AMENDED AND RESTATED NOTE PURCHASE AND PRIVATE SHELF AGREEMENT

Exhibit 10.16

 

[EXECUTION COPY]

 

 

WASTE HOLDINGS, INC.

 

AMENDED AND RESTATED NOTE PURCHASE AND

PRIVATE SHELF AGREEMENT

 

$25,000,000

 

6.96% SERIES A SENIOR NOTES DUE JUNE 30, 2008

 

$50,000,000

 

PRIVATE SHELF FACILITY

 

as of March 31, 2001

 

 

TABLE OF CONTENTS

 

 

 

 

Purchaser Schedule

Information Schedule

 

 

W ASTE H OLDINGS , INC .

3301 Benson Drive

Suite 601

Raleigh, North Carolina 27609

 

As of March 31, 2001

 

The Prudential Insurance Company

of America (“ Prudential ”)

Each Prudential Affiliate (as hereinafter defined)

which becomes bound by certain provisions of this

Agreement as hereinafter provided (together with

Prudential, the “ Purchasers ”)

 

c/o Prudential Capital Group

Two Ravinia Drive

Suite 1400

Atlanta, Georgia 30346

 

Ladies and Gentlemen:

 

The undersigned, Waste Holdings, Inc. (herein called the “ Company ”), hereby agrees with you as follows:

 

1.	PRELIMINARY STATEMENTS.

 

1A. Authorization of Issue of Series A and Series B Notes. The Company’s predecessor, Waste Industries, Inc. (the “ Predecessor ”), authorized (i) the issue of its senior unsecured promissory notes (the “ 1998 Series A Notes ”) in the aggregate principal amount of $25,000,000, originally dated June 30, 1998 and exchanged for amended and restated notes dated March 31, 2000, to mature June 30, 2008, bearing interest on the unpaid balance thereof from the date thereof until the principal thereof shall have become due and payable at the Applicable Rate and on overdue principal, Yield-Maintenance Amount and interest at the rate specified therein, and substantially in the form of Exhibit A-l attached hereto, and (ii) the issue of its senior unsecured promissory notes (the “ 1999 Series B Notes ”) in the aggregate principal amount of $25,000,000, originally dated February 2, 1999 and exchanged for amended and restated notes dated March 31, 2000, to mature February 2, 2009, bearing interest on the unpaid balance thereof from the date thereof until the principal thereof shall have become due and payable at the Applicable Rate and on overdue principal, Yield-Maintenance Amount and interest at the rate

 

specified therein, and substantially in the form of Exhibit A-2 attached hereto The terms “ 1998 Series A Note ” and “ 1998 Series A Notes ”, and “ 1999 Series B Note ” and “ 1999 Series B Notes ”, as used herein shall include, respectively, each 1998 Series A Note and each 1999 Series B Note delivered pursuant to any provision of this Agreement and each 1998 Series A Note and each 1999 Series B Note delivered in substitution or exchange for any such 1998 Series A Note or 1999 Series B Note pursuant to any such provision.

 

1B. Authorization of Issue of Shelf Notes. The Company will authorize the issue of its additional senior unsecured promissory notes (the “ Shelf Notes ”) in the aggregate principal amount of $25,000,000, to be dated the date of issue thereof, to mature, in the case of each Shelf Note so issued, no more than ten years after the date of original issuance thereof, to have an average life, in the case of each Shelf Note so issued, of no more than seven years after the date of original issuance thereof, to bear interest on the unpaid balance thereof from the date thereof at the rate per annum, and to have such other particular terms, as shall be set forth, in the case of each Shelf Note so issued, in the Confirmation of Acceptance with respect to such Shelf Note delivered pursuant to paragraph 2B(5), and to be substantially in the form of Exhibit A-3 attached hereto. The terms “ Shelf Note ” and “ Shelf Notes ” as used herein shall include each Shelf Note delivered pursuant to any provision of this Agreement and each Shelf Note delivered in substitution or exchange for any such Shelf Note pursuant to any such provision. The terms “ Note ” and “ Notes ” as used herein shall include each Exchange Note and each Shelf Note delivered pursuant to any provision of this Agreement and each Note delivered in substitution or exchange for any such Note pursuant to any such provision. Notes which have (i) the same final maturity, (ii) the same principal prepayment dates, (iii) the same principal prepayment amounts (as a percentage of the original principal amount of each Note), (iv) the same interest rate, (v) the same interest payment periods and (vi) the same date of issuance (which, in the case of a Note issued in exchange for another Note, shall be deemed for these purposes the date on which such Note’s ultimate predecessor Note was issued), are herein called a “ Series ” of Notes.

 

1C. Purpose of Agreement. The Predecessor had previously entered into the 1998 Agreement with the Purchasers, pursuant to which the Predecessor has issued the 1998 Notes, and into the 1996 Agreement with the noteholders party thereto (the “ Noteholders ”), pursuant to which the Predecessor has issued the 1996 Notes. The 1998 Series A Notes were originally issued on June 30, 1998, and then were exchanged for new 1998 Series A Notes when the 1998 Agreement was amended and restated on March 31, 2000. The 1999 Series B Notes were originally issued on February 2, 1999, and then were exchanged for new 1999 Series B Notes when the 1998 Agreement was amended and restated on March 31, 2000. The Predecessor and its subsidiaries have now undertaken a corporate reorganization (the “ Reorganization ”) which has resulted, among other things, in the termination of the Predecessor’s existence, in the assumption by the Company of the Predecessor’s obligations under the 1996 Agreement and the 1998 Agreement, and in the Company and its subsidiaries assuming the corporate structure set forth on Schedule 1C. In order to confirm and clarify the relationship between the Company and the Purchasers with respect to the 1998 Series A Notes and the 1999 Series B Notes and between the Company and the Noteholders with respect to the 1996 Notes, the Company and the Purchasers will amend and restate the 1998 Agreement and the Company and the Noteholders will amend and restate the 1996 Agreement. Each of the Guarantors listed on Schedule 10B will

 

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also execute a Guaranty Agreement to secure the performance of the Company’s obligations under this Agreement and a Guaranty to secure the performance of the Company’s obligations under the 1996 Agreement, as amended and restated as of the date hereof.

 

2.	EXCHANGE, PURCHASE AND SALE OF NOTES.

 

2A. Purchase and Sale of 1998 Series A Notes and 1999 Series B Notes. The Company has sold to each of you the 1998 Series A Notes in the original principal amounts set forth on the Purchaser Schedule hereto and in the aggregate principal amount of $25,000,000 and the 1999 Series B Notes in the original principal amounts set forth on the Purchaser Schedule hereto and in the aggregate principal amount of $25,000,000 (together, the “ Issued Notes ”). The Company hereby agrees to issue to you and, subject to the terms and conditions herein set forth, you agree to accept from the Company, in exchange for each 1998 Series A Note, a Note, in substantially the form of Exhibit B-l, in the principal amounts set forth on the Purchaser Schedule hereto, and in exchange for each 1999 Series B Note, a Note, in substantially the form of Exhibit B-2, in the principal amounts set forth on the Purchaser Schedule hereto. Each exchange shall occur at the offices of King & Spalding, 1185 Avenue of the Americas, New York, New York, on the date of closing, which shall be March 31, 2001 or any other date upon which the Company and you may mutually agree (herein called the “ Exchange Closing ” or the “ Exchange Closing Day ”).

 

2B. Purchase and Sale of Shelf Notes.

 

2B(1) Facility. Prudential is willing to consider, in its sole discretion and within limits which may be authorized for purchase by Prudential and Prudential Affiliates from time to time, the purchase of Shelf Notes pursuant to this Agreement. The willingness of Prudential to consider such purchase of Shelf Notes is herein called the “ Facility ”. At any time, the aggregate principal amount of Shelf Notes stated in paragraph 1B, minus the aggregate principal amount of Shelf Notes purchased and sold pursuant to this Agreement prior to such time, minus the aggregate principal amount of Accepted Notes (as hereinafter defined) which have not yet been purchased and sold hereunder prior to such time, plus the aggregate principal amount of Shelf Notes purchased and sold pursuant to this Agreement and thereafter retired prior to such time is herein called the “ Available Facility Amount ” at such time. NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.

 

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2B(2) Issuance Period. Shelf Notes may be issued and sold pursuant to this Agreement until the earlier of:

 

(i) June 30, 2001 (or if such anniversary is not a Business Day, the Business Day next preceding such date),

 

(ii) the thirtieth day after Prudential shall have given to the Company, or the Company shall have given to Prudential, a notice stating that it elects to terminate the issuance and sale of Shelf Notes pursuant to this Agreement (or if such thirtieth day is not a Business Day, the Business Day next preceding such thirtieth day),

 

(iii) the last Closing Day after which there is no Available Facility Amount,

 

(iv) the termination of the Facility under paragraph 7A, and

 

(v) the acceleration of any Note under paragraph 7A of this Agreement.

 

The period during which Shelf Notes may be issued and sold pursuant to this Agreement is herein called the “ Issuance Period ”.

 

2B(3) Request for Purchase. The Company may from time to time during the Issuance Period make requests for purchases of Shelf Notes (each such request being herein called a “ Request for Purchase ”). Each Request for Purchase shall be made to Prudential by telecopier or overnight delivery service, and shall:

 

(i) specify the aggregate principal amount of Shelf Notes covered thereby, which shall not be less than $5,000,000 and not be greater than the Available Facility Amount at the time such Request for Purchase is made,

 

(ii) specify the principal amounts, final maturities (which shall be no more than ten years from the date of issuance), principal prepayment dates, if any, and amounts and interest payment periods (which shall be quarterly in arrears) of the Shelf Notes covered thereby,

 

(iii) specify the use of proceeds of such Shelf Notes (which shall not be used to finance a Hostile Tender Offer),

 

(iv) specify the proposed day for the closing of the purchase and sale of such Shelf Notes, which shall be a Business Day during the Issuance Period not less than 10 days and not more than 30 days after the making of such Request for Purchase,

 

(v) specify the number of the account and the name and address of the depository institution to which the purchase prices of such Shelf Notes are to be transferred on the Closing Day for such purchase and sale,

 

(vi) certify that the representations and warranties contained in paragraph 8 are true on and as of the date of such Request for Purchase and that there exists on the date of such Request for Purchase no Event of Default or Default,

 

(vii) specify the Designated Spread for such Shelf Notes, and

 

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(viii) be substantially in the form of Exhibit C attached hereto.

 

Each Request for Purchase shall be in writing and shall be deemed made when received by Prudential.

 

2B(4) Rate Quotes. Not later than five Business Days after the Company shall have given Prudential a Request for Purchase pursuant to paragraph 2B(3), Prudential may, but shall be under no obligation to, provide to the Company by telephone or telecopier, in each case between 9:30 A.M. and 2:00 P.M. New York City local time (or such later time as Prudential may elect), interest rate quotes for the several principal amounts, maturities, principal prepayment schedules, and interest payment periods of Shelf Notes specified in such Request for Purchase. Each quote shall represent the interest rate per annum payable on the outstanding principal balance of such Shelf Notes at which Prudential or a Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of the principal amount thereof.

 

2B(5) Acceptance. Within 30 minutes after Prudential shall have provided any interest rate quotes pursuant to paragraph 2B(4) or such shorter period as Prudential may specify to the Company (such period herein called the “ Acceptance Window ”), the Company may, subject to paragraph 2B(6), elect to accept such interest rate quotes as to not less than $5,000,000 aggregate principal amount of the Shelf Notes specified in the related Request for Purchase. Such election shall be made by an Authorized Officer of the Company notifying Prudential by telephone or telecopier within the Acceptance Window (but not earlier than 9:30 A.M. or later than 2:00 P.M., New York City local time) that the Company elects to accept such interest rate quotes, specifying the Shelf Notes (each such Shelf Note being herein called an “ Accepted Note ”) as to which such acceptance (herein called a “ Acceptance ”) relates. The day the Company notifies Prudential of an Acceptance with respect to any Accepted Notes is herein called the “ Acceptance Day ” for such Accepted Notes. Any interest rate quotes as to which Prudential does not receive an Acceptance within the Acceptance Window shall expire, and no purchase or sale of Shelf Notes hereunder shall be made based on such expired interest rate quotes. Subject to paragraph 2B(6) and the other terms and conditions hereof, the Company agrees to sell to Prudential or a Prudential Affiliate, and Prudential agrees to purchase, or to cause the purchase by a Prudential Affiliate of, the Accepted Notes at 100% of the principal amount of such Notes. As soon as practicable following the Acceptance Day, the Company, Prudential and each Prudential Affiliate which is to purchase any such Accepted Notes will execute a confirmation of such Acceptance substantially in the form of Exhibit D attached hereto (herein called a “ Confirmation of Acceptance ”). If the Company should fail to execute and return to Prudential within three Business Days following receipt thereof a Confirmation of Acceptance with respect to any Accepted Notes, Prudential may at its election at any time prior to its receipt thereof cancel the closing with respect to such Accepted Notes by so notifying the Company in writing.

 

2B(6) Market Disruption. Notwithstanding the provisions of paragraph 2B(5), if Prudential shall have provided interest rate quotes pursuant to paragraph 2B(4) and thereafter prior to the time an Acceptance with respect to such quotes shall have been notified to Prudential in accordance with paragraph 2B(5) the domestic market for U.S. Treasury securities or other financial instruments shall have closed or there shall have occurred a general suspension,

 

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material limitation, or significant disruption of trading in securities generally on the New York Stock Exchange or in the domestic market for U.S. Treasury securities or other financial instruments, then such interest rate quotes shall expire, and no purchase or sale of Shelf Notes hereunder shall be made based on such expired interest rate quotes. If the Company thereafter notifies Prudential of the Acceptance of any such interest rate quotes, such Acceptance shall be ineffective for all purposes of this Agreement, and Prudential shall promptly notify the Company that the provisions of this paragraph 2B(6) are applicable with respect to such Acceptance.

 

2B(7) Facility Closings. Not later than 11:30 A.M. (New York City local time) on the Closing Day for any Accepted Notes, the Company will deliver to each Purchaser listed in the Confirmation of Acceptance relating thereto at the offices of the Prudential Capital Group, Gateway Center One, 11th Floor, Newark, New Jersey the Accepted Notes to be purchased by such Purchaser in the form of one or more Notes in authorized denominations as such Purchaser may request for each Series of Accepted Notes to be purchased on the Closing Day, dated the Closing Day and registered in such Purchaser’s name (or in the name of its nominee), against payment of the purchase price thereof by transfer of immediately available funds for credit to the Company’s account specified in the Request for Purchase of such Notes. If the Company fails to tender to any Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled Closing Day for such Accepted Notes as provided above in this paragraph 2B(7), or any of the conditions specified in paragraph 3 shall not have been fulfilled by the time required on such scheduled Closing Day, the Company shall, prior to 1:00 P.M., New York City local time, on such scheduled Closing Day notify Prudential (which notification shall be deemed received by each Purchaser) in writing whether (i) such closing is to be rescheduled (such rescheduled date to be a Business Day during the Issuance Period not less than one Business Day and not more than 10 Business Days after such scheduled Closing Day (the “ Rescheduled Closing Day ”) and certify to Prudential (which certification shall be for the benefit of each Purchaser) that the Company reasonably believes that it will be able to comply with the conditions set forth in paragraph 3 on such Rescheduled Closing Day and that the Company will pay the Delayed Delivery Fee, if applicable, in accordance with paragraph 2B(8)(iii) or (ii) such closing is to be canceled. In the event that the Company shall fail to give such notice referred to in the preceding sentence, Prudential (on behalf of each Purchaser) may at its election, at any time after 1:00 P.M., New York City local time, on such scheduled Closing Day, notify the Company in writing that such closing is to be canceled. Notwithstanding anything to the contrary appearing in this Agreement, the Company may elect to reschedule a closing with respect to any given Accepted Notes on not more than one occasion, unless Prudential shall have otherwise consented in writing.

 

2B(8) Fees.

 

2B(8)(i) Issuance Fee. The Company will pay to Prudential in immediately available funds a fee (herein called the “ Issuance Fee ”) on each Closing Day (other than the Exchange Closing Day) in an amount equal to 0.15% of the aggregate principal amount of Notes sold on such Closing Day.

 

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2B(8)(ii) Delayed Delivery Fee . If the closing of the purchase and sale of any Accepted Note is delayed for any reason beyond the original Closing Day for such Accepted Note, the Company will pay to Prudential (a) on the Cancellation Date or actual closing day of such purchase and sale and (b) if earlier, the next Business Day following 90 days after the Acceptance Day for such Accepted Note and on each Business Day following 90 days after the prior payment hereunder, a fee (herein called the “ Delayed Delivery Fee ”) calculated as follows:

 

(BEY - MMY) X DTS/360 X PA

 

where “ BEY ” means Bond Equivalent Yield, i.e., the bond equivalent yield per annum of such Accepted Note, “ MMY ” means Money Market Yield, i. e., the yield per annum on a commercial paper investment of the highest quality selected by Prudential on the date Prudential receives notice of the delay in the closing for such Accepted Note having a maturity date or dates the same as, or closest to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative investment being selected by Prudential each time such closing is delayed); “ DTS ” means Days to Settlement, i.e., the number of actual days elapsed from and including the original Closing Day with respect to such Accepted Note (in the case of the first such payment with respect to such Accepted Note) or from and including the date of the next preceding payment (in the case of any subsequent delayed delivery fee payment with respect to such Accepted Note) to but excluding the date of such payment; and “ PA ” means Principal Amount, i.e., the principal amount of the Accepted Note for which such calculation is being made. In no case shall the Delayed Delivery Fee be less than zero. If the foregoing calculation yields a negative number or zero, no Delayed Delivery Fee shall be due. Nothing contained herein shall obligate any Purchaser to purchase any Accepted Note on any day other than the Closing Day for such Accepted Note, as the same may be rescheduled from time to time in compliance with paragraph 2B(7).

 

2B(8)(iii) Cancellation Fee . If the Company at any time notifies Prudential in writing that the Company is canceling the closing of the purchase and sale of any Accepted Note, or if Prudential notifies the Company in writing under the circumstances set forth in the last sentence of paragraph 2B(5) or the penultimate sentence of paragraph 2B(7) that the closing of the purchase and sale of such Accepted Note is to be canceled, or if the closing of the purchase and sale of such Accepted Note is not consummated on or prior to the last day of the Issuance Period (the date of any such notification, or the last day of the Issuance Period, as the case may be, being herein called the “ Cancellation Date ”), the Company will pay the Purchasers in immediately available funds an amount (the “ Cancellation Fee ”) calculated as follows:

 

PI X PA

 

where “ PI ” means Price Increase, i.e., the quotient (expressed in decimals) obtained by dividing (a) the excess of the ask price (as determined by Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid price (as determined by Prudential) of the Hedge Treasury Notes(s) having a maturity date the same as, or closest to, such Accepted Note, on the Acceptance Day (if the difference is a negative number or zero, no Cancellation Fee shall be due) by (b) such bid price; and “ PA ” has the meaning ascribed to it in paragraph 2B(8)(iii). The

 

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foregoing bid and ask prices shall be as reported by Bridge Telerate (or, if such data for any reason ceases to be available through Bridge Telerate, any publicly available source of similar market data). Each price shall be based on a U.S. Treasury security having a par value of $100.00 and shall be rounded to the second decimal place. In no case shall the Cancellation Fee be less than zero.

 

3.	CONDITIONS OF CLOSING.

 

The Purchasers’ obligation to enter into, execute and deliver this Agreement, to exchange the Issued Notes as described in paragraph 2A and to purchase and pay for any Shelf Notes as described in paragraph 2B is subject to the satisfaction, on or before the applicable Closing Day for such Notes of the following conditions, as determined in the sole judgment of each Purchaser:

 

3A. Certain Documents. The Purchasers shall have received the following, each dated the date of the Exchange Closing Day or the applicable Closing Day, as the case may be:

 

(i) The Shelf Note(s) to be purchased by such Purchaser, or the Note(s) issued to you in exchange for your Issued Note(s) (the “ Exchange Notes ”).

 

(ii) In the case of the Exchange Notes, duly executed copies of the Security Agreement and each other Security Document, or amendment thereto, required by the Collateral Agent with respect to the Reorganization.

 

(iii) Certified copies of the resolutions of the Board of Directors of the Company authorizing the execution and delivery of this Agreement and the issuance of Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes.

 

(iv) A certificate of the Secretary or an Assistant Secretary and one other officer of the Company certifying the names and true signatures of the officers of the Company authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.

 

(v) Certified copies of the Articles of Incorporation and By-laws of the Company.

 

(vi) A favorable opinion of Wyrick, Robbins, Yates & Ponton, LLP, special counsel to the Company (or such other counsel designated by the Company and acceptable to the Purchaser(s)) satisfactory to such Purchaser and substantially in the form of Exhibit E-l (in the case of the Exchange Notes) or E-2 (in the case of any Shelf Notes) attached hereto and as to such other matters as such Purchaser may reasonably request. The Company hereby directs such counsel to deliver such opinion, agrees that the issuance and sale of any Notes will constitute a reconfirmation of such direction, and understands and agrees that each Purchaser receiving such an opinion will and is hereby authorized to rely on such opinion.

 

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(vii) A good standing certificate for the Company from the Secretary of State of North Carolina dated of a recent date and good standing or other certificates of qualification to do business as a foreign corporation for the Company in the States of South Carolina, Georgia, Tennessee and Virginia and such other evidence of the status of the Company as such Purchaser may reasonably request.

 

(viii) In the case of the Exchange Notes, all fees and disbursements of King & Spalding, counsel to the Purchasers, shall have been paid in full.

 

(ix) Additional documents or certificates with respect to legal matters or corporate or other proceedings related to the transactions contemplated hereby as may be reasonably requested by any Purchaser.

 

3B. Representations and Warranties; No Default. The representations and warranties contained in paragraph 8 shall be true on and as of such Closing Day, except to the extent of changes caused by the transactions herein contemplated and for any Closing Day after the Exchange Closing Day changes since the date of this Agreement which are disclosed in writing to Prudential and to which Prudential shall have consented in writing; there shall exist on such Closing Day no Event of Default or Default; and the Company shall have delivered to such Purchaser an Officer’s Certificate, dated such Closing Day, to both such effects.

 

3C. Purchase Permitted by Applicable Laws. The exchange of Issued Notes for Exchange Notes by each Purchaser, and the purchase of and payment for the Shelf Notes to be purchased by each Purchaser, on the terms and conditions herein provided (including the use of the proceeds of such Notes received or to be received by the Company) shall not violate any applicable law or governmental regulation (including, without limitation, Section 5 of the Securities Act or Regulation U or X of the Board of Governors of the Federal Reserve System) and shall not subject such Purchaser to any tax (other than any income taxes arising from such Purchaser’s ownership of the Notes), penalty, liability or other onerous condition under or pursuant to any applicable law or governmental regulation, and such Purchaser shall have received such certificates or other evidence as it may request to establish compliance with this condition.

 

3D. Payment of Fees. The Company shall have paid to the Purchasers any fees due them pursuant to or in connection with this Agreement, including any Issuance Fee due pursuant to paragraph 2B(8)(ii) and any Delayed Delivery Fee due pursuant to paragraph 2B(8)(iii).

 

3E. No Material Adverse Change. Prudential shall have received a certificate from the chief financial officer of the Company, dated the applicable Closing Day, saying that no material adverse change in the financial condition, business, operations or prospects of the Company or its subsidiaries, taken as a whole, has occurred since December 31, 1998.

 

3F. Environmental Compliance. With respect to any Closing Day other- than the Exchange Closing Day, the Purchasers shall have received such evidence (including without limitation certificates and environmental audits or reports by an independent environmental consultant) satisfactory to the Purchasers demonstrating the accuracy of the representations

 

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under paragraph 8L (without giving effect to any qualification with respect to the Company’s knowledge) and compliance with paragraph 5G.

 

4.	PREPAYMENTS.

 

The Notes shall be subject to required prepayment as and to the extent provided in paragraphs 4A, 4B and 4C, respectively. The Notes shall also be subject to prepayment under the circumstances set forth in paragraph 4D. Any prepayment made by the Company pursuant to any other provision of this paragraph 4 shall not reduce or otherwise affect its obligation to make any required prepayment as specified in paragraph 4A, 4B or 4C.

 

4A. Required Prepayments of 1998 Series A Notes. Until the 1998 Series A Notes shall be paid in full, the Company shall apply to the prepayment of the 1998 Series A Notes, without Yield-Maintenance Amount, the sum of $3,571,428.57 commencing on June 30, 2002 and each June 30, thereafter to and including June 30, 2007, and such principal amounts of the 1998 Series A Notes, together with interest thereon to the payment dates, shall become due on such payment dates. The remaining unpaid principal amount of the 1998 Series A Notes, together with interest accrued thereon, shall become due on June 30, 2008, the maturity date of the 1998 Series A Notes.

 

4B. Required Prepayments of 1999 Series B Notes. Until the 1999 Series B Notes shall be paid in full, the Company shall apply to the prepayment of the 1999 Series B Notes, without Yield-Maintenance Amount, the sum of $2,314,285.71 on the second day of each February commencing on February 2, 2003.

 

4C. Required Prepayments of Shelf Notes. Each Series of Shelf Notes shall be subject to required prepayments, if any, set forth in the Notes of such Series.

 

4D. Optional Prepayment With Yield-Maintenance Amount. The Notes of each Series shall be subject to prepayment, in whole at any time or from time to time in part (in integral multiples of $100,000 and in a minimum amount of $1,000,000), at the option of the Company, at 100% of the principal amount so prepaid plus interest thereon to the prepayment date and the Yield-Maintenance Amount, if any, with respect to each such Note. Any partial prepayment of a Series of the Notes pursuant to this paragraph 4D shall be applied in satisfaction of required payments of principal in inverse order of their scheduled due dates.

 

4E. Notice of Optional Prepayment. The Company shall give the holder of each Note of a Series to be prepaid pursuant to paragraph 4D irrevocable written notice of such prepayment not less than 10 Business Days prior to the prepayment date, specifying such prepayment date, the aggregate principal amount of the Notes of such Series to be prepaid on such date, the principal amount of the Notes of such Series held by such holder to be prepaid on that date and that such prepayment is to be made pursuant to paragraph 4D. Notice of prepayment having been given as aforesaid, the principal amount of the Notes specified in such notice, together with interest thereon to the prepayment date and together with the Yield-Maintenance Amount, if any, herein provided, shall become due and payable on such prepayment date. The Company shall,

 

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on or before the day on which it gives written notice of any prepayment pursuant to paragraph 4D, give telephonic notice of the principal amount of the Notes to be prepaid and the prepayment date to each Significant Holder which shall have designated a recipient for such notices in the Purchaser Schedule attached hereto or the applicable Confirmation of Acceptance or by notice in writing to the Company.

 

4F. Application of Prepayments. In the case of each prepayment of less than the entire unpaid principal amount of all outstanding Notes of any Series pursuant to paragraphs 4A, 4B, 4C, or 4D, the amount to be prepaid shall be applied pro rata to all outstanding Notes of such Series (including, for the purpose of this paragraph 4F only, all Notes prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph 4A, 4B, 4C, or 4D) according to the respective unpaid principal amounts thereof.

 

4G. Retirement of Notes. The Company shall not, and shall not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in part prior to their stated final maturity (other than by prepayment pursuant to paragraphs 4A, 4B, 4C, or 4D or upon acceleration of such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes of any Series held by any holder unless the Company or such Subsidiary or Affiliate shall have offered to prepay or otherwise retire or purchase or otherwise acquire, as the case may be, the same proportion of the aggregate principal amount of Notes of such Series held by each other holder of Notes of such Series at the time outstanding upon the same terms and conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by the Company or any of its Subsidiaries or Affiliates shall not be deemed to be outstanding for any purpose under this Agreement, except as provided in paragraph 4F.

 

5.	AFFIRMATIVE COVENANTS.

 

5A. Reporting Requirements.

 

5A(1) General Information. The Company covenants that it will deliver to each Significant Holder in triplicate:

 

(i) as soon as practicable and in any event within 45 days after the end of each quarterly period (other than the fourth quarterly period) in each fiscal year,

 

(1) Consolidated statements of income, stockholders’ equity and cash flows for the period from the beginning of the current fiscal year to the end of such quarterly period, and

 

(2) a Consolidated balance sheet as at the end of such quarterly period,

 

setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and reasonably satisfactory in form to the Required Holder(s) and certified by an authorized financial officer of the Company as fairly presenting, in all material respects, the financial condition of the Company and its Consolidated Subsidiaries as

 

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of the end of such period and the results of their operations for the period then ended in accordance with generally accepted accounting principles, subject to changes resulting from normal year-end adjustments and the inclusion of abbreviated footnotes; provided, however, that delivery pursuant to clause (iii) below of copies of the Quarterly Report on Form 10-Q of the Company for such quarterly period filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this clause (i);

 

(ii) as soon as practicable and in any event within 90 days after the end of each fiscal year,

 

(1) Consolidated statements of income, stockholders’ equity and cash flows for such year, and

 

(2) a Consolidated balance sheet as at the end of such year,

 

setting forth in each case in comparative form corresponding Consolidated figures from the preceding annual audit, all in reasonable detail and reasonably satisfactory in scope to the Required Holder(s) and reported on by independent public accountants of recognized standing selected by the Company whose report shall be without limitation as to the scope of the audit and reasonably satisfactory in substance to the Required Holder(s); provided, however, that delivery pursuant to clause (iii) below of copies of the Annual Report on Form 10-K of the Company for such year filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this clause (ii);

 

(iii) if the Company shall be publicly held, promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders and copies of all registration statements (without exhibits) and all reports (other than any registration statement filed on Form S-8) which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission);

 

(iv) promptly upon receipt thereof, a copy of each other report (including, without limitation, management letters) submitted to the Company or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any Subsidiary;

 

(v) promptly upon receipt thereof, a copy of each report, survey, study, evaluation, assessment or other document prepared by any consultant, engineer, Environmental Authority or other Person relating to compliance by the Company or any Subsidiary with any Environmental Requirements, if the cost of remediation, repair or compliance may be reasonably expected to exceed $250,000 in any one case or in the aggregate;

 

(vi) with reasonable promptness, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary

 

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in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this clause (vi), the term “qualified institutional buyer” shall have the meaning specified in Rule 144A under the Securities Act; and

 

(vii) with reasonable promptness, such other data relating to the business, operations, properties or financial condition of the Company or any of its Subsidiaries as a Significant Holder may reasonably request;

 

5A(2) Officer’s Certificates. (a) Together with each delivery of financial statements required by clauses 5A(l)(i) and (ii) above, the Company will deliver to each Significant Holder an Officer’s Certificate demonstrating (with computations in reasonable detail) compliance with the provisions of paragraphs 6A, 6B, 6C, 6E(1) and 6E(2) and stating that there exists no Event of Default or Default, or, if any Event of Default or Default exists, specifying the nature and period of existence thereof and what action the Company has taken, is taking or proposes to take with respect thereto;

 

(b) Should the Company elect to include the EBITA or EBITDA of companies acquired by the Company in the calculation of the Company’s consolidated EBITA or EBITDA, respectively, as described in the definitions of “Consolidated Earnings Before Interest, Taxes and Amortization or EBITA” and “Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization or EBITDA”, then simultaneously with the delivery of the financial statements referred to in (A) and (B) of such definitions, the chief executive officer or the chief financial officer of the Company shall deliver to the Purchasers an Officer’s Certificate and appropriate documentation certifying the historical operating results, adjustments and balance sheet of each such acquired company;

 

5A(3) Annual Accountant’s Letter. Together with each delivery of financial statements required by clause 5A(l)(ii) above, the Company will deliver to each Significant Holder a certificate of the independent public accountants giving the report on such financial statements stating that, in making the audit necessary for their report, they have obtained no knowledge of any Event of Default or Default, or, if they have obtained knowledge of any Event of Default or Default, specifying the nature and period of existence thereof. The accountants, however, shall not be liable to anyone as a result of this provision by reason of their failure to obtain knowledge of any Event of Default or Default which would not be disclosed in the course of an audit conducted in accordance with generally accepted auditing standards;

 

5A(4) Special Information. The Company also covenants that immediately after any Responsible Officer obtains actual knowledge of:

 

(a) an Event of Default or Default;

 

(b) a material adverse change in the financial condition, business or operations of the Company and its Subsidiaries, taken as a whole;

 

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(c) legal proceedings filed against the Company and/or any of its Subsidiaries, which reasonably could be expected to have a material adverse effect on the financial condition, business or operations of the Company and its Subsidiaries, taken as a whole, or which in any manner draws into question the validity of or reasonably could be expected to impair the ability of the Company to perform its obligations under this Agreement or the Notes;

 

(d) a default under any agreement or note evidencing Indebtedness for which the Company or any Subsidiary is liable, which individually or in the aggregate with all other agreements and notes in default for which the Company or any of its Subsidiaries is liable, exceeds $250,000;

 

(e) the occurrence of any other event that reasonably could be expected to impair the ability of the Company to meet its obligations hereunder;

 

(f) any (i) Environmental Liabilities, (ii) pending, threatened or anticipated Environmental Proceedings, (iii) Environmental Notices, (iv) Environmental Judgments and Orders, or (v) Environmental Releases at, on, in, under or in any way affecting the Properties which reasonably could be expected to have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries, taken as a whole; or

 

(g) with respect to any Plan that is subject to the funding requirements of Section 302 of ERISA or Section 412 of the Code, the Company (i) has given or is required to give notice to the Pension Benefit Guaranty Corporation that a material reportable event has occurred with respect to such Plan, (ii) has delivered notice to the Pension Benefit Guaranty Corporation of any intent to withdraw from or terminate any such Plan, or (iii) has failed to make timely a contribution to any such Plan;

 

the Company will deliver to each Significant Holder an Officer’s Certificate specifying the nature and period of existence thereof and what action the Company or the Subsidiary has taken, is taking or proposes to take with respect thereto.

 

5B. Inspection of Property. The Company covenants that, at such reasonable times and as often as a Significant Holder may reasonably request, it will permit any Person designated by a Significant Holder in writing, at such Significant Holder’s expense unless a Default has occurred and is continuing in which case at the Company’s expense, to:

 

(i) visit and inspect any of the properties of the Company and any Subsidiary;

 

(ii) examine the corporate or company books and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom; and

 

(iii) discuss the affairs, finances and accounts of any of such corporations with the principal officers of the Company or any of its Subsidiaries and their independent public accountants.

 

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5C. Covenant to Secure Notes Equally. The Company covenants that if it or any of its Subsidiaries shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by paragraph 6C (unless prior written consent shall have been obtained under paragraph 11C), it will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such other Indebtedness shall be so secured.

 

5D. Guaranteed Obligations. The Company covenants that if any Person (other than the Company) provides a Guarantee or provides collateral in any manner for any Indebtedness of the Company or any Subsidiary, it will simultaneously cause such Person to provide a Guarantee or provide collateral for the Notes equally and ratably with all Indebtedness Guaranteed or secured by such Person for so long as such Indebtedness is so Guaranteed and pursuant to documentation in form and substance reasonably satisfactory to such holder.

 

5E. New Guarantors. The Company covenants that at the time that any newly-created or acquired Subsidiary becomes a Borrower (as defined in the Bank Agreement) in accordance with Section 6.16 of the Bank Agreement, the Company will cause such Subsidiary to become simultaneously a Guarantor by executing and delivering to the Purchasers a Guaranty Agreement. The delivery of such Guaranty Agreement shall be accompanied by such other documents as the Required Holders may reasonably request including charter, bylaws, appropriate resolutions of the Board of Directors of any such Subsidiary providing such a Guaranty Agreement and legal opinions with respect thereto. Upon the delivery thereof, such Guaranty Agreement and such other documents shall constitute Related Documents hereunder.

 

5F. Maintenance of Insurance. The Company covenants that it and each of its Subsidiaries will maintain, with responsible insurers, insurance with respect to its properties and business against such casualties and contingencies (including, but not limited to, public liability, larceny, embezzlement or other criminal misappropriation) and in such amounts as is customary in the case of similarly situated corporations engaged in the same or similar businesses; provided, however, that the Company and each of its Subsidiaries may elect to continue to self-insure (i) their waste containers; (ii) certain immaterial assets such as radio towers consistent with their business practices in effect on the date hereof; and (iii) certain risks under their medical and short-term disability plans.

 

5G. Maintenance of Corporate Existence/Compliance with Law/Preservation of Property. The Company covenants that, except as permitted under paragraphs 6E(1) and 6E(2), it and each Subsidiary will do or cause to be done all things necessary to, at all times:

 

(i) preserve, renew and keep in full force and effect the corporate or company existence of the Company and its Subsidiaries (other than those Subsidiaries not material to the financial condition, business or operations of the Company and its Subsidiaries taken as a whole);

 

(ii) comply with all laws and regulations (including, without limitation, laws and regulations relating to equal employment opportunity and employee safety)

 

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applicable to it and any Subsidiary except where the failure to comply could not reasonably be expected to have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries, taken as a whole;

 

(iii) maintain, preserve and protect all material licenses, certificates, permits, franchises and intellectual property of the Company and its Subsidiaries; and

 

(iv) preserve all the remainder of its property used or useful in the conduct of its business and keep the same in good repair, working order and condition excluding normal wear and tear, except where the failure to preserve such property could not be reasonably expected to have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries, taken as a whole.

 

5H. Compliance with Environmental Laws . The Company covenants that it and each of its Subsidiaries will, comply in a timely fashion with, or operate pursuant to valid waivers of the provisions of, all applicable Environmental Requirements, including, without limitation, the emission of wastewater effluent, solid and hazardous waste and air emissions together with any other applicable Environmental Requirements for conducting, on a timely basis, periodic tests and monitoring for contamination of ground water, surface water, air and land and for biological toxicity of the aforesaid, and all applicable regulations of the Environmental Protection Agency or other relevant federal, state or local governmental authority, except where the failure to comply could not reasonably be expected to have a material adverse effect on the business, operations or financial condition of the Company and its Subsidiaries, taken as a whole. The Company agrees to indemnify and hold you, your officers, agents and employees (each an “ Indemnified Person ”) harmless from any loss, liability, claim or expense that you may incur or suffer as a result of a breach by the Company or any of its Subsidiaries, as the case may be, of this covenant other than as a result of the gross negligence or wilful misconduct of such Indemnified Person. The Company shall not be deemed to have breached or violated this paragraph 5H if the Company or any of its Subsidiaries is challenging in good faith by appropriate proceedings diligently pursued the application or enforcement of such Environmental Requirements for which adequate reserves have been established in accordance with generally accepted accounting principles.

 

5I. No Integration . The Company covenants that it has taken and will take all necessary action so that the issuance of the Notes does not and will not require registration under the Securities Act. The Company covenants that no future offer and sale of debt securities of the Company of any class will be made if there is a reasonable possibility that such offer and sale would, under the doctrine of “integration”, subject the issuance of the Notes to you to the registration requirements of the Securities Act.

 

5J. Financial Records . The Company covenants that it and each of its Subsidiaries will keep proper books of record and account in which full and correct entries (in all material respects and subject to normal year end adjustments and, as to interim statements, the absence of footnotes) will be made of the business and affairs of the Company or such Subsidiary under generally accepted accounting principles consistently applied (except for changes disclosed in the

 

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financial statements furnished to you pursuant to paragraph 5A and concurred in by the independent public accountants referred to in paragraph 5A).

 

6.	NEGATIVE COVENANTS .

 

Unless the Required Holders otherwise agree in writing, the Company shall not, and shall not permit any Subsidiary, to take any of the following actions or permit the occurrence or existence of any of the following events or conditions:

 

6A. Financial Limitations . The Company covenants that it will not permit at any time:

 

(a) Funded Debt to EBITDA . The ratio of (x) Funded Debt as at the end of any fiscal quarter to (y) EBITDA for the period of four (4) consecutive fiscal quarters ending on such date to be greater than the ratio set forth opposite such fiscal quarters:

 

 

(b) Senior Funded Debt to EBITDA . The ratio of (x) Senior Funded Debt as at the end of any fiscal quarter to (y) EBITDA for the period of four (4) consecutive fiscal quarters to be greater than the ratio set forth opposite such fiscal quarters:

 

 

(c) Consolidated Net Worth . Commencing with the fiscal quarter ended September 30, 1999, Consolidated Net Worth at the end of any fiscal quarter to be less than the sum of $62,000,000 plus the sum of (a) 50% of positive Consolidated Net Income for each fiscal quarter, beginning with the fiscal quarter ended December 31, 1999, and (b) 100% of the net proceeds of any sale by the Company or any of its Subsidiaries of (A) equity securities issued by the Company or any of its Subsidiaries or (B) warrants or subscription rights for equity securities issued by the Company or any of its Subsidiaries occurring after the Effective Date.

 

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(d) Interest Coverage . The ratio of (x) actual reported EBITA for any fiscal quarter to (y) Consolidated Total Interest Expense for such fiscal quarter to be less than the ratio set forth in the following table opposite such fiscal quarter:

 

 

(e) Profitable Operations . Consolidated Net Income to be less than $ 1.00 for any fiscal quarter.

 

(f) Capital Expenditures . Capital Expenditures for any fiscal year shall not exceed (i) $30,000,000 for the fiscal year 2001, and (ii) thereafter, 2.0 times the sum of (a) actual depreciation expenses plus (b) amortization expenses pertaining to landfills for such year.

 

6B. Restrictions on Indebtedness . Neither the Company nor any of its Subsidiaries shall become or be a guarantor or surety of, or otherwise create, incur, assume, or be or remain liable, contingently or otherwise, with respect to any Indebtedness, or become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services or otherwise) with respect to any undertaking or Indebtedness of any other Person, or incur any Indebtedness other than:

 

(a) Indebtedness to the Purchasers hereunder or Indebtedness arising under the 1998 Note Agreement;

 

(b) incurrence by the Company or any of its Subsidiaries of guaranty, suretyship or indemnification obligations in connection with such Person’s performance of services for its respective customers in the ordinary course of its business;

 

(c) incurrence by the Company or any of its Subsidiaries (other than a Designated LLC) of Indebtedness to the Company or to another of its Subsidiaries (other than a Designated LLC);

 

(d) other Indebtedness existing on the date hereof and listed and described on Schedule 6B hereto;

 

(e) (i) purchase money Indebtedness incurred in connection with the acquisition after the Effective Date of any real or personal property or under equipment leases or equipment chattel, (ii) existing Indebtedness of any Subsidiary acquired after the Effective Date (the “ Acquired Subsidiary ”) originally incurred by the Acquired Subsidiary in connection with the lease or acquisition of property or fixed assets used in the business of the Acquired Subsidiary; or with respect to industrial finance bonds issued to finance the purchase of such property or assets; (iii) Indebtedness with respect to Capitalized Leases; (iv) other unsecured Indebtedness; and (v) Indebtedness with respect to Subordinated Debt; provided that in the event that after the Effective Date any

 

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Subsidiary of the Company guaranties any Subordinated Debt, the terms of such guaranty shall provide for the release of such guaranty upon the sale of stock or all or substantially all of the assets of such Subsidiary (even if such sale was made in a foreclosure); provided that the aggregate amount of such Indebtedness under this subsection (e) shall not exceed .5x EBITDA for the period of four (4) consecutive fiscal quarters most recently ended;

 

(f) Indebtedness with respect to landfill closure bonds of the Company and its Subsidiaries in an aggregate amount not to exceed $5,000,000;

 

(g) Bank Debt in principal amount not to exceed $300,000,000;

 

(h) Indebtedness to the Designated LLCs evidenced by Designated Intercompany Debentures in an aggregate amount not to exceed $100,000,000; and

 

(i) incurrence by a Designated LLC of Indebtedness to the Company or any of it Subsidiaries in an aggregate amount not to exceed $100,000,000, whether in the form of intercompany payables, advances, notes or debentures, each of which, regardless of form, shall be pledged to the Collateral Agent, the proceeds of which are loaned or contributed as capital to a direct or indirect Subsidiary of such Designated LLC, which Subsidiary is a Guarantor;

 

(j) Guaranty obligations of the Company with respect to undertakings by Sampson County Disposal, Inc. (or Sampson County Disposal, LLC as successor to Sampson County Disposal, Inc.) under (i) the Remarketing and Interest Services Agreement by and between Sampson County Disposal, Inc., the Company and Wachovia Securities, Inc. and (ii) the Bond Purchase Agreement by and among Wachovia Securities, Inc., The Sampson County Industrial Facilities and Pollution Control Financing Authority, Sampson County Disposal, Inc. and the Company;

 

provided that if the creation, incurrence, assumption or existence of any Indebtedness would constitute a default or an event of default under the Bank Debt, then the creation, incurrence, assumption or existence of such Indebtedness shall not be permitted hereunder.

 

6C. Restrictions on Liens. Neither the Company nor any of its Subsidiaries shall create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any property or assets of any character, whether now owned or hereafter acquired, or upon the income or profits therefrom; or transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; or acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; or suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it which if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or sell, assign, pledge or otherwise transfer any accounts,

 

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contract rights, general intangibles or chattel paper, with or without recourse, except as follows (the “ Permitted Liens ”):

 

(a) liens to secure taxes, assessments and other government charges or claims for labor, material or supplies in respect of obligations not overdue;

 

(b) deposits or pledges made in connection with, or to secure payment of, workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;

 

(c) liens in respect of judgments or awards which have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Company or any such Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review and in respect of which the Company or any such Subsidiary maintains adequate reserves;

 

(d) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue, provided that such liens may continue to exist for a period of more than 120 days if the validity or amount thereof shall currently be contested by the Company or any such Subsidiary in good faith and if the Company or any such Subsidiary shall have set aside on its books adequate reserves with respect thereto as required by GAAP, and provided further that the Company or any such Subsidiary will pay any such claim forthwith upon commencement of proceedings to foreclose any such lien;

 

(e) encumbrances consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which the Company or any such Subsidiary is a party, and other minor liens or encumbrances none of which in the opinion of the Company or any such Subsidiary interferes materially with the use of the property affected in the ordinary conduct of the business of the Company or any such Subsidiary, which defects do not individually or in the aggregate have a materially adverse effect on the business of the Company or any such Subsidiary individually or of the Company and its Subsidiaries on a consolidated basis;

 

(f) liens existing on the date hereof and listed on Schedule 6C hereto;

 

(g) liens in favor of Fleet National Bank (f/k/a BankBoston, N.A.), as Collateral Agent for the benefit of the Banks (the “ Collateral Agent ”), the Purchasers hereunder and the noteholders under the 1998 Agreement; and

 

(h) purchase money security interests in or purchase money mortgages on real or personal property acquired after the Effective Date hereof to secure purchase money Indebtedness of the type permitted by paragraph 6B(e)(i), (ii) and (iii), incurred in

 

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connection with the acquisition of such property, which security interests cover only the real or personal property so acquired.

 

6D. Restrictions on Investments. Neither the Company nor any of its Subsidiaries shall purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or other obligations or securities of, or any interest in, any other Person, or make or commit to make any acquisition under paragraph 6E, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any other Person, other than:

 

(a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase;

 

(b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having unimpaired capital and surplus in excess of $250,000,000;

 

(c) securities commonly known as “commercial paper” issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than “P 1” if rated by Moody’s Investors Service, Inc., and not less than “A 1” if rated by Standard and Poor’s Rating Group;

 

(d) Investments existing on the date hereof and listed on Schedule 6D hereto;

 

(e) Investments permitted under paragraph 6E;

 

(f) Extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or surplus in the ordinary course of business;

 

(g) Investments consisting of loans and advances to the Company or to another of its Subsidiaries (other than a Designated LLC);

 

(h) Other Investments not to exceed the sum of $2,000,000 in the aggregate at any one time outstanding with respect to non-hazardous solid waste collection, transfer, hauling, recycling or disposal businesses, projects, joint-ventures or enterprises or purchase options; and

 

(i) Investments consisting of the Company or any Subsidiary’s ownership interests in the Designated LLCs (and the related capital contributions in respect thereof) as set forth in Schedule 6D and Investments in the Guarantors by the Designated LLCs constituting Indebtedness permitted under paragraph 6B.

 

6E. Merger, Consolidation and Disposition of Assets.

 

6E(1) Mergers and Acquisitions. Neither the Company nor any of its Subsidiaries will become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock

 

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acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except the merger or consolidation of, or asset or stock acquisitions between the Company and its existing Subsidiaries and between existing Subsidiaries of the Company and except as otherwise provided in this paragraph. The Company or any of its Subsidiaries may purchase or otherwise acquire all or substantially all of the assets or stock or other equity interests of any other Person provided that:

 

(a) the Company is in current compliance with and, giving effect to the proposed acquisition (including any borrowings made or to be made in connection therewith), will continue to be in compliance with all of the covenants in paragraph 6A hereof on a pro forma historical combined basis as if the transaction occurred on the first day of the period of measurement; provided, that, in the case of transactions involving cash consideration to be paid by the Company or any of its Subsidiaries (including cash deferred payments, contingent or otherwise, and the aggregate amount of all Funded Debt assumed) in excess of $15,000,000, the Purchasers shall have received an Officer’s Certificate demonstrating compliance with paragraph 6A on a pro forma historical combined basis as if the transaction occurred on the first day of the period of measurement;

 

(b) at the time of such acquisition, no Default or Event of Default has occurred and is continuing, and such acquisition will not otherwise create a Default or an Event of Default hereunder;

 

(c) the business to be acquired is predominantly in the same lines of business as the Company, or businesses reasonably related or incidental thereto (e.g., non-hazardous solid waste collection, transfer, hauling, recycling, or disposal);

 

(d) the business to be acquired operates predominantly in the continental United States;

 

(e) all of the assets to be acquired shall be owned by an existing or newly created Subsidiary of the Company which Subsidiary shall be a Guarantor, 100% of the assets (other than motor vehicle titles and real estate) and stock or other equity interests of which have been or, simultaneously with such acquisition, will be pledged to the Collateral Agent on behalf of the Banks, the noteholders under the 1998 Note Agreement and the Purchasers in accordance with the Intercreditor Agreement or, in the case of a stock or other equity interest acquisition, the acquired company, simultaneously with such acquisition, shall become a Guarantor or shall be merged with and into a wholly owned Subsidiary of the Company that is a Guarantor and such newly acquired or created Subsidiary shall otherwise comply with the provisions of paragraph 5E hereof;

 

(f) not later than seven (7) days prior to the proposed acquisition date, a copy of the purchase agreement and financial projections, together with audited (if available, or otherwise unaudited) financial statements for any Subsidiary to be acquired or created, for the preceding two (2) fiscal years or such shorter period of time as such Subsidiary has

 

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been in existence shall have been furnished to the Purchasers, only in cases of Material Acquisitions or upon request by the Purchasers;

 

(g) not later than seven (7) days prior to the proposed acquisition date, (1) a summary of the Company’s results of their standard due diligence review, and (2) in the case of a landfill acquisition, a review by a Consulting Engineer and a copy of the Consulting Engineer’s report shall have been furnished to the Purchasers, only in cases of Material Acquisitions or upon request by the Purchasers;

 

(h) the board of directors and (if required by applicable law) the shareholders, or the equivalent thereof, of the business to be acquired has approved such acquisition;

 

(i) if such acquisition is made by a merger, a Guarantor, or a wholly-owned Subsidiary of the Company which shall become a Guarantor in connection with such merger, shall be the surviving entity; and

 

(j) cash consideration to be paid by the Company or such Subsidiary in connection with any such acquisition or series of related acquisitions (including cash deferred payments, contingent or otherwise, and the aggregate amount of all Funded Debt assumed), shall not exceed $15,000,000 without the consent of the Required Holders (any acquisition requiring cash consideration in excess of $15,000,000 being referred to as a “ Material Acquisition ”); provided, however, from the date of this Agreement until the delivery by the Company to each of the Purchasers of (i) the Officer’s Certificate delivered under paragraph 5A(2) for the fiscal quarter ending March 31, 2002 showing the Company’s compliance with the financial covenants contained in this Agreement, and (ii) the Company’s financial statements described in paragraph 5A(1) for the fiscal year ended December 31, 2001, all references to “$15,000,000” in this paragraph 6E(1)(j) shall be replaced with “$5,000,000”.

 

6E(2) Disposition of Assets. Neither the Company nor any Subsidiary will become a party to or agree to or effect any disposition of assets in excess of $500,000 in the aggregate (the “ Basket ”) without the prior written consent of the Required Holders. Notwithstanding the foregoing, the sale of inventory, the licensing of intellectual property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices, are permitted hereunder without being charged against the Basket.

 

6E(3) Permitted Transfers. Notwithstanding the other provisions of this paragraph 6E, transfers of Designated Property (each, a “ Permitted Transfer ”) will be permitted, provided, that the following conditions are met:

 

(a) such Permitted Transfer is made for fair market value;

 

(b) the proceeds of such Permitted Transfer are applied to pay down the revolving loans outstanding under the Bank Agreement (but without reducing the commitments of the banks under the Bank Agreement);

 

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(c) in the case of a transfer of the ownership interests in a Designated LLC, the Designated LLC subject to such transfer shall reaffirm its joint and several obligations with respect to the Secured Obligations by entering into a guaranty agreement in form and substance satisfactory to the Purchasers (the “ Designated Guaranty ”); and

 

(d) all assets of a transferred Designated LLC other than Designated Property shall remain subject to the lien thereon that has been granted to the Collateral Agent for the benefit of the Banks and the Purchasers as security for the Secured Obligations, and the transferee of such Designated LLC and the Designated LLC shall each have acknowledged the full force and effect of such lien and of the Designated Guaranty executed by such Designated LLC pursuant to (c) above.

 

In the event of a proposed Permitted Transfer of any membership units or interests of a Designated LLC or any Designated Property, the proposed transferor will give the Collateral Agent and the Purchasers at least fifteen Business Days prior written notice of the proposed Permitted Transfer. Subject to the Purchasers’ election to exercise their rights of first refusal as set forth below, the Collateral Agent will, in accordance with Section 24 of the Security Agreement, within ten Business Days of receipt of such notice, endorse, assign and deliver to the transferor the requested certificates, if any, of membership units or ownership interests, or any other Designated Property in the Collateral Agent’s possession or under its control, which are included in the Permitted Transfer by the transferor and any other instruments or documents evidencing the ownership of such membership units or ownership interest or Designated Property in the Collateral Agent’s possession or under its control. Upon receipt of the proceeds of the Permitted Transfer for application to the revolving loans outstanding under the Bank Agreement (but without reducing the commitments of the banks under the Bank Agreement), the Collateral Agent, the banks party to the Bank Agreement and the Purchasers shall have no further interest or right to such membership units or interests or such Designated Property, and, if requested by transferor or transferor’s transferee, the Collateral Agent, in accordance with Section 24 of the Security Agreement, shall execute an appropriate termination of the lien with respect to such units or interests, or such Designated Property, as applicable; provided that any Designated LLC subject to a Permitted Transfer shall retain its joint and several obligations with respect to the Secured Obligations by executing a Designated Guaranty and the liens on the assets of such Designated LLC (other than Designated Property) granted to the Collateral Agent for the benefit of the banks party to the Bank Agreement and the Purchasers as security for the Secured Obligations shall continue in force and shall be reaffirmed by the Designated LLC as a condition of such Permitted Transfer. To the extent that, notwithstanding the above, any Permitted Transfer of membership units or ownership interests or Designated Property by the Company or any of its Subsidiaries occurs during the Designated Property Notice Period, the proceeds shall be applied to pay the outstanding Secured Obligations pursuant to the terms of the Intercreditor Agreement. Upon the commencement of a Designated Property Notice Period, the provisions set forth in this Agreement and the Security Documents allowing the Permitted Transfers shall terminate until such time, if ever, as restored by the written election of the Purchasers.

 

6E(4) Right of First Refusal. If at any time following the date of this Agreement, the owner of Designated Property (the “ Seller of Designated Property ”) receives a bona fide offer

 

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from a third party to purchase all or any part of its Designated Property for a purchase price that has been reached through arms-length negotiation and such Seller of Designated Property wishes to accept such offer (the “ Third Party Offer ”), such Seller of Designated Property shall, as a condition precedent to its right to sell such Designated Property to the third party, comply with the following procedure:

 

(a) By written notice (the “ Notice of Sale of Designated Property ”), such Seller of Designated Property shall inform the Collateral Agent of the Third Party Offer. The Notice must contain the name of the offeror, a description of the Designated Property to be sold, the purchase price therefor, the proposed closing date (which shall in no event be sooner than twenty Business Days from the date of the Notice of Sale of Designated Property), all other terms and conditions of the Third Party Offer and shall further contain an offer to sell all of such Designated Property to the Collateral Agent or its assign pursuant to the terms and provisions of this paragraph 6E(4) on the same terms and conditions contained in the Third Party Offer.

 

(b) The Collateral Agent may elect, in accordance with Section 24 of the Security Agreement, with the consent of the Majority Banks (as defined in the Bank Agreement), the Required Holders and the Administrative Agent, exercisable within twenty Business Days of the receipt of the Notice of Sale of Designated Property, to purchase all of such Designated Property contained in the Third Party Offer. In addition, the Collateral Agent, in accordance with Section 24 of the Security Agreement, with the consent of the Majority Banks, the Required Holders and the Administrative Agent, shall be entitle