ERISA Affiliate. "PREPAYMENT EVENT" shall mean any (a) incurrence of Indebtedness not permitted in accordance with SECTION 6.01, (b) direct or indirect purchase, redemption, defeasance or prepayment of any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness required to be identified on SCHEDULE 6.01, (c) sale, transfer or other disposition of a material portion of Obligor's assets not permitted in accordance with SECTION 6.03, (d) merger, consolidation or combination with any Person, or purchase, lease or other acquisition of a material portion of the property or assets of any Person not permitted in accordance with SECTION 6.03, (e) declaration or payment of any kind to any shareholder or Affiliate of the Obligor, or setting apart of any sum in respect thereof, not permitted in accordance with SECTION 6.05, (f) issuance of equity or other securities not permitted in accordance with SECTION 6.11, or (g) Change of Control. -5- 11 "REGULATION D, G, T, U OR X" shall mean Regulation D, G, T, U or X of the Board, as each of the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof. "RELATED TRANSACTIONS" shall mean (a) the incurrence by Obligor on the Closing Date of not more than $5,375,000 in principal amount of additional Indebtedness in excess of the Loan and the other Indebtedness identified on SCHEDULE 6.01 as of the Closing Date, (b) the incurrence by STS on the Closing Date of not more than $31,000,000 in principal amount of Indebtedness, (c) the acquisition by STS on the Closing Date of all or substantially all of the assets constituting or otherwise relating to the municipal solid waste transporting division of Jack Gray Transport, Inc. for an aggregate purchase price (together with related fees, costs and expenses) not in excess of $31,000,000, (d) the contribution by Obligor on the Closing Date of not more than $4,500,000 to the cash equity capital of STS and (e) the execution, delivery and effectiveness of the Management Agreement, all of the foregoing consummated pursuant to terms and conditions reasonably acceptable to the Holder. "REPORTABLE EVENT" shall mean any Reportable Event within the meaning of Section 4043(b) of Title IV of ERISA or the regulations issued thereunder, other than an event for which the 30 day notice contained in Subparts B and C of 29 C.F.R. Section 4083 is waived. "STOCKHOLDER'S EQUITY" shall mean the sum of the capital stock, capital in excess of par and stated value of shares of its capital stock, retained earnings and any other account, including any special account for common stock subject to redemption, which, in accordance with generally accepted accounting principles, constitutes stockholder's equity (or such other appropriate account designation), but shall specifically exclude all amounts due from officers, employees, stockholders (other than revenues due from stockholders in the ordinary course of business) and Affiliates. "STS" shall mean Specialty Transportation Services, Inc., an Illinois corporation. "SUBSIDIARY" shall mean, as to any Person (a) any corporation, more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (b) any partnership, association, joint venture, or other entity in which such Person and/or one or more Subsidiaries of such Person has greater than a 50% equity interest at the time. "TANGIBLE NET WORTH" shall mean, as of any particular date, the Obligor's Stockholder's Equity, minus the value of the Obligor's unamortized debt discount and expense, amounts owing or due from Affiliates, employees, directors or shareholders of the Obligor, unamortized deferred charges, goodwill, organization costs, research and development costs, noncompetition agreements, patents, copyrights, trademarks and other intangible items, including any write-up in the book value of any asset resulting from a revaluation thereof, all as determined in accordance with generally accepted accounting principles. -6- 12 "TAX SHARING AGREEMENT" shall mean a tax sharing agreement between the Obligor and STS dated on or prior to the Closing Date. "TAXES" shall mean the Taxes defined in SECTION 2.05(F). "TERMINATION DATE" shall mean July 1, 1999. "TRANSACTIONS" shall mean collectively the execution, delivery and performance by the Obligor of this Note, the Warrant and the other Loan Documents, the borrowing by the Obligor hereunder, and all other transactions contemplated by this Note, the Warrant and the other Loan Documents. "UNITED STATES" and "U.S." shall each mean the United States of America. "WARRANT" shall mean the Warrant issued by the Obligor to the Holder on the Closing Date, as amended, supplemented, restated or modified from time to time, all in form and substance acceptable to the Holder. "VOTING TRUST AGREEMENT" shall mean that certain Voting Trust Agreement regarding STS dated as of the Closing Date by and among the shareholders of STS and the other Persons signatory thereto. SECTION 1.02. ACCOUNTING TERMS. Except as otherwise herein specifically provided, each accounting term used herein shall have the meaning given it under generally accepted accounting principles in effect from time to time in the United States applied on a consistent basis; provided, however, that each reference in ARTICLES VI or VII hereof, or in the definition of any term used in ARTICLE VI or VII hereof, to generally accepted accounting principles, shall mean generally accepted accounting principles as in effect in the United States on the date hereof. SECTION 1.03. INTERPRETATION. In this Note and each other Loan Document, unless a clear contrary intention appears: (a) The singular number includes the plural number and vice versa; (b) Reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Loan Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity; (c) reference to either gender includes the other gender; (d) reference to any agreement (including this Note and the Schedules and Exhibits and the other Loan Documents), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof and the other Loan Document; -7- 13 (e) reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder; (f) reference to any Article, Section, Schedule, or Exhibit means such Article or Section of this Note or Schedule or Exhibit to this Note; (g) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Note as a whole and not to any particular Article, Section or other provision hereof; (h) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". ARTICLE II THE LOAN SECTION 2.01. THE LOAN. Subject to the terms and conditions of this Note, the Holder shall make a term loan to the Obligor on the Closing Date in the initial principal amount of $1,000,000 (the "LOAN"). SECTION 2.02. EVIDENCE OF LOAN. The Loan made by the Holder to the Obligor hereunder shall be evidenced by this Note. The Holder is hereby authorized by the Obligor (but not obligated) to, record on any schedules attached to this Note (or on a continuation of such schedules attached to this Note and made a part hereof), or otherwise record in the Holder's internal records, an appropriate notation evidencing the date and amount of each payment of principal of any portion of the Loan, each payment of interest on the Loan and the other information provided for on such schedule; provided, however, that the failure of the Holder to make such a notation or any error in such a notation shall not affect the obligation of the Obligor to repay the Loan in accordance with the terms of this Note. SECTION 2.03. INTEREST. Except as set forth in SECTION 2.04, the Obligor shall pay the Holder interest on the outstanding principal balance of the Loan at a rate per annum equal to the Designated Rate. The records of the Holder as to the interest rate applicable to the Loan shall be binding and conclusive absent manifest error. Interest shall be payable from the Closing Date to the Termination Date. Interest shall be computed on the basis of the actual number of days elapsed on the basis of a year consisting of 360 days, and shall be payable as provided in SECTION 2.05. SECTION 2.04. INTEREST ON OVERDUE AMOUNTS. If the Obligor shall default in the payment of the principal of or interest on the Loan or any other amount becoming due hereunder, by scheduled maturity, notice of prepayment, acceleration or otherwise, the Obligor shall on demand from time to time from the Holder pay interest, to the extent permitted by law, on such defaulted -8- 14 amount from the day after the due date thereof to the date of actual payment (after as well as before judgment) at a rate per annum computed on the basis of the actual number of days elapsed on the basis of a year consisting of 360 days, equal to the Designated Rate plus 4% per annum ("DEFAULT RATE"). SECTION 2.05. PAYMENTS. (a) PRINCIPAL AND INTEREST. If not sooner paid, the outstanding principal amount of the Loan shall be paid on the Termination Date. Interest on the Loan shall be payable monthly in arrears on each Interest Payment Date, commencing on February 1, 1998. All payments by the Obligor pursuant to this Note, whether in respect of principal, interest, or otherwise, shall be made without setoff, counterclaim or deduction in same day funds by the Obligor to the Holder. All such payments required to be made to the Holder shall be made not later than 2:00 p.m., Chicago time, on the date due by wire transfer to the Loan Account or such other account as the Holder shall specify from time to time by notice to the Obligor. Funds received after that time shall be deemed to have been received by the Holder on the next following Business Day. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest, if any, in connection with such payment. (b) MANDATORY PAYMENTS. Upon the occurrence of any Prepayment Event, the principal amount outstanding hereunder, together with all accrued interest hereon and any accrued unpaid fees and all other liabilities of the Obligor accrued hereunder and under the other Loan Documents, shall automatically become due and payable, both as to principal and interest, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Obligor, anything contained herein to the contrary notwithstanding. (c) VOLUNTARY PAYMENTS. The Obligor may from time to time, upon at least three days' prior written notice to the Holder, voluntarily prepay the Loan in whole or in part without premium or penalty; provided that any partial prepayment shall be in an aggregate principal amount of at least $100,000 and in integral multiples of $25,000 in excess thereof. Any partial prepayment shall be applied to the principal amount of this Note. All prepayments of principal shall include interest accrued to the date of prepayment on the principal amount being prepaid. If the Obligor prepays the Loan in whole or in part, or if the maturity of the Loan is accelerated, the Obligor shall pay the Holder, at the time of any such prepayment or acceleration, a prepayment premium in an amount equal to (i) the product of 4% multiplied by the aggregate principal amount of the prepayment of the Loan, for any prepayment made prior to the first anniversary of the Closing Date and (ii) the product of 3% multiplied by the aggregate principal amount of the prepayment of the Loan, for any prepayment made thereafter. (d) REVIVAL OF PAYMENTS. To the extent that the Obligor makes a payment or payments to the Holder, which payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment received, the Obligations or part thereof intended to be satisfied shall be -9- 15 revived and shall continue in full force and effect, as if such payments had not been received by the Holder. (e) ADDITIONAL AMOUNTS. If the implementation of or any change in any law or regulation or in the interpretation by any court or administrative or governmental authority charged with their administration shall either (i) impose, modify or deem applicable any reserve, special deposit, capital adequacy or similar requirement not existing on the date of this Note against any assets held by, deposits with or for the account of, or loans or commitments by, the Holder in connection with this Note or the Loan (including a request or requirement which affects the manner in which the Holder allocates capital resources to its commitments, including its obligations hereunder); or (ii) impose on the Holder any other condition not existing on the date of this Note regarding this Note or the Loan and the result of any event referred to in clause (i) or (ii) above shall be to (A) increase the cost to the Holder of making or maintaining the Loan (which increase in cost shall be the result of the Holder's reasonable allocation of the aggregate of such costs increases resulting from such events), or (B) reduce any amounts payable by the Obligor hereunder, or (C) reduce the rate of return on the Holder's capital as a consequence of its making and maintaining of the Loan to a level below that which the Holder could have achieved but for such circumstances, then, upon demand by the Holder, the Obligor shall pay to the Holder, from time to time as specified by the Holder, additional amounts which shall be sufficient to compensate the Holder on an after-tax basis for such increased cost or reduction in payment or in rate of return. If any such amount is not paid on demand by the Holder, the Obligor shall pay the Holder interest at the interest rate specified in SECTION 2.04 on each such amount from the date when payment was due until paid in full. Each demand by the Holder hereunder shall be accompanied by a certificate setting forth in reasonable detail such increased cost or reduction in payment or in rate of return as a result of any event mentioned in clause (i) or (ii) above and shall, absent manifest error, be conclusive. In determining such amounts, the Holder may use any reasonable average and attribution methods. (f) TAXES ON PAYMENTS. All payments made by the Obligor under this Note shall be made free and clear of, and without deduction or withholding for or on account of, any future income, stamp or other taxes, levies, imposts, deductions, charges, or withholdings excluding taxes imposed on net income of the Holder (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "TAXES"). If any Taxes are required to be withheld from any amounts so payable to the Holder hereunder, the amounts so payable to the Holder shall be increased to the extent necessary to yield to the Holder (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Note. Whenever any Tax is paid by the Obligor, as promptly as possible thereafter, the Obligor shall send to the Holder a certified copy of any original official receipt received by the Obligor showing payment thereof. If the Obligor fails to pay any Taxes when due to the appropriate taxing authority, the Obligor shall indemnify the Holder for any incremental taxes, interest or penalties that may become payable by the Holder as a result of any such failure. -10- 16 ARTICLE III CONDITIONS TO THE LOAN SECTION 3.01. INITIAL CONDITIONS TO LOAN. The obligations of the Holder to make the Loan is subject to the following conditions precedent, all of which shall be in form and substance satisfactory to the Holder in its sole and absolute discretion: (a) NOTE. The Holder shall have received this Note, duly executed and delivered by the parties hereto, together with all Schedules, Exhibits and attachments hereto. (b) WARRANT. The Holder shall have received the Warrant, duly executed and delivered by the Obligor. (c) INSURANCE. The Holder shall have received copies of certificates and policies evidencing the insurance required under SECTION 5.03(a) of this Note. (d) SEARCHES. The Holder shall have received recently dated reports describing all Lien filings with respect to the Obligor. No such report shall list any Lien other than (i) Permitted Liens and (ii) Liens released on or before the Closing Date pursuant to such termination statements, releases and other documents as are acceptable to the Holder. (e) MANAGEMENT AGREEMENT. The Holder shall have received a copy of the form of Management Agreement to be duly executed and delivered as of the Closing Date, subject only to such non-material changes as are not adverse to the Obligor, certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. (f) VOTING TRUST AGREEMENT. The Holder shall have received a copy of the form of Voting Trust Agreement to be duly executed and delivered as of the Closing Date, subject only to such non-material changes as are not adverse to the Obligor, certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. (g) TAX SHARING AGREEMENT. The Holder shall have received a copy of the form of Tax Sharing Agreement to be duly executed and delivered as of the Closing Date, subject only to such non-material changes as are not adverse to the Obligor, certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. (h) AUTHORIZATION DOCUMENTATION. The Holder shall have received (i) a copy of the articles of incorporation of the Obligor, certified by the Secretary of State of its state of incorporation of a recent date, and a certificate as to its good standing (including tax status) from the Secretary of States of its state of incorporation and each state in which its failure to be so qualified could reasonably be expected to result in a Material Adverse Effect, each dated as of a recent date, and (ii) a certificate of the Secretary or an Assistant Secretary of the Obligor, dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the certificate of incorporation and by-laws of the Obligor as in effect on the date of such certificate, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Obligor's board of directors authorizing the execution, delivery and performance of the Transactions, and that such resolutions have not been -11- 17 modified, rescinded or amended and are in full force and effect, and (C) as to the incumbency and specimen signature of each officer of the Obligor executing this Note or the other Loan Documents. (i) CERTIFICATION. The Holder shall have received a certificate, dated as of the Closing Date, whereby the Obligor certifies as to the matters specified in SECTIONS 3.02. (j) LEGAL OPINION. The Holder shall have received a favorable written opinion of counsel for the Obligor in form and substance reasonably acceptable to the Holder and its counsel. (k) RELATED TRANSACTIONS. Each of the Related Transactions shall have been consummated in the manner contemplated by this Note, and the Holder shall have received a copy of the form of each material agreement pursuant to which the Related Transactions were so consummated, subject only to such non- material changes as are not adverse to the Obligor, certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. (l) FINANCIAL CONDITION. The Holder shall have received such information as it may require in order to satisfy itself as to the financial condition of the Obligor and STS and the lack of material contingent liabilities (other than as contemplated pursuant to the Transactions and Related Transactions) of the Obligor and STS. (m) LEGAL MATTERS. Legal matters incident to the Transactions and the execution and delivery of this Note and the other Loan Documents and to the transactions contemplated hereby shall be satisfactory to the Holder and its counsel. (n) CLOSING FEE. The Obligor shall have paid to the Holder on the Closing Date a closing fee of $15,000, which fee shall be due and payable and deemed fully earned and nonrefundable on the Closing Date. (o) CONSENTS. The Holder shall have received a copy of each consent to the Transactions required to be delivered in respect of any Indebtedness, duly executed and delivered to the Obligor, each certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. (p) FURTHER ASSURANCES. The Holder shall have received all further documents, notifications and other assurances reasonably required by the Holder in respect of the Transactions. SECTION 3.02. GENERAL CONDITIONS. The obligation of the Holder to make and continue the Loan is subject to the satisfaction of the Holder with the fulfillment of the following conditions: (a) REPRESENTATIONS. The representations and warranties set forth in ARTICLE IV shall be true and correct in all material respects with the same effect as though made on and as of such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date). -12- 18 (b) COMPLIANCE. The Obligor shall be in compliance in all material respects with all the terms and provisions contained herein and in the other Loan Documents to be observed or performed, and at the time of and immediately after such borrowing, no Default or Event of Default shall have occurred and be continuing. (c) RELATED TRANSACTIONS. Within ten (10) Business Days after the Closing Date, the Holder shall have received a copy of each duly executed material agreement (including the Management Agreement, the Voting Trust Agreement and documents relating to Indebtedness incurred on the Closing Date) pursuant to which the Related Transactions were consummated, certified by the Secretary or an Assistant Secretary of the Obligor as being a true, accurate and complete copy thereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce the Holder to execute this Note and to make and continue the Loan, the Obligor represents and warrants to the Holder as follows: SECTION 4.01. ORGANIZATION; CORPORATE POWERS. The Obligor and its Subsidiaries are each duly organized, validly existing and in good standing under the laws of states of their respective organization. Each of the Obligor and its Subsidiaries has the requisite corporate power and authority, including all material licenses, registrations, permits, franchises, patents, copyrights, trademarks, trade names, consents and approvals, to own its property and assets and to carry on its business as now conducted and is qualified to do business and in good standing in every jurisdiction where such qualification is required, except where failure to so qualify could not have a Material Adverse Effect. The Obligor has all requisite corporate power and authority to consummate the Transactions and each of the Obligor and STS has all requisite corporate power and authority to consummate the Related Transactions to which it is a party. SECTION 4.02. AUTHORIZATION. The consummation of the Transactions and the Related Transactions (a) has been duly authorized by all requisite corporate action of the Obligor and STS, as applicable, and (b) will not (i) violate (A) any provision of law, statute, rule or regulation (including Regulations D, G, T, U or X) or the articles of incorporation or other constitutive documents or the by-laws or regulations of the Obligor or STS, (B) any order of any court, or any rule, regulation or order of any other agency of government binding upon the Obligor or STS, or (C) any provisions of any material indenture, agreement or other instrument to which the Obligor or STS is a party, or by which the Obligor or STS or any of their respective properties or assets is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement or other instrument referred to in clause (b)(i)(C) above or (iii) result in the creation or imposition of any Lien (other than Permitted Liens) upon any property or assets of the Obligor. SECTION 4.03. GOVERNMENTAL APPROVAL. Except as specifically provided by the Loan Documents, no registration with or consent or approval of, or other action by, any federal, state -13- 19 or other governmental agency, authority or regulatory body is or will be required in connection with the consummation of the Transactions by the Obligor or the consummation of the Related Transactions. SECTION 4.04. ENFORCEABILITY. This Note constitutes, and each of the other Loan Documents when duly executed and delivered by the Obligor will constitute, legal, valid and binding obligations of the Obligor enforceable in accordance with its terms. SECTION 4.05. FINANCIAL MATTERS. The Obligor has heretofore furnished to the Holder the Obligor's audited financial statements for the fiscal year ended December 31, 1996 and unaudited financial statements for the eleven (11) month period ended November 30, 1997, which financial statements fairly state, in accordance with generally accepted accounting principles applied on a consistent basis, the Obligor's financial condition and results of operations as of the dates, and for the periods, set forth therein. Such financial statements and the notes thereto, together with the schedules to this Note, disclose all material liabilities, direct or contingent, of the Obligor and its Subsidiaries as of the dates thereof in accordance with generally accepted accounting principles applied on a consistent basis. The financial statements referred to in this SECTION 4.05 have been prepared on a consolidated and consolidating (in the case of the unaudited financial statements only) basis in accordance with generally accepted accounting principles applied on a consistent basis. SECTION 4.06. NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, there has been no event or occurrence that could have a Material Adverse Effect. SECTION 4.07. SUBSIDIARIES. As of the Closing Date, all Subsidiaries of the Obligor are identified on SCHEDULE 4.07 hereto, together with the ownership interest of the Obligor in each such Subsidiary. As of the Closing Date, the Obligor does not have any subsidiaries and is not a partner or joint venturer in any partnerships or joint ventures except as set forth on SCHEDULE 4.07 as of the Closing Date. SECTION 4.08. LITIGATION. There are no actions, suits or proceedings at law or in equity or by or before any arbitrator or any governmental instrumentality or other agency or regulatory authority now pending or threatened in writing against or, to the Obligor's knowledge, otherwise affecting, the Obligor (or any predecessor of the Obligor) or any of its Subsidiaries or the businesses, assets or rights of the Obligor (or any predecessor of the Obligor) or any of its Subsidiaries (a) which involve this Note or any of the other Loan Documents or any of the Transactions or the Related Transactions, or (b) as to which, if adversely determined, could, individually or in the aggregate, have a Material Adverse Effect. SECTION 4.09. COMPLIANCE WITH LAWS. Neither the Obligor (or any predecessor of the Obligor) nor any of its Subsidiaries is in violation in any material respect of any law, including any Environmental Law, or in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental agency or instrumentality. SECTION 4.10. ENVIRONMENTAL PROTECTION. Except as specified in SCHEDULE 4.10 and after giving effect to the Transactions and the Related Transactions: (a) the business of the Obligor -14- 20 and its Subsidiaries, the methods and means employed by the Obligor and its Subsidiaries in the operation thereof (including all operations and conditions at or in the properties of the Obligor and its Subsidiaries), and the assets owned, leased, held or operated by the Obligor and its Subsidiaries, comply in all material respects with all applicable laws, rules, regulations, ordinances and codes of every kind, including Environmental Laws; (b) the Obligor and its Subsidiaries have obtained all permits under Environmental Laws necessary to its operations other than such permits the absence of which could not, individually or in the aggregate, have a Material Adverse Effect, and all such permits are in good standing and the Obligor and its Subsidiaries are in compliance with all material terms and conditions of such permits; and (c) neither the Obligor nor its Subsidiaries have received (i) any claim or notice of violation, lien, complaint, suit, order or other claim or notice to the effect that it is or may be liable to any Person as a result of (A) the environmental condition of any of their respective properties or any other property, or (B) the release or threatened release of any Hazardous Materials, or (ii) any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9604), or comparable state laws, and to the best of the Obligor's knowledge, none of the operations of the Obligor or its Subsidiaries are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release or threatened release of any Hazardous Material at the Obligor's or its Subsidiaries' properties or at any other location, including any location to which the Obligor or its Subsidiaries have transported, or arranged for the transportation of, any Hazardous Materials. SECTION 4.11. AGREEMENTS. Neither the Obligor nor its Subsidiaries are a party to any agreement or instrument or subject to any restriction that has a present Material Adverse Effect. Neither the Obligor nor its Subsidiaries are in default in any manner (including a default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any material agreement or instrument to which it is a party) that could have a Material Adverse Effect. SECTION 4.12. FEDERAL RESERVE REGULATIONS. Neither the Obligor nor its Subsidiaries are engaged principally, or as of one of their important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. Neither the Loan nor any of the proceeds thereof, are for the purpose, whether immediate, incidental or ultimate of (a) buying or carrying Margin Stock, or (b) extending credit to others for the purpose of buying or carrying Margin Stock, or (c) refunding indebtedness originally incurred for such purpose, or for any purpose which entails a violation of, or which is inconsistent with, the provisions of Regulations of the Board, including Regulations D, G, T, U and X thereof. SECTION 4.13. TAXES. The Obligor and each of its Subsidiaries have filed or caused to be filed all Federal, state and local tax returns which are required to be filed by it, and has paid or caused to be paid all taxes shown to be due and payable on such returns or on any assessments received by it, other than any taxes or assessments, the validity of which the Obligor is contesting in good faith by appropriate proceedings, and with respect to which the Obligor shall have set aside on its books adequate reserves. SECTION 4.14. LABOR AND EMPLOYMENT. The Obligor, each ERISA Affiliate and each Plan is in compliance in all material respects with those provisions of ERISA, the Internal -15- 21 Revenue Code of 1986 and the Age Discrimination in Employment Act, and the regulations and published interpretations thereunder which are applicable to the Obligor, any ERISA Affiliate or such Plan. As of the date hereof, no Reportable Event has occurred with respect to any Pension Plan as to which the Obligor or any ERISA Affiliate was required to file a report with the Pension Benefit Guaranty Corporation. No Pension Plan (other than a Multiemployer Plan) has any material amount of unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or any accumulated funding deficiency (within the meaning of Section 302(a)(2) of ERISA), whether or not waived, and neither the Obligor nor any of its ERISA Affiliates has incurred or expects to incur any material withdrawal liability under Subtitle E of Title IV of ERISA to a Multiemployer Plan. No Plan of the Obligor or any ERISA Affiliate obligates any of such Persons to provide post-retirement medical benefits, except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985. The Obligor and each ERISA Affiliate is in compliance in all material respects with all labor and employment laws, rules, regulations and requirements of all applicable domestic and foreign jurisdictions. There are no pending or threatened (in writing) labor disputes, work stoppages or strikes. SECTION 4.15. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Obligor nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 4.16. CAPITALIZATION. After giving effect to the Transactions and after the date hereof the record and beneficial (within the meaning of applicable rules and regulations promulgated by the Securities and Exchange Commission) owners of the equity interests of the Obligor (other than non- Affiliate members of the general investing public) are correctly set forth in SCHEDULE 4.16. Except for Liens granted pursuant to the Related Transactions, all such equity interests of Larry L. Asche, Diane L. Asche, Kevin M. Clark, Leon M. Monachos and Gary I. Goldberg are owned free and clear of all Liens, such Persons have the unencumbered right to vote all of such interests and there are no outstanding options, warrants (other than the Warrant) or rights to purchase, nor any agreement for the subscription, purchase or acquisition of, any of such interests. SECTION 4.17. PROPERTIES. The Obligor has good and marketable title to, or valid leasehold interests in, all of its material assets and properties reflected in its most recent balance sheet, except for such properties as are no longer useful in the conduct of its business or have been disposed of in the ordinary course of business, subject to no liens except for Permitted Liens. All such assets and properties are in good repair, working order and condition and all such assets and properties are owned by the Obligor free and clear of all Liens other than Permitted Liens. SECTION 4.18. INTELLECTUAL PROPERTY; LICENSES. The Obligor possesses adequate assets, licenses, patents, patent applications, copyrights, trademarks, trademark applications and tradenames to continue to conduct its business as heretofore conducted. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any of the foregoing which taken in isolation or when considered with all other such revocations or terminations could have a Material Adverse Effect. The Obligor has no notice or knowledge of -16- 22 any fact or any past, present or threatened occurrence that could preclude or impair the Obligor's ability to retain or obtain any authorization necessary for the operation of its businesses. SECTION 4.19. SOLVENCY. Neither the Obligor nor STS is insolvent and the execution and delivery of this Note and the other Loan Documents pursuant thereto and the consummation of the Transactions and the Related Transactions will not render the Obligor or STS insolvent. Each of the fair value and present fair saleable value of the assets of the Obligor or STS exceeds its respective liabilities. The Obligor understands that in this context "insolvent" means, with respect to any Person, that the present fair saleable value of the total assets of such Person is less than the amount of the total liabilities of such Person. The Obligor also understands that the term "liabilities" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent (with contingent liabilities valued based on the Obligor's good faith estimate of the probability of occurrence). Neither the Obligor nor STS will be unable to pay its debts as they become absolute and mature. Neither the Obligor nor STS will incur debts beyond its ability to pay as they mature. The borrowing of the Loan and the consummation of the Transactions and the Related Transactions will not leave the Obligor or STS with property remaining in its hands constituting unreasonably small capital with which to conduct its business. SECTION 4.20. COMPLETE DISCLOSURE. All factual information furnished by or on behalf of the Obligor to the Holder for purposes of or in connection with this Note or the Transactions or Related Transactions is, and all other such factual information hereafter furnished by or on behalf of the Obligor will be, true and accurate in all material respects on the date as of which such information is furnished and not incomplete by omitting to state any fact necessary to make such information not misleading at such time in light of the circumstances under which such information was provided. ARTICLE V AFFIRMATIVE COVENANTS The Obligor covenants and agrees with the Holder that, so long as this Note shall remain in effect or the principal hereof or interest hereon, any fee or any other expense or amount payable hereunder shall be unpaid, unless the Holder shall otherwise consent in writing, the Obligor shall: SECTION 5.01. EXISTENCE. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence. SECTION 5.02. BUSINESSES AND PROPERTIES; COMPLIANCE WITH LAWS. At all times (a) do or cause to be done all things necessary to preserve, renew and keep in full force and effect the rights, licenses, registrations, authorizations, permits, franchises, patents, copyrights, trademarks and trade names, material to the conduct of its business, (b) maintain and operate its business in substantially the manner in which it is presently conducted and operated, (c) comply in all material respects with all laws and regulations applicable to the operation of such business, including all Environmental Laws, whether now in effect or hereafter enacted and with all other applicable laws and regulations, (d) take all action which may be required to obtain, preserve, renew and extend all franchises, registrations, licenses, permits and other authorizations which may be material to the operation of such business, (e) maintain, preserve and protect all property material to the -17- 23 conduct of such business, and (f) keep its property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times. SECTION 5.03. INSURANCE. (a) GENERAL INSURANCE. Maintain insurance coverage on its insurable properties, including all inventory, equipment and real property, against the perils of fire, theft, burglary, public liability, worker's compensation and business interruption and such other risks as are customary with companies similarly situated and in the same or similar business under policies issued by financially sound and reputable insurers having general policyholder ratings of at least AA in Best's Insurance Guide or any successor thereto, in such amounts as are customary with companies similarly situated and in the same or similar business. The Obligor shall pay all insurance premiums payable by it and, at the Holder's request, shall deliver copies of certificates of insurance (with copies of such policies) to the Holder. In case of any material loss, damage to or destruction of a substantial portion of any material property of the Obligor, the Obligor shall promptly give written notice thereof to the Holder generally describing the nature and extent of such damage or destruction, and the Obligor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at the Obligor's sole cost and expense, will promptly repair or replace the property so lost, damaged or destroyed. (b) KEY MAN LIFE INSURANCE. Within 20 Business Days after the Closing Date, obtain and maintain at all times thereafter key man life insurance coverage on the life of Larry L. Asche and Kevin M. Clark, each in a minimum amount of $1,000,000 and under a policy issued by financially sound and reputable insurers having general policyholder ratings of at least AA in Best's Insurance Guide or any successor thereto. The Obligor shall pay all insurance premiums payable by it in respect thereof and, within twenty (20) Business Day after the Closing Date, shall deliver the policy of such insurance (or certificate of insurance with a copy of such policy) to the Holder. Such insurance policy shall contain an assignment or pledge, as the case may be, of Obligor's beneficial interest in such policy to the Holder, in form and substance reasonably satisfactory to the Holder, providing that such insurance shall not be cancelable except upon 30 days' prior notice to the Holder. SECTION 5.04. OBLIGATIONS AND TAXES. Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to liens or charges upon such properties or any part thereof; provided, however, that the Obligor shall not be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Obligor shall have set aside on its books adequate reserves with respect thereto. SECTION 5.05. FINANCIAL STATEMENTS; REPORTS. Furnish to the Holder: -18- 24 (a) ANNUAL STATEMENTS. Within 90 days after the end of each fiscal year (a) a balance sheet and income statement and cash flows statement of the Obligor showing the consolidated financial condition of the Obligor as of the close of such year and the results of consolidated operations during such year, all the foregoing financial statements to be audited by a "Big Four" independent public accounting firm and accompanied by the unqualified opinion of such accounting firm stating that such financial statements present fairly in all material respects the financial position for the periods indicated in conformity with generally accepted accounting principles consistently applied and (b) consolidating balance sheets and income statements for the Obligor showing the financial condition and results of operations of the Obligor as of the close of such fiscal year and the results of operations during such year, together with a certificate of a Financial Officer that such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied. (b) QUARTERLY STATEMENTS. Within 45 days after the end of each fiscal quarter, consolidated and consolidating balance sheets and income statements for the Obligor showing the financial condition and results of operations of the Obligor as of the end of each such quarter and for the then elapsed portion of the current fiscal year, together with a certificate of a Financial Officer that such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied. (c) MONTHLY STATEMENTS. Within 30 days after the end of each calendar month, consolidated and consolidating balance sheets and income statements for the Obligor showing the financial condition and results of operations of the Obligor as of the end of each such calendar month and for the then elapsed portion of the current fiscal year, together with a certificate of a Financial Officer that such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied. (d) ACCOUNTANT REPORTS. Promptly upon the receipt thereof, copies of all reports submitted to the Obligor by any accountants in connection with each audit of the financial statements of the Obligor made by such accountants, including any comment letters and other letters and documents submitted by such accountants to management in connection with all reviews and audits. (d) COMPLIANCE CERTIFICATE. Concurrently with the delivery of the financial statements referred to in SECTIONS 5.01(a) and (c) above, a certificate of a Financial Officer demonstrating, in reasonable detail with relevant calculations included, compliance with the financial covenants contained in ARTICLE VII for the period covered by such financial statements. (e) ADDITIONAL INFORMATION. Promptly, from time to time, such other information regarding the compliance by the Obligor with the terms of this Note and the other Loan Documents or the affairs, operations or condition (financial or otherwise) of the Obligor or any of its Subsidiaries as the Holder may request. SECTION 5.06. LITIGATION AND OTHER NOTICES. Give the Holder prompt written notice of the following: -19- 25 (a) ORDERS; INJUNCTIONS. The issuance by any court or governmental agency or authority of any injunction, order, decision or other restraint prohibiting, or having the effect of prohibiting, the making or continuation of the Loan or the initiation of any litigation or similar proceeding seeking any such injunction, order or other restraint. (b) LITIGATION. The filing or commencement of any action, suit or proceeding against the Obligor or any of its Subsidiaries whether at law or in equity or by or before any court or any federal, state, municipal or other governmental agency or authority and which, if adversely determined against the Obligor or any of its Subsidiaries could result in liability (not covered by independent third-party liability insurance) in excess of $200,000 in the aggregate. (c) ENVIRONMENTAL MATTERS. (i) Any release or threatened release of any Hazardous Material required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (ii) any remedial action taken by the Obligor or any of its Subsidiaries or any other Person in response to any Hazardous Material on, under or about the Obligor's or any of its Subsidiaries' properties or any other property, and (iii) any violation by the Obligor or any of its Subsidiaries of any Environmental Law, in each case, which could result in a Material Adverse Effect. (d) DEFAULT. Any Default or Event of Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto. (e) MATERIAL ADVERSE EFFECT. Any development in the business or affairs of the Obligor or any of its Subsidiaries which could have a Material Adverse Effect. SECTION 5.07. ERISA. Comply in all material respects with the applicable provisions of ERISA and the provisions of the Internal Revenue Code of 1986 relating thereto and (a) furnish to the Holder as soon as possible, and in any event within 30 days after the Obligor knows or has reason to know thereof, notice of (i) the establishment by the Obligor or any ERISA Affiliate of any Pension Plan, (ii) the commencement by the Obligor or any ERISA Affiliate of contributions to a Multiemployer Plan, (iii) any failure by the Obligor or any ERISA Affiliate to make contributions required by Section 302 of ERISA (whether or not such requirement is waived pursuant to Section 303 of ERISA), or (iv) the occurrence of any Reportable Event with respect to any Pension Plan, together with a statement of the controller, treasurer or executive vice president of the Obligor setting forth details as to such Reportable Event and the action which the Obligor proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if any notice is required to be given to said Corporation, (b) promptly after receipt thereof, a copy of any notice the Obligor or any ERISA Affiliate may receive from the Pension Benefit Guaranty Corporation relating to the intention of said Corporation to terminate any Pension Plan, or to appoint a trustee to administer any Pension Plan and (c) promptly after receipt thereof, a copy of any notice of withdrawal liability from any Multiemployer Plan. SECTION 5.08. MAINTAINING RECORDS; ACCESS TO PREMISES AND INSPECTIONS. Maintain financial records in accordance with generally accepted practices. The Obligor shall, permit the Holder and its duly authorized representatives and agents to visit and inspect any of its -20- 26 properties, corporate books and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances and accounts with, and to be advised as to the same by, its officers, employees and independent public accountants (and by this provision the Obligor authorizes such accountants to discuss with the Holder the finances and affairs of the Obligor) at such reasonable times and reasonable intervals as the Holder may designate, in each case with prior notice to the Obligor (except during the continuance of any Default or Event of Default or while the Holder in good faith suspects a Default or Event of Default is continuing in which case such inspections may be made at any time without prior notice). SECTION 5.09. USE OF PROCEEDS. Immediately upon the Obligor's receipt thereof, all of the proceeds of the Loan shall be contributed in cash by the Obligor on the Closing Date to the common equity capital of STS. ARTICLE VI NEGATIVE COVENANTS The Obligor covenants and agrees with the Holder that, so long as this Note shall remain in effect or the principal hereof or interest hereon, any fee or any other expense or amount payable hereunder shall be unpaid, unless the Holder shall otherwise consent in writing, it will not, either directly or indirectly: SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness, including pursuant to any Guaranty, except that the following Indebtedness is permitted: (a) Indebtedness incurred pursuant to this Note and the other Loan Documents, (b) Indebtedness incurred in the ordinary course of business with respect to customer deposits and trade payables not the result of borrowing and not evidenced by any note or other evidence of indebtedness, (c) Indebtedness incurred to acquire equipment to be used in the ordinary course of the Obligor's business, provided that the Lien securing such Indebtedness attaches solely to such equipment within twenty (20) days after the acquisition thereof and the principal amount of such Indebtedness does not exceed 100% of the cost of such equipment, (d) Indebtedness under capital leases relating to equipment to be used in the ordinary course of the Obligor's business, provided that the Lien securing such Indebtedness attaches solely to such equipment within twenty (20) days after the commencement date of such lease and the present value of rental payments under such lease does not exceed 100% of the cost of such equipment, (e) unsecured Guaranties by the Obligor of Indebtedness described in the foregoing clauses (c) and (d) incurred by its Subsidiaries other than STS and (f) Indebtedness, including as incurred pursuant to the Related Transactions, listed on SCHEDULE 6.01 hereto as of the Closing Date (provided that the Obligor shall not, directly or indirectly, purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any of the Indebtedness referred to in this clause (f), other than, in the case of Indebtedness incurred pursuant to the LaSalle Documents, as required in accordance with the terms thereof as of the Closing Date). SECTION 6.02. NEGATIVE PLEDGE. Create, incur, assume or permit to exist any Lien on any property or assets now owned or hereafter acquired by it or on any income or rights in respect of any thereof, except for the following (collectively "PERMITTED LIENS"): -21- 27 (a) Liens, if any, created pursuant to the Loan Documents in favor of the Holder; (b) Liens for or priority claims imposed by law which are incidental to the conduct of business or the ownership of properties and assets (including mechanic's and warehousemen's liens) and deposits, pledges or liens to secure statutory obligations, surety or appeal bonds or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided, that in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith and adequate reserves have been set up by the Obligor as the case may be; (c) Liens securing the payment of taxes, assessments and governmental charges or levies incurred in the ordinary course of business, either (i) not delinquent, or (ii) being contested in good faith by appropriate legal or administrative proceedings and as to which the Obligor shall have set aside on its books adequate reserves, and so long as during the period of any such contest, the Obligor shall suffer no loss of any privilege of doing business or any other right, power or privilege necessary or material to the operation of its business; (d) Liens arising after the Closing Date securing Indebtedness permitted in SECTION 6.01 (other than clause (b) and, in the case of Indebtedness not secured as of the Closing Date, clause (f) thereof); (e) Liens listed on SCHEDULE 6.02 hereto as of the Closing Date, including, in the case of Liens incurred pursuant to the LaSalle Documents, any extensions or renewals thereof, or additions thereto, as required in accordance with the LaSalle Documents as in effect on the Closing Date; and (f) extensions, renewals and replacements of Liens referred to in paragraphs (a) through (e) of this SECTION 6.02; provided, however, that any such extension, renewal or replacement Lien shall be limited to the property or assets covered by the Lien extended, renewed or replaced and that the obligations secured by any such extension, renewal or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed or replaced. SECTION 6.03. SALE OF ASSETS. Sell, transfer or otherwise dispose of any of its assets, except (a) inventory disposed of in the ordinary course of business, and (b) equipment which is obsolete or no longer useful in the Obligor's business disposed of in the ordinary course of business. SECTION 6.04. CONSOLIDATIONS, MERGERS OR PURCHASES OF ASSETS. Merge into or consolidate or combine with any other Person, or purchase, lease or otherwise acquire (in one transaction or a series of related transactions) all or any part of the property or assets of any Person (other than purchases or other acquisitions of inventory, materials, leases, property and equipment in the ordinary course of business); provided that, the Obligor may acquire all or substantially all of the assets, or all of the capital stock, of another Person so long as (a) the Holder shall receive at least ten (10) Business Days prior written notice of such acquisition, together with a reasonably detailed description (including financials) thereof, (b) such acquisition of capital stock shall be consensual -22- 28 and shall have been approved by the target's board of directors and (c) at the time of such acquisition and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing. SECTION 6.05. RESTRICTED PAYMENTS. Except in respect of the Warrant, declare or pay, directly or indirectly, any dividend or distribution or make any other payment of any other kind to any of its shareholders or its Affiliates (including any redemption, purchase or acquisition of, whether in cash, property, securities or a combination thereof, any partnership interests or capital accounts or warrants, options or any of its other securities, other than, to the extent no Default or Event of Default is then pending or would result therefrom, in respect of employee bonuses and other incentives awarded pursuant to reasonable incentive programs approved by the Holder in advance (which approval shall not be unreasonably withheld)) or set apart any sum for the aforesaid purposes. SECTION 6.06. INVESTMENTS, LOANS AND ADVANCES. Purchase, or hold beneficially any stock, other securities or evidences of Indebtedness of, or make or permit to exist any loans or advances to, or make any investment (other than the investment in STS required to be made hereunder on the Closing Date pursuant to the Related Transactions) or acquire any interest whatsoever in, any other Person (including the formation or acquisition of any Subsidiaries). SECTION 6.07. TRANSACTIONS WITH AFFILIATES. Sell or transfer any assets to, or purchase or acquire any assets of, any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the Obligor's business and upon fair and reasonable terms that are no less favorable to the Obligor than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of the Obligor. Make any loan, advance or investment (other than the investment in STS required to be made hereunder on the Closing Date pursuant to the Related Transactions) in, or otherwise engage in any material transaction with any Affiliate, except as permitted by SECTIONS 6.01 and 6.04. SECTION 6.08. LINE OF BUSINESS. Engage, directly or indirectly, in any material line of business substantially different from those lines of business engaged in by the Obligor as of the Closing Date. SECTION 6.09. FISCAL YEAR, ACCOUNTING. Change its fiscal year or method of accounting (other than immaterial changes and methods), except as required by generally accepted accounting principles. SECTION 6.10. LIMITATIONS ON SALE OF ASSETS, DISTRIBUTIONS. Permit or place any material restriction, directly or indirectly, on the sale, pledge, transfer or other disposition of any material asset, other than (a) such restrictions as ordinarily appear in contracts entered into in the ordinary course of business, examples of which include restrictions on the ability to assign leases or contract rights and (b) obligations and the restrictions arising under this Note and the other Loan Documents and Indebtedness described on SCHEDULE 6.01 as in effect as of the Closing Date. SECTION 6.11. ISSUANCE OF EQUITY INTERESTS. Except with respect to the Warrant, without the prior written approval of the Holder (which approval shall not be unreasonably withheld), issue any capital stock or other equity interests or any options or warrants to purchase, or -23- 29 securities convertible into, capital or equity interests, other than, to the extent no Default or Event of Default is then pending or would result therefrom, in respect of employee bonuses and other incentives awarded pursuant to reasonable incentive programs approved by the Holder in advance (which approval shall not be unreasonably withheld). SECTION 6.12. CERTAIN DOCUMENTS. Amend, modify or waive (or agree to the amendment, modification or waiver of) any term or provision of its certificate of incorporation or bylaws. SECTION 6.13. OPERATING LEASES. Not acquire or use the possession of any property under any operating lease or similar arrangement, other than leases of equipment in the ordinary course of the Obligor's business. ARTICLE VII FINANCIAL COVENANTS The Obligor covenants and agrees with the Holder that, so long as this Note shall remain in effect or the principal hereof or interest hereon, any fee or any other expense or amount payable hereunder shall be unpaid, unless the Holder shall otherwise consent in writing, the Obligor will not, either directly or indirectly: SECTION 7.1. TANGIBLE NET WORTH. Permit the Obligor's Tangible Net Worth (computed on a consolidated basis, but excluding STS) to be less than $4,000,000 at any time. SECTION 7.2. MINIMAL ANNUAL NET INCOME. Permit the Obligor's net income (computed on a consolidated basis in accordance with generally accepted accounting principles consistently applied, but excluding STS) to be less than $1,200,000 as at the end of any fiscal year of the Obligor and, further, not less than $150,000 as at the end of the first fiscal quarter of the Obligor's 1998 fiscal year and $200,000 as at the end of any fiscal quarter thereafter. SECTION 7.3. LEVERAGE RATIO. Permit the Obligor's Leverage Ratio (computed on a consolidated basis, but excluding STS) to be greater than 3.00 to 1.00 at any time. ARTICLE VIII DEFAULTS SECTION 8.01. EVENTS OF DEFAULT. Each of the following events shall constitute events of default ("EVENTS OF DEFAULT") hereunder: (a) default shall be made in the payment of any principal or interest on the Loan or any other amount payable hereunder, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; -24- 30 (b) any representation or warranty made by or on behalf of the Obligor in connection with this Note or the other Loan Documents or any of the Transactions shall prove to have been false or misleading in any material respect when made; (c) default shall be made in the due observance of any covenant, condition or agreement on the part of the Obligor contained in SECTIONS 5.01, 5.05, 5.06, ARTICLE VI OR ARTICLE VII; (d) default shall be made in the due observance or performance of any other covenant, condition or agreement to be observed or performed by the Obligor pursuant to the terms of this Note or the other Loan Documents and such default shall continue unremedied for a period of 30 days after the earlier of (i) written notice from the Holder of such default or (ii) actual knowledge by the Obligor of such default; (e) the Obligor or STS or AGC Transportation Services, Inc. shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other federal or state bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for itself or for a substantial part of its properties or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable generally, or admit in writing its inability, to pay its debts as they become due, (vii) suspend the transaction of all or a substantial portion of its usual business or (viii) take corporate action for the purpose of effecting any of the foregoing; (f) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Obligor or any of its Subsidiaries or a substantial part of any of its properties or assets under Title 11 of the United States Code or any other federal or state bankruptcy, insolvency or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for the Obligor or any of its Subsidiaries or for a substantial part of its properties, or (iii) the winding-up or liquidation of the Obligor or any of its Subsidiaries; and such proceeding or petition shall continue undismissed for 30 days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for 30 days; (g) (i) a default or event of default shall occur and be continuing (after the expiration of all applicable cure periods, if any) under or in connection with any Indebtedness of the Obligor or any event shall occur if the effect of any such default or event shall be to accelerate, or to permit the holder or obligee of any Indebtedness (or any trustee or agent on behalf of such holder or obligee) to accelerate (with or without notice or lapse of time or both), the maturity of Indebtedness in an aggregate amount in excess of $200,000; or (ii) any payment of principal or interest, regardless of amount, on any Indebtedness of the Obligor in an aggregate principal amount in excess of $200,000, shall not be paid when due, whether at maturity, by acceleration or otherwise (after giving effect to any period of grace specified in the instrument evidencing or governing such Indebtedness); -25- 31 (h) (i) a Reportable Event shall have occurred with respect to any Pension Plan or a notice of intent to terminate a Pension Plan shall have been furnished to the affected parties (as provided in Section 4041(c)(1) of ERISA); or (ii) the Pension Benefit Guaranty Corporation shall have instituted proceedings to terminate any Pension Plan, or a trustee shall have been appointed by a United States District Court to administer any Pension Plan, if in any such case such Pension Plan then has an amount of unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA); or (iii) the Obligor or any ERISA Affiliate incurs withdrawal liability to any Multiemployer Plan under subtitle E of Title IV of ERISA, which, in the case of any of the foregoing, could reasonably be expected to have a Material Adverse Effect; (i) a final judgment for the payment of money in excess of $200,000 shall be rendered by a court or other tribunal against the Obligor and shall remain undischarged for a period of 30 consecutive days during which execution of such judgment shall not have been stayed effectively or final judgments for the payment of money aggregating in excess of $200,000 shall be rendered against the Obligor and such judgments shall remain undischarged for a period of 30 consecutive days during which execution of such judgments shall not have been stayed effectively; (j) the Warrant shall cease to be in full force and effect, enforceable in accordance with its terms, or the Obligor shall assert the invalidity of the Warrant; (j) the Management Agreement shall cease to be in full force and effect, enforceable in accordance with its terms, or the Obligor or STS shall assert the invalidity of the Management Agreement, or the Obligor shall fail to receive from STS pursuant to the Management Agreement a cash fee (subject to no offset or similar right) of not less than $480,000 per annum; (k) the Tax Sharing Agreement shall cease to be in full force and effect, enforceable in accordance with its terms, or STS shall assert the invalidity of the Tax Sharing Agreement, or the Obligor shall fail to receive from STS the amounts required to be so received pursuant to the Tax Sharing Agreement; (l) a default or event of default shall occur under any of the other Loan Documents, which shall remain uncured after the expiration of any applicable cure period, if any; or (m) a Change of Control shall occur. SECTION 8.02. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default (other than an event described in SECTION 8.01(e) or (f)), and at any time thereafter during the continuance of such event, the Holder may, by written notice to the Obligor, declare this Note to be forthwith due and payable, whereupon the principal hereof, together with accrued interest hereon and any unpaid accrued fees and all other liabilities of the Obligor accrued hereunder and under the other Loan Documents, shall become forthwith due and payable both as to principal and interest, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Obligor, anything contained herein to the contrary notwithstanding. Upon the occurrence of any event described in SECTION 8.01(e) or (f), the principal amount outstanding hereunder, together with all accrued interest hereon and any accrued unpaid fees and all -26- 32 other liabilities of the Obligor accrued hereunder and under the other Loan Documents, shall automatically become due and payable, both as to principal and interest, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Obligor, anything contained herein to the contrary notwithstanding. ARTICLE IX MISCELLANEOUS SECTION 9.01. NOTICES. (a) Notices and other communications provided for herein and in the other Loan Documents shall be in writing and shall be delivered personally or mailed, by certified or registered mail, postage prepaid or delivered by overnight courier addressed: IF TO THE HOLDER: Aim Financial Corporation 30 North LaSalle Street Suite 4030 Chicago, Illinois 60602 Attention: Tim Ozark Telephone: (312) 357-9000 With a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attention: Ronald H. Jacobson Telephone: (312) 558-5600 IF TO THE OBLIGOR: Aasche Transportation Services, Inc. 10214 North Mt.Vernon Road Shannon, Illinois 61078 Attention: Leon Monachos Telephone: (815) 864-2421 With a copy to: Sachnoff & Weaver, Ltd. 30 South Wacker Drive, 29th Floor Chicago, Illinois 60606-7484 Attention: Joel Schaider Telephone: (312) 207-1000 (b) All notices and other communications given to any party hereto in accordance with the provisions of this Note shall be deemed to have been given on the date of receipt, in each case -27- 33 addressed to such Person as provided in this SECTION 9.01 or in accordance with the latest unrevoked direction from such Person. SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Obligor herein and in the other Loan Documents shall be considered to have been relied upon by the Holder and shall survive the making by the Holder of the Loan and the execution and delivery to the Holder of this Note evidencing the Loan and shall continue in full force and effect until this Note and all accrued interest hereon and all other Obligations then due and payable have been fully paid and the Holder has no further commitment to lend hereunder. SECTION 9.03. SUCCESSORS AND ASSIGNS. Whenever in this Note any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Obligor or the Holder that are contained in this Note shall bind and inure to the benefit of their respective successors and assigns. The Obligor may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Holder. The Holder shall have the right to sell participations in and make assignments of all or any part of the Loan and this Note in its sole and absolute discretion and without the consent of or notice to the Obligor. SECTION 9.04. EXPENSES OF THE HOLDER; INDEMNITY. (a) The Obligor agrees to pay all fees and expenses reasonably incurred by the Holder (including the fees and expenses of the Holder's counsel and its paralegals, field exam expenses and related fees and environmental audit, title insurance and appraisal fees) in connection with the preparation and administration of this Note and the other Loan Documents, or with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions shall be consummated) or incurred by the Holder (including the fees and expenses of the Holder's counsel and its paralegals) in connection with the enforcement of its rights in connection with this Note or the other Loan Documents. The Obligor further agrees that it shall indemnify the Holder from and hold it harmless against any documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of this Note or any of the other Loan Documents. (b) The Obligor agrees to indemnify the Holder and its Affiliates, directors, officers, employees and agents (each, an "Indemnified Person") against, and to hold each Indemnified Person harmless from, any and all losses, claims, damages, liabilities, penalties, actions, judgments, suits, costs, and related expenses, including legal and paralegal fees and expenses, incurred by or asserted against any such Indemnified Person arising out of, in any way connected with, or as a result of any claim, investigation, litigation or other proceeding relating to (i) this Note or the other Loan Documents, (ii) the performance by the Obligor of its respective obligations hereunder and thereunder, (iii) the consummation of the Transactions, (iv) the release of Hazardous Materials, including any damage or injury resulting from any such Hazardous Materials to or affecting the Obligor's properties or the soil, water, air, vegetation, buildings, personal property, persons or animals located on such properties or on any other property or otherwise, or (v) any violation of any Environmental Laws. The foregoing indemnity includes the cost of remedial action to the extent required to cause the Obligor's properties to be in compliance with all applicable Environmental Laws. Notwithstanding the foregoing, this indemnity shall not extend to any Indemnified Person -28- 34 to the extent any such loss, claim, damage, liability or related expense arises solely from the gross negligence or willful misconduct of such Indemnified Person. (c) The provisions of this Section shall remain operative and in full force and effect regardless of the expiration of the term of this Note or the other Loan Documents, the consummation of the Transactions, the repayment of the Loan, the invalidity or unenforceability of any term or provision of this Note or any of the other Loan Documents, or any investigation made by or on behalf of the Holder. All amounts due under this SECTION 9.04 shall be payable on written demand in reasonable detail therefor. SECTION 9.05. RIGHT OF SETOFF. The Holder is hereby authorized at any time and from time to time after the occurrence and during the continuance of an Event of Default to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Holder to or for the credit or the account of the Obligor to amounts then due and payable under this Note and the other Loan Documents, irrespective of whether or not the Holder shall have made any demand under this Note or any of the other Loan Documents. The rights of the Holder under this SECTION 9.05 are in addition to other rights and remedies (including other rights of setoff) which the Holder may have under applicable law. SECTION 9.06. APPLICABLE LAW. THIS NOTE AND EACH OF THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING EFFECT TO ILLINOIS CHOICE OF LAW DOCTRINE. SECTION 9.07. WAIVERS. No failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Holder hereunder are cumulative and not exclusive of any rights or remedies which it would otherwise have. No waiver of any provision of this Note or the other Loan Documents, or consent to any departure by the Obligor therefrom shall in any event be effective unless the same shall be authorized as provided in SECTION 9.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Obligor in any case shall entitle the Obligor to any other or further notice or demand in similar or other circumstances. SECTION 9.08. AMENDMENTS. Neither this Note nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Obligor and the Holder. SECTION 9.09. SEVERABILITY. In the event any one or more of the provisions contained in this Note or the other Loan Documents should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. -29- 35 SECTION 9.10. COUNTERPARTS. This Note may be executed in two or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one contract, and shall become effective when copies hereof which, when taken together, bear the signatures of each of the parties hereto shall be delivered or mailed to the Holder and the Obligor. SECTION 9.11. HEADINGS. Article and Section headings and the Table of Contents used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Note. SECTION 9.12. CONSENT TO JURISDICTION. THE OBLIGOR HEREBY IRREVOCABLY AGREES THAT ANY SUIT, ACTION, PROCEEDING OR CLAIM AGAINST IT ARISING OUT OF OR IN ANY WAY RELATING TO THIS NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, MAY BE BROUGHT OR ENFORCED IN THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS AND THE OBLIGOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY PROCEEDING BROUGHT IN CHICAGO, ILLINOIS AND FURTHER IRREVOCABLY WAIVES ANY CLAIMS THAT ANY SUCH PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 9.13. WAIVER OF JURY TRIAL. THE OBLIGOR AND THE HOLDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT OR UNDER OR IN CONNECTION WITH ANY AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH THIS NOTE OR ANY OTHER LOAN DOCUMENT, AND AGREE THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS NOTE. SECTION 9.14. INTEREST LIMITATION. Anything in this Note or any Loan Document to the contrary notwithstanding, the Obligor shall never be required to pay interest at a rate in excess of the highest lawful rate, and if the effective rate of interest that would otherwise be payable under this Note or any Loan Document would exceed the highest lawful rate, or if any holder of this Note shall receive monies that are deemed to constitute interest which would increase the effective rate of interest payable under this Note or any Loan Document to a rate in excess of the highest lawful rate, then (a) the amount of interest that would otherwise be payable under this Note and the Loan Documents shall be reduced to the amount allowed under applicable law, and (b) any interest paid -30- 36 in excess of the highest lawful rate shall, at the option of the holders of this Note, be either refunded to the payor or credited on the principal of this Note. SECTION 9.15. LOAN DOCUMENTS. In the event of any conflict or inconsistency between the terms and provisions of this Note and those of any other Loan Document, the terms and provisions of this Note shall govern and control to the extent of such conflict or inconsistency. [signature page follows] -31- 37 IN WITNESS WHEREOF, the parties hereto have caused this Senior Unsecured Term Note to be duly executed by their duly authorized officers, all as of the day and year first above written. OBLIGOR: AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ------------------------------------------------- Title: Chief Financial Officer ---------------------------------------------- HOLDER: AIM FINANCIAL CORPORATION By: /s/ Timothy K. Ozane ------------------------------------------------- Title: President ---------------------------------------------- EX-10.4 5 SR. SUB. PROMISSORY NOTE 1 EXHIBIT 10.4 Chicago, Illinois, January 16, 1998 $500,000 AASCHE TRANSPORTATION SERVICES, INC. SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE (THE NOTE) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "COMPANY"), promises to pay to the order of Larry L. Asche, the registered holder or registered assigns hereof (the "HOLDER"), the principal amount of Five Hundred Thousand Dollars ($500,000) payable on February 1, 2003 (the "MATURITY DATE"), together with accrued interest on the outstanding principal amount of this Note, all as hereinafter set forth. 1. Payments and Prepayments. (a) Provided no Event of Default (as defined below) shall have occurred and be continuing, from and after the date of disbursement of funds, the principal balance from time to time unpaid shall bear interest at the fixed rate (determined from time to time in accordance with the terms hereof) equal to the Prime Rate less .25% per annum (the "INTEREST RATE"). As used herein, the "PRIME RATE" shall mean the prime rate of interest quoted on each Adjustment Date (as defined below) by the Wall Street Journal as the base rate on corporate loans at large U.S. money center commercial banks on such day; provided that in the event the Wall Street Journal ceases quoting a prime rate, Prime Rate shall mean the per annum rate of interest quoted as the Bank Prime Loan Rate for the most recent weekday for which such rate is quoted in Statistical Release H.15 (519) published from time to time by the Board of Governors of the Federal Reserve System; provided further that in the event that both of the aforesaid indices cease to be published or to quote rates of the aforesaid types, the Prime Rate shall be determined from a comparable index chosen by the Company in good faith. (b) For a period commencing on the date of disbursement hereof and ending December 31, 1998, the Interest Rate, determined in accordance with the terms of Section 1(a) hereof, shall be 8.25% per annum. On February 1, 1999 and on February 1 of each year thereafter (each an "Adjustment Date"), the Interest Rate shall be adjusted to an amount equal to the then applicable Prime Rate less .25% per annum and shall thereupon be fixed until the next occurring Adjustment Date. 2 (c) After the earlier of (i) the Maturity Date, whether by acceleration or otherwise, or (ii) the occurrence of any Event of Default hereunder, the total unpaid indebtedness hereunder shall bear interest at the rate of two percent (2%) plus the Prime Rate (the "DEFAULT RATE"). (d) Interest shall be computed on the basis of a 360 day year and charged for the actual number of days elapsed. (e) The Company shall make successive monthly installment payments of interest with the final payment of all unpaid principal and all accrued and unpaid interest due and payable on the Maturity Date. Payments of interest shall be made in arrears commencing on February 1, 1998 and thereafter on the first day of each successive month through and including February 1, 2003. (f) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (g) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (h) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty. (i) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register the Note. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose 2 3 at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event ("EVENT OF DEFAULT") that: (i) the Company defaults in making the payment of any installment of interest when due or principal and all accrued interest on this Note at the Maturity Date and such failure continues for a period of thirty (30) days after the due date thereof; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the Default Rate. It is the intention of the Company 3 4 and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. 4 5 (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Note who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this date first written above. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos --------------------------------- Name: Leon M. Monachos Title: Chief Financial Officer EX-10.5 6 SR. SUB. PROMISSARY NOTE 1 Exhibit 10.5 Chicago, Illinois, January 16, 1998 $500,000 AASCHE TRANSPORTATION SERVICES, INC. SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE (THE "NOTE") HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "COMPANY"), promises to pay to the order of Diane L. Asche, the registered holder or registered assigns hereof (the "HOLDER"), the principal amount of Five Hundred Thousand Dollars ($500,000) payable on February 1, 2003 (the "MATURITY DATE"), together with accrued interest on the outstanding principal amount of this Note, all as hereinafter set forth. 1. Payments and Prepayments. (a) Provided no Event of Default (as defined below) shall have occurred and be continuing, from and after the date of disbursement of funds, the principal balance from time to time unpaid shall bear interest at the fixed rate (determined from time to time in accordance with the terms hereof) equal to the Prime Rate less .25% per annum (the "INTEREST RATE"). As used herein, the "PRIME RATE" shall mean the prime rate of interest quoted on each Adjustment Date (as defined below) by the Wall Street Journal as the base rate on corporate loans at large U.S. money center commercial banks on such day; provided that in the event the Wall Street Journal ceases quoting a prime rate, Prime Rate shall mean the per annum rate of interest quoted as the Bank Prime Loan Rate for the most recent weekday for which such rate is quoted in Statistical Release H.15 (519) published from time to time by the Board of Governors of the Federal Reserve System; provided further that in the event that both of the aforesaid indices cease to be published or to quote rates of the aforesaid types, the Prime Rate shall be determined from a comparable index chosen by the Company in good faith. (b) For a period commencing on the date of disbursement hereof and ending December 31, 1998, the Interest Rate, determined in accordance with the terms of Section 1(a) hereof, shall be 8.25% per annum. On February 1, 1999 and on February 1 of each year thereafter (each an "ADJUSTMENT DATE"), the Interest Rate shall be adjusted to an amount equal to the then applicable Prime Rate less .25% per annum and shall thereupon be fixed until the next occurring Adjustment Date. 2 (c) After the earlier of (i) the Maturity Date, whether by acceleration or otherwise, or (ii) the occurrence of any Event of Default hereunder, the total unpaid indebtedness hereunder shall bear interest at the rate of two percent (2%) plus the Prime Rate (the "DEFAULT RATE"). (d) Interest shall be computed on the basis of a 360 day year and charged for the actual number of days elapsed. (e) The Company shall make successive monthly installment payments of interest with the final payment of all unpaid principal and all accrued and unpaid interest due and payable on the Maturity Date. Payments of interest shall be made in arrears commencing on February 1, 1998 and thereafter on the first day of each successive month through and including February 1, 2003. (f) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (g) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (h) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty. (i) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register the Note. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose 2 3 at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event ("EVENT OF DEFAULT") that: (i) the Company defaults in making the payment of any installment of interest when due or principal and all accrued interest on this Note at the Maturity Date and such failure continues for a period of thirty (30) days after the due date thereof; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the Default Rate. It is the intention of the Company 3 4 and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. 4 5 (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Note who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this date first written above. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos -------------------------------------- Name: Leon M. Monachos Title: Chief Financial Officer 5 EX-10.6 7 14% SR. SUB. PROMISSARY NOTE 1 EXHIBIT 10.6 Chicago, Illinois, January 26, 1998 $25,000 AASCHE TRANSPORTATION SERVICES, INC. 14% SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), promises to pay to Diane L. Asche the registered holder or registered assigns hereof (the "Holder"), the principal amount of Twenty Five Thousand Dollars ($25,000) payable on August 1, 1999 (the "Maturity Date"), together with accrued interest on the outstanding principal amount of this Note (the "Note") at the annual rate calculated on the basis of the actual number of days elapsed over a year of 360 days, of fourteen percent (14%) through the Maturity Date, such interest to be payable in full on 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 specified in Section 6 of this Note. 1. Payments and Prepayments. (a) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (b) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (c) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty at any time. (d) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register all Notes. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event that: (i) the Company defaults in making the payment of principal and all accrued interest on this Note at the Maturity Date; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or 2 3 (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the sum of the rate set forth in the introduction of this Note plus two percent (2%). It is the intention of the Company and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under 3 4 Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Note who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. 4 5 IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer 5 EX-10.7 8 SR. SUB PROMISSARY NOTE 1 EXHIBIT 10.7 Chicago, Illinois, January 20, 1998 $500,000 AASCHE TRANSPORTATION SERVICES, INC. SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE (THE "NOTE") HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "COMPANY"), promises to pay to the order of Kevin M. Clark, the registered holder or registered assigns hereof (the "HOLDER"), the principal amount of Five Hundred Thousand Dollars ($500,000) payable on February 1, 2003 (the "MATURITY DATE"), together with accrued interest on the outstanding principal amount of this Note, all as hereinafter set forth. 1. Payments and Prepayments. (a) Provided no Event of Default (as defined below) shall have occurred and be continuing, from and after the date of disbursement of funds, the principal balance from time to time unpaid shall bear interest at the fixed rate (determined from time to time in accordance with the terms hereof) equal to the Prime Rate less .25% per annum (the "INTEREST RATE"). As used herein, the "PRIME RATE" shall mean the prime rate of interest quoted on each Adjustment Date (as defined below) by the Wall Street Journal as the base rate on corporate loans at large U.S. money center commercial banks on such day; provided that in the event the Wall Street Journal ceases quoting a prime rate, Prime Rate shall mean the per annum rate of interest quoted as the Bank Prime Loan Rate for the most recent weekday for which such rate is quoted in Statistical Release H.15 (519) published from time to time by the Board of Governors of the Federal Reserve System; provided further that in the event that both of the aforesaid indices cease to be published or to quote rates of the aforesaid types, the Prime Rate shall be determined from a comparable index chosen by the Company in good faith. (b) For a period commencing on the date of disbursement hereof and ending December 31, 1998, the Interest Rate, determined in accordance with the terms of Section 1(a) hereof, shall be 8.25% per annum. On February 1, 1999 and on February 1 of each year thereafter (each an "ADJUSTMENT DATE"), the Interest Rate shall be adjusted to an amount equal to the then applicable Prime Rate less .25% per annum and shall thereupon be fixed until the next occurring Adjustment Date. 2 (c) After the earlier of (i) the Maturity Date, whether by acceleration or otherwise, or (ii) the occurrence of any Event of Default hereunder, the total unpaid indebtedness hereunder shall bear interest at the rate of two percent (2%) plus the Prime Rate (the "DEFAULT RATE"). (d) Interest shall be computed on the basis of a 360 day year and charged for the actual number of days elapsed. (e) The Company shall make successive monthly installment payments of interest with the final payment of all unpaid principal and all accrued and unpaid interest due and payable on the Maturity Date. Payments of interest shall be made in arrears commencing on February 1, 1998 and thereafter on the first day of each successive month through and including February 1, 2003. (f) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (g) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (h) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty. (i) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register the Note. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose 2 3 at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event ("EVENT OF DEFAULT") that: (i) the Company defaults in making the payment of any installment of interest when due or principal and all accrued interest on this Note at the Maturity Date and such failure continues for a period of thirty (30) days after the due date thereof; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the Default Rate. It is the intention of the Company 3 4 and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. 4 5 (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Note who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this date first written above. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ------------------------------ Name: Leon M. Monachos Title: Chief Financial Officer 5 EX-10.8 9 14% SR. SUB. PROMISSARY NOTE 1 EXHIBIT 10.8 Chicago, Illinois, January 26, 1998 $250,000 AASCHE TRANSPORTATION SERVICES, INC. 14% SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), promises to pay to Richard S. Baugh, the registered holder or registered assigns hereof (the "Holder"), the principal amount of Two Hundred Fifty Thousand Dollars ($250,000) payable on August 1, 1999 (the "Maturity Date"), together with accrued interest on the outstanding principal amount of this Note (the "Note") at the annual rate calculated on the basis of the actual number of days elapsed over a year of 360 days, of fourteen percent (14%) through the Maturity Date, such interest to be payable in full on 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 specified in Section 6 of this Note. 1. Payments and Prepayments. (a) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (b) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (c) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty at any time. (d) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register all Notes. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event that: (i) the Company defaults in making the payment of principal and all accrued interest on this Note at the Maturity Date; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or 2 3 trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the sum of the rate set forth in the introduction of this Note plus two percent (2%). It is the intention of the Company and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 3 4 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE 4 5 WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/Leon M. Monachos ------------------------------------------- Leon M. Monachos, Chief Financial Officer 5 EX-10.9 10 14% SR. SUB. PROMISSARY NOTE 1 EXHIBIT 10.9 Chicago, Illinois, January 26, 1998 $250,000 AASCHE TRANSPORTATION SERVICES, INC. 14% SENIOR SUBORDINATED PROMISSORY NOTE THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE TRUST INDENTURE ACT OF 1939 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), promises to pay to Gary I. Goldberg, the registered holder or registered assigns hereof (the "Holder"), the principal amount of Two Hundred Fifty Thousand Dollars ($250,000) payable on August 1, 1999 (the "Maturity Date"), together with accrued interest on the outstanding principal amount of this Note (the "Note") at the annual rate calculated on the basis of the actual number of days elapsed over a year of 360 days, of fourteen percent (14%) through the Maturity Date, such interest to be payable in full on 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 specified in Section 6 of this Note. 1. Payments and Prepayments. (a) Payments of principal and/or interest on this Note shall be made at the principal office of the Company, located at 10214 N. Mt. Vernon Road, Shannon, Illinois 61078, or such other place or places within the United States as may be specified by the Holder of this Note in a written notice to the Company at least ten (10) business days before a given payment date. (b) Payment of principal and interest on this Note shall be made in lawful money of the United States of America by mailing the Company's check in the proper amount to the Holder at least three days prior to the due date of the payment or otherwise transferring good funds so as to be received by the Holder on the due date of the payment. (c) This Note is subject to prepayment, in whole or in part, at the option of the Company without premium or penalty at any time. (d) The Company will give the Holder written notice indicating the amount of any prepayment and the proposed date thereof not less than fifteen (15) days prior to any such prepayment of this Note. 2 2. Obligation Absolute. The obligations under this Note are absolute and unconditional obligations of the Company and no modification, release, consent, waiver, rearrangement or amendment shall impair the obligations of the Company hereunder. 3. Security. The payment of this Note and the Company's obligations hereunder are not secured by any collateral. 4. Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register all Notes. No transfer of this Note shall be valid as against the Company unless made upon the register. This Note is subject to the restrictions on transfer of this Note and in compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Note or Notes for a like principal amount. Subject to Section 7, this Note may be exchanged for like notes in the same aggregate principal amount in other denominations; provided, however, that none of the Notes shall be in denominations less than $100,000. To be exchanged, this Note shall be surrendered for that purpose at the principal office of the Company, and the Company shall execute and deliver in exchange therefor the Note or Notes which the holder making the exchange shall be entitled to receive, bearing serial numbers not contemporaneously outstanding. This Note, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by such Holder's duly authorized attorney. The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 5. Events of Default. In the event that: (i) the Company defaults in making the payment of principal and all accrued interest on this Note at the Maturity Date; (ii) the Company hereafter makes an assignment for the benefit of creditors, or files a petition in bankruptcy as to itself, is adjudicated insolvent or bankrupt, petitions any receiver or of any trustee for the Company or any substantial part of the property of the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether or not hereafter in effect; or if there is hereafter commenced against the Company any such proceeding and an order approving the petition is entered or such proceeding remains undismissed for a period of sixty (60) days, or the Company by any act or omission to act indicates its consent to or approval of or acquiescence in any such proceeding or the appointment of any receiver of, or trustee for, the Company or any substantial part of its properties, or suffers any such receivership or trusteeship to continue undischarged for a period of sixty (60) days; or 2 3 (iii) the Company defaults in the due observance or performances, in any material respect, of any covenant, condition or agreement to be observed or performed pursuant to the terms of this Note (other than a default which is specifically provided for in this Section 5) and such default continues unremedied for more than thirty (30) days after the Company has received written notice thereof; Then, and in each and every case, the holder of the Note may declare the principal and accrued but unpaid interest of the Note to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable. 6. Certain Consequences Upon Default. If and during such time as an Event of Default has occurred and is continuing, the Company shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (whether before or after judgment) at the rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the sum of the rate set forth in the introduction of this Note plus two percent (2%). It is the intention of the Company and the Holder of this Note to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Note, and any other document executed in connection herewith, in no event shall this Note or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If for any circumstances whatsoever, fulfillment of any provision of this Note or of any such other document at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if for any such circumstances the holder of this Note shall ever receive anything of value as interest or deemed interest by applicable law under this Note or any such other document or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under this Note or on account of any other indebtedness of the Company to such holder, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Company. In determining whether or not the interest paid or payable with respect to any indebtedness of the Company to the Holder, under any specific contingency, exceeds the highest lawful rate, the Company and such holder shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, (iii) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that the actual rate of such interest does not exceed the maximum amount permitted by applicable law, and/or (iv) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law. 7. Investment Representations. (a) The Holder hereby acknowledges that this Note is not being registered (i) under the Securities Act of 1933, as amended (the "Act") or under the Trust Indenture Act of 1939 (the "Trust Indenture Act") on the ground that the issuance of the Note is exempt from registration under 3 4 Section 4(2) of the Act as not involving any public offering or (ii) under any applicable state securities law because the issuance of this Note does not involve any public offering; and that the Company's reliance on the Section 4(2) exemption of the Act and under applicable state securities laws is predicated in part on the representations hereby made to the Company by the Holder that it is acquiring this Note for investment for its own account, with no present intention of dividing its participation with others or reselling or otherwise distributing the same. (b) The Holder hereby agrees that it will not sell or transfer all or any part of this Note unless and until it shall first have given written notice to the Company describing such sale or transfer and furnished to the Company either (i) an opinion, reasonably satisfactory to counsel for the Company, of counsel (skilled in securities matters, selected by the Holder and reasonably satisfactory to the Company) to the effect that the proposed sale or transfer may be made without registration under either the Act or the Trust Indenture Act and without registration or qualification under any state law, or (ii) an interpretive letter from the Securities and Exchange Commission to the effect that no enforcement action will be recommended if the proposed sale or transfer is made without registration under the Act or the Trust Indenture Act. (c) The Company may refuse to recognize a transfer of this Note on its books should a holder attempt to transfer this Note otherwise than in compliance with this Section 7. 8. Notices. Any notice required by the provisions of this Note shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Note who has so furnished an address to the Company. 9. Miscellaneous. (a) This Note is the obligation of the Company only, and no recourse shall be had for the payment thereof or interest thereon against any shareholder, officer or director of the Company, whether by virtue of any constitution, statute, rule or law or otherwise, such liability, by the acceptance hereof, and as part of the consideration hereof, being expressly waived. (b) Upon receipt of evidence reasonably satisfactory to the Company the loss, theft, destruction or mutilation of this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incident thereto, and upon surrender or cancellation of this Note, if mutilated, the Company will make and deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. (c) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE COMPANY AND THE HOLDER HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO AGREEMENTS AND INSTRUMENTS MADE AND TO BE PERFORMED IN ILLINOIS AND CANNOT BE MODIFIED OR CHANGED ORALLY. 4 5 IN WITNESS WHEREOF, the Company has duly caused this Note to be signed on its behalf, in its name and by its duly authorized officers as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer 5 EX-10.10 11 WARRANT TO PURCHASE C/S 1 EXHIBIT 10.10 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-1 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Larry L. Asche (a "Holder") or registered assigns, is entitled the holder thereof to purchase 100,000 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $3.90 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 16th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------- Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. Date: (1) ---------------------------------- (Signature of Owner) ---------------------------------- (Street Address) ---------------------------------- (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: __________________________________ (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 EX-10.11 12 WARRENT TO PURCHASE C/S 1 EXHIBIT 10.11 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-2 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Diane L. Asche (a "Holder") or registered assigns, is entitled the holder thereof to purchase 100,000 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $3.90 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 16th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. Date: (1) --------------------------------------- (Signature of Owner) --------------------------------------- (Street Address) --------------------------------------- (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: - -------------------------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 6 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrant Shares constituting a part of the within Warrant not being assigned hereby) all of the right of the undersigned under the within Warrant to purchase the number of shares of Warrant Shares set forth below: Name(s) of Number of Assignee(s) SSN/F.E.I.N. Address Warrants ----------- ------------ ------- ---------- and does hereby irrevocably constitute and appoint ____________________ the undersigned's attorney to make such transfer on the books of Aasche Transportation Services, Inc. maintained for the purposes, with full power of substitution in the premises. (2) --------------------------------------- (Signature of Owner) - ----------------------------------- (2) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 6 EX-10.12 13 WARRENT TO PURCHASE C/S 1 EXHIBIT 10.12 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-10 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Diane L. Asche (a "Holder") or registered assigns, is entitled the holder thereof to purchase 2,500 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $4.20 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued. 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ---------------------------------------- Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. (1) ------------------------------- Date: (Signature of Owner) ------------------------------- (Street Address) ------------------------------- (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: - -------- (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 6 ================================================================================ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrant Shares constituting a part of the within Warrant not being assigned hereby) all of the right of the undersigned under the within Warrant to purchase the number of shares of Warrant Shares set forth below: Name(s) of Number of Assignee(s) SSN/F.E.I.N. Address Warrants - ----------- ----------- ------- --------- and does hereby irrevocably constitute and appoint ____________________ the undersigned's attorney to make such transfer on the books of Aasche Transportation Services, Inc. maintained for the purposes, with full power of substitution in the premises. (2) -------------------------------- (Signature of Owner) ================================================================================ - -------- (2) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 6 EX-10.13 14 WARRENT TO PURCHASE C/S 1 EXHIBIT 10.13 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-3 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Kevin M. Clark (a "Holder") or registered assigns, is entitled the holder thereof to purchase 100,000 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $3.97 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 20th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos --------------------------------- Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. Date: (1) ---------------------------------------------- (Signature of Owner) --------------------------------------------- (Street Address) --------------------------------------------- (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: - --------------------------- (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 6 ================================================================================ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrant Shares constituting a part of the within Warrant not being assigned hereby) all of the right of the undersigned under the within Warrant to purchase the number of shares of Warrant Shares set forth below:
Name(s) of Number of Assignee(s) SSN/F.E.I.N. Address Warrants - ----------- ------------ ------- ---------
and does hereby irrevocably constitute and appoint ____________________ the undersigned's attorney to make such transfer on the books of Aasche Transportation Services, Inc. maintained for the purposes, with full power of substitution in the premises. (2) ------------------------------------ (Signature of Owner) ================================================================================ - -------- (2) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 6 EX-10.14 15 WARRENT TO PURCHASE C/S 1 EXHIBIT 10.14 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-4 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Richard S. Baugh (a "Holder") or registered assigns, is entitled the holder thereof to purchase 25,000 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $4.20 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued. 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------------- Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. (1) ------------------------------ Date: (Signature of Owner) ------------------------------ (Street Address) ------------------------------ (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: - -------- (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 6 ================================================================================ FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrant Shares constituting a part of the within Warrant not being assigned hereby) all of the right of the undersigned under the within Warrant to purchase the number of shares of Warrant Shares set forth below: Name(s) of Number of Assignee(s) SSN/F.E.I.N. Address Warrants - ---------- ----------- ------- --------- and does hereby irrevocably constitute and appoint ____________________ the undersigned's attorney to make such transfer on the books of Aasche Transportation Services, Inc. maintained for the purposes, with full power of substitution in the premises. (2) --------------------------------- (Signature of Owner) ================================================================================ - -------- (2) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 6 EX-10.15 16 WARRENT TO PURCHASE C/S 1 EXHIBIT 10.15 THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. NO. A-5 WARRANT TO PURCHASE COMMON STOCK Aasche Transportation Services, Inc., a Delaware corporation (the "Company"), for value received, hereby certifies that Gary I. Goldberg (a "Holder") or registered assigns, is entitled the holder thereof to purchase 25,000 fully paid non-assessable shares ("Warrant Shares") of common stock, $0.0001 par value per share (the "Common Stock"), of the Company, subject to the provisions set forth below, at the purchase price (the "Exercise Price") of $4.20 per Warrant Share, subject to adjustment as set forth below. The number of Warrant Shares which may be purchased under this Warrant, and the Exercise Price therefor, are subject to additional adjustment from time to time as set forth herein. Notwithstanding the foregoing, in the event the Company, for any reason, fails to close the acquisition of the municipal waste hauling business of Jack Gray Transport, Inc. by January 31, 1998, this Warrant shall be canceled and deemed null and void. 1. Exercise of Warrant. 1.1. Exercise. The Holder may exercise this Warrant in whole or in part at any time until this Warrant terminates (as provided in Section 5 hereof) by the surrender of this Warrant and delivery of a duly executed Exercise Notice in the form attached hereto at the principal offices of the Company, specifying the number of Warrant Shares to be purchased and accompanied by the payment to the Company, or for the account of the Company, by cash, certified check, bank draft or wire transfer, of the full Exercise Price for such Warrant Shares. The Company agrees that the Warrant Shares purchased upon exercise of this Warrant shall be deemed for all purposes to be issued to the Holder exercising this Warrant as of the close of business on the date on which this Warrant is surrendered and payment is made as aforesaid. Certificates for the Warrant Shares so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten business days, after the issuance of the Warrant Shares. All certificates representing Warrant Shares may bear legends respecting restrictions under securities laws which normally appear on the Company's certificates for shares issued in private placements. In the event the Holder shall exercise this Warrant in part only, the Company shall deliver to the Holder within a reasonable time, not exceeding ten business days, after such exercise, a new Warrant (dated the date hereof) in the form of this Warrant to purchase a number of Warrant Shares equal to the number of Warrant Shares which may be purchased under this Warrant minus the number of Warrant Shares purchased by the Holder upon such exercise in part of this Warrant. 1.2. No Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon exercise of this Warrant. If, upon exercise of all of this Warrant, the Holder would, except for the provisions of this Section 1.2, be entitled to receive a fractional share of Common 2 Stock, then an amount equal to such fractional share multiplied by the fair market value (as reasonably determined by the Company's Board of Directors) of one share of Common Stock shall be paid by the Company in cash to such Holder. 2. Transferability. Subject to the provisions of Section 8 hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant and a properly executed assignment at the principal office of the Company. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 3. Shares to be Issued. 3.1. Shares to be Issued; Reservation of Shares. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly authorized, issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof other than those liens and charges attaching by or through action of the Holder. The Company further covenants and warrants that it will from time to time take all action required to assure that the par value per share of the Common Stock is at all times equal to or less than the Exercise Price per Warrant Share. The Company further covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant. 4. Adjustments to Warrant Rights. 4.1. Split and Subdivision of Common Stock. If the Company shall split or subdivide the outstanding shares of Common Stock or pay a dividend or make a distribution with respect to Common Stock payable in additional shares of Common Stock or other securities or rights convertible into or entitling the holder thereof to receive additional shares of Common Stock, then the Exercise Price per Warrant Share shall be appropriately decreased and the number of Warrant Shares subject to this Warrant shall be appropriately increased in proportion to such increase in outstanding shares of Common Stock. Such adjustments shall be made as of the record date of such split, dividend or distribution, or if no record date is established, as of the effective date thereof. 4.2. Combination of Common Stock. If the Company combines the outstanding shares of Common stock into a smaller number of shares, then the purchase price per Warrant Share shall be appropriately increased and the number of Warrant Shares subject to this Warrant shall be appropriately decreased in proportion to such decrease in outstanding shares of Common Stock. Such adjustment shall be made as of the record date of such combination, or if no record is established, as of the effective date thereof. 4.3. Reorganization. If any capital reorganization or reclassification of the capital of the Company or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effective, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be 2 3 made whereby the Holder shall thereafter have the right to purchase and receive at any time after the consummation of such transaction until the termination of this Warrant upon the basis and upon the terms and conditions specified herein and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place; and in any case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the purchase price per Warrant Share and the number of Warrant Shares issuable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be, to any shares of stock, securities or assets thereafter deliverable upon the exercise of this Warrant. The Company shall not effect any such consolidation, merger or sale unless the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall have assumed by a written instrument executed and mailed by certified mail or delivered to the Holder at the last address of the Holder appearing on the books of the Company, the obligation of the Company or such successor corporation to deliver such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. 5. Termination. This Warrant shall terminate on February 1, 2003. 6. Rights of Holder. The Holder shall not, by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder in the Company. 7. Investment Representation. The Holder by accepting this Warrant represents that this Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution and that the Holder has no present intention of selling or otherwise disposing of this Warrant or the shares of Common Stock obtained upon exercise thereof. The Holder further agrees that unless a current registration statement under the Securities Act of 1933, as amended (the "Securities Act") shall be in effect with respect to Company's Common Stock, the Holder, by accepting this Warrant, covenants and agrees to, at the time of exercise of any Warrant, if so requested by the Company, deliver to the Company a written statement reconfirming such Holder's investment representations made hereunder. 8. Sale without Registration. The Holder of this Warrant acknowledges that neither this Warrant nor the Warrant Shares have been registered under the Securities Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (i) an effective registration statement as to this Warrant or such Warrant Shares under the Securities Act or (ii) an opinion (reasonably acceptable to the Company) of counsel reasonably acceptable to the the Company, to the effect that such registration is not required under the circumstances. 9. Replacement of Warrant. In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Warrant of like tenor and denomination and deliver the same (a) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant or (b) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of such Warrant (it being understood that a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction shall be satisfactory evidence unless the 3 4 Company has cause to believe to the contrary) and an indemnity agreement reasonably satisfactory to the Company. 10. Notices. All notices and other communications from the Company to the Holder shall be in writing and shall be delivered by hand, by telecopier, by overnight courier or mailed by first class, registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder, or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this Warrant who has so furnished an address to the Company. 11. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be construed and enforced in accordance with and governed by the internal laws of the State of Illinois without giving effect to conflicts of law principles. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. This Warrant is being executed as an instrument under seal. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of this 26th day of January, 1998. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ------------------------------------ Leon M. Monachos, Chief Financial Officer 4 5 EXERCISE NOTICE To: Aasche Transportation Services, Inc. The undersigned owner of an accompanying Warrant hereby irrevocably exercises the option to purchase ______ shares of Common Stock, $0.0001 par value per share, of Aasche Transportation Services, Inc. in accordance with the terms of such Warrant, directs that the shares issuable and deliverable upon such purchase (together with any check for a fractional interest) be issued in the name of and delivered to the undersigned, and makes payment in full therefor at the Exercise Price provided in such Warrant. Date: (1) -------------------------------------- (Signature of Owner) -------------------------------------- (Street Address) -------------------------------------- (City) (State) (Zip Code) Securities and/or check to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: Any new Warrant to purchase Warrant Shares issuable after this partial exercise of the within Warrant to be issued to: Name: Street Address: City, State and Zip Code: SSN/F.E.I.N.: - ----------- (1) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 5 6 =============================================================================== FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant hereby sells, assigns and transfers unto the Assignee(s) named below (including the undersigned with respect to any Warrant Shares constituting a part of the within Warrant not being assigned hereby) all of the right of the undersigned under the within Warrant to purchase the number of shares of Warrant Shares set forth below:
Name(s) of Number of Assignee(s) SSN/F.E.I.N. Address Warrants - ----------- ------------ ------- ---------
and does hereby irrevocably constitute and appoint ____________________ the undersigned's attorney to make such transfer on the books of Aasche Transportation Services, Inc. maintained for the purposes, with full power of substitution in the premises. (2) --------------------------------------- (Signature of Owner) =============================================================================== - ----------- (2) The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever. 6 EX-10.16 17 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.16 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as of the 2nd day of January, 1998, by and between Specialty Transportation Services, Inc., an Illinois corporation (the "EMPLOYER") and Gary I. Goldberg (the "EXECUTIVE"). RECITALS A. The Executive has assigned a substantial portion of his interests in that certain Asset Purchase Agreement executed by and between the Executive and Jack Gray Transport, Inc. ("JGT"), dated as of September 24, 1997, as amended by amendment dated as of January 2, 1998 (the "ASSET PURCHASE AGREEMENT"), to Aasche Transportation Services, Inc. ("AASCHE") (referred to hereinafter as the "ASSIGNMENT") (which Asset Purchase Agreement is expected to be further assigned to the Employer on or about January 30, 1998), and the Employer has agreed to engage the Executive to provide services for the benefit of the Employer and the Executive desires to accept such employment with the Employer. B. The Employer and the Executive acknowledge that the Executive will be a member of the senior management team of the Employer and, as such, will participate in implementing the Employer's business plan. C. In the course of his prior employment with JGT and in the course of his employment with the Employer, the Executive has had and will continue to have access to certain confidential information that relates to or will relate to the business of the Employer. D. The Employer desires that any such information not be disclosed to other parties or otherwise used for unauthorized purposes. NOW, THEREFORE, in consideration of the above premises and the following mutual covenants and conditions, the parties agree as follows: 1. Employment. The Employer shall employ the Executive as the President of the Employer. In addition to the foregoing, the Employer acknowledges that the Executive has been elected as a Director of the Employer. The Executive hereby accepts such employment and positions on the following terms and conditions. 2. Duties. The Executive shall work for the Employer in a full-time capacity. The Executive shall, during the term of this Agreement, have the duties, responsibilities, powers, and authority customarily associated with the position of President. The Executive shall report to, and follow the direction of, the Board of Directors of the Employer (the "BOARD"). The Executive shall diligently, competently, and faithfully perform all duties, and shall devote substantially all his entire business time, energy, attention, and skill to the performance of duties for the Employer and will use his best efforts to promote the interests of the Employer. Upon the 2 consent of a majority of the Board, it shall not be considered a violation of the foregoing for the Executive to serve on corporate, industry, civic, or charitable boards or committees, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Employer in accordance with this Agreement. 3. Executive Loyalty. The Executive shall devote substantially all of his time, attention, knowledge, and skill solely and exclusively to the business and interests of the Employer, and the Employer shall be entitled to all benefits and profits arising from or incident to any and all work, services, and advice of the Executive. The Executive expressly agrees that during the term of this Agreement, he shall not engage, directly or indirectly, as a partner, advisor, agent, employee, or in any other form or capacity, in any other business similar to that of the Employer other than as Vice President, director and stockholder of Aasche. The foregoing notwithstanding, nothing herein contained shall be deemed to prevent the Executive from investing his money in the capital stock or other securities of any corporation whose stock or securities are publicly-owned or are regularly traded on any public exchange, nor shall anything herein contained be deemed to prevent the Executive from investing his money in real estate or other businesses unrelated to the business of Employer. 4. Term of Employment. Unless sooner terminated as hereinafter provided, this Agreement shall be entered into for a period of five (5) years, commencing as of the date first set forth above (the "INITIAL TERM"). The term of employment shall be renewed automatically for successive periods of one (1) year each (a "RENEWAL TERM") after the expiration of the Initial Term and any subsequent Renewal Term, unless the Board provides the Executive, or the Executive provides the Board, with written notice to the contrary at least thirty (30) days prior to the end of the Initial Term or any Renewal Term. 5. Compensation. A. Salary. The Employer shall pay the Executive an annual salary of $175,000 (the "INITIAL SALARY"), payable in substantially equal installments in accordance with the Employer's payroll policy from time to time in effect. The Executive's salary shall be subject to any payroll or other deductions as may be required to be made pursuant to law, government order, or by agreement with, or consent of, the Executive. Changes to the Initial Salary, as adjusted, may be made following an annual salary review, the first of which shall take place in or around January, 1999, and all subsequent reviews shall occur in or around January of each year thereafter. B. Bonus. For the 1998 and all subsequent fiscal years, the Executive shall participate in an executive bonus plan to be established for the executive employees of the Employer. C. Stock Options. Effective on the date hereof, Aasche shall grant the Executive a nonstatutory option to purchase five hundred thousand (500,000) shares of the Common Stock of Aasche, par value $.0001 per share. The grant of such stock option, and the terms and conditions thereof, are set forth in the option agreement attached hereto as Exhibit A. 2 3 D. Other Benefits. During the term of this Agreement, the Employer shall: (1) include the Executive in any life insurance, disability insurance, medical, dental or health insurance, savings, pension and retirement plans and other benefit plans or programs (including, if applicable, any excess benefit or supplemental executive retirement plans) maintained by the Employer for the benefit of its executives; (2) include the Executive in such perquisites as the Employer may establish from time to time that are commensurate with his position and at least comparable to those received by other executives of the Employer, including the use of a Cadillac Seville or an automobile of comparable value; and (3) provide the Executive with four (4) weeks paid vacation per annum. 6. Expenses. The Employer shall reimburse the Executive for all reasonable and approved business expenses, provided the Executive submits paid receipts or other documentation acceptable to the Employer and as required by the Internal Revenue Service to qualify as ordinary and necessary business expenses under the Internal Revenue Code of 1986, as amended. 7. Termination. Notwithstanding anything in Paragraph 4 of this Agreement to the contrary, the Executive's services shall terminate upon the first to occur of the following events: A. At the end of the term of this Agreement, including any Renewal Terms. B. Upon the Executive's date of death or the date the Executive is given written notice that he has been determined to be disabled by the Employer. For purposes of this Agreement, "DISABILITY" shall mean a physical or mental condition that impairs the Executive's ability to perform substantially his required duties for a period of four (4) consecutive months or for any aggregate period of six (6) months in any twelve (12) month period. A determination as to whether or not the Executive has become disabled pursuant to this Paragraph 7B shall be made following examinations by the Executive's physician and a physician chosen by the Employer. If the physicians as chosen by the Executive and the Employer shall be unable to agree, the parties shall choose a third physician whose assessment as to whether or not the Executive has suffered a Disability shall be binding. A termination of the Executive's employment by the Employer for Disability shall be communicated to the Executive by written notice and shall be effective on the tenth (10th) business day after receipt of such notice by the Executive, unless the Executive returns to full-time performance of his duties before such tenth (10th) business day. 3 4 C. On the date the Employer provides the Executive with written notice that he is being terminated for "cause." For purposes of this Agreement, the Executive shall be deemed terminated for cause if the Employer terminates the Executive after the Executive: (1) shall have committed any felony including, but not limited to, a felony involving fraud, theft, misappropriation, dishonesty, or embezzlement; (2) shall have committed intentional acts that materially impair the goodwill or business of the Employer or cause material damage to its property, goodwill, or business; or (3) shall have refused to, or willfully failed to, perform his material duties associated with the position of President of the Employer. D. On the date the Executive terminates his employment for any reason, provided that the Executive shall give the Employer thirty (30) days written notice prior to such date of his intention to terminate this Agreement. E. On the date the Employer terminates the Executive's employment for any reason, other than a reason set forth in Paragraph 7C, provided that the Employer shall give the Executive thirty (30) days written notice prior to such date of its intention to terminate this Agreement. 8. Compensation Upon Termination. A. If the Executive's services are terminated pursuant to Paragraph 7, the Executive shall be entitled to his salary through his final date of active employment. The Executive also shall be entitled to any benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) or required under the terms of any death, insurance, or retirement plan, program, or agreement provided by the Employer and to which the Executive is a party or in which the Executive is a participant, including, but not limited to, any short-term or long-term disability plan or program, if applicable. In addition, other than upon termination of the Executive's services pursuant to Paragraph 7C or 7D, the Executive shall be entitled to a prorated portion of the annual bonus to which he would otherwise be entitled pursuant to Paragraph 5B. The pro-rata bonus shall be equal to the product of: (1) at the Employer's discretion, either (i) the estimated bonus the Executive would have received for the fiscal year had the Executive's services not been terminated, or (ii) the actual bonus received by the Executive for the year immediately preceding the year in which his services are terminated and (2) a fraction, the numerator of which shall equal the number of months which the Executive worked during the fiscal year in which his employment is terminated and the denominator of which shall equal twelve. Such pro rata bonus shall be payable to the Executive no later than thirty (30) days after his employment is terminated. 4 5 B. In addition to the salary and benefits set forth in Paragraph 8A, if the Executive's services are terminated pursuant to Paragraph 7E, the Executive shall be entitled to the continuation of his base salary for the remainder of the Initial Term or any Renewal Term then in effect (the "SALARY CONTINUATION PERIOD"), at the rate then in effect as provided under Paragraph 5A and payable in substantially equal installments in accordance with the Employer's payroll policy from time to time in effect, provided he signs an agreement that releases the Employer from actions, suits, claims, proceedings and demands related to the period of employment and/or the termination of employment. 9. Protective Covenants. The Executive acknowledges and agrees that solely by virtue of his employment by, and relationship with, JGT and the Employer, he has acquired and will acquire "Confidential Information", as hereinafter defined, as well as special knowledge of JGT's and the Employer's relationships with their customers, and that, but for his association with JGT and the Employer, the Executive would not or will not have had access to said Confidential Information or knowledge of said relationships. The Executive further acknowledges and agrees (i) that JGT and the Employer have long term, near-permanent relationships with their customers, and that those relationships were developed at great expense and difficulty to JGT and the Employer, over several years of close and continuing involvement; and (ii) that JGT's and the Employer's relationships with their customers are and will continue to be valuable, special and unique assets of the Employer and that the identity of their customers is kept under tight security with the Employer and cannot be readily ascertained from publicly available materials or from materials available to the Employer's competitors. In return for the consideration described in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and as a condition precedent to the Employer entering into this Agreement and the Assignment, and as an inducement to the Employer to do so, the Executive hereby represents, warrants, and covenants as follows: A. The Executive has executed and delivered this Agreement as his free and voluntary act, after having determined that the provisions contained herein are of a material benefit to him, and that the duties and obligations imposed on him hereunder are fair and reasonable and will not prevent him from earning a comparable livelihood following the termination of his employment with the Employer; B. The Executive has read and fully understands the terms and conditions set forth herein, has had time to reflect on and consider the benefits and consequences of entering into this Agreement, and has had the opportunity to review the terms hereof with an attorney or other representative, if he so chooses; C. The execution and delivery of this Agreement by the Executive does not conflict with, or result in a breach of or constitute a default under, any agreement or contract, whether oral or written, to which the Executive is a party or by which the Executive may be bound; 5 6 D. The Executive agrees that, during the time of his employment and for a period of one (1) year after the termination of the Executive's employment hereunder for any reason whatsoever or for no reason, whether voluntary or involuntary, or, if longer, during any Salary Continuation Period, the Executive will not, except on behalf of Employer, anywhere in North America where the Employer now conducts or operates, or may conduct or operate, its business prior to the date of the Executive's termination of employment: (1) directly or indirectly, contact, solicit or direct any person, firm, or corporation to contact or solicit, any of the Employer's customers or prospective customers (as hereinafter defined) for the purpose of selling or attempting to sell, services that are the same as or similar to the services provided by the Employer to its customers during the term hereof (the "BUSINESS"). In addition, the Executive will not disclose the identity of any such customers or prospective customers, or any part thereof, to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever; and (2) directly or indirectly, whether as an investor (excluding investments representing less than one percent (1%) of the common stock of a public company), lender, owner, stockholder, officer, director, consultant, employee, agent, salesperson or in any other capacity, whether part-time or full-time, become associated with any business involved in the Business; and (3) solicit or accept if offered to him, with or without solicitation, on his own behalf or on behalf of any other person, the services of any person who is an employee of the Employer, nor solicit any of the Employer's employees to terminate employment with the Employer, nor agree to hire any employee of the Employer into employment with himself or any company, individual or other entity; and (4) act as a consultant, advisor, officer, manager, agent, director, partner, independent contractor, owner, or employee for or on behalf of any of the Employer's customers or prospective customers, with respect to or in any way with regard to any aspect of the Business; E. The Executive acknowledges and agrees that the scope described above is necessary and reasonable in order to protect the Employer in the conduct of its Business and that, if the Executive becomes employed by another employer, he shall be required to disclose the existence of this Paragraph 9 to such employer and the Executive hereby consents to and the Employer is hereby given permission to disclose the existence of this Paragraph 9 to such employer; F. For purposes of this Paragraph 9, "customer" shall be defined as any person, firm, or entity, including any affiliates thereof, that purchased any type of service from the Employer or JGT or is or was doing business with the Employer, JGT or the Executive 6 7 within the twelve (12) month period immediately preceding termination of the Executive's employment. For purposes of this Paragraph 9, "prospective customer" shall be defined as any person, firm, or entity contacted or solicited by the Employer, JGT or the Executive (whether directly or indirectly) or who contacted the Employer, JGT or the Executive (whether directly or indirectly) within the twelve (12) month period immediately preceding termination of the Executive's employment for the purpose of having such persons, firms, or entities become a customer of the Employer or JGT. G. The Executive agrees that both during his employment and thereafter the Executive will not, for any reason whatsoever, use for himself or disclose to any person not employed by the Employer any "Confidential Information" of the Employer acquired by the Executive during his relationship with the Employer or with JGT, both prior to and during the term of this Agreement. The Executive further agrees to use Confidential Information solely for the purpose of performing duties with the Employer and further agrees not to use Confidential Information for his own private use or commercial purposes or in any way detrimental to the Employer. The Executive agrees that "Confidential Information" includes but is not limited to: (1) any financial, business, planning, operations, services, potential services, products, potential products, technical information and/or know-how, formulas, production, purchasing, marketing, sales, personnel, customer, broker, supplier, or other information of the Employer; (2) any papers, data, records, processes, methods, techniques, systems, models, samples, devices, equipment, compilations, invoices, customer lists, or documents of the Employer; (3) any confidential information or trade secrets of any third party provided to the Employer in confidence or subject to other use or disclosure restrictions or limitations; and (4) any other information, written, oral, or electronic, whether existing now or at some time in the future, whether pertaining to current or future developments, and whether previously accessed during the Executive's tenure with JGT or to be accessed during his future employment with the Employer, which pertains to the Employer's affairs or interests or with whom or how the Employer does business. The Employer acknowledges and agrees that Confidential Information does not include (1) information properly in the public domain, or (2) information in the Executive's possession prior to the date of his original employment with JGT; H. During and after the term of employment hereunder, the Executive will not remove from the Employer's premises any documents, records, files, notebooks, correspondence, computer printouts, computer programs, computer software, price lists, microfilm, or other similar documents containing Confidential Information, including copies thereof, whether prepared by him or others, except as his duty shall require, and in such cases, will promptly return such items to the Employer. Upon termination of his employment with the Employer, all such items including summaries or copies thereof, then in the Executive's possession, shall be returned to the Employer immediately; I. The Executive recognizes and agrees that all ideas, inventions, enhancements, plans, writings, and other developments or improvements (the "INVENTIONS") conceived by the Executive, alone or with others, during the term of his employment, whether or not during working hours, that are within the scope of the Business or that relate to any of the 7 8 Employer's work or projects, are the sole and exclusive property of the Employer. The Executive further agrees that (1) he will promptly disclose all Inventions to the Employer and hereby assigns to the Employer all present and future rights he has or may have in those Inventions, including without limitation those relating to patent, copyright, trademark or trade secrets; and (2) all of the Inventions eligible under the copyright laws are "work made for hire." At the request of and without charge to the Employer, the Executive will do all things deemed by the Employer to be reasonably necessary to perfect title to the Inventions in the Employer and to assist in obtaining for the Employer such patents, copyrights or other protection as may be provided under law and desired by the Employer, including but not limited to executing and signing any and all relevant applications, assignments or other instruments. Notwithstanding the foregoing, pursuant to the Employee Patent Act, Illinois Public Act 83-493, the Employer hereby notifies the Executive that the provisions of this Paragraph 9 shall not apply to any Inventions for which no equipment, supplies, facility or trade secret information of the Employer was used and which were developed entirely on the Executive's own time, unless (1) the Invention relates (i) to the business of the Employer, or (ii) to actual or demonstrably anticipated research or development of the Employer, or (2) the Invention results from any work performed by the Executive for the Employer; J. The Executive acknowledges and agrees that all customer lists, supplier lists, and customer and supplier information, including, without limitation, addresses and telephone numbers, are and shall remain the exclusive property of the Employer, regardless of whether such information was developed, purchased, acquired, or otherwise obtained by the Employer or the Executive. The Executive agrees to furnish to the Employer on demand at any time during the term of this Agreement, and upon termination of this Agreement, his complete list of the correct names and places of business and telephone numbers of all of its customers and suppliers served by him. The Executive also agrees to furnish to the Employer on demand at any time during the term of this Agreement, and upon the termination of this Agreement, any other records, notes, computer printouts, computer programs, computer software, price lists, microfilm, or any other documents related to the Employer's business, including originals and copies thereof; and K. It is agreed that any breach or anticipated or threatened breach of any of the Executive's covenants contained in this Paragraph 9 will result in irreparable harm and continuing damages to the Employer and its business and that the Employer's remedy at law for any such breach or anticipated or threatened breach will be inadequate and, accordingly, in addition to any and all other remedies that may be available to the Employer at law or in equity in such event, any court of competent jurisdiction may issue a decree of specific performance or issue a temporary and permanent injunction, without the necessity of the Employer posting bond or furnishing other security and without proving special damages or irreparable injury, enjoining and restricting the breach, or threatened breach, of any such covenant, including, but not limited to, any injunction restraining the Executive from disclosing, in whole or part, any Confidential Information. The Executive acknowledges the truthfulness of all factual statements in this Agreement and agrees that he is estopped from and will not make any factual statement in any proceeding that is contrary to this Agreement or any part thereof. The Executive further agrees 8 9 to pay all of the Employer's costs and expenses, including reasonable attorneys' and accountants' fees, incurred in enforcing such covenants. 10. Notices. Any and all notices required in connection with this Agreement shall be deemed adequately given only if in writing and (a) personally delivered, or sent by first class, registered or certified mail, postage prepaid, return receipt requested, or by recognized overnight courier, (b) sent by facsimile, provided a hard copy is mailed on that date to the party for whom such notices are intended, or (c) sent by other means at least as fast and reliable as first class mail. A written notice shall be deemed to have been given to the recipient party on the earlier of (a) the date it shall be delivered to the address required by this Agreement; (b) the date delivery shall have been refused at the address required by this Agreement; (c) with respect to notices sent by mail or overnight courier, the date as of which the Postal Service or overnight courier, as the case may be, shall have indicated such notice to be undeliverable at the address required by this Agreement; or (d) with respect to a facsimile, the date on which the facsimile is sent and receipt of which is confirmed. Any and all notices referred to in this Agreement, or which either party desires to give to the other, shall be addressed to his residence in the case of the Executive, or to its principal office in the case of the Employer. 11. Waiver of Breach. Upon the unanimous consent of the Board, a waiver by the Employer of a material breach of any provision of this Agreement by the Executive shall not operate or be construed as a waiver or estoppel of any subsequent breach by the Executive. No waiver shall be valid unless in writing and signed by an authorized officer of the Employer. 12. Assignment. The Executive acknowledges that the services to be rendered by him are unique and personal. Accordingly, the Executive may not assign any of his rights or delegate any of his duties or obligations under this Agreement. The rights and obligations of the Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Employer. 13. Entire Agreement. This Agreement sets forth the entire and final agreement and understanding of the parties and contains all of the agreements made between the parties with respect to the subject matter hereof. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto, with respect to the subject matter hereof. No change or modification of this Agreement shall be valid unless in writing, signed by the Employer and the Executive and subject to the unanimous consent of the Board. If any provision of this Agreement shall be found invalid or unenforceable for any reason, in whole or in part, then such provision shall be deemed modified, restricted, or reformulated to the extent and in the manner necessary to render the same valid and enforceable, or shall be deemed excised from this Agreement, as the case may require, and this Agreement shall be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified, restricted, or reformulated or as if such provision had not been originally incorporated herein, as the case may be. The parties further agree to seek a lawful substitute for any provision found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to 9 10 decide the enforceability of this Agreement modify those restrictions in this Agreement that, once modified, will result in an agreement that is enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement. 14. Headings. The headings in this Agreement are inserted for convenience only and are not to be considered a construction of the provisions hereof. 15. Execution of Agreement. This Agreement may be executed in several counterparts, each of which shall be considered an original, but which when taken together, shall constitute one agreement. 16. Recitals. The recitals to this Agreement are incorporated herein as an integral part hereof and shall be considered as substantive and not precatory language. 17. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Indiana, without reference to its conflict of law provisions, and any court action commenced to enforce this Agreement shall have as its sole and exclusive venue the County of Porter, Indiana. IN WITNESS WHEREOF, the parties have set their signatures on the date first written above. EMPLOYER: SPECIALTY TRANSPORTATION SERVICES, INC., an Illinois corporation By:/s/ Leon M. Monachos /s/ Gary I. Goldberg -------------------- --------------------- Gary I. Goldberg Its: V.P. Finance ------------------- 10 11 EXHIBIT A AASCHE TRANSPORTATION SERVICES, INC. NONSTATUTORY STOCK OPTION AGREEMENT THIS AGREEMENT is made effective this 2nd day of January, 1998 ("EFFECTIVE DATE"), by and between Aasche Transportation Services, Inc., a Delaware corporation (the "COMPANY"), and Gary I. Goldberg (the "OPTIONEE"). WHEREAS, in accordance with the terms of his employment agreement with the Company and Specialty Transportation Services, Inc. ("STS") of even date herewith, the Company desires to grant to the Optionee an option to purchase shares of its common capital stock (the "SHARES"). NOW, THEREFORE, in consideration of the following mutual covenants and for other good and valuable consideration, the parties agree as follows: 1. GRANT OF OPTION The Company grants to the Optionee the right and option to purchase all or any part of an aggregate of 500,000 Shares (the "OPTION") on the terms and conditions and subject to all the limitations set forth herein. The Optionee acknowledges that the definitive records pertaining to the grant of this Option, and exercises of rights hereunder, shall be retained by the Company. The Option granted herein is intended to be a nonstatutory option. 2. PURCHASE PRICE The purchase price of the Shares subject to the Option shall be $3.9375 per Share, the closing price per Share on the Effective Date as reported in the Wall Street Journal. 3. EXERCISE OF OPTION Subject to this Agreement, the Option shall be exercisable as follows: EXERCISE PERIOD Commencement Expiration Number of Shares Date Date ---------------- ---- ---- 250,000 January 2, 1998 January 1, 2008 250,000 January 2, 2003 January 1, 2008 12 The foregoing notwithstanding, the Company may accelerate the Exercise Period set forth above based upon STS' attainment of certain annual performance goals, which performance goals shall be set forth in an attachment to this Agreement. Furthermore, if the Optionee's employment with STS is terminated pursuant to Paragraph 7B or 7E of the Employment Agreement entered into by STS and the Optionee as of January 2, 1998 (the "EMPLOYMENT AGREEMENT"), all Shares not then exercisable pursuant to the above exercise schedule shall immediately become exercisable and shall be exercisable through January 1, 2008. The Option shall expire on, and shall be exercised (if at all) prior to the first to occur of: (a) Ten (10) years from the Effective Date; (b) Sixty (60) days after the date on which the Optionee shall cease, for any reason or cause whatsoever, and without regard to such reason or cause (except as set forth in (c) below and other than termination of the Optionee's employment pursuant to Paragraph 7B or 7E of the Employment Agreement), to be an employee of STS; or (c) The date the Optionee's employment is terminated, if it is terminated for "cause" as that term is defined in the Optionee's Employment Agreement. Upon expiration of the Option without it having been duly exercised, the Option shall be and become null, void, and of no further effect. 4. EXERCISE OF OPTION AND ISSUANCE OF SHARES The Option may be exercised in whole or in part (to the extent that it is exercisable in accordance with its terms) by giving written notice (or any other approved form of notice) to the Company. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised and shall specify a date (other than a Saturday, Sunday or legal holiday) not less than five (5) nor more than ten (10) days after the date of such written notice, as the date on which the Shares will be purchased, at the principal office of the Company during ordinary business hours, or at such other hour and place agreed upon by the Company and the person or persons exercising the Option, and shall otherwise comply with the terms and conditions of this Agreement. On the date specified in such written notice (which date may be extended by the Company if any law or regulation requires the Company to take any action with respect to the Shares prior to the issuance thereof), the Company shall accept payment for the Shares and shall deliver to the Optionee an appropriate certificate or certificates for the Shares as to which the Option was exercised. The Option price of any Shares shall be payable at the time of exercise either in cash, by certified check or bank check, or by wire transfer. The Company shall pay all original issue taxes with respect to the issuance of Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith. The holder of this Option shall have the rights of a stockholder only with respect 2 13 to those Shares covered by the Option which have been registered in the holder's name in the share register of the Company upon the due exercise of the Option. 5. REPRESENTATIONS AND COVENANTS OF THE OPTIONEE (a) In connection with the grant of the Option hereunder, the Optionee represents and warrants to the Company that: (i) The Shares subject to the Option under this Agreement shall be acquired for the Optionee's own account and not with a view to, or present intention of, distribution in violation of the Securities Act of 1933 (the "1933 ACT") or any applicable state securities laws, and the Shares will not be disposed of in contravention of the 1933 Act or any applicable state securities laws. (ii) The Optionee is sophisticated in financial matters and is able to evaluate the risks and benefits of the Option and the Shares. (iii) The Optionee acknowledges that he is able to bear the economic risk of the exercise of the Option for an indefinite period of time, because the Shares have not been registered under the 1933 Act and, therefore, cannot be resold unless subsequently registered under the 1933 Act or an exemption from such registration is available. (iv) The Optionee has had an opportunity to ask questions and receive answers concerning the terms and conditions of the grant of the Option and has had full access to such information concerning the Company as he has requested. 6. WITHHOLDING The Company shall have the power and right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes required by law to be withheld with respect to any grant made under or as a result of this Agreement. In the alternative, upon any taxable event hereunder, the Optionee may elect, subject to Company approval, to satisfy the withholding requirement in whole or in part, by having the Company withhold Shares that would otherwise be transferred to the Optionee having a fair market value, on the date the tax is to be determined, equal to the minimum marginal tax that could be imposed on the transaction. All elections shall be made in writing and signed by the Optionee. 7. LEGEND The Optionee shall be bound by the provisions of the following legend (or similar legend) which shall be endorsed upon the certificate(s) evidencing the Shares issued pursuant to the grant of the Option hereunder. "The shares represented by this certificate have been acquired for investment and they may not be sold or otherwise transferred by any person in the absence 3 14 of an effective registration statement for the shares under the Securities Act of 1933 or an opinion of counsel satisfactory to the Company that an exemption from registration is then available." 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Shares of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividends payable in capital stock, or the like, appropriate adjustments to prevent dilution or enlargement of the Shares granted to, or available for, the Optionee shall be made in the manner and kind of Shares granted hereunder. 9. NON-ASSIGNABILITY This Option shall not be transferable by the Optionee and shall be exercisable only by the Optionee, except as this Agreement may otherwise provide. 10. NOTICES Any notices required or permitted by the terms of this Agreement shall be given by registered or certified mail, return receipt requested, addressed as follows: To the Company: Aasche Transportation Services, Inc. 10214 N. Mt. Vernon Road Shannon, Illinois 61078 Attn: Board of Directors To the Optionee: Gary I. Goldberg 7418 Oak Avenue Gary, Indiana 46403 or to such other address or addresses of which notice in the same manner has previously been given. Any such notice shall be deemed to have been given when mailed in accordance with the foregoing provisions. 11. GOVERNING LAW This Agreement shall be construed and enforced in accordance with the laws of the State of Illinois. 4 15 12. BINDING EFFECT This Agreement shall (subject to the provisions of Section 9 hereof) be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto. IN WITNESS WHEREOF, the Company and the Optionee have caused this Agreement to be executed on their behalf, by their duly authorized representatives, all on the day and year first above written. AASCHE TRANSPORTATION SERVICES, INC. By: /s/ Leon M. Monachos ----------------------------------------------- Leon M. Monachos, Chief Financial Officer /s/ Gary I. Goldberg ----------------------------------------------- Gary I. Goldberg 5 EX-99.(C) 18 CONSENT OF INDEPENDENT AUDITORS 1 Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-19475, 333-06569, and 33-87826) and on Form S-3 (No. 333-37529) of Aasche Transportation Services, Inc. and in the related Prospectus of our report dated January 6, 1998, with respect to the financial statements of Jack Gray Transport Municipal Solid Waste Division included in Form 8-K/A of Aasche Transportation Services, Inc. dated March 30, 1998, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Chicago, Illinois January 6, 1998 -----END PRIVACY-ENHANCED MESSAGE-----