Filed by Bowne Pure Compliance





Exhibit 4.12




Execution Copy




 





INVESTMENT AGREEMENT




among




PURE EARTH, INC.

as the Company




and




FIDUS MEZZANINE CAPITAL, L.P.

as an Investor




Series B Preferred Stock




Dated as of March 4, 2008




 






 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I

	DEFINITIONS

	 
	 	 	 	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Accounting Terms
	 	 	18	 
	1.3 Other Terms; Construction
	 	 	18	 
	 
	 	 	 	 
	ARTICLE II

PURCHASE OF PREFERRED STOCK AND WARRANT

	 
	 	 	 	 
	2.1 The Purchase of Preferred Stock and Warrant
	 	 	19	 
	2.2 Terms of Preferred Stock
	 	 	20	 
	2.3 The Closing
	 	 	20	 
	2.4 Fees
	 	 	20	 
	2.5 Recovery of Payments
	 	 	20	 
	2.6 Use of Proceeds
	 	 	20	 
	2.7 Redemption
	 	 	20	 
	2.8 Investment Unit
	 	 	23	 
	2.9 Additional Shares
	 	 	23	 
	2.10 Pro Rata Treatment
	 	 	23	 
	2.11 Change in Law; Illegality
	 	 	24	 
	2.12 Taxes
	 	 	25	 
	2.13 Mitigation of Costs
	 	 	27	 
	 
	 	 	 	 
	ARTICLE III

	CONDITIONS OF CLOSING

	 
	 	 	 	 
	3.1 Investors Conditions of Closing
	 	 	27	 
	3.2 Company Party Conditions to Closing
	 	 	30	 
	 
	 	 	 	 
	ARTICLE IV

COMPANY REPRESENTATIONS AND WARRANTIES

	 
	 	 	 	 
	4.1 Corporate Organization and Power
	 	 	30	 
	4.2 Authorization; Enforceability
	 	 	30	 
	4.3 No Violation
	 	 	31	 
	4.4 Governmental and Third-Party Authorization; Permits
	 	 	31	 
	4.5 Litigation
	 	 	31	 
	4.6 Taxes
	 	 	32	 
	4.7 Subsidiaries; Capitalization
	 	 	32	 
	4.8 Full Disclosure
	 	 	32	 
	4.9 Margin Regulations
	 	 	32	 
	4.10 No Material Adverse Effect
	 	 	32	 
	4.11 Financial Matters
	 	 	33	 
	 
	 	 	 	 






 


i









 





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	4.12 Ownership of Properties
	 	 	34	 
	4.13 ERISA
	 	 	35	 
	4.14 Environmental Matters
	 	 	35	 
	4.15 Compliance with Laws
	 	 	36	 
	4.16 Intellectual Property
	 	 	37	 
	4.17 Investment Company Act
	 	 	37	 
	4.18 Insurance
	 	 	37	 
	4.19 Material Contracts
	 	 	37	 
	4.20 Labor Relations
	 	 	38	 
	4.21 OFAC; Anti-Terrorism Laws
	 	 	38	 
	4.22 Securities Laws
	 	 	38	 
	4.23 Transactions with Affiliates
	 	 	39	 
	4.24 SBA Matters
	 	 	39	 
	4.25 No Indebtedness to First National Bank of Elmer
	 	 	39	 
	 
	 	 	 	 
	ARTICLE IV-A

	INVESTOR REPRESENTATIONS AND WARRANTIES

	 
	 	 	 	 
	4A.1 Organization and Authority
	 	 	39	 
	4A.2 Non-contravention
	 	 	40	 
	4A.3 Investment
	 	 	40	 
	4A.4 Restricted Securities
	 	 	40	 
	4A.5 Place of Business
	 	 	41	 
	4A.6 Associated Suppliers
	 	 	41	 
	 
	 	 	 	 
	ARTICLE V

	AFFIRMATIVE COVENANTS

	 
	 	 	 	 
	5.1 Financial Statements
	 	 	41	 
	5.2 Other Business and Financial Information
	 	 	43	 
	5.3 Existence; Franchises; Maintenance of Properties
	 	 	45	 
	5.4 Compliance with Laws
	 	 	45	 
	5.5 Payment of Obligations
	 	 	45	 
	5.6 Insurance
	 	 	46	 
	5.7 Maintenance of Books and Records; Inspection
	 	 	46	 
	5.8 Creation or Acquisition of Subsidiaries
	 	 	46	 
	5.9 Environmental Laws
	 	 	47	 
	5.10 Board Observation Rights
	 	 	48	 
	5.11 OFAC, PATRIOT Act Compliance
	 	 	48	 
	5.12 SBA Matters
	 	 	48	 
	5.13 SEC Filings
	 	 	49	 
	 
	 	 	 	 
	ARTICLE VI

	DEBT INCURRENCE TEST

	 
	 	 	 	 
	6.1 Debt Incurrence Test
	 	 	50	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE VII

	NEGATIVE COVENANTS

	 
	 	 	 	 
	7.1 Merger; Consolidation
	 	 	51	 
	7.2 Liens
	 	 	51	 
	7.3 Asset Dispositions
	 	 	53	 
	7.4 Investments
	 	 	53	 
	7.5 Restricted Payments
	 	 	55	 
	7.6 Transactions with Affiliates
	 	 	55	 
	7.7 Lines of Business
	 	 	56	 
	7.8 Sale-Leaseback Transactions
	 	 	57	 
	7.9 Equity Limitations
	 	 	57	 
	7.10 Limitation on Certain Restrictions
	 	 	58	 
	7.11 Fiscal Year
	 	 	58	 
	7.12 Accounting Changes
	 	 	58	 
	 
	 	 	 	 
	ARTICLE VIII

	EVENTS OF NONCOMPLIANCE

	 
	 	 	 	 
	8.1 Events of Noncompliance
	 	 	58	 
	8.2 Remedies: Redemption, etc
	 	 	60	 
	8.3 Rescission of Put Right
	 	 	60	 
	8.4 Remedies: Set-Off
	 	 	60	 
	 
	 	 	 	 
	ARTICLE IX

	MISCELLANEOUS

	 
	 	 	 	 
	9.1 Expenses; Indemnity; Damage Waiver
	 	 	61	 
	9.2 Governing Law; Submission to Jurisdiction; Waiver of Venue; Service of Process
	 	 	63	 
	9.3 Waiver of Jury Trial
	 	 	64	 
	9.4 Notices; Effectiveness; Electronic Communication
	 	 	64	 
	9.5 Amendments, Waivers, etc
	 	 	65	 
	9.6 Successors and Assigns
	 	 	65	 
	9.7 No Waiver
	 	 	66	 
	9.8 Survival
	 	 	66	 
	9.9 Severability
	 	 	66	 
	9.10 Construction
	 	 	66	 
	9.11 Confidentiality
	 	 	67	 
	9.12 Counterparts; Integration; Effectiveness
	 	 	68	 
	9.13 USA Patriot Act Notice
	 	 	68	 
	9.14 Action by Investors
	 	 	68	 
	9.15 Subordination; Payment Restrictions
	 	 	69	 
	 
	 	 	 	 





 


iii









 





	 	 	 
	EXHIBITS

 
	Exhibit A
	 	Form of Certificate of Designations
	Exhibit B
	 	Form of Compliance Certificate
	Exhibit C
	 	Form of Financial Condition Certificate
	Exhibit D
	 	Form of Guaranty
	Exhibit E
	 	Form of Warrant
	 
	 	 
	SCHEDULES

	 
	 	 
	Schedule 1.1(a)
	 	Litigation Expense Add Backs
	Schedule 1.1(b)
	 	Consolidated EBITDA
	Schedule 1.1(c)
	 	Existing Indebtedness
	Schedule 1.1(d)
	 	Permitted Acquisitions
	Schedule 4.4
	 	Consents and Approvals
	Schedule 4.5
	 	Litigation
	Schedule 4.6
	 	Taxes
	Schedule 4.7
	 	Subsidiaries; Capitalization
	Schedule 4.10
	 	No Material Adverse Effect
	Schedule 4.11(b)
	 	Exceptions to GAAP
	Schedule 4.12
	 	Real Property Interests
	Schedule 4.14(a)
	 	Environmental Matters – Underground Pipe/Tanks
	Schedule 4.14(b)
	 	Environmental Matters – Material Compliance
	Schedule 4.14(c)
	 	Environmental Matters – Hazardous waste in compliance
	Schedule 4.14(d)
	 	Environmental Matters – Complaint/Claim for Environmental Law
	Schedule 4.14(e)
	 	Environmental Matters – Environmental Permits
	Schedule 4.14(f)
	 	Environmental Matters – Assumed Liabilities
	Schedule 4.14(g)
	 	Environmental Matters – 100m Expense for Compliance within 18 mos.
	Schedule 4.14(h)
	 	Environmental Matters – Material Documents and Correspondence
	Schedule 4.16
	 	Intellectual Property
	Schedule 4.18
	 	Insurance
	Schedule 4.19
	 	Material Contracts
	Schedule 4.20
	 	Labor Relations
	Schedule 4.23
	 	Transactions with Affiliates
	Schedule 7.2
	 	Liens
	Schedule 7.4
	 	Investments
	Schedule 7.6
	 	Transactions with Affiliates
	Schedule 9.4
	 	Notice Addresses






 


iv









 







INVESTMENT AGREEMENT




THIS INVESTMENT AGREEMENT, dated as of the 4th day of March, 2008, is made among PURE EARTH,
INC., a Delaware corporation (the “Company”), and FIDUS MEZZANINE CAPITAL, L.P., a Delaware
limited partnership, as an Investor (as defined herein).



BACKGROUND STATEMENT




The Company desires to obtain financing through the sale and issuance of 6,300 shares of its
Series B Preferred Stock (the “Preferred Stock”) and the Warrant to the Investors and the
Investors desire to purchase the Preferred Stock and the Warrant, on the terms and conditions set
forth in this Agreement and the other documents contemplated hereby.



AGREEMENT




NOW, THEREFORE, in consideration of the mutual provisions, covenants and agreements herein
contained, the parties hereto hereby agree as follows:



ARTICLE I

DEFINITIONS




1.1 Defined Terms. For purposes of this Agreement, in addition to the terms defined
elsewhere herein, the following terms have the meanings set forth below (such meanings to be
equally applicable to the singular and plural forms thereof):



“Acquisition” means any transaction or series of related transactions, consummated on
or after the date hereof, by which any one or more of the Company and any Subsidiaries of the
Company acquire (i) any parcel or group of related parcels of real property, (ii) a fixed asset or
group of related fixed assets, (iii) the assets of any Person or any going business, division
thereof or line of business, or (iv) the Capital Stock, by direct purchase, combination, merger or
otherwise, of any Person.



“Acquisition Addbacks” means with respect to any Target acquired in a Permitted
Acquisition, the following (and only the following) costs and expenses that will be eliminated as a
result of consummating and integrating the Permitted Acquisition: (i) excess owners’ compensation
and expenses, (ii) excess property rental costs, (iii) excess head count costs, and (iv) excess
corporate expenses, in each case, to the extent approved by the Investors in their reasonable
discretion.



“Acquisition Pro Forma” has the meaning given to such term in Section 5.1(e).



“Additional Shares” has the meaning given to such term in Section 2.9.


 


 









 





“Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, (i) Controls or is Controlled by or is under
common Control with the Person specified or (ii) beneficially owns, is owned by or is under common
ownership with respect to securities or other ownership interests of such Person having 10% or more
of the combined voting power of the then outstanding securities or other ownership interests of
such Person ordinarily (and apart from rights accruing under special circumstances) having the
right to vote in the election of directors or other governing body of such Person. Notwithstanding
the foregoing, no Investor shall be deemed an “Affiliate” of any Company Party.



“Agreement” means this Investment Agreement, as amended, modified, restated or
supplemented from time to time in accordance with its terms.



“Asset Disposition” means any sale, assignment, lease, conveyance, transfer or other
disposition by the Company or any of its Subsidiaries (whether in one or a series of transactions)
of all or any of its assets, business or other properties (including Capital Stock of
Subsidiaries), other than pursuant to a Casualty Event.



“Authorized Officer” means, with respect to any action specified herein to be taken by
or on behalf of a Company Party, any officer of such Company Party duly authorized by resolution of
its board of directors or other governing body to take such action on its behalf, and whose
signature and incumbency shall have been certified to the Investors by the secretary or an
assistant secretary of such Company Party.



“Bankruptcy Code” means 11 U.S.C. §§ 101 et seq., as amended from time
to time, and any successor statute, and all regulations from time to time promulgated thereunder.



“Bankruptcy Event” means the occurrence of an Event of Noncompliance pursuant to
Section 8.1(e) or Section 8.1(f).



“Business Day” means any day other than a Saturday or Sunday, a legal holiday or a day
on which commercial banks in Chicago, Illinois or Philadelphia, Pennsylvania are authorized or
required by law to be closed.



“Capital Lease” means, with respect to any Person, any lease of property (whether
real, personal or mixed) by such Person as lessee that is or is required to be, in accordance with
GAAP, recorded as a capital lease on such Person’s balance sheet.



“Capital Lease Obligations” means, with respect to any Person, the obligations of such
Person to pay rent or other amounts under any Capital Leases, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.



“Capital Stock” means (i) with respect to any Person that is a corporation, any and
all shares, interests or equivalents in capital stock (whether voting or nonvoting, and whether
common or preferred) of such corporation, and (ii) with respect to any Person that is not a
corporation, any and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or options to
purchase any of the foregoing.


 


2









 





“Cash Equivalents” means (i) securities issued or unconditionally guaranteed or
insured by the United States of America or any agency or instrumentality thereof, backed by the
full faith and credit of the United States of America and maturing within one year from the date of
acquisition, (ii) commercial paper issued by any Person organized under the laws of the United
States of America, maturing within 180 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by Standard & Poor’s Ratings
Services or at least P-1 or the equivalent thereof by Moody’s Investors Service, Inc., (iii) time
deposits and certificates of deposit maturing within 180 days from the date of issuance and issued
by a bank or trust company organized under the laws of the United States of America or any state
thereof (y) that has combined capital and surplus of at least $500,000,000 or (z) that has (or is a
subsidiary of a bank holding company that has) a long-term unsecured debt rating of at least A or
the equivalent thereof by Standard & Poor’s Ratings Services or at least A2 or the equivalent
thereof by Moody’s Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
30 days with respect to underlying securities of the types described in clause (i) above entered
into with any bank or trust company meeting the qualifications specified in clause (iii) above, and
(v) money market funds at least 95% of the assets of which are continuously invested in securities
of the foregoing types.



“Casie Companies” means Casie Ecology Oil Salvage, Inc., MidAtlantic Recycling
Technologies, Inc. and Rezultz, Incorporated.



“Casualty Event” means, with respect to any property (including any interest in
property) of any Company Party, any loss of, damage to, or condemnation or other taking of, such
property for which such Company Party receives insurance proceeds, proceeds of a condemnation award
or other compensation.



“Certificate of Designations” means the Certificate of Designations, Preferences and
Rights of Series B Preferred Stock as in effect immediately after the Closing, which shall
incorporate the provisions contained in Exhibit A.



“Certificate of Incorporation” means the Company’s Amended and Restated Certificate of
Incorporation, as the same may be further amended, modified or restated from time to time not in
contravention of the terms hereof. All references in this Agreement and the other Investment
Documents to the Certificate of Incorporation shall be deemed to include a reference to the
Certificate of Designations.



“Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any
change in any law, rule, regulation or treaty or in the administration, interpretation or
application thereof by any Governmental Authority or (iii) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any Governmental Authority.



“Closing Date” has the meaning given to such term in Section 2.3.



“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute, and all rules and regulations from time to time promulgated thereunder.



“Company” has the meaning given to such term in the introductory paragraph hereof.


 


3









 





“Company Parties” means the Company, the Company’s Subsidiaries from time to time, and
their respective successors.



“Company SEC Documents” has the meaning given to such term in Section 5.13.



“Compliance Certificate” means a fully completed and duly executed certificate in the
form of Exhibit B, together with a covenant compliance worksheet in form and substance reasonably
acceptable to the Investors.



“Consolidated EBITDA” means, for any Reference Period, the aggregate of (i)
Consolidated Net Income for such period, plus (ii) the sum of (A) interest expense, (B) federal,
state, local and other income taxes, (C) depreciation and amortization, (D) any and all costs,
expenses (including attorneys fees and expenses), judgments, amounts paid in settlement, penalties,
fines, charges and other liabilities incurred by any Person for which Consolidated EBITDA is being
calculated in connection with any of the matters set forth on Schedule 1.1(a), (E) reasonable fees
and expenses of attorneys, accountants and consultants incurred in connection with the acquisition
and integration of a Target to the extent incurred within the first 12 months following the
acquisition of such Target, and (F) compensation and benefits for temporary employees retained and
direct costs of temporary services rendered and temporary equipment rented, in each case, for
purposes of improving the business of a Target to the extent such costs are incurred during the
first 12 months following the Acquisition of such Target, all to the extent taken into account in
the calculation of Consolidated Net Income for such Reference Period and all calculated in
accordance with GAAP, except as otherwise permitted in the definition of Consolidated Net Income.
Consolidated EBITDA for the Company and its Subsidiaries for the twelve-month period ended December
31, 2007 is set forth on Schedule 1.1(b).



“Consolidated Funded Debt” means, as of any date of determination, the aggregate
(without duplication) of all Funded Debt of the Company and its Subsidiaries as of such date,
determined on a consolidated basis in accordance with GAAP.



“Consolidated Net Income” means, for any Reference Period, net income (or loss) for
the a Person for such Reference Period, determined on a consolidated basis in accordance with GAAP
(after deduction for minority interests and subject to the non-GAAP adjustments set forth below);
provided that, in making such determination, there shall be excluded (i) the net income (or
loss) of any other Person that is not a Subsidiary of the Company (or is accounted for by the
Company by the equity method of accounting) except to the extent of actual payment of cash
dividends or distributions by such Person to the Company or any Subsidiary of the Company during
such Reference Period, (ii) the net income (or loss) of any other Person acquired by, or merged
with, the Company or any of its Subsidiaries for any period prior to the date of such acquisition
or merger, and (iii) the net income (or loss) of any Subsidiary of the Company to the extent that
the declaration or payment of dividends or similar distributions by such Subsidiary of
such net income is not at the time permitted by operation of the terms of its charter,
certificate of incorporation or formation or other constituent document or any agreement or
instrument (other than an Investment Document) or Requirement of Law applicable to such Subsidiary;
and provided further, that, until March 31, 2008, for any Reference Period through
March 31, 2008, the net income (or loss) of the Casie Companies shall be based on a good faith
estimate by the Company of such net income (or loss).


 


4









 





“Contingent Purchase Price Obligations” means any earnout obligations or similar
deferred or contingent purchase price obligations of the Company or any of its Subsidiaries
incurred or created in connection with an Acquisition.



“Control” means, with respect to any Person, the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the terms “Controlled”
and “Controlling” have correlative meanings.



“Controlled Investment Affiliate” means, with respect to any Person, any other Person
(including, without limitation, any fund or investment vehicle) that (i) directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under common Control with
the Person specified and (ii) is organized primarily for the purpose of making equity or debt
investments in one or more companies.



“Dollars” or “$” means dollars of the United States of America.



“Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, allegations, notices of noncompliance or
violation, investigations by a Governmental Authority, or proceedings (including, without
limitation, administrative, regulatory and judicial proceedings) relating in any way to any
Hazardous Substance, any actual or alleged violation of or liability under any Environmental Law or
any permit issued, or any approval given, under any Environmental Law (collectively,
“Claims”), including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting
from any Hazardous Substance or arising from alleged injury or threat of injury to human health or
the environment.



“Environmental Laws” means any and all federal, state and local laws, statutes,
ordinances, rules, regulations, permits, licenses, approvals, rules of common law and orders of
courts or Governmental Authorities, relating to the protection of human health, occupational safety
with respect to exposure to Hazardous Substances, or the environment, now or hereafter in effect,
and in each case as amended from time to time, including, without limitation, requirements
pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or remediation of
Hazardous Substances.



“Equity Issuance” means the issuance, sale or other disposition by any Company Party
of its Capital Stock, any rights, warrants or options to purchase or acquire any shares of its
Capital Stock or any other security or instrument representing, convertible into or exchangeable
for an equity interest in any Company Party.


 


5









 





“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any successor statute, and all rules and regulations from time to time
promulgated thereunder.



“ERISA Affiliate” means any Person (including any trade or business, whether or not
incorporated) deemed to be under “common control” with, or a member of the same “controlled group”
as, the Company or any of its Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.



“ERISA Event” means any of the following with respect to a Plan or Multiemployer Plan,
as applicable: (i) a Reportable Event, (ii) a complete or partial withdrawal by the Company or any
ERISA Affiliate from a Multiemployer Plan that results in liability under Section 4201 or 4204 of
ERISA, or the receipt by the Company or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA, (iii) the distribution by the
Company or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a notice of intent to
terminate any Plan or the taking of any action to terminate any Plan, (iv) the commencement of
proceedings by the PBGC under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice
from any Multiemployer Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of any Multiemployer Plan
against the Company or any ERISA Affiliate to enforce Section 515 of ERISA, which is not dismissed
within 30 days, (vi) the imposition upon the Company or any ERISA Affiliate of any liability under
Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA,
or the imposition or threatened imposition of any Lien upon any assets of the Company or any ERISA
Affiliate as a result of any alleged failure to comply with the Code or ERISA in respect of any
Plan, (vii) the engaging in or otherwise becoming liable for a nonexempt Prohibited Transaction by
the Company or any ERISA Affiliate, or a violation of the applicable requirements of Section 404 or
405 of ERISA or the exclusive benefit rule under Section 401(a) of the Code by any fiduciary of any
Plan for which the Company or any of its ERISA Affiliates may be directly or indirectly liable,
(viii) the failure of any Plan to satisfy the minimum funding standard of Section 302 of ERISA and
Section 412 of the Code, whether or not waived, (ix) prior to January 1, 2008, the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA (as
in effect at such time), would have resulted in the loss of tax-exempt status of the trust of which
such Plan is a part if the Company or an ERISA Affiliate failed to timely provide security to such
Plan in accordance with the provisions of such sections, or (x) on or after January 1, 2008, the
incurrence of an obligation to provide a notice under Section 101(j) of ERISA, the adoption of an
amendment which may not take effect due to the application of Section 436(c)(1) of the Code or
Section 206(g)(2)(A) of ERISA, or the payment of a contribution in order to satisfy the
requirements of Section 436(c)(2) of the Code or Section 206(g)(2)(B) of ERISA.



“Event of Noncompliance” has the meaning given to such term in Section 8.1.


 


6









 





“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to
time, and any successor statute, and all rules and regulations from time to time promulgated
thereunder.



“Excluded Taxes” means, with respect to any Investor or any other recipient of any
payment to be made by or on account of any obligation of the Company hereunder, (i) taxes imposed
on or measured by its overall net income (however denominated), and franchise taxes imposed on it
by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient
is organized or in which its principal office is located or, in the case of any Investor, in which
its applicable office is located (but not including any franchise taxes imposed solely as a result
of the purchasing or holding of the Preferred Stock) , (ii) any branch profits taxes imposed by the
United States or any similar tax imposed by any other jurisdiction in which the Company is located
and (iii) in the case of a Foreign Investor, any withholding tax that is imposed on amounts payable
to such Foreign Investor at the time such Foreign Investor becomes a party hereto (or designates a
new office) or is attributable to such Foreign Investor’s failure or inability (other than as a
result of a Change in Law) to comply with Section 2.12(e), except to the extent that such Foreign
Investor (or its assignor, if any) was entitled, at the time of designation of a new office (or
assignment), to receive additional amounts from the Company with respect to such withholding tax
pursuant to Section 2.12(a).



“Existing Indebtedness” means all Indebtedness incurred under the credit facilities
set forth on Schedule 1.1(c) not to exceed $10,000,000 in the aggregate (reduced by principal
repayments on term loans and any permanent reductions of revolving credit commitments) at any time,
and as may be refinanced or replaced from time to time.



“Existing Preferred Stock” means the Company’s Series A Preferred Stock issued for an
aggregate purchase price not to exceed $1,000,000 having the terms, rights and preferences in
effect under the Certificate of Incorporation as of the date hereof, as such may be amended,
changed, supplemented, restated or otherwise modified in accordance with the terms, rights and
preferences applicable to the Preferred Stock.



“Federal Reserve Board” means the Board of Governors of the Federal Reserve System or
any successor thereto.



“Fee Letter” means the letter from Fidus to the Company, dated as of the date hereof,
relating to certain fees payable by the Company in respect of the transactions contemplated by this
Agreement, as amended, modified, restated or supplemented from time to time.



“Fidus” means Fidus Mezzanine Capital. L.P., a Delaware limited partnership, and its
successors and assigns.



“Financial Condition Certificate” means a fully completed and duly executed
certificate, in substantially the form of Exhibit C, together with the attachments thereto.



“Financial Officer” means, with respect to the Company, the chief financial officer,
vice president — finance, principal accounting officer or treasurer of the Company.



“fiscal quarter” means a fiscal quarter of the Company and its Subsidiaries.


 


7









 





“fiscal year” means a fiscal year of the Company and its Subsidiaries.



“Foreign Investor” means, with respect to the Company, any Investor that is organized
under the laws of a jurisdiction other than that in which the Company is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.



“Foreign Subsidiary” means a Subsidiary of the Company that is a “controlled foreign
corporation,” as such term is defined in Section 957 of the Code.



“Fundamental Asset Transaction” means any sale, assignment, lease, conveyance,
exchange, transfer, sale-leaseback or other disposition of more than 50% of the assets, business or
properties of the Company and its Subsidiaries, on a consolidated basis, whether in one or a series
of related transactions, whether or not in the ordinary course of business and whether or not
directly or indirectly or through the sale or other disposition of equity securities of any of the
Subsidiaries of the Company.



“Funded Debt” means, with respect to any Person, all Indebtedness of such Person
(other than Indebtedness of the types referred to in clauses (ix) and (x) (and clause (xi) to the
extent it refers back to Indebtedness described in clause (ix) or (x)) of the definition of
“Indebtedness”) and all Guaranty Obligations with respect to Funded Debt of other Persons.



“GAAP” means generally accepted accounting principles in the United States of America,
as set forth in the statements, opinions and pronouncements of the Accounting Principles Board, the
American Institute of Certified Public Accountants and the Financial Accounting Standards Board,
consistently applied and maintained, as in effect from time to time (subject to the provisions of
Section 1.2).



“Governmental Authority” means the government of the United States of America or any
other nation, or of any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.



“Guarantor” means any Subsidiary of the Company that is a guarantor of the Obligations
under the Guaranty (or under another guaranty agreement in form and substance satisfactory to the
Required Investors).



“Guaranty” means a guaranty agreement made by the Guarantors in favor of the
Investors, in substantially the form of Exhibit D, as amended, modified, restated or supplemented
from time to time.


 


8









 





“Guaranty Obligation” means, with respect to any Person, any direct or indirect
liability of such Person with respect to any Indebtedness, liability or other obligation (the
“primary obligation”) of another Person (the “primary obligor”), whether or not
contingent, (i) to purchase, repurchase or otherwise acquire or take any interest in any such
primary obligation or,
other than in the ordinary course of business, any property constituting direct or indirect
security therefor, (ii) to advance or provide funds (x) for the payment or discharge of any such
primary obligation or (y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level of income or
financial condition of the primary obligor (including, without limitation, keep well agreements,
maintenance agreements, comfort letters or similar agreements or arrangements), (iii) to lease or
purchase property, securities or services other than in ordinary course of business primarily for
the purpose of assuring the owner of any such primary obligation of the ability of the primary
obligor in respect thereof to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss or failure or inability to
perform in respect thereof; provided, however, that, with respect to the Company
and its Subsidiaries, the term Guaranty Obligation shall not include endorsements for collection or
deposit in the ordinary course of business. The amount of any Guaranty Obligation of any
guaranteeing Person hereunder shall be deemed to be the lower of (a) an amount equal to the stated
or determinable amount of the primary obligation in respect of which such Guaranty Obligation is
made and (b) the maximum amount for which such guaranteeing Person may be liable pursuant to the
terms of the instrument embodying such Guaranty Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in
which case the amount of such Guaranty Obligation shall be such guaranteeing Person’s maximum
reasonably anticipated liability in respect thereof as determined by such guaranteeing Person in
good faith.



“Hazardous Substance” means any substance or material meeting any one or more of the
following criteria: (i) it is or contains a substance designated as a hazardous waste, hazardous
substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental
Law, (ii) it is toxic, explosive, corrosive, ignitable, infectious, radioactive, mutagenic or
otherwise hazardous to human health or the environment and is or becomes regulated by any
Governmental Authority, or (iii) it is or contains, without limiting the foregoing, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.



“Hedge Agreement” means any interest or foreign currency rate swap, cap, collar,
option, hedge, forward rate or other similar agreement or arrangement designed to protect against
fluctuations in interest rates, currency exchange rates or spot prices of raw materials.



“Indebtedness” means, with respect to any Person (without duplication), (i) all
obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by
notes, bonds, debentures or similar instruments, or upon which interest payments are customarily
made, (iii) (A) the maximum stated or face amount of all surety bonds (except performance bonds
obtained by a Company Party for the purpose of guaranteeing to a customer the performance of
services by such Company Party), letters of credit (except standby letters of credit issued in
connection with performance bonds obtained by a Company Party for the purpose of guaranteeing to a
customer the performance of services by such Company Party) and bankers’ acceptances issued or
created for the account of such Person to the extent such maximum stated or face amount exceeds
$2,000,000 in the aggregate and (B) without duplication, all drafts drawn under surety bonds,
letters of credit and bankers’ acceptances issued
or created for the account of such Person (to the extent unreimbursed) regardless of whether
such surety bonds, letters of credit and bankers’ acceptances are excluded from clause (iii)(A),
(iv) all obligations of such Person to



 


9









 






pay the deferred purchase price of property or services
(excluding trade payables incurred in the ordinary course of business), including any Contingent
Purchase Price Obligations for which the contingency has been met and which are now determinable in
amount except to the extent that such Contingent Purchase Price Obligations are payable solely in
Capital Stock of the Company, (v) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person, (vi) all Capital
Lease Obligations of such Person, (vii) all Preferred Stock and Existing Preferred Stock, with the
amount of Indebtedness represented by the Preferred Stock and Existing Preferred Stock being equal
to the greater of its voluntary or involuntary liquidation preference and its maximum fixed
repurchase price, (viii) the principal balance outstanding and owing by such Person under any
synthetic lease, tax retention operating lease or similar off-balance sheet financing product but
excluding operating leases entered into in the ordinary course of business, (ix) all Guaranty
Obligations of such Person with respect to Indebtedness of another Person, (x) the net termination
obligations of such Person under any Hedge Agreements, calculated as of any date as if such
agreement or arrangement were terminated as of such date, and (xi) all indebtedness of the types
referred to in clauses (i) through (x) above (A) of any partnership or unincorporated joint venture
in which such Person is a general partner or joint venturer to the extent such Person is liable
therefor or (B) secured by any Lien on any property or asset owned or held by such Person
regardless of whether or not the indebtedness secured thereby shall have been incurred or assumed
by such Person or is nonrecourse to the credit of such Person, the amount thereof being equal to
the value of the property or assets subject to such Lien. Notwithstanding the foregoing, for
purposes of this definition (x) the amount of Indebtedness represented by the Preferred Stock shall
be the Liquidation Value thereof and (y) the obligations under the Warrant shall not be considered
Indebtedness.



“Indemnified Taxes” means Taxes other than Excluded Taxes.



“Intellectual Property” means (i) all inventions (whether or not patentable and
whether or not reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissues, continuations,
continuations-in-part, divisions, revisions, extensions, and reexaminations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all
goodwill associated therewith, and all applications, registrations, and renewals in connection
therewith, (iii) all copyrightable works and all copyrights (registered and unregistered), (iv) all
trade secrets and confidential information (including, without limitation, financial, business and
marketing plans and customer and supplier lists and related information), (v) all computer software
and software systems (including, without limitation, data, databases and related documentation),
(vi) all Internet web sites and domain names, (vii) all technology, know-how, processes and other
proprietary rights, and (viii) all licenses or other agreements to or from third parties regarding
any of the foregoing.



“Investment Documents” means this Agreement, the Certificate of Designations, the Fee
Letter, the Warrant, any Guaranty, and all other agreements, instruments, documents and
certificates now or hereafter executed and delivered to any Investor by or on behalf of the Company
or any other Company Party with respect to this Agreement, in each case as amended, modified,
supplemented or restated from time to time.



“Investments” has the meaning given to such term in Section 7.4.


 


10









 





“Investor” means Fidus and each other Person that becomes an “Investor” hereunder
pursuant to Section 9.6, and their respective successors and assigns.



“Key Person Event” means the failure of (i) Brent Kopenhaver to serve as Chief
Financial Officer of the Company with at least the duties and responsibilities customarily
associated with such title, (ii) Mark Alsentzer to serve as Chief Executive Officer of the Company
with at least the duties and responsibilities customarily associated with such title, (iii) each of
Brent Kopenhaver and Mark Alsentzer to serve as a director on the board of directors of each of the
Company and its Subsidiaries, (iv) Brent Kopenhaver ceasing to beneficially own at least 134,000
shares of Common Stock (subject to equitable adjustment for stock splits, stock dividends and
similar events) or (v) Mark Alsentzer ceasing to beneficially own 1,919,000 shares of Common Stock
(subject to equitable adjustment for stock splits, stock dividends and similar events).



“Knowledge” of the Company means facts or circumstances within the actual conscious
awareness of Mark Alsentzer, Brent Kopenhaver or the President of any Subsidiary of the Company or
subunit of a Subsidiary of the Company for which a President has been appointed.



“Leverage Ratio” means, as of any date of determination, the ratio of (i) Consolidated
Funded Debt as of such date (minus the aggregate amount of cash and Cash Equivalents held by the
Company and its Subsidiaries as of such date) to (ii) the aggregate of Consolidated EBITDA for the
Company and its Subsidiaries plus Pro Forma Acquisition EBITDA for each Permitted
Acquisition, in each case, for such Reference Period.



“Lien” means any mortgage, pledge, hypothecation, assignment, security interest, lien
(statutory or otherwise), charge or other encumbrance of any nature, whether voluntary or
involuntary, including, without limitation, the interest of any vendor or lessor under any
conditional sale agreement, title retention agreement, Capital Lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.



“Liquidation Value” on any date means, with respect to any share of Preferred Stock,
the sum of (i) the Original Per Share Purchase Price and (ii) the aggregate of all dividends
accrued and unpaid on such share. For the avoidance of doubt, dividends that have been paid
in-kind but for which new shares of Preferred Stock have not been issued shall be deemed to be
unpaid for the purposes of determining the Liquidation Value of a share of Preferred Stock.



“Mandatory Redemption Event” has the meaning given to such term in Section 2.7(b).



“Margin Stock” has the meaning given to such term in Regulation U.



“Material Adverse Effect” means a material adverse effect upon (i) the business,
assets, properties, liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the ability of
any Company Party to perform its obligations under this Agreement or any of the other Investment
Documents to which it is a party or (iii) the legality, validity or enforceability of this
Agreement or any of the
other Investment Documents or the rights and remedies of the Investors hereunder and
thereunder.


 


11









 





“Material Contract” has the meaning given to such term in Section 4.19.



“Multiemployer Plan” means any “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate makes, is making or is
obligated to make contributions or has made or been obligated to make contributions.



“Net Cash Proceeds” means, in the case of any Casualty Event or Asset Disposition, the
aggregate cash proceeds received by any Company Party in respect thereof (including insurance
proceeds and condemnation awards), less (i) reasonable fees and out-of-pocket expenses payable by
any Company Party in connection therewith, (ii) taxes paid or payable as a result thereof, and
(iii) the amount required to retire Indebtedness to the extent such Indebtedness is secured by
Permitted Liens on the subject property; it being understood that the term “Net Cash
Proceeds” shall include, as and when received, any cash received upon the sale or other
disposition of any non-cash consideration received by any Company Party in respect of any of the
foregoing events.



“Notice of Third-Party Claim” has the meaning given to such term in Section 9.1(c).



“Obligations” means all amounts owing, due or payable (including dividends accruing
after the filing of a petition or commencement of a case by or with respect to the Company seeking
relief under any applicable federal and state laws pertaining to bankruptcy, reorganization,
arrangement, moratorium, readjustment of debts, dissolution, liquidation or other debtor relief,
specifically including, without limitation, the Bankruptcy Code and any fraudulent transfer and
fraudulent conveyance laws, whether or not the claim for such interest is allowed in such
proceeding) with respect to the Preferred Stock and the Warrant and all fees, expenses, indemnities
and other obligations owing, due or payable at any time by the Company or any Subsidiary Guarantor
to any Investor or any other Person entitled thereto, under this Agreement or any of the other
Investment Documents, in each case whether direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, and whether
existing by contract, operation of law or otherwise.



“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control,
and any successor thereto.



“Other Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Investment Document or from the execution, delivery or enforcement of, or otherwise
with respect to, this Agreement or any other Investment Document.



“Original Per Share Purchase Price” means $1,000 per share, as adjusted to reflect
stock splits, combinations, recapitalizations and similar events.



“PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) of 2001, as amended from time
to time, and any successor statute, and all rules and regulations from time to time promulgated
thereunder.



“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA, and any successor thereto.


 


12









 





“Permitted Acquisition” means (a) any Acquisition to which the Required Investors
shall have given their prior written consent (which consent may be in their sole discretion and may
be given subject to such additional terms and conditions as the Required Investors shall
establish), (b) any of the Acquisition transactions set forth on Schedule 1.1(d) or (c) any
Acquisition with respect to which all of the following conditions and requirements have been
satisfied:



(i) such Acquisition shall be consensual and shall have been approved by the board of
directors or similar governing body of the Person whose assets or Capital Stock is to be acquired
(the “Target”);



(ii) such Acquisition shall not involve the assumption of any actual or contingent liabilities
(including without limitation under applicable Environmental Laws and whether or not covered or
potentially covered by insurance policies and proceeds), other than (A) indebtedness for money
borrowed and (B) any other actual or contingent liabilities, which after reasonable due diligence
and inquiry are estimated in the reasonable and good faith business judgment of the Company’s Chief
Executive Officer or President and Chief Financial Officer not to exceed $1,000,000 (which
estimation for all Acquisitions, whether or not zero, must be set forth in a written certificate of
such officers and delivered to the Investor prior to consummation of such Acquisition);



(iii) the business of the Target must be located within the continental United States of
America;



(iv) no additional Indebtedness or other liabilities shall be incurred, assumed or otherwise
be reflected on a consolidated balance sheet of the Company, its Subsidiaries and the Target after
giving effect to such Acquisition, except (A) Indebtedness otherwise permitted under the Investment
Agreement, (B) ordinary course trade payables and accrued expenses of the Target and (C) the
liabilities permitted by clause (c)(ii) above;



(v) the sum of all amounts payable in connection with any individual Acquisition (including
all transaction costs and all Indebtedness (including maximum potential earn-out obligations and
contingent purchase obligations) incurred or assumed in connection therewith or otherwise reflected
on a consolidated balance sheet of the Company, its Subsidiaries and the Target) shall not,
together with the estimate of any liabilities being assumed in connection with such Acquisition in
accordance with clause (c)(ii) above, exceed $5,000,000 (or $1,500,000 with respect to Acquisitions
of real property or Targets for the purpose of cleanup or remediation of brownfields) and any
earn-out or similar obligation must have an ascertainable maximum dollar amount;



(vi) the business and assets acquired in such Acquisition shall be free and clear of all Liens
other than Permitted Liens;



(vii) at the time of such Acquisition and after giving effect thereto, no Event of
Noncompliance has occurred and is continuing (including without limitation an Event of Default
arising from a breach of Section 7.7);



(viii) the Company and its Subsidiaries will be solvent upon the consummation of the
Acquisition;


 


13









 





(ix) to the extent there are actual or contingent liabilities assumed by the Company and its
Subsidiaries in connection with an Acquisition (as determined pursuant to clause (c)(ii) above),
such Target shall be required to be a separate Subsidiary of the Company at closing and maintained
as such thereafter;



(x) the Company shall have delivered to the Investors, a certificate confirming compliance
with each of the foregoing requirements; and



(xi) the Casie Companies shall be Subsidiary Guarantors and shall have delivered to the
Investors the items set forth in Sections 5.8(a)(ii), (iii) and (iv) and 5.8(b).



“Permitted Asset Disposition” means any Asset Disposition permitted under
Section 7.3(v).



“Permitted Liens” has the meaning given to such term in Section 7.2.



“Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.



“Plan” means any “employee pension benefit plan” within the meaning of Section 3(2) of
ERISA that is subject to the provisions of Title IV of ERISA (other than a Multiemployer Plan) and
to which the Company or any ERISA Affiliate may have any liability.



“Preferred Stock” has the meaning given to such term in the Background Statement.



“Pro Forma Acquisition EBITDA” means, for each business acquired pursuant to a
Permitted Acquisition consummated after the Closing Date but during the twelve month period
preceding the date of determination thereof, Consolidated EBITDA based upon or derived from
financial information delivered to the Investors prior to the consummation of such acquisition, for
the twelve month period ending on the last day of the latest month for which financial statements
are available, adjusted for Acquisition Addbacks. At the end of each subsequent month occurring
within the twelve months after the closing of a Permitted Acquisition, Pro Forma Acquisition EBITDA
for such acquisition will be reduced by the amount of Consolidated EBITDA and Acquisition Addbacks
for the oldest month of the preceding year (or a pro rata portion thereof if appropriate) as
reported on the Pro Forma Acquisition EBITDA Certificate delivered for such Acquisition (subject in
each case to the discretion provided to the Investors in the definition of Acquisition Addbacks).



“Pro Forma Acquisition EBITDA Certificate” means the certificate required to be
delivered pursuant to Section 5.1(e) with respect to each Permitted Acquisition, which certificate
shall set forth the Consolidated EBITDA, proposed Acquisition Addbacks, and proposed Pro Forma
Acquisition EBITDA, on a month-by-month basis for the twelve months preceding the date of
consummation of the Permitted Acquisition.



“Pro Forma Balance Sheet” has the meaning given to such term in Section 3.1(f).



“Pro Forma Basis” has the meaning given to such term in Section 1.3(b).


 


14









 





“Prohibited Transaction” means any transaction described in (i) Section 406 of ERISA
that is not exempt by reason of Section 408 of ERISA or by reason of a Department of Labor
prohibited transaction individual or class exemption or (ii) Section 4975(c) of the Code that is
not exempt by reason of Section 4975(c)(2) or 4975(d) of the Code.



“Projections” has the meaning given to such term in Section 4.11(d).



“Pure Earth Energy” means the business of (i) supplying the cement kiln industry with
a variety of alternate fuels derived from the collection of non-hazardous industrial and
residential waste materials that were traditionally landfilled, (ii) owning or contracting with
various processing and recycling centers to receive such waste materials from generators and
process the waste into a usable fuel product, and (iii) receiving and processing sewer sludge
received from municipalities into “biosolids” that will be supplied to the cement kiln industry.



“Put Right” has the meaning given to such term in Section 8.2(a).



“Redemption Date” means March 3, 2013.



“Redemption Price” means the Liquidation Value of the shares of Preferred Stock being
redeemed or repaid multiplied by the “Applicable Redemption Percentage” set forth below
either in the table or the proviso thereto:



	 	 	 	 	 
	 	 	Applicable Redemption	 
	 	 	Percentage	 
	 
	 	 	 	 
	On or prior to the first
anniversary of the Closing Date
	 	 	103	%
	 
	 	 	 	 
	After the first anniversary but
on or prior to the third
anniversary of the Closing Date
	 	 	102	%
	 
	 	 	 	 
	Thereafter
	 	 	100	%






; provided, however, that with respect to any shares of Preferred Stock redeemed
pursuant to Section 2.7(d), the Applicable Redemption Percentage shall be 100% so long as the
contemplated Acquisition is in fact consummated.



“Realty” means all real property and interests in real property now or hereafter
acquired or leased by any Company Party.



“Reference Period” with respect to any date of determination, means (except as may be
otherwise expressly provided herein) the period of twelve consecutive fiscal months of the Company
immediately preceding such date or, if such date is the last day of a fiscal quarter, the period of
four consecutive fiscal quarters ending on such date.



“Regulations D, T, U and X” means Regulations D, T, U and X, respectively, of the
Federal Reserve Board, and any successor regulations.


 


15









 





“Related Parties” means, with respect to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, agents and advisors of such Person and of such Person’s
Affiliates.



“Reportable Event” means, with respect to any Plan, (i) any “reportable event” within
the meaning of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of ERISA
has not been waived by the PBGC (including, without limitation, any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412 of the Code or
Section 302 of ERISA, regardless of the issuance of any waivers in accordance with Section 412 of
the Code), (ii) any such “reportable event” subject to advance notice to the PBGC under
Section 4043(b)(3) of ERISA, (iii) any application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code, and (iv) a cessation of operations
described in Section 4062(e) of ERISA.



“Required Investors” means, at any time, the Investors holding outstanding shares of
Preferred Stock representing more than 50% of the aggregate Liquidation Value, at such time, of all
outstanding shares of Preferred Stock.



“Requirement of Law” means, with respect to any Person, the charter, articles or
certificate of organization or incorporation and bylaws or other organizational or governing
documents of such Person, and any statute, law, treaty, rule, regulation, order, decree, writ,
injunction or determination of any arbitrator or court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the transactions
contemplated by this Agreement and the other Investment Documents.



“Responsible Officer” means, with respect to any Company Party, the president, the
chief executive officer, the chief financial officer, any executive officer, limited liability
company manager or any other Financial Officer of such Company Party, and any other officer or
similar official thereof responsible for the administration of the obligations of such Company
Party in respect of this Agreement or any other Investment Document.



“Sale of the Company” means (i) any Person or group of Persons acting in concert as a
partnership or other group becoming, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, the beneficial owner of outstanding Capital
Stock of the Company having 50% or more of the Total Voting Power of the Company or (ii) the
consummation of a Fundamental Asset Transaction.



“Sanctioned Country” means a country subject to a sanctions program identified on the
list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/
programs/, or as otherwise published from time to time.



“Sanctioned Person” means (i) a Person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.shtml, or as otherwise published from time to time,
or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled
by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to
a sanctions program administered by OFAC.


 


16









 





“SBA” means the Small Business Administration.



“SBIA” means the Small Business Investment Act of 1958, as amended, and the
regulations promulgated thereunder.



“SBIA Investor” has the meaning given to such term in Section 5.12.



“Securities Act” means the Securities Act of 1933, as amended as amended from time to
time, and any successor statute, and all rules and regulations from time to time promulgated
thereunder.



“Subsidiary” means, with respect to any Person, any corporation or other Person of
which more than 50% of the outstanding Capital Stock having ordinary voting power to elect a
majority of the board of directors, board of managers or other governing body of such Person, is at
the time, directly or indirectly, owned or controlled by such Person and one or more of its other
Subsidiaries or a combination thereof (irrespective of whether, at the time, securities of any
other class or classes of any such corporation or other Person shall or might have voting power by
reason of the happening of any contingency). When used without reference to a parent entity, the
term “Subsidiary” shall be deemed to refer to a Subsidiary of the Company.



“Subsidiary Guarantor” means any Guarantor that is a Subsidiary of the Company.



“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.



“Target” has the meaning given to such term in the definition of Permitted
Acquisition.



“Third-Party Claim” has the meaning given to such term in Section 9.1(c).



“Total Voting Power” means, with respect to any Person, the total number of votes
which may be cast in the election of directors of such Person at any meeting of stockholders of
such Person if all securities entitled to vote in the election of directors of such Person (on a
fully diluted basis, assuming the exercise, conversion or exchange of all rights, warrants, options
and securities exercisable for, exchangeable for or convertible into, such voting securities) were
present and voted at such meeting (other than votes that may be cast only upon the happening of a
contingency).



“Transactions” means, collectively, the transactions contemplated by the Investment
Documents, including (i) the issuance, purchase and sale of the Preferred Stock and the Warrant
hereunder on the Closing Date and (iii) the payment of permitted fees and expenses in connection
with the foregoing.



“Unfunded Pension Liability” means, with respect to any Plan, the excess of its
benefit liabilities under Section 4001(a)(16) of ERISA over the current value of its assets,
determined in accordance with the applicable assumptions used for funding under Section 412 of the
Code for the applicable plan year.


 


17









 





“Warrant” means the Warrant to purchase shares of the Company’s common stock,
substantially in the form attached hereto as Exhibit E.



“Wholly Owned” means, with respect to any Subsidiary of any Person, that 100% of the
outstanding Capital Stock of such Subsidiary is owned, directly or indirectly, by such Person.



1.2 Accounting Terms. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance with, GAAP applied on
a basis consistent with the most recent audited consolidated and consolidating financial statements
of the Company delivered to the Investors prior to the Closing Date; provided that if the
Company notifies the Investors that it wishes to amend any financial covenant in Article VI to
eliminate the effect of any change in GAAP on the operation of such covenant (or if the Required
Investors notify the Company that the Required Investors wish to amend Article VI for such
purpose), then the Company’s compliance with such covenant shall be determined on the basis of GAAP
as in effect immediately before the relevant change in GAAP became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the
Required Investors.



1.3 Other Terms; Construction.



(a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word
“will” shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented, restated or otherwise modified (subject to any
restrictions on such amendments, supplements, restatements or modifications set forth herein or in
any other Investment Document), (ii) any reference herein to any Person shall be construed to
include such Person’s successors and assigns permitted hereunder, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used in any Investment
Document, shall be construed to refer to such Investment Document in its entirety and not to any
particular provision thereof, (iv) all references in an Investment Document to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, the Investment Document in which such references appear, (v) any reference to any law
or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) the words “asset” and
“property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and contract rights.


 


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(b) Notwithstanding the foregoing, calculations to determine compliance by the Company for any
period with the Debt Incurrence Test as set forth in Section 6.1 or to determine whether a
condition to any transaction or event has been met, shall be determined in each case on a pro forma
basis (a “Pro Forma Basis”) after giving effect to any Acquisition, Asset Disposition,
incurrence or payment of Indebtedness or other transaction (each, a “transaction”)
occurring during such period (or proposed to be consummated, as the case may be) as if such
transaction had occurred as of the first day of such period, in accordance with the following:



(i) any Indebtedness incurred or assumed by any Company Party in connection with any
transaction (including any Indebtedness of a Person acquired in an Acquisition that is not retired
or repaid in connection therewith) shall be deemed to have been incurred or assumed as of the first
day of the applicable period (and if such Indebtedness has a floating or formula rate, such
Indebtedness shall, for purposes of such determination, have an implied rate of interest during the
applicable period determined by utilizing the rate of interest that is or would be in effect with
respect to such Indebtedness as of the date of determination);



(ii) any Indebtedness retired or repaid in connection with any transaction (including any
Indebtedness of a Person acquired in an Acquisition) shall be deemed to have been retired or repaid
as of the first day of the applicable period;



(iii) with respect to any Acquisition, income statement items (whether positive or negative)
and balance sheet items attributable to the Person or assets acquired shall (to the extent not
otherwise included in the consolidated and consolidating financial statements of the Company and
its Subsidiaries in accordance with GAAP or in accordance with other provisions of this Agreement)
be included in such calculations to the extent relating to the applicable period as provided
herein; and



(iv) with respect to any Asset Disposition, income statement items (whether positive or
negative) and balance sheet items attributable to the assets disposed of shall be excluded from
such calculations to the extent relating to the applicable period.



ARTICLE II




PURCHASE OF PREFERRED STOCK AND WARRANT




2.1 The Purchase of Preferred Stock and Warrant.



Subject to and upon satisfaction of the terms and conditions herein set forth (or waiver of such
conditions by the Required Investors), and in reliance upon the representations and warranties of
the Company contained herein, at the closing of the transactions
contemplated by this Agreement (the “Closing”), the Investors shall purchase from the Company, and the Company shall issue and
sell to the Investors, (i) the Preferred Stock and (ii) the Warrant, for the aggregate purchase
price of $6,300,000.


 


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2.2 Terms of Preferred Stock.



The terms of, and the rights and privileges associated with, the Preferred Stock shall be as set
forth in the Certificate of Designations.



2.3 The Closing.



The Closing shall take place at such time that the Company and the Investors may agree (the
“Closing Date”) at such place or by such means as the Company and the Investors may agree.
At the Closing, (i) the Company shall issue, sell and deliver the Preferred Stock and the Warrant
to the Investors, and (ii) the Investors shall pay $6,300,000 to the Company in exchange for the
Preferred Stock and the Warrant by wire transfer of immediately available funds pursuant to written
instructions delivered to the Investors by the Company at or prior to the Closing. The Company
hereby authorizes the Investors to disburse such amount in accordance with the terms of any written
instructions from any Authorized Officer of the Company.



2.4 Fees.



The Company agrees to pay to Fidus, for its own account, on the Closing Date, the fees under
the Fee Letter in the amounts due and payable on the Closing Date as required by the terms thereof;



2.5 Recovery of Payments.



The Company agrees that to the extent the Company makes a payment or payments to or for the
account of any Investor, which payment or payments or any part thereof are subsequently required to
be repaid to the Company or a trustee, receiver or any other party under any bankruptcy, insolvency
or similar state or federal law, common law or equitable cause (whether as a result of any demand,
settlement, litigation or otherwise), then, to the extent of such payment or repayment, the
Obligation intended to be satisfied shall be revived and continued in full force and effect as if
such payment had not been received.



2.6 Use of Proceeds.



The proceeds of the sale of the Preferred Stock and the Warrant to the Investors on the
Closing Date shall be used (i) for general corporate purposes, including working capital and
acquisitions permitted hereunder and (ii) to pay or reimburse permitted fees and expenses in
connection with the issuance of the Preferred Stock and the Warrant.



2.7 Redemption.



(a) The Company shall redeem, at the Redemption Price, any and all outstanding shares of
Preferred Stock of each Investor on the Redemption Date.



(b) The Company shall redeem, at the Redemption Price, the outstanding shares of Preferred
Stock of each Investor, in whole or in part at the option of such Investor, upon the occurrence of
any of the following: (i) a Sale of the Company, (ii) a Key Person Event, (iii) an Event of
Noncompliance or (iv) the failure of the covenants contained in ARTICLES V, VI or VII to be
effective and applicable in respect of the Preferred Stock (each, a “Mandatory Redemption
Event”).


 


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The Company shall give written notice to the Investors of (A) the expected occurrence of any
Mandatory Redemption Event arising under clause (i) of the definition thereof not less than 30 nor
more than 60 days prior to the proposed closing date thereof, describing in reasonable detail such
transaction, including the proposed closing and payment date with respect thereto, and (B) the
occurrence of a Key Person Event specified in clause (ii) above and an Event of Noncompliance
specified in clause (iii) above within ten days of obtaining Knowledge or receiving notice of such
occurrence. To have shares of Preferred Stock redeemed, the holders thereof must give written
notice to the Company after the occurrence of a Mandatory Redemption Event, demanding redemption
and specifying the number of shares to be redeemed. With respect to the events specified in clause
(i) of the definition of “Mandatory Redemption Event,” each Investor must deliver such notice to
the Company within twenty days after receiving notice from the Company as to any such event. Upon
receipt of any proper redemption demand from an Investor, the Company covenants and agrees that it
will redeem the shares of Preferred Stock or the portion thereof held by such Investor subject to
redemption. The closing date for any redemption due to the occurrence of an event specified in
clause (i) of the definition of “Mandatory Redemption Event” shall not be later than the closing
date of such event. The closing date for a redemption due to any other Mandatory Redemption Event
shall occur within ten Business Days of the Company’s receipt of the redemption demand.



The obligation of the Company to redeem the Preferred Stock pursuant to this Section 2.7(b) is
subject to the occurrence of the Mandatory Redemption Event in respect of which such offers and
acceptances shall have been made. In the event that such Mandatory Redemption Event does not occur
on or prior to the proposed redemption date in respect thereof, the redemption shall be deferred
until and shall be made upon the date on which such Mandatory Redemption Event occurs. The Company
shall keep each Investor reasonably and timely informed of (i) any such deferral of the date of
redemption, (ii) the date on which such Mandatory Redemption Event and the redemption are expected
to occur, and (iii) any determination by the Company that efforts to effect such Mandatory
Redemption Event have
ceased or been abandoned (in which case the offers and acceptances made pursuant to this
Section in respect of such Mandatory Redemption Event shall be deemed rescinded).



(c) To the extent the Company shall have funds legally available for such payment, the Company
shall have the right at any time and from time to time, upon the notice provided for below, to
redeem, at the Redemption Price, the outstanding shares of Preferred Stock in whole or in part;
provided that if less than all of the outstanding shares of Preferred Stock are to be
redeemed, the Company shall redeem a pro rata portion of each Investor’s shares of Preferred Stock.
In the event of such an optional redemption, the Company shall give the Investors irrevocable
(other than as provided below) written notice of such redemption not less than forty-five days
prior to the redemption date, specifying (i) the redemption date, (ii) the number of shares of
Preferred Stock to be redeemed on such date, (iii) the redemption price, (iv) the place or places
where certificates for such shares are to be surrendered for payment of the redemption price, (v)
that dividends on the shares to be redeemed will cease to accrue on such redemption date, and (vi)
stating that such redemption is to be made pursuant to this Section 2.7(c); provided, however, that
the Company may withdraw such offer at any time prior to the redemption date so long as any of the
rights of any Investor shall not have been prejudiced in any material respect by reliance upon such
offer of redemption.


 


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(d) In addition to the optional redemption rights provided in Section 2.7(c), in the event
that (1) the Company requests, in writing, that the Investors consent to a contemplated Acquisition
that otherwise does not constitute a Permitted Acquisition, (2) the Company gives at least 20 days
prior written notice of such contemplated Acquisition prior to the consummation thereof and the
Company provides prior to consummation of such contemplated Acquisition all financial and due
diligence information regarding the contemplated Acquisition reasonably requested by the Investors
prior to such consummation, (3) the Required Investors notify the Company, in writing, that they
will not provide such consent and (4) the Company actually consummates such Acquisition, to the
extent the Company shall have funds legally available for such payment, the Company shall have the
right, upon the notice provided for below, to redeem, at the Redemption Price, the outstanding
shares of Preferred Stock in whole but not in part. In the event of such an optional redemption,
the Company shall give the Investors irrevocable (other than as provided below) written notice of
such redemption not more than ten days following the consummation of such Acquisition, specifying
(i) the redemption date, which shall not be more than 30 days following the consummation of such
Acquisition, (ii) the number of shares of Preferred Stock to be redeemed on such date, (iii) the
redemption price, (iv) the place or places where certificates for such shares are to be surrendered
for payment of the redemption price, (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date, and (vi) stating that such redemption is to be made pursuant to
this Section 2.7(d); provided, however, that the Company may withdraw such offer at
any time prior to the redemption date so long as any of the rights of any Investor shall not have
been prejudiced in any material respect by reliance upon such offer of redemption.



(e) With respect to any shares of Preferred Stock to be redeemed or repurchased under this
Section 2.7 , the Company shall pay to the Investors holding the Preferred Stock being redeemed or
purchased an amount in cash equal to the Redemption Price of the Preferred Stock being redeemed or
purchased. The Company also shall pay in cash to the Investors holding Preferred Stock at the time
of such redemption all accrued and unpaid fees, charges and other
amounts owed by any Company Party to such Investors pursuant to the Investment Documents. If
the Company is unable or shall fail to discharge its obligation to redeem all outstanding shares of
Preferred Stock at the time required pursuant to this Section 2.7 (excluding, for the purposes of
clarity, where the Company is permitted to rescind or cancel any redemption as permitted herein),
(i) the Company shall discharge such redemption or purchase obligation as soon thereafter as
possible and the amounts payable in connection with such redemption or purchase shall bear interest
as provided in the Certificate of Designations, from and after the date redemption is required
pursuant to this Section 2.7.



(f) Upon the redemption of shares of Preferred Stock and payment of the redemption price
therefor, dividends shall no longer accrue on such shares of Preferred Stock hereunder. In case
fewer than all the shares represented by any certificate representing shares of Preferred Stock are
redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the
Investor.


 


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2.8 Investment Unit.



The Company and the Investors hereby acknowledge and agree that (a) the Preferred Stock and
the Warrant are part of an investment unit within the meaning of Section 1273(c)(2) of the Code,
(b) for United States federal income tax purposes, the issue price of the Warrant within the
meaning of Section 1273(b) of the Code, which issue price was determined pursuant to Section
1.1273-2(h)(1) of the Treasury Regulations, is equal to $1,307,457, and (c) each of the Company and
the Investors shall use such issue price for all income tax purposes with respect to the issuance
of the Preferred Stock and the Warrant.



2.9 Additional Shares.



At the written request of any Investor, the Company shall be required to issue additional
shares of Preferred Stock (“Additional Shares”) with respect to the payment of dividends
previously accreted to the Liquidation Value of outstanding shares of the Preferred Stock of such
holder pursuant to the Certificate of Designations. The Additional Shares shall be identical to
all other shares of Preferred Stock except that the “Original Issue Date” (as defined in the
Certificate of Designations) with respect to such shares shall be the date such Additional Shares
are actually issued. In such cases, the number of Additional Shares to be issued as payment of
such previously accreted dividends shall be equal to the amount of accreted dividends being paid by
the issuance of Additional Shares divided by the Original Per Share Purchase Price, carried out to
five decimal points for fractional shares. Upon the issuance of Additional Shares to such holder,
the amount of accreted dividends on outstanding shares of the Preferred Stock of such holder shall
be reduced by the amount of the accreted dividend paid by the issuance of Additional Shares
pursuant to this Section 2.9.



2.10 Pro Rata Treatment.



If any Investor shall, by exercising any right of setoff or counterclaim or otherwise, obtain
payment in respect of the Preferred Stock, the Warrant or other Obligations hereunder resulting in
such Investor’s receiving payment of a proportion of the aggregate amount of the Liquidation Value
of the Preferred Stock held by it and or other such Obligations greater than its pro rata share
thereof as provided herein (except where such excess payment is received as a result of the
Inventors differing decisions with respect to redeeming their shares of Preferred Stock where such
redemption is at the election of individual Investors), then the Investor receiving such greater
proportion shall (a) notify the other Investors of such fact, and (b) purchase (for cash at face
value) Obligations of the other Investors, or make such other adjustments as shall be equitable, so
that the benefit of all such payments shall be shared by the Investors ratably in accordance with
the Liquidation Value of their respective shares of Preferred Stock and other amounts owing them,
provided that (i) if any such Obligations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the provisions of this
Section shall not be construed to apply to (x) any payment made by the Company pursuant to and in
accordance with the express terms of this Agreement or (y) any payment obtained by an Investor as
consideration for the assignment of or sale of its Preferred Stock or Warrant to any assignee or
participant, other than to the Company or any Subsidiary thereof (as to which the provisions of
this Section 2.10 shall apply). The Company consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Investor acquiring an Obligation pursuant to
the foregoing arrangements may exercise against the Company rights of setoff and counterclaim with
respect to such Obligation as fully as if such Investor were a direct obligee of the Company in the
amount of such Obligation. If under any applicable bankruptcy, insolvency or similar law, any
Investor receives a secured claim in lieu of a setoff to which this Section 2.10 applies, such
Investor shall, to the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Investors entitled under this Section 2.10 to share in
the benefits of any recovery on such secured claim.


 


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2.11 Change in Law; Illegality.



(a) If any Change in Law shall:



(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance
charge or similar requirement against assets of, deposits with or for the account of, or credit
extended or participated in by, any Investor, all as a result and only to the extent of such
Investor’s participation in the Transactions;



(ii) subject any Investor to any tax of any kind whatsoever with respect to this Agreement, or
change the basis of taxation of payments to such Investor in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 2.12 and the imposition of, or any change in
the rate of, any Excluded Tax payable by such Investor); or



(iii) impose on any Investor any other condition, cost or expense affecting this Agreement;



and the result of any of the foregoing shall be to increase the cost to such Investor, or to reduce
the amount of any sum received or receivable by such Investor hereunder, then, upon request of
such Investor, the Company will pay to such Investor, as the case may be, such additional amount or
amounts as will compensate such Investor, as the case may be, for such additional costs incurred or
reduction suffered.



(b) If any Investor determines in good faith and in the exercise of its reasonable business
judgment that any Change in Law affecting such Investor or any office of such Investor or such
Investor’s holding company, if any, regarding capital requirements has or would have the effect of
reducing the rate of return on such Investor’s capital or on the capital of such Investor’s holding
company, if any, as a consequence of this Agreement or such Investor’s purchase or ownership of the
Preferred Stock to a level below that which such Investor or such Investor’s holding company could
have achieved but for such Change in Law (taking into consideration such Investor’s and the
policies of such Investor’s holding company with respect to capital adequacy), then from time to
time the Company will pay to such Investor such additional amount or amounts as will compensate
such Investor or such Investor’s holding company for any such reduction suffered.



(c) A certificate of an Investor setting forth the amount or amounts reasonably determined by
such Investor in good faith necessary to compensate such Investor or its holding company, as the
case may be, as specified in Section 2.11(a) or 2.11(b) and delivered to the Company shall be
conclusive absent manifest error. The Company shall pay such Investor the amount shown as due on
any such certificate within ten days after receipt thereof.


 


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(d) Failure or delay on the part of any Investor to demand compensation pursuant to the
foregoing provisions of this Section shall not constitute a waiver of such Investor’s right to
demand such compensation, provided that the Company shall not be required to compensate an
Investor pursuant to the foregoing provisions of this Section for any increased costs incurred or
reductions suffered more than nine months prior to the date that such Investor notifies the Company
of the Change in Law giving rise to such increased costs or reductions and of such Investor’s
intention to claim compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period referred to above shall be
extended to include the period of retroactive effect thereof).



(e) Notwithstanding anything to the contrary elsewhere in this Agreement, if any Change in Law
results in an increase in payments by Company to any Investor hereunder, the Company may
immediately redeem the Preferred Stock of such Investor in whole or in part at a Redemption Price
calculated in the same manner as optional redemptions are conducted pursuant to Section 2.7(c)
hereof.



2.12 Taxes.



(a) Any and all payments by or on account of any obligation of the Company hereunder or under
any other Investment Document shall be made free and clear of and without reduction or withholding
for any Indemnified Taxes or Other Taxes, provided that if the Company shall be required by
applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then
(i) the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section) the Investor
receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Company shall make such deductions and
(iii) the Company shall timely pay the full amount deducted to the relevant Governmental Authority
in accordance with applicable law.



(b) Without limiting the provisions of Section 2.12(a), the Company shall timely pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.



(c) The Company shall indemnify each Investor within 10 days after demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable in respect of the Obligations (including Indemnified Taxes or Other Taxes imposed
or asserted on or attributable to amounts payable under this Section) paid by such Investor and any
penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment or liability
delivered to the Company by an Investor shall be conclusive absent manifest error.



(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Company to a Governmental Authority, the Company shall deliver to the applicable Investors the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to such Investors.


 


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(e) Any Foreign Investor that is legally entitled to and desires to obtain the benefit of an
exemption from or reduction of withholding tax for United States federal income tax purposes, with
respect to payments hereunder or under any other Investment Document shall deliver to the Company,
at the time or times prescribed by applicable law or reasonably requested by the Company, such
properly completed and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate of withholding. In addition, any
Investor, if requested by the Company, shall deliver such other documentation prescribed by
applicable law or reasonably requested by the Company as will enable the Company to determine
whether or not such Investor is subject to backup withholding or information reporting
requirements.



Without limiting the generality of the foregoing, any Foreign Investor shall deliver to the
Company on or prior to the date on which such Foreign Investor becomes an Investor under this
Agreement (and from time to time thereafter upon the request of the Company, but only if such
Foreign Investor is legally entitled to do so), whichever of the following is applicable:



(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,



(ii) duly completed copies of Internal Revenue Service Form W-8ECI,



(iii) in the case of a Foreign Investor claiming the benefits of the exemption for portfolio
interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign
Investor is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10
percent shareholder” of the Company within the meaning of Section 881(c)(3)(B) of
the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the
Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or



(iv) any other form prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable law to permit the Company to determine the
withholding or deduction required to be made.



(f) If any Investor receives a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Company or with respect to which the Company has paid additional amounts
pursuant to this Section, such Investor shall promptly pay to the Company an amount equal to such
refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Company under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of such Investor and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund), provided that the
Company, upon the request of such Investor agrees to repay the amount paid over to the Company
(plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to
such Investor in the event such Investor is required to repay such refund to such Governmental
Authority.


 


26









 





(g) Notwithstanding the foregoing, the Company may, at any time, challenge the imposition of
any Taxes or Other Taxes subject to payment or indemnification by Company hereunder and, without
limiting the foregoing, pursue a refund of any such Taxes or Other Taxes. Any such amounts
recovered, including, any interest, penalties or other amounts, shall be the property of the
Company. Any Investor with respect to whom any such challenge or refund relates agrees to
reasonably cooperate, at the sole expense of the Company, with the Company in the pursuit of such
challenge or refund including, without limitation, permitting such challenge or refund request to
be brought in the name of such investor and providing to the Company or its designee a limited
power of attorney with respect thereto. Any amounts recovered in connection with any such
challenge or refund request shall be promptly paid to the Company.



2.13 Mitigation of Costs.



If any Investor requests compensation under Sections 2.11(a) or 2.11(b), or the Company is
required to pay any additional amount to any Investor or any Governmental Authority for the account
of any Investor pursuant to Section 2.12, then such Investor shall use reasonable efforts to
designate a different office for funding or holding its Preferred Stock and the Warrant hereunder
or to assign its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Investor, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Sections 2.11(a), 2.11(b) or 2.12, as the case may
be, in the future, and (ii) in each case, would not subject such Investor to any unreimbursed cost
or expense and would not otherwise be disadvantageous to such Investor. The Company hereby agrees
to pay all reasonable costs and expenses incurred by any Investor in connection with any such
designation or assignment.



ARTICLE III




CONDITIONS OF CLOSING




3.1 Investors Conditions of Closing.



The obligation of each Investor to purchase the Preferred Stock and the Warrant on the Closing
Date is subject to the satisfaction of the following conditions precedent:



(a) The Investors shall have received the following, each dated as of the Closing Date (unless
otherwise specified) and in such number of copies as the Investors shall have requested:



(i) this Agreement, executed and delivered by the Company;



(ii) a certificate representing the shares of Preferred Stock executed, delivered and issued
by the Company;



(iii) the Warrant, duly executed by the Company;



(iv) the Guaranty, duly executed by each Wholly Owned Subsidiary of the Company except for the
Casie Companies;


 


27









 





(v) a registration rights agreement, in form and substance satisfactory to the Investors, duly
executed by the Company;



(vi) a securityholders agreement, in form and substance satisfactory to the Investors, duly
executed by the Company, Brent Kopenhaver and Mark Alsentzer;



(vii) an opinion of counsel reasonably acceptable to the Investors, in form and substance
reasonably satisfactory to Fidus; and



(viii) properly completed and executed SBA Form 652, SBA Form 480 and Part A of SBA Form 1031
from the Company.



(b) The Investors shall have received a certificate, signed by the president, the chief
executive officer or the chief financial officer of the Company, dated the Closing Date and in form
and substance reasonably satisfactory to the Investors, certifying that (i) all representations and
warranties of the Company Parties contained in this Agreement and the other Investment Documents
are true and correct as of the Closing Date, both immediately before and immediately after giving
effect to the consummation of the Transactions and the application of the proceeds thereof (except
to the extent any such representation or warranty is expressly stated to have been made as of a
specific date, in which case such representation or warranty shall be true and correct as of such
date), (ii) no Event of Noncompliance has occurred and is continuing, both immediately before and
after giving effect to the Transactions and the application of the proceeds
thereof, and (iiii) all conditions to the purchase the Preferred Stock and the Warrant set
forth in this Section 3.1 have been satisfied or waived as required hereunder.



(c) The Investors shall have received a certificate of the secretary or an assistant secretary
of each Company Party executing any Investment Documents as of the Closing Date, dated the Closing
Date and in form and substance reasonably satisfactory to Fidus, certifying (i) that attached
thereto is a true and complete copy of the articles or certificate of incorporation, certificate of
formation or other organizational document and all amendments (including the amendments required to
amend the terms, rights, preferences and privileges of the Existing Preferred Stock and designate
the terms, rights, preferences and privileges of the Preferred Stock) thereto of such Company
Party, certified as of a recent date by the Secretary of State (or comparable Governmental
Authority) of its jurisdiction of organization, and that the same has not been amended since the
date of such certification, (ii) that attached thereto is a true and complete copy of the bylaws,
operating agreement or similar governing document of such Company Party, as then in effect and as
in effect at all times from the date on which the resolutions referred to in clause (iii) below
were adopted to and including the date of such certificate, and (iii) that attached thereto is a
true and complete copy of resolutions adopted by the board of directors (or similar governing body)
of such Company Party, authorizing the execution, delivery and performance of this Agreement and
the other Investment Documents to which it is a party, and as to the incumbency and genuineness of
the signature of each officer of such Company Party executing this Agreement or any of such other
Investment Documents, and attaching all such copies of the documents described above.


 


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(d) The Investors shall have received (i) a certificate as of a recent date of the good
standing of each Company Party executing any Investment Documents as of the Closing Date, under the
laws of its jurisdiction of organization, from the Secretary of State (or comparable Governmental
Authority) of such jurisdiction, and (ii) a certificate as of a recent date of the qualification of
each Company Party to conduct business as a foreign corporation in such jurisdictions as Fidus may
have reasonably requested, from the Secretary of State (or comparable Governmental Authority) of
such jurisdiction.



(e) The Investors shall have received copies of the financial statements and information
referred to in Sections 4.11(a) and 4.11(b);



(f) The Investors shall have received an executed Financial Condition Certificate, attaching
copies of (i) the Projections, (ii) an unaudited consolidated and consolidating balance sheet of
the Company and its Subsidiaries (other than the Casie Companies) as of December 31, 2007
calculated in accordance with GAAP except for the exclusion of all matters relating to the Casie
Companies, showing adjustments on a Pro Forma Basis to give effect to the consummation of the
Transactions, all as if such events had occurred on such date (the “Pro Forma Balance
Sheet”) and (iii) an unaudited consolidated and consolidating balance sheet of the Casie
Companies as of December 31, 2007, all of which shall be in form and substance satisfactory to the
Investors.



(g) The Investors shall be satisfied that, on a Pro Forma Basis after giving effect to the
Transactions, all as if such events had occurred on the date of the Pro Forma Balance Sheet,
(i) Consolidated EBITDA for the Company and its Subsidiaries for the twelve-month period
ending on December 31, 2007 is not less than $7,200,000, (ii) Consolidated Funded Debt is not
greater than $21,000,000 and (iii) the Leverage Ratio is not greater than 1.8x; and the Investors
shall have received a certificate of a Financial Officer of the Company as to the foregoing in form
and substance satisfactory to the Investors.



(h) The Investors shall have received written instructions from an Authorized Officer of the
Company, including wire transfer information, directing the payment of the proceeds of the
Preferred Stock and the Warrant to be made hereunder.



(i) No Event of Noncompliance shall have occurred and be continuing on such date, both
immediately before and immediately after giving effect to the Transactions.



(j) Each of the representations and warranties contained in Article IV and in the other
Investment Documents shall be true and correct on and as of the Closing Date, with the same effect
as if made on and as of such date, both immediately before and immediately after giving effect to
the purchase and sale of the Preferred Stock and the Warrant contemplated hereby (except to the
extent any such representation or warranty is expressly stated to have been made as of a specific
date, in which case such representation or warranty shall be true and correct as of such date).


 


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3.2 Company Party Conditions to Closing.



The obligation of each Company Party to consummate the transactions described in this
Agreement on the Closing Date is subject to the satisfaction of the following conditions precedent:



(a) The Company Parties shall have received this Agreement, dated as of the Closing Date and
in such number of copies as the Company Parties shall have requested, executed and delivered by all
Investors; and



(b) The Company shall have received payment of the aggregate purchase price for the Preferred
Stock and Warrant set forth in Section 2.1 hereof in immediately available funds.



ARTICLE IV




COMPANY REPRESENTATIONS AND WARRANTIES




To induce the Investors to enter into this Agreement and to induce the Investors to purchase
the Preferred Stock and the Warrant contemplated hereby, the Company represents and warrants to
each Investor that the statements contained in this Article IV are correct as of the date of this
Agreement, except as otherwise expressly set forth in the schedules delivered by the Company to the
Investor on the date hereof. Such schedules will be arranged in sections corresponding to the
sections contained in this Article IV.



4.1 Corporate Organization and Power.



Each Company Party (i) is a corporation or a limited liability company duly organized or
formed, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as the case may be, (ii) has the full corporate or limited liability
company power and authority to execute, deliver and perform the Investment Documents to which it is
or will be a party, to own and hold its property and to engage in its business as presently
conducted, and (iii) is duly qualified to do business as a foreign corporation or limited liability
company and is in good standing in each jurisdiction where the nature of its business or the
ownership of its properties requires it to be so qualified, except where the failure to be so
qualified, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.



4.2 Authorization; Enforceability.



Each Company Party has taken, or on the Closing Date will have taken, all necessary corporate
or limited liability company action, as applicable, to execute, deliver and perform each of the
Investment Documents to which it is or will be a party, and has, or on the Closing Date (or any
later date of execution and delivery) will have, validly executed and delivered each of the
Investment Documents to which it is or will be a party. This Agreement constitutes, and each of
the other Investment Documents upon execution and delivery will constitute, the legal, valid and
binding obligation of each Company Party that is a party hereto or thereto, enforceable against it
in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights generally, by general
equitable principles or by principles of good faith and fair dealing (regardless of whether
enforcement is sought in equity or at law).


 


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4.3 No Violation.



The execution, delivery and performance by each Company Party of each of the Investment
Documents to which it is or will be a party, and compliance by it with the terms hereof and
thereof, do not and will not (i) violate any provision of its articles or certificate of
incorporation or formation, its bylaws or operating agreement, or other applicable formation or
organizational documents, (ii) contravene any other Requirement of Law applicable to it,
(iii) conflict with, result in a breach of or constitute (with notice, lapse of time or both) a
default under any indenture, mortgage, lease, agreement, contract or other instrument to which it
is a party, by which it or any of its properties is bound or to which it is subject, or (iv) result
in or require the creation or imposition of any Lien upon any of its properties, revenues or
assets; except, in the case of clauses (ii) and (iii) above, where such contraventions, violations,
conflicts, breaches or defaults, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.



4.4 Governmental and Third-Party Authorization; Permits.



No consent, approval, authorization or other action by, notice to, or registration or filing
with, any Governmental Authority or other Person is or will be required as a condition to or
otherwise in connection with the due execution, delivery and performance by each Company Party of
this Agreement or any of the other Investment Documents to which it is or will be a party or the
legality, validity or enforceability hereof or thereof, other than (i) consents, authorizations and
filings that have been (or on or prior to the Closing Date will have been) made or obtained and
that are (or on the Closing Date will be) in full force and effect, which consents, authorizations
and filings are listed on Schedule 4.4, and (ii) consents and filings the failure to obtain or make
which, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. Each Company Party has, and is in good standing with respect to, all governmental
approvals, licenses, permits and authorizations necessary to conduct its business as presently
conducted and to own or lease and operate its properties, except for those the failure to obtain
which, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.



4.5 Litigation.



There are no actions, investigations, suits or proceedings pending or, to the Knowledge of the
Company, threatened, at law, in equity or in arbitration, before any court, other Governmental
Authority, arbitrator or other Person, (i) against or affecting any of the Company Parties or any
of their respective properties that, if adversely determined, could reasonably be expected to have
a Material Adverse Effect, or (ii) with respect to this Agreement, any of the other Investment
Documents or any of the transactions contemplated hereby or thereby. The actions, investigations,
suits or proceedings pending or, to the Knowledge of the Company, threatened against or affecting
the Company as of the Closing Date are listed on Schedule 4.5.


 


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4.6 Taxes.



Each Company Party has timely filed all federal, state, local and foreign tax returns and
reports required to be filed by it and has paid, prior to the date on which penalties would attach
thereto or a Lien would attach to any of the properties of a Company Party if unpaid, all taxes,
assessments, fees and other charges levied upon it or upon its properties that are shown thereon as
due and payable, other than those that are not yet delinquent or that are being contested in good
faith and by proper proceedings and for which adequate reserves have been established in accordance
with GAAP. Such returns accurately reflect in all material respects all liability for taxes of the
Company Parties for the periods covered thereby. As of the Closing Date, there is no ongoing audit
or examination or, to the Knowledge of the Company, other investigation by any Governmental
Authority of the tax liability of any of the Company Parties, and there is no material unresolved
claim by any Governmental Authority concerning the tax liability of any Company Party for any
period for which tax returns have been or were required to have been filed, other than unsecured
claims for which adequate reserves have been established in
accordance with GAAP. As of the Closing Date, no Company Party has waived or extended or has
been requested to waive or extend the statute of limitations relating to the payment of any taxes.



4.7 Subsidiaries; Capitalization.



Schedule 4.7 sets forth, as of the Closing Date and after giving effect to the Transactions,
(i) all of the Subsidiaries of the Company and, (ii) as to the Company and each Subsidiary not
Wholly Owned by the Company, (x) the number of shares, units or other interests of each class of
Capital Stock outstanding, and the number and effect, if exercised, of all outstanding options,
warrants, rights of conversion or purchase and similar rights and (y) the direct holders of all
such Capital Stock and the number of shares, units, interests, options, warrants or other purchase
rights held by each. All outstanding shares of Capital Stock of the Company and each of its
Subsidiaries are duly and validly issued, fully paid and nonassessable. As of the Closing Date
there are no shares of Capital Stock, warrants, rights, options or other equity securities, or
other Capital Stock of any Company Party outstanding or reserved for any purpose other than
outstanding to or reserved for issuance to the Company or a Wholly Owned Subsidiary of the Company.



4.8 Full Disclosure. The representations and warranties contained in this Article IV, when
taken together with the schedules hereto do not contain any untrue statement of a material fact nor
omit to state any material fact necessary in order to make the statements and information contained
herein and therein not misleading.



4.9 Margin Regulations.



No Company Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin Stock. No proceeds
of the Preferred Stock or the Warrant will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose, in each case that
would violate or be inconsistent with Regulations T, U or X or any provision of the Exchange Act.



4.10 No Material Adverse Effect.



Since December 31, 2006, there has been no Material Adverse Effect and there exists no event,
condition or state of facts that could reasonably be expected to result in a Material Adverse
Effect other than any Material Adverse Effect (i) readily ascertainable from the face of financial
statements delivered to the Investors on or prior to closing for periods ended after December 31,
2006 and (ii) arising from changes, events, circumstances or conditions generally
affecting the industry in which the Company Parties operate of which the Company has no
Knowledge or general macro economic conditions.


 


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4.11 Financial Matters.



(a) The Company has furnished to the Investors copies of (i) the audited consolidated and
consolidating balance sheets of the Company and its Subsidiaries (other than the Casie Companies)
as of December 31, 2006 and 2005, in each case with the related statements of income, cash flows
and stockholders’ equity for the fiscal years then ended, together with the opinion of auditors
thereon, and (ii) the unaudited consolidated and consolidating balance sheet of the Company and its
Subsidiaries (other than the Casie Companies) as of December 31, 2007, and the related statements
of income, cash flows and stockholders’ equity for the year ended December 31, 2007. Such
financial statements have been prepared in accordance with GAAP (subject, with respect to the
unaudited financial statements, to the absence of notes required by GAAP, to normal year-end
adjustments and to the exclusion of all financial information relating to the Casie Companies) and
present fairly in all material respects the financial condition of the Company and its Subsidiaries
(other than the Casie Companies) on a consolidated and consolidating basis as of the respective
dates thereof and the results of operations of the Company and its Subsidiaries (other than the
Casie Companies) on a consolidated and consolidating basis for the respective periods then ended.
Except as fully reflected in the most recent financial statements referred to above and the notes
thereto, there are no material liabilities or obligations with respect to the Company and its
Subsidiaries (other than the Casie Companies) of any nature whatsoever (whether absolute,
contingent or otherwise and whether or not due) that are required in accordance with GAAP to be
reflected in such financial statements and that are not so reflected.



(b) The Company has furnished to the Investors copies of (i) the audited consolidated and
consolidating balance sheets of the Casie Companies as of December 31, 2006 and 2005, in each case
with the related statements of income, cash flows and stockholders’ equity for the fiscal years
then ended, together with the opinion of auditors thereon, and (ii) the unaudited consolidated and
consolidating balance sheet of the Casie Companies as of December 31, 2007, and the related
statements of income, cash flows and stockholders’ equity for the year ended December 31, 2007.
Such financial statements have been prepared in accordance with GAAP (subject, with respect to the
unaudited financial statements, to the absence of notes required by GAAP, to normal year-end
adjustments and the fact that the Casie Companies are not consolidated with the Company) and
present fairly in all material respects the financial condition of the Casie Companies on a
consolidated and consolidating basis as of the respective dates thereof and the results of
operations of the Casie Companies on a consolidated and consolidating basis for the respective
periods then ended. Except as fully reflected in the most recent financial statements referred to
above and the notes thereto, there are no material liabilities or obligations with respect to the
Casie Companies of any nature whatsoever (whether absolute, contingent or otherwise and whether or
not due) that are required in accordance with GAAP to be reflected in such financial statements and
that are not so reflected.


 


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(c) The Pro Forma Balance Sheet reflects adjustments made on a Pro Forma Basis to give effect
to the consummation of the Transactions, all as if such events had occurred on the date as of which
the Pro Forma Balance Sheet is prepared. The Pro Forma Balance Sheet has
been prepared in good faith and having a reasonable basis set forth therein, presents fairly
in all material respects the consolidated and consolidating financial condition of the Company and
its Subsidiaries (other than the Casie Companies) on an unaudited Pro Forma Basis as of the date
set forth therein after giving effect to the consummation of the transactions described above.



(d) The Company has prepared, and has furnished to the Investors a copy of, projected
consolidated and consolidating balance sheets and statements of income and cash flows of the
Company and its Subsidiaries (consisting of balance sheets and statements of income and cash flows
prepared by the Company on a monthly basis through fiscal year 2008, giving effect to the
consummation of the Transactions (the “Projections”). In the good faith opinion of
management of the Company, the assumptions used in the preparation of the Projections were
reasonable when made and continue to be reasonable as of the date hereof. The Projections have
been prepared in good faith by the executive and financial personnel of the Company.



(e) After giving effect to the consummation of the Transactions, each Company Party (i) has
capital sufficient to carry on its businesses as conducted and as proposed to be conducted,
(ii) has assets with a fair saleable value, determined on a going concern basis, which are (y) not
less than the amount required to pay the probable liability on its existing debts as they become
absolute and matured and (z) greater than the total amount of its liabilities (including identified
contingent liabilities, valued at the amount that can reasonably be expected to become absolute and
matured in their ordinary course), and (iii) does not intend to, and does not believe that it will,
incur debts or liabilities beyond its ability to pay such debts and liabilities as they mature in
their ordinary course.



(f) Since December 31, 2006, there has not been an occurrence of a “material weakness” (as
defined in statement on Auditing Standards No. 60) in, or fraud that involves management or other
employees who have a significant role in, the Company’s internal controls over financial reporting.



(g) Neither (i) the board of directors of the Company, a committee thereof or the Chief
Financial Officer of the Company has concluded that any financial statement previously furnished to
the Investors should no longer be relied upon because of an error, nor (ii) has the Company been
advised by its auditors that a previously issued audit report or interim review cannot be relied
on.



4.12 Ownership of Properties. Each Company Party (i) has good and marketable title to all
real property owned by it, (ii) holds interests as lessee under valid leases in full force and
effect with respect to all material leased real and personal property used in connection with its
business, and (iii) has good title to all of its other material properties and assets reflected in
the most recent financial statements referred to in Section 4.11(a) (except as sold or otherwise
disposed of since the date thereof in the ordinary course of business), in each case free and clear
of all Liens other than Permitted Liens. Schedule 4.12 lists, as of the Closing Date and after
giving effect to the Transactions, all Realty of the Company Parties, indicating in each case the
identity of the owner, the address of the property, the nature of use of the premises, and whether
such interest is a leasehold or fee ownership interest.


 


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4.13 ERISA.



(a) Each Company Party and its ERISA Affiliates is in compliance with the applicable
provisions of ERISA, and each Plan is and has been administered in compliance with all applicable
Requirements of Law, including, without limitation, the applicable provisions of ERISA and the
Code, in each case except where the failure so to comply, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect. No ERISA Event that could reasonably
be expected to have a Material Adverse Effect (i) has occurred within the five-year period prior to
the Closing Date, (ii) has occurred and is continuing, or (iii) to the Knowledge of the Company, is
reasonably expected to occur with respect to any Plan. Except as could not reasonably be expected
to have a Material Adverse Effect, no Plan has any Unfunded Pension Liability as of the most recent
annual valuation date applicable thereto, and no Company Party or any of its ERISA Affiliates has
engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.



(b) No Company Party or any of its ERISA Affiliates has any outstanding liability on account
of a complete or partial withdrawal from any Multiemployer Plan, and no Company Party or any of its
ERISA Affiliates would become subject to any liability under ERISA if any such Company Party or
ERISA Affiliate were to withdraw completely from all Multiemployer Plans as of the most recent
valuation date. No Multiemployer Plan is in “reorganization” or is “insolvent” within the meaning
of such terms under ERISA.



4.14 Environmental Matters



(a) There are no underground tanks and related pipes and pumps at any Realty.



(b) (i) Each Company Party is presently and has been for a period of seven years prior to the
Closing Date in material compliance with all Environmental Laws and (ii) there exists no fact or
circumstance related to the Realty, or any act or omission of any Company Party that requires
reporting, investigation, assessment, cleanup, remediation or any other type of response action
pursuant to any Environmental Law or that could reasonably be expected to be the basis for any
Environmental Claim.



(c) No Company Party has generated, manufactured, refined, transported, treated, stored,
handled, disposed, transferred, produced or processed any Hazardous Substances at or upon the
Realty or formerly owned, leased or operated property, except in material compliance with all
applicable Environmental Laws.



(d) No Company Party has (i) entered into or been subject to any consent decree, compliance
order or administrative order with respect to any Realty or formerly owned, leased or operated
property or any facilities or operations thereon; (ii) received notice under the citizen suit
provisions of any Environmental Law; (iii) received any request for information, notice, notice of
violation, demand letter, administrative inquiry or formal or informal complaint or claim
pursuant to any Environmental Law; or (iv) been subject to or threatened with Environmental
Claims.


 


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(e) Each Company Party has all governmental approvals, licenses, permits, and authorizations
required under any Environmental Law that are necessary or reasonable to conduct the business,
activities and operations of each Company Party (“Environmental Permits”), all applications for
renewal of such Environmental Permits have been submitted on a timely basis, and Schedule 4.14(e)
lists all Environmental Permits and currently pending applications for Environmental Permits.



(f) No Company Party has assumed, undertaken or otherwise become subject to any material
liability of any other Person relating to or arising from any Environmental Law.



(g) To the Knowledge of the Company, no Company Party, Realty or the business will require a
capital expenditure or annual operating expense increase in excess of $100,000 during the 18-month
period following the Closing Date to achieve compliance with any Environmental Law or Environmental
Permit as in effect on the date of this Agreement.



(h) Each Company Party has delivered to the Buyer copies of, and Schedule 4.14(h) sets forth a
list of, all (i) Environmental Permits, and (ii) all material documents, records and information in
its possession or control concerning Environmental Laws or Environmental Claims relating to any
Company Party, including environmental agency reports and correspondence and previously conducted
environmental audits and documents regarding any transportation, release, disposal or treatment of
Hazardous Substances by any Company Party or at, upon or from any Realty or any formerly owned,
leased or operated property.



4.15 Compliance with Laws. Each Company Party has timely filed all material reports,
documents and other materials required to be filed by it under all applicable Requirements of Law
with any Governmental Authority, has retained all material records and documents required to be
retained by it under all applicable Requirements of Law, and is otherwise in compliance with all
applicable Requirements of Law in respect of the conduct of its business and the ownership and
operation of its properties, except in each case to the extent that the failure to comply
therewith, individually or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.


 


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4.16 Intellectual Property.



Each Company Party owns, or has the legal right to use, all Intellectual Property necessary
for it to conduct its business as currently conducted. Schedule 4.16 lists, as of the Closing Date
and after giving effect to the Transactions, all registered Intellectual Property
owned by any Company Party. No claim is pending, and the Company has no Knowledge of any
claim that has been asserted by any Person, challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual Property. The use
of such Intellectual Property by any Company Party does not infringe on the known rights of any
Person, except for such claims and infringements that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.



4.17 Investment Company Act.



No Company Party is an “investment company,” a company “controlled” by an “investment
company,” or an “investment advisor,” within the meaning of the Investment Company Act of 1940, as
amended.



4.18 Insurance.



Schedule 4.18 sets forth, as of the Closing Date and after giving effect to the Transactions,
an accurate and complete list and a brief description of all policies of property and casualty,
liability, business interruption, workers’ compensation, and other forms of insurance owned or held
by the Company Parties or pursuant to which any of their respective assets are insured. The
assets, properties and business of the Company Parties are insured against such hazards and
liabilities, under such coverages and in such amounts, as Company management believes are generally
maintained by companies similarly situated.



4.19 Material Contracts. Schedule 4.19 lists, as of the Closing Date each agreement to
which any Company Party is a party, by which any Company Party or its properties is bound or to
which any Company Party is subject including, without limitation, all contracts relating to the
incurrence of Indebtedness or the issuance or sale of the Company’s Capital Stock but excluding
any and all environmental service contracts entered into in the ordinary course of business
(collectively, “Material Contracts”), in each instance the breach or termination of which
could reasonably be expected to impose any material liability or material additional cost on the
Company or any Subsidiary, and also indicates the parties thereto (including purchase orders for
the acquisition by the Company of inventory or equipment in an amount greater than $500,000 in any
year and excluding ordinary course of business sales orders from the Company’s customers). As of
the Closing Date and after giving effect to the Transactions, (i) each Material Contract is in full
force and effect and is enforceable by each Company Party that is a party thereto in accordance
with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, by general or equitable
principles or by principles of good faith and fair dealing, and (ii) no Company Party or, to the
Knowledge of the Company, any other party thereto is in breach of or default under any Material
Contract in any material respect or has given notice of termination or cancellation of any Material
Contract.


 


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4.20 Labor Relations. No Company Party is engaged in any unfair labor practice within the meaning of the National
Labor Relations Act of 1947, as amended. As of the Closing Date, there is (i) no unfair labor
practice complaint before the National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining agreement, pending or, to the
Knowledge of the Company, threatened, against any Company Party, (ii) no strike, lock-out,
slowdown, stoppage, walkout or other labor dispute pending or, to the Knowledge of the Company,
threatened, against any Company Party, and (iii) to the Knowledge of the Company, no petition for
certification or union election or union organizing activities taking place with respect to any
Company Party. As of the Closing Date, there are no collective bargaining agreements or
Multiemployer Plans covering the employees of the Company Parties.



4.21 OFAC; Anti-Terrorism Laws.



(a) No Company Party or any Affiliate of any Company Party (i) is a Sanctioned Person,
(ii) has more than 10% of its assets in Sanctioned Countries, or (iii) derives more than 10% of its
operating income from investments in, or transactions with, Sanctioned Persons or Sanctioned
Countries. No part of the proceeds of the purchase and sale of the Preferred Stock and the Warrant
hereunder will be used directly or indirectly to fund any operations in, finance any investments or
activities in or make any payments to, a Sanctioned Person or a Sanctioned Country.



(b) Neither the purchase and sale of the Preferred Stock and the Warrant hereunder nor the use
of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.
The Company Parties are in compliance in all material respects with the PATRIOT Act.



4.22 Securities Laws.



(a) All shares of Capital Stock and other securities (including all options and other Capital
Stock equivalents) issued by each Company Party have been issued in transactions exempt from
registration under the Securities Act, and all applicable state securities or “blue sky” laws.



(b) Neither the Company Parties or any of their Affiliates, nor any other Person acting on
their behalf, has directly or indirectly engaged in any form of general solicitation or general
advertising with respect to the Preferred Stock and the Warrant, its common stock or any other
securities of any Company Party previously offered, sold or issued.



(c) None of the events described in Item 401(f) of Regulation S-K under the Securities Act,
has occurred during the last five years with respect to any current or past director or officer of
any Company Party.


 


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4.23 Transactions with Affiliates.



There are no contractual obligations of any Company Party to any officer, director,
shareholder, or Affiliate of the Company Parties other than for (i) payment of salary for services
rendered or of other obligations pursuant to employment agreements, (ii) reimbursement for
reasonable expenses incurred on behalf of a Company Party and (iii) standard employee benefits made
generally available to all employees of the such Person. To the Knowledge of the Company, none of
the officers, directors, shareholders, employees, or Affiliates of any Company Party has incurred
Indebtedness to a Company Party that remains outstanding or has any direct or indirect material
ownership interest in any Affiliate of a Company Party or, to the Knowledge of the Company, with
which a Company Party has a business relationship except that such Person may own stock in publicly
traded companies.



4.24 SBA Matters. The Company acknowledges that certain of the Investors are Small
Business Investment Companies (as defined in the SBIA), subject to the rules and regulations
contained in and promulgated under the SBIA. The Company, together with its “affiliates” (for
purposes of this paragraph only, as that term is defined in Title 13, Code of Federal Regulations,
§121.103), constitute a Small Business Concern (as defined in the SBIA). No Company Party
presently engages in, and shall not hereafter engage in, any activities for which a Small Business
Concern is prohibited from engaging in under 13 C.F.R §107.720, nor shall any Company Party use
directly or indirectly the proceeds of the Preferred Stock or the Warrant for any purpose for which
a Small Business Investment Company is prohibited from providing funds by the SBIA. The
representations made by the Company in the SBA forms delivered pursuant to Section 3.1(a) shall be
deemed to be representations made by the Company under this Section 4.24.



4.25 No Indebtedness to First National Bank of Elmer. All indebtedness and obligations of
the Company Parties associated with each Lien of the Company Parties in favor of “The First
National Bank of Elmer,” “First National Bank of Elmer” or a similarly named entity in existence as
of the date hereof have been indefeasibly repaid in cash in full.



ARTICLE IV-A




INVESTOR REPRESENTATIONS AND WARRANTIES




To induce the Company to enter into this Agreement and to induce the Company to issue and sell
the Preferred Stock and Warrant, each Investor as of the date of this Agreement (for purposes of
this Article IV-A, each “Investor”) represents and warrants to each the Company that the
statements contained in this Article IV-A are correct as of the date of this Agreement.



4A.1 Organization and Authority. Each Investor is duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its formation. Each Investor has the
requisite power and authority to execute and deliver this Agreement and the Investment Documents to
which it is a party and to perform its obligations hereunder and thereunder. This Agreement and
the Investment Documents to which it is a party constitute the valid and legally binding
obligations of each Investor, enforceable in accordance with terms and conditions hereof
and thereof, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights generally, by general
equitable principles or by principles of good faith and fair dealing (regardless of whether
enforcement is sought in equity or at law).



 


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Except as could not reasonably be expected to have a
material adverse effect on the ability of the Investors to fulfill their obligations under the
Investment Documents, assuming the accuracy of all representations and warranties of the Company
made herein, each Investor has given each notice to, made each filing with, and obtained each
authorization, consent, and approval of each government, governmental agency and third Person
required to be given, made or obtained by such Investor as of the date hereof to consummate the
transactions contemplated by this Agreement and the Investment Documents to which each Investor is
a party. The execution, delivery, and performance of this Agreement and the Investment Documents
to which each Investor is a party have been duly authorized by each Investor.



4A.2 Non-contravention. Assuming the accuracy of the representations and warranties
made by the Company in this Agreement (and the certificates and other documents contemplated
hereby), neither the execution and the delivery by the Investors of this Agreement, nor the
Investment Documents to which each Investor is a party, nor the consummation of the transactions
contemplated hereby or thereby, will (a) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge or other restriction of any government,
governmental agency or court to which each Investor is subject or any provision of its
organizational documents, or (b) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, or create in any party the right to accelerate, terminate, modify or
cancel, any agreement, contract, lease, license, instrument or other arrangement to which each
Investor is a party or by which it is bound or to which any of its assets is subject; except, where
such contraventions, violations, conflicts, breaches or defaults, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the ability of the Investors
to fulfill their obligations under the Investment Documents.



4A.3 Investment. Each Investor (a) is acquiring the Preferred Stock and Warrant
solely for its own account as principal for investment purposes only and not with a view to or for
sale in connection with any distribution thereof within the meaning of the Securities Act, and (b)
is an “accredited investor” as defined in the Securities Act. Each Investor is experienced in
evaluating and investing in companies such as the Company Parties and has substantial experience in
investing in and evaluating private placement transactions of securities in companies similar to
the Company Parties and is capable of evaluating the risks and merits of its investment in the
Preferred stock and Warrant and has the capacity to protect its own interests. Each Investor has
had an opportunity to discuss the Company Parties’ business, management, financial affairs and the
terms and conditions of the offering of the Preferred Stock and Warrant with management of the
Company Parties and has had an opportunity to review the Company Parties’ facilities.



4A.4 Restricted Securities. Each Investor acknowledges that, because the Preferred
Stock, Warrant and shares underlying the Warrant have not been registered under the Securities Act
of 1933 or any state securities laws, such securities must be held indefinitely unless subsequently
registered under the Securities Act of 1933 and applicable state securities law or an exemption
from registration or resale under such laws is available. Each Investor is familiar with
the provisions of Rule 144 promulgated under the Securities Act of 1933 and the resale limitation
imposed thereby and by the Securities Act.


 


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4A.5 Place of Business. Each Investor has its principal place of business or is
otherwise resident in the states of New York, Illinois and North Carolina.



4A.6 Associated Suppliers. No Investor has an Associate (as defined in 13 C.F.R
§107.50) with respect to which any Company Party’s activities would be deemed to be activities for
which a Small Business Concern (as defined in the SBIA) is prohibited from engaging in under 13
C.F.R §107.720(h). In the event any Person becomes such an Associate of any Investor prior to the
first anniversary of the date hereof, such Investor shall notify the Company of the identity of
such Associate.



ARTICLE V




AFFIRMATIVE COVENANTS




The Company covenants and agrees to the following, unless and until shares of Preferred Stock
with an aggregate Liquidation Value of less than ten percent of the aggregate Liquidation Value of
the Preferred Stock on the date hereof remain outstanding:



5.1 Financial Statements. The Company will deliver to each Investor:



(a) As soon as available and in any event within 40 days after the end of January 2008 and 30
days after the end of February and March 2008, for the (i) Company and its Subsidiaries (other than
the Casie Companies) and (ii) separately, the Casie Companies, unaudited consolidated and
consolidating balance sheets as of the end of such fiscal month and unaudited consolidated and
consolidating statements of income, cash flows for the fiscal month then ended and for that portion
of the fiscal year then ended, all in reasonable detail and all certified on behalf of the Company
by an appropriate Responsible Officer as being prepared in accordance with GAAP (subject to the
absence of notes required by GAAP, normal year-end adjustments and the absence of consolidation of
such financial statements of the Casie Companies with such financial statements of the Company and
its other Subsidiaries), applied on a basis consistent with that of the preceding month or
containing disclosure of the effect on the financial condition or results of operations of any
change in the application of accounting principles and practices during such month;



As soon as available and in any event within 30 days after the end of each fiscal month
beginning with April 2008, for the Company and its Subsidiaries, unaudited consolidated and
consolidating balance sheets as of the end of such fiscal month and unaudited consolidated and
consolidating statements of income, cash flows for the fiscal month then ended and for that portion
of the fiscal year then ended, all in reasonable detail and all certified on behalf of the Company
by an appropriate Responsible Officer as being prepared in accordance with GAAP (subject to the
absence of notes required by GAAP and normal year-end adjustments), applied on a basis consistent
with that of the preceding month or containing disclosure of the effect on the
financial condition or results of operations of any change in the application of accounting
principles and practices during such month;


 


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(b) As soon as available and in any event within 45 days after the end of each fiscal quarter
of each fiscal year, beginning with the first fiscal quarter for which such financial statements
were not delivered as of the Closing Date, unaudited consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the end of such fiscal quarter and unaudited consolidated
and consolidating statements of income, cash flows and stockholders’ equity for the Company and its
Subsidiaries for the fiscal quarter then ended and for that portion of the fiscal year then ended,
in each case setting forth comparative consolidated and consolidating figures as of the end of and
for the corresponding period in the preceding fiscal year together with comparative budgeted
figures for the fiscal period then ended, all in reasonable detail and all certified on behalf of
the Company by an appropriate Responsible Officer as being prepared in accordance with GAAP
(subject to the absence of notes required by GAAP and subject to normal year-end adjustments)
applied on a basis consistent with that of the preceding quarter or containing disclosure of the
effect on the financial condition or results of operations of any change in the application of
accounting principles and practices during such quarter.



(c) As soon as available and in any event within 90 days after the end of each fiscal year,
beginning with fiscal year 2007, an audited consolidated and unaudited consolidating balance sheet
of the Company and its Subsidiaries as of the end of such fiscal year and the related audited
consolidated and unaudited consolidating statements of income, cash flows and stockholders’ equity
for the Company and its Subsidiaries for the fiscal year then ended, including the notes thereto,
in each case setting forth comparative consolidated and unaudited consolidating figures as of the
end of and for the preceding fiscal year for the fiscal year then ended, all in reasonable detail
and, with respect to the audited statements, certified by the independent certified public
accounting firm regularly retained by the Company or another independent certified public
accounting firm of recognized standing reasonably acceptable to the Required Investors, together
with a report thereon by such accountants that is not qualified as to going concern or scope of
audit and to the effect that such financial statements present fairly in all material respects the
consolidated and unaudited consolidating financial condition and results of operations of the
Company and its Subsidiaries as of the dates and for the periods indicated in accordance with GAAP
applied on a basis consistent with that of the preceding year or containing disclosure of the
effect on the financial condition or results of operations of any change in the application of
accounting principles and practices during such year; and



(d) Concurrently with each delivery of the financial statements described in Sections 5.1(b)
and 5.1(c), a management’s discussion and analysis report in such form as may be reasonably
acceptable to the Required Investors.



(e) In connection with any Acquisition, the Company shall have delivered to the Investors
within 30 days following consummation of the Acquisition:



(A) a pro forma consolidated balance sheet, income statement and cash flow statement of the
Company and its Subsidiaries (the “Acquisition Pro Forma”), based on recent financial
statements of the Target or, if no such financial statements are available, such other financial
information pertaining to the Target as is available;


 


42









 





(B) copies of all financial analyses, financial projections and financial models prepared by
or on behalf of the Company Parties regarding the Acquisition and any documentation on which such
financial analyses, financial projections or financial models were based;



(C) copies of all analyses and calculations of the actual or contingent liabilities estimated
with respect to any Acquisition as required by clause (ii) of the definition of Permitted
Acquisition;



(D) upon the reasonable request of the Required Investors, due diligence materials prepared or
received by or on behalf of the Company Parties regarding the Acquisition; and



(E) copies of the acquisition agreement and related agreements and instruments and all
opinions, certificates, lien search results and other documents delivered in connection with such
Acquisition.



In addition, for Pro Forma Acquisition EBITDA arising out of such Acquisition to be included in the
Consolidated EBITDA for any period, the Company shall have first delivered a Pro Forma Acquisition
EBTIDA Certificate with respect to such Acquisition.



5.2 Other Business and Financial Information. The Company will deliver to each Investor:



(a) Concurrently with each delivery of the financial statements described in
Sections 5.1(a), 5.1(b) (including with respect to financial statements as of the end of and for
the fourth fiscal quarter of each fiscal year) and 5.1(c), a Compliance Certificate with respect to
the period covered by the financial statements being delivered thereunder, executed by a Financial
Officer of the Company.



(b) As soon as available and in any event prior to the commencement of each fiscal year for
each fiscal year thereafter, a consolidated and consolidating operating budget for the Company and
its Subsidiaries for such fiscal year (prepared on a monthly basis), consisting of a consolidated
and consolidating balance sheet and consolidated and consolidating statements of income and cash
flows, together with a certificate of a Financial Officer of the Company to the effect that such
budget has been prepared in good faith and, in the good faith opinion of management, upon
reasonable assumptions; and as soon as available from time to time thereafter, any modifications or
revisions to or restatements of such budget;



(c) Promptly upon receipt thereof, copies of any “management letter” submitted to any Company
Party by its certified public accountants in connection with each annual, interim or special audit,
and promptly upon completion thereof, any response reports from such Company Party in respect
thereof;


 


43









 





(d) Promptly upon the sending, filing or receipt thereof, copies of (i) all financial
statements, reports, notices and proxy statements that any Company Party shall send or make
available generally to its shareholders, (ii) all regular, periodic and special reports,
registration statements and prospectuses (other than on Form S-8) that any Company Party shall
render to or file with the Securities and Exchange Commission, the National Association of
Securities Dealers, Inc. or any national securities exchange, and (iii) all press releases and
other statements made available generally by any Company Party to the public concerning material
developments in the business of the Company Parties;



(e) Promptly upon (and in any event within ten days after) the Company obtaining Knowledge
thereof, written notice of any of the following:



(i) the occurrence of any Event of Noncompliance, together with a written statement of a
Responsible Officer of the Company specifying the nature of such Event of Noncompliance, the period
of existence thereof and the action that the Company has taken and proposes to take with respect
thereto;



(ii) the institution or threatened institution of any action, suit, investigation or
proceeding against or affecting any Company Party, including any such investigation or proceeding
by any Governmental Authority (other than routine periodic inquiries, investigations or reviews),
that, if adversely determined, could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, and any material development in any litigation or other proceeding
previously reported pursuant to Section 4.5 or this Section 5.2(e)(ii);



(iii) the receipt by any Company Party from any Governmental Authority of (A) any notice
asserting any failure by any Company Party to be in compliance with applicable Requirements of Law
or that threatens the taking of any action against any Company Party or sets forth circumstances
that, if taken or adversely determined, could reasonably be expected to have a Material Adverse
Effect, or (B) any notice of any actual or threatened suspension, limitation or revocation of,
failure to renew, or imposition of any restraining order, escrow or impoundment of funds in
connection with, any license, permit, accreditation or authorization of any Company Party, where
such action could reasonably be expected to have a Material Adverse Effect;



(iv) the occurrence of any ERISA Event, together with (x) a written statement of a Responsible
Officer of the Company specifying the details of such ERISA Event and the action that the
applicable Company Party has taken and proposes to take with respect thereto, (y) a copy of any
notice with respect to such ERISA Event that may be required to be filed with the PBGC and (z) a
copy of any notice delivered by the PBGC to any Company Party or an ERISA Affiliate with respect to
such ERISA Event;



(v) the occurrence of any material default under, or any proposed or threatened termination or
cancellation of, any Material Contract, the default under or termination or cancellation of which
could reasonably be expected to have a Material Adverse Effect;


 


44









 





(vi) the amendment, modification or waiver of any provision of any Company Parties’ articles
or certificate of incorporation or formation, bylaws, operating agreement or other applicable
formation or organizational documents, as applicable, the terms of any class or series of its
Capital Stock, or any agreement among the holders of its Capital Stock or any of them; and



(vii) the occurrence of any of the following: (x) the assertion of any material Environmental
Claim against or affecting any Company Party, Realty or real property formerly leased, operated or
owned by any Company Party, or any Company Party’s discovery of a basis for any such Environmental
Claim; (y) the receipt by any Company Party of notice of any alleged material violation of or
material noncompliance with any Environmental Laws or material release of any Hazardous Substance
not in compliance with Environmental Laws and Environmental Permits; or (z) the commencement of any
material investigation, remediation or other responsive action by any Company Party or any other
Person in response to the actual or alleged violation of any Environmental Law by any Company Party
or generation, storage, transport, release, disposal or discharge of any Hazardous Substances on,
to, upon or from any Realty or any real property formerly leased, operated or owned by any Company
Party; and



(f) As promptly as reasonably possible, such other information about the business, condition
(financial or otherwise), operations or properties of any Company Party as any Investor may from
time to time reasonably request.



5.3 Existence; Franchises; Maintenance of Properties.



The Company will, and will cause each of its Subsidiaries to, (i) maintain and preserve in
full force and effect its legal existence, except as expressly permitted otherwise by Section 7.1,
(ii) obtain, maintain and preserve in full force and effect all other rights, franchises, licenses,
permits, certifications, approvals and authorizations required by Governmental Authorities and
necessary to the ownership, occupation or use of its properties or the conduct of its business,
except to the extent the failure to do so could not reasonably be expected to have a Material
Adverse Effect, and (iii) keep all material properties in good working order and condition (normal
wear and tear and damage by casualty excepted) and from time to time make all necessary repairs to
and renewals and replacements of such properties, except to the extent that any of such properties
are obsolete or are being replaced or, in the good faith judgment of the Company, are no longer
useful or desirable in the conduct of the business of the Company Parties.



5.4 Compliance with Laws.



The Company will, and will cause each of its Subsidiaries to, comply in all respects with all
Requirements of Law applicable in respect of the conduct of its business and the ownership and
operation of its properties, except to the extent the failure so to comply could not reasonably be
expected to have a Material Adverse Effect.



5.5 Payment of Obligations.



The Company will, and will cause each of its Subsidiaries to, (i) pay, discharge or otherwise
satisfy at or before maturity all liabilities and obligations as and when due (subject to any
applicable subordination, grace and notice provisions), except to the extent failure to do so could
not reasonably be expected to have a Material Adverse Effect, and (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it, upon its income or profits or upon
any of its properties, prior to the date on which penalties would attach thereto, and all lawful
claims that, if unpaid, would become a Lien (other than a Permitted Lien) upon any of the
properties of any Company Party; provided, however, that no Company Party shall be
required to pay any such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings and as to which such Company Party is maintaining adequate reserves
with respect thereto in accordance with GAAP.


 


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5.6 Insurance.



The Company will, and will cause each of its Subsidiaries to maintain with insurance companies
the Company reasonably believes to be financially sound insurance with respect to its assets,
properties and business, against such hazards and liabilities, of such types and in such amounts,
as is generally maintained by companies in the same or similar businesses similarly situated.



5.7 Maintenance of Books and Records; Inspection.



The Company will, and will cause each of its Subsidiaries to, (i) maintain adequate books,
accounts and records, in which full, true and correct entries shall be made of all financial
transactions in relation to its business and properties, and prepare all financial statements
required under this Agreement, in each case in accordance with GAAP and in compliance with the
requirements of any Governmental Authority having jurisdiction over it, and (ii) permit employees
or agents of any Investor to visit and inspect its properties and examine or audit its books,
records, working papers and accounts and make copies and memoranda of them, and to discuss its
affairs, finances and accounts with its officers and employees and, upon notice to the Company, the
independent public accountants of the Company and its Subsidiaries (and by this provision the
Company authorizes such accountants to discuss the finances and affairs of the Company and its
Subsidiaries), all at such times and from time to time, upon reasonable notice and during normal
business hours, as may be reasonably requested.



5.8 Creation or Acquisition of Subsidiaries.



The Company may from time to time create or acquire new Subsidiaries in connection with
Permitted Acquisitions or otherwise, and the Subsidiaries of the Company may create or acquire new
Subsidiaries, provided that:



(a) Concurrently with (and in any event within 10 Business Days after) the creation or direct
or indirect acquisition of any new Subsidiary, the Company will deliver to the Investors:



(i) Except with respect to non-Wholly Owned Subsidiaries (other than any such Subsidiary
operating Pure Earth Energy if and when acquired), the Guaranty or a joinder to the Guaranty,
executed by such new Subsidiary, pursuant to which such new Subsidiary shall become a guarantor
thereunder and shall guarantee the payment in full of the Obligations of the Company under this
Agreement and the other Investment Documents;



(ii) upon the request of the Investors, a written legal opinion of counsel to such Subsidiary
addressed to the Investors, in form and substance reasonably satisfactory to the Required
Investors, which shall cover such matters relating to such Subsidiary and the creation or
acquisition thereof incident to the transactions contemplated by this Agreement and this Section
5.8 and the other Investment Documents as set forth in the legal opinion of counsel delivered to
the Investors on the Closing Date;


 


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(iii) (A) a copy of the certificate of incorporation (or other charter documents) of such
Subsidiary, certified by the applicable Governmental Authority of the jurisdiction of incorporation
or organization of such Subsidiary, (B) a copy of the bylaws or similar organizational document of
such Subsidiary, certified on behalf of such Subsidiary by the corporate secretary or assistant
secretary of such Subsidiary, (C) an original certificate of good standing for such Subsidiary
issued by the applicable Governmental Authority of the jurisdiction of incorporation or
organization of such Subsidiary and (D) copies of the resolutions of the board of directors and, if
required, stockholders or other equity owners of such Subsidiary authorizing the execution,
delivery and performance of the agreements, documents and instruments executed pursuant to
Section 5.8(a), certified on behalf of such Subsidiary by an Authorized Officer of such Subsidiary,
all in form and substance reasonably satisfactory to the Investors;



(iv) a certificate of the secretary or an assistant secretary of such Subsidiary as to the
incumbency and signature of the officers executing agreements, documents and instruments executed
pursuant to Section 5.8(a);



(v) a certificate as to the solvency of such Subsidiary, addressed to the Investors, dated as
of the date of creation or acquisition of such Subsidiary and in form and substance reasonably
satisfactory to the Investors;



(vi) evidence satisfactory to the Investors that no Event of Noncompliance shall exist
immediately before or after the creation or acquisition of such Subsidiary or be caused thereby;
and



(vii) a certificate executed by an Authorized Officer of each of the Company and such
Subsidiary, which shall constitute a representation and warranty by the Company and such Subsidiary
as of the date of the creation or acquisition of such Subsidiary that all conditions contained in
this Agreement to such creation or acquisition have been satisfied, in form and substance
reasonably satisfactory to the Investors;



(b) As promptly as reasonably possible, the Company and its Subsidiaries will deliver any such
other documents and certificates as the Required Investors may reasonably
request in connection therewith, in form and substance reasonably satisfactory to the Required
Investors; and



(c) No Subsidiary may be a Foreign Subsidiary.



5.9 Environmental Laws.



The Company will, and will cause each of its Subsidiaries to, (i) comply in all material
respects with, and use commercially reasonable efforts to ensure compliance in all material
respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain
and comply in all material respects with and maintain, and use commercially reasonable efforts to
ensure that all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all Environmental Permits, and (ii) conduct and complete all investigations,
studies, sampling and testing, and all response, remedial, removal and other actions, required
under Environmental Laws and promptly comply with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws, except to the extent that the same are being
contested in good faith by appropriate proceedings or to the extent the failure to conduct or
complete any of the foregoing could not reasonably be expected to be material.


 


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5.10 Board Observation Rights.



(a) The boards of directors, boards of managers or similar governing bodies of the Company
shall hold general meetings (which may be held by conference call) at least quarterly for the
purpose of discussing the business and operations of the Company and its Subsidiaries. The Company
shall notify Fidus or, if Fidus ceases to hold at least 50% of the Preferred Stock, the one
Investor holding the largest percentage of the Preferred Stock (the Person holding such rights
under this Section 5.10, the “Observation Party”) and the other Investors of the date and
time for each general or special meeting of its board of directors, board of managers or similar
governing body (or any committee thereof) or of the adoption of any resolutions by any such body or
committee by written consent (describing in reasonable detail the nature and substance of such
action) at the time notice is provided to the outside directors or managers of the Company or any
Subsidiary, as applicable, and concurrently send to each Investor any materials sent to directors
or managers of the Company or such Subsidiary, including a draft of any resolutions proposed to be
adopted by written consent. The Observation Party shall be free during the period prior to the
meeting to contact the directors of the Company or such Subsidiary and discuss the pending actions
to be taken.



(b) The Observation Party shall be entitled to select two representatives to attend and
participate (but not vote) in all meetings of the board of directors, board of managers or other
governing body (including any committee thereof) of the Company and each Subsidiary, including
telephonic meetings, and such representative shall be entitled to reimbursement for reasonable
out-of-pocket expenses incurred in connection with such attendance and participation. The
representatives designated by the Observation Party shall be entitled to receive all written
materials and other information given to the participants in such meetings.



5.11 OFAC, PATRIOT Act Compliance. The Company will, and will cause each of its Subsidiaries to, (i) refrain from doing business in
a Sanctioned Country or with a Sanctioned Person in violation of the economic sanctions of the
United States administered by OFAC, and (ii) provide, to the extent commercially reasonable, such
information and take such actions as are reasonably requested by any Investor in order to assist
the Investors in maintaining compliance with the PATRIOT Act.



5.12 SBA Matters.



(a) The Company hereby agrees that, upon the request of any Investor that is a small business
investment company under the SBIA (an “SBIA Investor”), the Company will redeem the
Preferred Stock in full (at the Redemption Price) and purchase the Warrant at the purchase price
set forth therein, in immediately available funds, in the event that any Company Party changes the
nature of its business within one year after the Closing Date in a manner that would cause such
Company Party to be ineligible for financing under 13 C.F.R. §107.720 without the written approval
of the SBA to permit the SBIA Investor to retain such investment in the Company under 13 C.F.R.
§107.760(b)(1) (as amended from time to time).


 


48









 





(b) Each Company Party will keep such records and submit to the SBA timely, complete and
accurate compliance reports at such times and in such form and containing such information as the
SBA may determine to be necessary to enable the SBA to ascertain whether the Company Parties have
complied or are complying with 13 C.F.R. Part 112 (“Part 112”). Upon the request of any
SBIA Investor, the Company Parties will submit to such SBIA Investor such information regarding the
Company Parties as may be reasonably necessary to enable such SBIA Investor to meet its reporting
requirements under Part 112. Each Company Party will permit the SBA to have access with advance
written notice and during normal business hours to such of its books, records, accounts and other
sources of information, and its facilities as may be pertinent to ascertain compliance with Part
112. Where any information required of the Company Parties is in the exclusive possession of any
other agency, institution or Person and such agency, institution or Person shall fail or refuse to
furnish this information, the Company Parties shall so certify in their report and shall set forth
what efforts they have made to obtain this information.



5.13 SEC Filings. In the event that the Company files a registration statement on Form 10,
or other form of registration statement, (the “Registration Statement”) with the Securities
and Exchange Commission (“SEC”) for the purpose of registering any of its Capital Stock
under the Exchange Act and, if applicable, the Securities Act (such Registration Statement and any
other reports filed with or furnished to the SEC, or required to be filed with or furnished to the
SEC, subsequent to the filing of such Registration Statement, if any, including any amendments
thereto, collectively the “Company SEC Documents”), each Company SEC Document, when filed
with or furnished to the SEC (or, in the case of any Registration Statement, when such Registration
Statement is declared effective by the SEC), will comply in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and will comply, as
applicable, in all material respects with the then-applicable accounting standards. None of the
Company SEC Documents when filed will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein,
in light of
the circumstances under which they were made, not misleading. Following the effectiveness of the
Registration Statement, to the extent required by the rules and regulations of the SEC, the Company
will file with and furnish to the SEC all reports required to be filed and furnished by an issuer
of equity securities registered under the Exchange Act.


 


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ARTICLE VI




DEBT INCURRENCE TEST




The Company covenants and agrees to the following, unless and until shares of Preferred Stock
with an aggregate Liquidation Value of less than ten percent of the aggregate Liquidation Value of
the Preferred Stock on the date hereof remain outstanding:



6.1 Debt Incurrence Test. The Company will not, and will not permit or cause any of its
Subsidiaries to, incur Indebtedness (other than Existing Indebtedness the proceeds of which are
used solely to fund (i) working capital or (ii) capital expenditures not to exceed $100,000 during
any trailing twelve-month period) if, after such incurrence, the Leverage Ratio shall exceed the
ratio set forth below opposite the period that includes the date on which such Indebtedness was
incurred:



	 	 	 	 	 
	 	 	Maximum	 
	Period	 	Leverage Ratio	 
	 
	 	 	 	 
	Closing Date
through the second anniversary of the Closing Date
	 	 	3.75:1.00	 
	 
	 	 	 	 
	Thereafter
	 	 	3.25:1.00	 






For purposes of this Section 6.1, Consolidated EBITDA shall be determined as of the date of the
last financial statements required to be delivered pursuant to Section 5.1 and shall reflect the
financial information contained therein. Upon any incurrence of any such Indebtedness, the Company
shall deliver to each Investor a Compliance Certificate, executed by a Financial Officer of the
Company, together with a Leverage Ratio worksheet in form and substance reasonably acceptable to
the Investors, reflecting the computation of the Leverage Ratio immediately following the
incurrence of such Indebtedness.



ARTICLE VII




NEGATIVE COVENANTS




The Company covenants and agrees to the following, unless and until shares of Preferred Stock
with an aggregate Liquidation Value of less than ten percent of the aggregate Liquidation Value of
the Preferred Stock on the date hereof remain outstanding:


 


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7.1 Merger; Consolidation. The Company will not, and will not permit or cause any of its
Subsidiaries to, liquidate, wind up or dissolve, or enter into any consolidation, merger or other
combination, or agree to do any of the foregoing; provided, however, that:



(i) any Wholly Owned Subsidiary of the Company may merge or consolidate with, or be liquidated
into, (x) the Company (so long as the Company is the surviving or continuing entity) or (y) any
other Wholly Owned Subsidiary (so long as, if either constituent entity is a Subsidiary Guarantor,
the surviving or continuing entity is a Subsidiary Guarantor), and in each case so long as no Event
of Noncompliance has occurred and is continuing or would result therefrom; provided,
however, that no Subsidiary acquired or established pursuant to a Permitted Acquisition
that is required to be maintained as a separate Subsidiary pursuant to the definition of Permitted
Acquisition shall be permitted to be involved in such a merger, consolidation or liquidation; and



(ii) to the extent not otherwise permitted under the foregoing clauses, any Wholly Owned
Subsidiary that has sold, transferred or otherwise disposed of all or substantially all of its
assets in connection with an Asset Disposition permitted under this Agreement and no longer
conducts any active trade or business may be liquidated, wound up and dissolved, so long as no
Event of Noncompliance has occurred and is continuing or would result therefrom.



7.2 Liens. The Company will not, and will not permit or cause any of its Subsidiaries to,
directly or indirectly, make, create, incur, assume or suffer to exist, any Lien upon or with
respect to any part of its property or assets, whether now owned or hereafter acquired, or file or
permit the filing of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits under the Uniform
Commercial Code of any state or under any similar recording or notice statute, or agree to do any
of the foregoing, other than the following (collectively, “Permitted Liens”):



(i) Liens created by or otherwise existing under or in connection with any permitted
Indebtedness;



(ii) Liens in existence on the Closing Date and set forth on Schedule 7.2, and any extensions,
renewals or replacements thereof; provided that any such extension, renewal or replacement
Lien shall be limited to all or a part of the property that secured the Lien so
extended, renewed or replaced (plus any improvements on such property) and shall secure only
those obligations that it secures on the date hereof (and any renewals, replacements, refinancings
or extensions of such obligations that do not increase the outstanding principal amount thereof);
provided, however, that each Lien in favor of “The First National Bank of Elmer,”
“First National Bank of Elmer” or a similarly named entity in existence as of the date hereof shall
be terminated and released, and a UCC termination statement shall be filed with respect thereto,
within 30 days after the date hereof;



(iii) Liens imposed by law, such as Liens of carriers, warehousemen, mechanics, materialmen
and landlords, incurred in the ordinary course of business for sums not constituting borrowed money
that are not overdue for a period of more than 60 days or that are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established in accordance with
GAAP (if so required);


 


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(iv) Liens incurred in the ordinary course of business in connection with worker’s
compensation, unemployment insurance or other forms of governmental insurance or benefits, or to
secure the performance of letters of credit, bids, tenders, statutory obligations, surety and
appeal bonds, leases, public or statutory obligations, government contracts and other similar
obligations (other than obligations for borrowed money) entered into in the ordinary course of
business;



(v) Liens for taxes, assessments or other governmental charges or statutory obligations that
are not delinquent or remain payable without any penalty or that are being contested in good faith
by appropriate proceedings and for which adequate reserves have been established in accordance with
GAAP (if so required);



(vi) Liens securing the purchase money Indebtedness, provided that (x) any such Lien
shall attach to the property being acquired, constructed or improved with such Indebtedness
concurrently with or within 90 days after the acquisition (or completion of construction or
improvement) or the refinancing thereof by the Company or such Subsidiary, (y) the amount of the
Indebtedness secured by such Lien shall not exceed 100% of the cost to the Company or such
Subsidiary of acquiring, constructing or improving the property and any other assets then being
financed solely by the same financing source, and (z) any such Lien shall not encumber any other
property of the Company or any of its Subsidiaries except assets then being financed solely by the
same financing source;



(vii) customary rights of set-off, revocation, refund or chargeback under deposit agreements
or under the Uniform Commercial Code of banks or other financial institutions where the Company or
any of its Subsidiaries maintains deposits (other than deposits intended as cash collateral) in the
ordinary course of business;



(viii) Liens that arise in favor of banks under Article 4 of the Uniform Commercial Code on
items in collection and the documents relating thereto and proceeds thereof;



(ix) Liens arising from the filing (for notice purposes only) of UCC-1 financing statements
(or equivalent filings, registrations or agreements in foreign jurisdictions) in respect of true
leases otherwise permitted hereunder;



(x) with respect to any Realty occupied by the Company or any of its Subsidiaries, all
easements, rights of way, reservations, licenses, encroachments, variations and similar
restrictions, charges and encumbrances on title that do not secure monetary obligations and do not
materially impair the use of such property for its intended purposes or the value thereof; and



(xi) any leases, subleases, licenses or sublicenses granted by the Company or any of its
Subsidiaries to third parties in the ordinary course of business and not interfering in any
material respect with the business of the Company and its Subsidiaries, and any interest or title
of a lessor, sublessor, licensor or sublicensor under any lease or license permitted under this
Agreement.


 


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7.3 Asset Dispositions.



The Company will not, and will not permit or cause any of its Subsidiaries to, directly or
indirectly, make or agree to make any Asset Disposition (other than as permitted with respect to
Cash Equivalents pursuant to Section 7.4) except for:



(i) the sale or other disposition of inventory and Cash Equivalents in the ordinary course of
business, the sale, discount or write-off of past due or impaired accounts receivable for
collection purposes (but not for factoring, securitization or other financing purposes), and the
termination or unwinding of Hedge Agreements permitted hereunder;



(ii) the sale or other disposition of assets pursuant to any Casualty Event, provided
any Net Cash Proceeds therefrom are reinvested or applied to the prepayment of any Indebtedness or
redemption of the Preferred Stock pursuant to the Investment Documents;



(iii) the sale, lease or other disposition of assets by the Company or any Subsidiary of the
Company to the Company or to any Wholly Owned Subsidiary (that is a Subsidiary Guarantor), in each
case so long as no Event of Noncompliance shall have occurred and be continuing or would result
therefrom; provided, however, that no such sale, lease or other disposition of
assets (except for immaterial assets that are not real property assets) by or to any Subsidiary
acquired or established pursuant to a Permitted Acquisition that is required to be maintained as a
separate Subsidiary pursuant to the definition of Permitted Acquisition shall be permitted pursuant
to this clause (iii);



(iv) the sale, exchange or other disposition in the ordinary course of business of equipment
or other capital assets that are obsolete or no longer necessary for the operations of the Company
and its Subsidiaries; and



(v) the sale or other disposition of assets (other than the Capital Stock of Subsidiaries) to
Persons other than the Company and its Subsidiaries outside the ordinary course of business for
fair value and for cash, provided that (x) the aggregate amount of Net Cash
Proceeds from all such sales or dispositions that are consummated during any fiscal year shall
not exceed $500,000 and (y) no Event of Noncompliance shall have occurred and be continuing or
would result therefrom.



7.4 Investments.



The Company will not, and will not permit or cause any of its Subsidiaries to, directly or
indirectly, (a) purchase, own, invest in or otherwise acquire any Capital Stock, evidence of
indebtedness or other obligation or security or any interest whatsoever in any other Person, or
make or permit to exist any loans, advances or extensions of credit to, or any investment in cash
or by delivery of property in, any other Person, or (b) purchase or otherwise acquire or lease
(whether in one or a series of related transactions) any assets (including without limitation real
property) or any portion of the assets, business or properties of another Person (in each case
including pursuant to an Acquisition), (c) create or acquire any Subsidiary, or become a partner or
joint venturer in any partnership or joint venture (collectively, “Investments”), or (d)
make a commitment or otherwise agree to do any of the foregoing, other than the following, in each
case without duplication of the other clauses of this Section 7.4:



(i) The holding of Cash Equivalents;



(ii) Investments consisting of the extension of trade credit, the creation of prepaid
expenses, the purchase of inventory, supplies, equipment and other assets, and advances to
employees for travel or similar business related expenses, in each case by the Company and its
Subsidiaries in the ordinary course of business;


 


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(iii) Investments consisting of loans and advances to employees, officers or directors of the
Company and its Subsidiaries in the ordinary course of business not exceeding $25,000 at any time
outstanding;



(iv) Investments (including equity securities and debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary
course of business;



(v) Investments existing as of the Closing Date and described in Schedule 7.4;



(vi) Investments of the Company under Hedge Agreements entered into in the ordinary course of
business to manage existing or anticipated interest rate, foreign currency or commodity risks and
not for speculative purposes;



(vii) Investments consisting of intercompany Indebtedness, which in the case of such
Indebtedness incurred by a non-Wholly Owned Subsidiary shall be evidenced by written promissory
notes at market interest rates for such Indebtedness if extended by a third party (as determined in
good faith by the Company’s board of directors) and secured by substantially all assets of such
non-Wholly Owned Subsidiary, provided, however, that no such Indebtedness
may be incurred by a non-Wholly Owned Subsidiary upon the occurrence and during the
continuance of an Event of Noncompliance;



(viii) Subject to clause (vii) above and clause (x) below, Investments directly resulting from
the consummation of Permitted Acquisitions, provided that no Subsidiary may be newly
created or acquired unless the Company complies with the provisions of Section 5.8 and, as
applicable, all requirements of this Agreement applicable to Permitted Acquisitions;



(ix) Investments in the Capital Stock of Wholly Owned Subsidiaries and non-Wholly Owned
Subsidiaries that are Subsidiary Guarantors;



(x) Investments in the Capital Stock of non-Wholly Owned Subsidiaries that are not Subsidiary
Guarantors in an amount up to $250,000 for each such Subsidiary and $2,000,000 in the aggregate at
any time for all such Subsidiaries; provided, however, that no Investments
permitted by this clause (x) shall be permitted to be made upon the occurrence and during the
continuance of an Event of Noncompliance; and



(xi) other Investments of the Company and its Subsidiaries not otherwise permitted under this
Section 7.4 (other than any Acquisition) in an aggregate amount not exceeding $250,000 at any time
outstanding for all such Investments;



provided, however, that no Investments shall be made in the Casie Companies by the
Company Parties (other than the Casie Companies) from and after the date hereof except while the
Casie Companies are Subsidiary Guarantors and after the Casie Companies shall have delivered to the
Investors the items set forth in Sections 5.8(a)(ii), (iii) and (iv) and 5.8(b).


 


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7.5 Restricted Payments.



(a) The Company will not, and will not permit or cause any of its Subsidiaries to, directly or
indirectly, declare or make any dividend payment, or make any other distribution of cash, property
or assets, in respect of any of its Capital Stock or any warrants, rights or options to acquire its
Capital Stock, or purchase, redeem, retire or otherwise acquire for value any shares of its Capital
Stock or any warrants, rights or options to acquire its Capital Stock or set aside funds for any of
the foregoing, except that:



(i) the Company and any of its Subsidiaries may do any of the forgoing in respect of the
Preferred Stock as provided in the Investment Documents, the Warrant, or the Existing Preferred
Stock;



(ii) the Company and any of its Subsidiaries may declare and make dividend payments or other
distributions payable solely in its Common Stock;



(iii) each Subsidiary of the Company may declare and make dividend payments or other
distributions to the Company or to another Subsidiary of the Company that is a Subsidiary
Guarantor, in each case to the extent not prohibited under applicable Requirements of Law;



(iv) each non-Wholly Owned Subsidiary may declare and make dividend payments or other
distributions to its equity holders other than the Company Parties on a pro rata basis based
on respective equity interests held to the extent of available excess cash flow from
operations, in each case to extent not prohibited under applicable Requirements of Law;



(v) so long as no Event of Noncompliance shall have occurred and be continuing or would result
therefrom, the Company may purchase, redeem, retire or otherwise acquire shares of its Capital
Stock (or options or rights to acquire its Capital Stock) held by former officers, directors or
employees following termination of service or employment, in an aggregate cash amount not exceeding
$100,000 during any fiscal year or $500,000 for all such purchases, redemptions, retirements and
acquisitions from and after the Closing Date; and



(b) The Company will not, and will not permit any of its Subsidiaries to, make any payment in
respect of any Contingent Purchase Price Obligations (whether or not such Contingent Purchase Price
Obligations constitute Indebtedness) unless no Event of Noncompliance has occurred and is
continuing or would result therefrom.



7.6 Transactions with Affiliates. The Company will not, and will not permit or cause any
of its Subsidiaries to, enter into any transaction (including, without limitation, any purchase,
sale, lease or exchange of property, Equity Issuance, or the rendering of any service) with any
officer, director, stockholder or other Affiliate of the Company or any of its Subsidiaries, except
in the ordinary course of its business and upon fair and reasonable terms that are no less
favorable to it than it would be obtained in a comparable arm’s length transaction with a Person
other than an Affiliate of the Company or any of its Subsidiaries; provided,
however, that nothing contained in this Section 7.6 shall prohibit:



(a) transactions described on Schedule 7.6 (and any renewals or replacements thereof on terms
not in the aggregate materially more disadvantageous to the applicable Company Party) or otherwise
expressly permitted under this Agreement;


 


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(b) transactions among the Company and/or the Subsidiary Guarantors not prohibited under this
Agreement (provided that such transactions shall remain subject to any other applicable
limitations and restrictions set forth in this Agreement);



(c) Equity Issuances with respect to the Company’s Capital Stock to directors, officers and
employees of the Company Parties pursuant to employee benefit plans, employment agreements or other
employment arrangements approved by the Board of Directors of the Company; and



(d) the payment by the Company of reasonable compensation and benefits to its directors,
officers and employees (provided that directors’ fees and expenses paid in cash shall not
exceed, in any event, $25,000 in aggregate during any fiscal year).



7.7 Lines of Business. The Company will not, and will not permit or cause any of its
Subsidiaries to, engage in any lines of business outside of the continental United States of
America and any lines of businesses other than those directly related to the transportation,
treatment, disposal, recycling, beneficial reuse, brownfield development, consulting and
supplemental fuel supply from waste-derived
products and materials, and businesses and activities reasonably related thereto; provided,
however, that the Company will not, and will not permit or cause any of its Subsidiaries
to, (i) engage in any activities, or own any assets, related to the nuclear, solar or wind energy
industries or (ii) create, generate, use, accept, dispose of or treat Hazardous Substances (A) in
excess of 2200 pounds in any calendar month for any single company other than the Casie Companies,
which shall not be bound by this clause (A), and excluding any transportation of Hazardous
Substances by any company or (B) by operating a hazardous waste landfill, operating a commercial
hazardous waste incinerator or in connection with any activity that requires obtaining a material
Environmental Permit that is not identified on Schedule 4.14(e); provided, however,
that the Casie Companies may engage in any activities that do not require (x) a material amendment
to any Environmental Permit identified on Schedule 4.14(e) (other than an amendment, whether
material or not, to increase the volume of those hazardous waste types identified on such
Environmental Permit or to bring existing operations of the Casie Companies into compliance with
applicable Environmental Laws) or (y) a material Environmental Permit other than as identified on
Schedule 4.14(e); provided, further, however, that with the prior written
consent of the Required Investors, the Casie Companies may supplement the hazardous waste types
identified in any Environmental Permit identified on Schedule 4.14(e) and subsequently engage in
any activities permitted by such supplemented Environmental Permit.


 


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7.8 Sale-Leaseback Transactions.



The Company will not, and will not permit or cause any of its Subsidiaries to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any
lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or
mixed, and whether now owned or hereafter acquired) (i) that any Company Party has sold or
transferred (or is to sell or transfer) to a Person other than the Company or a Subsidiary
Guarantor or (ii) that any Company Party intends to use for substantially the same purpose as any
other property that, in connection with such lease, has been sold or transferred (or is to be sold
or transferred) by a Company Party to a Person other than the Company or a Subsidiary Guarantor.



7.9 Equity Limitations.



(a) The Company will not, and will not permit or cause any of its Subsidiaries to, amend,
modify or waive any provision of its or their articles or certificate of incorporation or
formation, bylaws, operating agreement or other applicable formation or organizational documents,
as applicable, the terms of any class or series of its Capital Stock, or any agreement among the
holders of its Capital Stock or any of them, in each case related to this Section 7.9(a) other than
in a manner that would not adversely affect the Preferred Stock.



(b) The Company will not, and will not permit or cause any of its Subsidiaries to, (i) create
or authorize the creation, increase or decrease the authorized or increase the issued (except as
provided in Section 2.9) amount, of any class or series of shares of Capital Stock of the Company,
unless the class or series of stock (x) ranks junior to the Preferred Stock
(including, without limitation, as to dividends, right to receive a redemption payment and the
distribution of assets upon liquidation), (y) other than the Existing Preferred Stock, does not
have any redemption, put or other purchase obligation that could arise prior to the date that is
the first anniversary of the Redemption Date and (z) does not in any manner adversely affect the
terms, designations, powers, preferences or other rights of the holders of Preferred Stock, or (ii)
create or authorize any obligation or security convertible into shares of any class or series of
stock, unless such class or series of stock ranks junior to the Preferred Stock (including, without
limitation, as to dividends, right to receive a redemption payment and the distribution of assets
upon liquidation) and does not in any manner adversely affect the terms, designations, powers,
preferences or other rights of the holders of Preferred Stock, regardless of whether any such
creation, authorization or increase shall be by means of amendment to the Certificate of
Incorporation, filing of a certificate of designations thereto, or by merger, consolidation or
otherwise.



(c) With respect to any non-Wholly Owned Subsidiary, the Company will not permit such
Subsidiary to create or issue any Capital Stock to Persons other than the Company and its
Subsidiaries except for common equity interests with (i) no rights, preferences or privileges over
any other class or series of Capital Stock of such Subsidiary, (ii) no redemption or repurchase
obligations by the Company and its Subsidiaries, (iii) no rights by the holders thereof to block or
veto dividends or distributions on the Capital Stock of such Subsidiary, and (iv) only the right to
share in a pro rata portion of the profits and losses of such Subsidiary based on the ratio of the
amount invested and the fair market value of the Capital Stock of such Subsidiary at the time of
such investment.


 


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7.10 Limitation on Certain Restrictions. Except as expressly provided in Section 9.15 and
in similar provisions contained in the Warrant and the Certificate of Designations, the Company
will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or permit to exist or be effective any restriction or encumbrance on (a) the
ability of the Company Parties to perform and comply with their respective obligations under the
Investment Documents or (b) the ability of any Subsidiary of the Company to make any dividend
payment or other distribution in respect of its Capital Stock, to repay Indebtedness owed to the
Company or any other Subsidiary, to make loans or advances to the Company or any other Subsidiary,
or to transfer any of its assets or properties to the Company or any other Subsidiary, except (in
the case of clause (b) above only) for such restrictions or encumbrances existing under or by
reason of (i) this Agreement and the other Investment Documents, (ii) applicable Requirements of
Law, (iii) customary non-assignment provisions in leases and licenses of real or personal property
entered into by the Company or any Subsidiary as lessee or licensee in the ordinary course of
business, restricting the assignment or transfer thereof or of property that is the subject thereof
and (iv) customary restrictions and conditions contained in any agreement relating to the sale of
assets (including Capital Stock of a Subsidiary) pending such sale, provided that such
restrictions and conditions apply only to the assets being sold and such sale is permitted under
this Agreement.



7.11 Fiscal Year. The Company will not, and will not permit or cause any of its Subsidiaries to, change its fiscal
year or its method of determining fiscal quarters.



7.12 Accounting Changes. Other than as permitted pursuant to Section 1.2, the Company will
not, and will not permit or cause any of its Subsidiaries to, make or permit any material change in
its accounting policies or reporting practices, except as may be required by GAAP.



ARTICLE VIII




EVENTS OF NONCOMPLIANCE




8.1 Events of Noncompliance. The occurrence of any one or more of the following events
shall constitute an “Event of Noncompliance”:



(a) Any Company Party shall fail to (x) pay any sums for the payment of any dividends (in cash
or in kind) under the terms of the Investment Documents when due or payable, or (y) redeem the
Preferred Stock when required to do so in accordance with the Investment Documents, and in the case
of either (x) or (y), such failure continues for two Business Days after the Company is provided
with notice thereof by the Investors;



(b) The Company or any other Company Party shall fail to observe, perform or comply with any
condition, covenant or agreement contained in (i) Section 2.6 and such failure shall continue
unremedied for a period of five Business Days, (ii) Sections 5.1, 5.2(a) or 5.8 for a period of
two Business Days, (iii) Sections 5.2(e)(i), 5.3(i) or 5.10 or in Article VI or Article VII for
any period or (iv) Section 5.2 (other than Sections 5.2(a) and 5.2(e)(i)) and (in the case of this
clause (iv) only) such failure shall continue unremedied for a period of ten Business Days after
the earlier of (y) the date on which the Company acquires Knowledge thereof and (z) the date on
which written notice thereof is delivered by any Investor to the Company;


 


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(c) The Company or any other Company Party shall fail to observe, perform or comply with any
condition, covenant or agreement contained in this Agreement or any of the other Investment
Documents other than those enumerated in Sections 8.1(a) and 8.1(b), and such failure (i) by the
express terms of such Investment Document, constitutes an Event of Noncompliance, or (ii) shall
continue unremedied for any grace period specifically applicable thereto or, if no grace period is
specifically applicable, for a period of 30 days after the earlier of (y) the date on which the
Company acquires Knowledge thereof and (z) the date on which written notice thereof is delivered by
any Investor to the Company;



(d) Any representation or warranty made or deemed made by or on behalf of the Company or any
other Company Party in this Agreement (when taken together with the schedules hereto), any of the
other Investment Documents or in any certificate, instrument, report
or other document furnished at any time in connection herewith or therewith shall prove to
have been incorrect in any material respect as of the time made or deemed made;



(e) The Company or any other Company Party shall (i) file a voluntary petition or commence a
voluntary case seeking liquidation, winding-up, reorganization, dissolution, arrangement,
readjustment of debts or any other relief under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, (ii) consent to the institution
of, or fail to controvert in a timely and appropriate manner, any petition or case of the type
described in Section 8.1(f), (iii) apply for or consent to the appointment of or taking possession
by a custodian, trustee, receiver or similar official for or of itself or all or a substantial part
of its properties or assets, (iv) fail generally, or admit in writing its inability, to pay its
debts generally as they become due, (v) make a general assignment for the benefit of creditors or
(vi) take any corporate action to authorize or approve any of the foregoing;



(f) Any involuntary petition or case shall be filed or commenced against the Company or any
other Company Party seeking liquidation, winding-up, reorganization, dissolution, arrangement,
readjustment of debts, the appointment of a custodian, trustee, receiver or similar official for it
or all or a substantial part of its properties or any other relief under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and unstayed for a period of 60 days; or an order,
judgment or decree approving or ordering any of the foregoing shall be entered in any such
proceeding; and



(g) After it has been initially executed, the Guaranty shall for any reason cease to be in
full force and effect as to any Guarantor, or any Guarantor or any Person acting on its behalf
shall deny or disaffirm such Guarantor’s obligations thereunder.


 


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8.2 Remedies: Redemption, etc.



Upon and at any time after the occurrence and during the continuance of any Event of
Noncompliance, each Investor may take any or all of the following actions at the same or different
times:



(a) (i) if such event is a Bankruptcy Event, the Company shall redeem immediately all of the
outstanding Preferred Stock and (ii) if such event is any other Event of Noncompliance, each
Investor, at its option, may require the Company to redeem all or any portion of the shares of
Preferred Stock held by such Investor (a “Put Right”) in accordance with the terms of the
Certificate of Incorporation and the Investment Documents. Each Investor may exercise its Put
Right by providing written notice of exercise of such Put Right to the Company identifying the
shares of Preferred Stock to be redeemed by the Company in accordance with the terms of the
Certificate of Incorporation and the Investment Documents. In the event of any redemption of the
Preferred Stock pursuant to this Section 8.2, the Company shall pay to each Investor an amount in
cash equal to the Redemption Price of the Preferred Stock. The Company also shall pay in cash to
such Investors at the time of such redemption all accrued and unpaid fees, charges
and other amounts owed by any Company Party to each such Investor under the Investment
Documents;



(b) at the option of the Required Investors, the Investors shall be entitled to receive
additional dividends on the Preferred Stock as provided in the Certificate of Incorporation; and



(c) exercise all rights and remedies available to it under this Agreement, the other
Investment Documents and applicable law.



8.3 Rescission of Put Right.



The provisions of this Article VIII are subject to the condition that, if any Investor has
given the Company notice that the Preferred Stock shall be redeemed by reason of the occurrence of
any Event of Noncompliance described in Section 8.2 other than a Bankruptcy Event, any Investor
may, by written instrument filed with the Company, rescind and annul such notice and the
consequences thereof; provided, however, that at the time such declaration is annulled and
rescinded: (i) no judgment or decree has been entered for the payment of any monies due pursuant
to the Preferred Stock or this Agreement; or (ii) the Preferred Stock had not previously been
redeemed by the Company; and (iii) each and every other Event of Noncompliance shall have been made
good, cured or waived, unless the same specifically has been waived in writing by such Investor;
provided, further, however, that no such rescission and annulment shall extend to or affect any
subsequent Event of Noncompliance or impair any right consequent thereto.




8.4 Remedies: Set-Off.




Upon and at any time after the occurrence and during the continuance of any Event of
Noncompliance, each Investor and each of its respective Affiliates is hereby authorized at any time
and from time to time, to the fullest extent permitted by applicable law, to set off and apply any
and all amounts at any time held and other obligations (in whatever currency) at any time owing by
such Investor or any such Affiliate to or for the credit or the account of the Company against any
and all of the obligations of the Company now or hereafter existing under this Agreement or any
other Investment Document to such Investor. The rights of each Investor and its respective
Affiliates under this Section are in addition to other rights and remedies (including other rights
of setoff) that such Investor or its Affiliates may have. Each Investor agrees to notify the
Company and each other Investor promptly after any such setoff and application; provided
that the failure to give such notice shall not affect the validity of such setoff and application.


 


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ARTICLE IX




MISCELLANEOUS




9.1 Expenses; Indemnity; Damage Waiver.



(a) The Company shall pay (i) all reasonable out-of-pocket expenses incurred by the Investors
(including the reasonable fees, charges and disbursements of counsel), in connection with the
preparation, negotiation, execution, delivery and administration of this Agreement and the other
Investment Documents or any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and
(ii) all reasonable out-of-pocket expenses incurred by any Investor (including the reasonable fees,
charges and disbursements of any counsel for any Investor), in connection with the enforcement or
protection of its rights upon and during the continuance of an Event of Noncompliance (A) in
connection with this Agreement and the other Investment Documents, including its rights under this
Section, or (B) in connection with the Preferred Stock and the Warrant purchased hereunder,
including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Preferred Stock and the Warrant.



(b) The Company shall indemnify each Investor, and each Related Party of any of the foregoing
Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related expenses (including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee), incurred by any
Indemnitee in connection with a third-party claim or asserted against any Indemnitee by any third
party or by the Company or any other Company Party arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Investment Document or any
agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of
their respective obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) any Preferred Stock or the Warrant or the use or proposed use
of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Substances
on or from any property owned or operated by any Company Party, or any Environmental Claim related
in any way to any Company Party, or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by the Company or any other Company Party, and
regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such
Indemnitee or (y) result from a claim brought by the Company or any other Company Party against an
Indemnitee for breach of such Indemnitee’s obligations hereunder or under any other Investment
Document, if the Company or such Company Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction. The Investors hereby
agree that the liability of the Company to all Investors pursuant to this Section 9.1(b) for
damages related to any diminution in value of the Warrants and the Warrant Shares (each, as defined
in the Warrant) resulting from an Event of Noncompliance shall be limited to a maximum aggregate
amount of
$2,000,000 and shall only be recoverable by such Investors in the event such damages are in
excess of $100,000 (in which case damages may be recovered back to dollar one).


 


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(c) (i) If any third party shall promptly notify any Indemnitee with respect to any matter (a
“Third-Party Claim”) which may give rise to a claim for indemnification against any
indemnifying party under Section 9.1(b), then the Indemnitee shall notify the Company thereof in
writing (a “Notice of Third-Party Claim”); provided, however, that no delay
on the part of the Indemnitee in notifying any indemnifying party shall relieve the indemnifying
party from any obligation hereunder unless (and then solely to the extent) the indemnifying party
thereby is materially prejudiced. A Notice of Third-Party Claim shall state in reasonable detail
the nature of the Third-Party Claim.



(ii) Any indemnifying party will have the right to defend the Indemnitee against the
Third-Party Claim with counsel of its choice reasonably satisfactory to the Indemnitee so long as
(A) the indemnifying party provides written acknowledgement to the Indemnitee that the indemnifying
party will indemnify the Indemnitee in respect of the Third-Party Claim (except for any liabilities
under such Third-Party Claim determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or willful misconduct of such
Indemnitee) and provides notice to the Indemnitee that the indemnifying party intends to undertake
such defense and provides the Indemnitee with evidence reasonably acceptable to the Indemnitee that
the indemnifying party will have the financial resources to defend against the Third-Party Claim
and fulfill its indemnification obligations hereunder, (B) the Third-Party Claim involves only
money damages and does not seek an injunction or other equitable relief and (C) the indemnifying
party conducts the defense of the Third-Party Claim actively and diligently.



(iii) So long as the indemnifying party is conducting the defense of the Third-Party Claim in
accordance with this Section 9.1(c), (A) the Indemnitee may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third-Party Claim, (B) the Indemnitee will
not consent to the entry of any judgment or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the indemnifying party (not to be withheld
unreasonably), and (C) the indemnifying party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third-Party Claim without the prior written consent
of the Indemnitee (not to be withheld unreasonably), provided that if the Indemnitee fails
to provide such consent within 30 days following a written request from the indemnifying party to
the Indemnitee in accordance with the notice provisions hereof and such settlement involves a full
release with no finding or indication of wrong doing by the Indemnitee or admission of liability by
the Indemnitee and involves only money damages and does not seek an injunction or other equitable
relief, the indemnification provided to the Indemnitee shall be limited to the amount of such
settlement.



(iv) In the event any of the conditions in Section 9.1(c)(ii) is or becomes unsatisfied,
however, (A) the Indemnitee may defend against, and consent to the entry of any judgment or enter
into any settlement with respect to, the Third-Party Claim in any manner it may deem reasonably
appropriate (and the Indemnitee need not obtain any consent from, any indemnifying party in
connection therewith), (B) the indemnifying party will reimburse the Indemnitee promptly and
periodically for the costs of defending against the Third-Party Claim (including
reasonable attorneys’ fees and expenses), and (C) the indemnifying party will remain
responsible for any amounts required to be indemnified hereunder the Indemnitee may suffer
resulting from, arising out of or relating to the Third-Party Claim to the fullest extent provided
in this Section 9.1.


 


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(d) To the fullest extent permitted by applicable law, no party to this Agreement shall
assert, and each such party hereby waives, any direct claim against another party to this Agreement
(including without limitation, with respect to any indemnification obligation hereunder) on any
theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other
Investment Document or any agreement or instrument contemplated hereby, the transactions
contemplated hereby or thereby, any Preferred Stock or the Warrant or the use of the proceeds
thereof, in each case other than a claim for diminution of value of the Warrants and Warrant Shares
(each, as defined in the Warrant); provided, however, that the limitations in this
sentence shall not in any way limit any rights of indemnification of an Indemnitee under Sections
9.1(a), 9.1(b) or 9.1(c). No Indemnitee referred to in Section 9.1(b) shall be liable for any
damages arising from the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Investment Documents or the transactions
contemplated hereby or thereby.



(e) All amounts due under this Section shall be payable by the Company upon demand therefor
(except that the Investors shall not have the right to receive advances or payments of
out-of-pockets costs and expenses incurred in connection with a claim by the Investors for
diminution in value of the Warrants and Warrant Shares (each, as defined in the Warrant) prior to
resolution of such claim).



9.2 Governing Law; Submission to Jurisdiction; Waiver of Venue; Service of Process.



(a) This Agreement and the other Investment Documents shall (except as may be expressly
otherwise provided in any Investment Document) be governed by, and construed in accordance with,
the law of the State of New York (including Sections 5-1401 and 5-1402 of the New York General
Obligations Law, but excluding all other choice of law and conflicts of law rules).



(b) Each party hereto irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the courts of the State of Illinois sitting in the County of Cook
and of the United States District Court of the Northern District of Illinois, and any appellate
court from any thereof, in any action or proceeding arising out of or relating to this Agreement or
any other Investment Document, or for recognition or enforcement of any judgment, and each of the
parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such state court or, to the fullest extent permitted
by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any
other Investment Document shall affect any right that any
Investor may otherwise have to bring any action or proceeding relating to this Agreement or
any other Investment Document against the Company or any other Company Party or its properties in
the courts of any jurisdiction.


 


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(c) The Company irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any objection that it may now or hereafter have to the laying of venue of any
action or proceeding arising out of or relating to this Agreement or any other Investment Document
in any court referred to in Section 9.2(b). Each of the parties hereto hereby irrevocably waives,
to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.



(d) Each party hereto irrevocably consents to service of process in the manner provided for
notices in Section 9.4. Nothing in this Agreement will affect the right of any party hereto to
serve process in any other manner permitted by applicable law.



9.3 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
INVESTMENT DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.



9.4 Notices; Effectiveness; Electronic Communication.



(a) Except in the cases of notices and other communications expressly permitted to be given by
telephone (and except as provided in Section 9.4(b)), all notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by telecopier as follows:



(i) if to the Company, to it at the address (or telecopier number) specified on Schedule 9.4;
and



(ii) if to any Investor, to it at its address (or telecopier number) specified on
Schedule 9.4.



Notices sent by hand or overnight courier service, or mailed by certified or registered mail,
shall be deemed to have been given when received; notices sent by telecopier shall be deemed to
have been given when sent with electronic confirmation of transmission (except that, if not given
during normal business hours for the recipient, shall be deemed to have been given at
the opening of business on the next Business Day for the recipient). Notices delivered
through electronic communications to the extent provided in Section 9.4(b) shall be effective as
provided in Section 9.4(b).


 


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(b) Notices and other communications to the Investors hereunder may be delivered or furnished
by electronic communication (including e-mail) pursuant to procedures approved by each Investor.
The Company may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communication pursuant to procedures approved by it, provided that
approval of such procedures may be limited to particular notices or communications. Unless any
Investor otherwise prescribes, notices and other communications sent to an e-mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such
as by the “return receipt requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not sent during
the normal business hours of the recipient, such notice or communication shall be deemed to have
been sent at the opening of business on the next Business Day for the recipient.



(c) Any party hereto may change its address or telecopier number for notices and other
communications hereunder by notice to the other parties hereto (except that each Investor need not
give notice of any such change to the other Investors in their capacities as such).



9.5 Amendments, Waivers, etc..



This Agreement may be amended, modified, supplemented or restated and the Company may take any
action herein prohibited, or omit to perform any act herein required to be performed by it, only if
the Company shall obtain the prior written consent of the Required Investors to such amendment,
action or omission to act.



9.6 Successors and Assigns.



Neither the Company not any other Company Party shall assign any of its rights, or any of its
obligations, under this Agreement or any other Investment Document without first obtaining the
written consent of the Required Investors. This Agreement, each other Investment Document, the
Preferred Stock and the Warrant may be endorsed, assigned and transferred in whole or part by an
Investor without obtaining the Consent of any Person; provided, however, that,
other than upon and during the continuance of any Event of Noncompliance, (i) with respect to
endorsements, assignments and transfers that are made to any Person other than Affiliates of an
Investor, such transfer shall be conditioned upon and subject to the consent of the Company (which
consent shall not be unreasonably withheld) and (ii) no such endorsement, assignment or transfer
shall be made to a direct competitor of the Company. All covenants, representations, warranties
and other stipulations in this Agreement and other documents referred to herein, given by or on
behalf of any of the parties hereto, shall bind and inure to the benefit of the respective
successors, heirs, personal representatives and assigns of the parties hereto.


 


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9.7 No Waiver.



The rights and remedies of the Investors expressly set forth in this Agreement and the other
Investment Documents are cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the part of any Investor
in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or privilege preclude other or further exercise
thereof or the exercise of any other right, power or privilege or be construed to be a waiver of
any Event of Noncompliance. No course of dealing between any Company Party or the Investors or
their agents or employees shall be effective to amend, modify or discharge any provision of this
Agreement or any other Investment Document or to constitute a waiver of any Event of Noncompliance.
No notice to or demand upon any Company Party in any case shall entitle any Company Party to any
other or further notice or demand in similar or other circumstances or constitute a waiver of the
right of any Investor to exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.



9.8 Survival.



All representations, warranties and agreements made by or on behalf of the Company or any
other Company Party in this Agreement and in the other Investment Documents shall survive from and
after the date hereof. In addition, notwithstanding anything herein or under applicable law to the
contrary, the provisions of this Agreement and the other Investment Documents relating to
indemnification or payment of costs and expenses, including, without limitation, the provisions of
Sections 2.11, 2.12 and 9.1, shall survive the redemption of the Preferred Stock, the exercise of
the Warrant and any termination of this Agreement or any of the other Investment Documents.



9.9 Severability.



To the extent any provision of this Agreement is prohibited by or invalid under the applicable
law of any jurisdiction, such provision shall be ineffective only to the extent of such prohibition
or invalidity and only in such jurisdiction, without prohibiting or invalidating such provision in
any other jurisdiction or the remaining provisions of this Agreement in any jurisdiction.



9.10 Construction.



The headings of the various articles, sections and subsections of this Agreement and the table
of contents have been inserted for convenience only and shall not in any way affect the meaning or
construction of any of the provisions hereof. Except as otherwise expressly provided herein and in
the other Investment Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Investment Documents, the provision of this
Agreement shall control.


 


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9.11 Confidentiality.



In handling any confidential information of any Company Party, each Investor shall exercise
the same degree of care that it exercises with respect to its own proprietary information of the
same types to maintain the confidentiality of any non-public information thereby received or
received pursuant to this Agreement, except that the foregoing shall not be construed to prevent
any Investor from:



(a) making any disclosure of any information (A) if required to do so by any Requirement of
Law, (B) to any Governmental Authority having or claiming authority to regulate or oversee any
aspect of such Person’s business or that of the corporate parent or affiliates of such Person in
connection with the exercise of such authority or claimed authority, (C) pursuant to subpoena or
other legal process, or (D) expressly contemplated or permitted by the Investment Documents;



(b) making disclosures of any information to the extent such Person or its counsel deems
necessary or appropriate to do so to enforce its rights hereunder or under any other Investment
Document or any remedy provided herein or therein or otherwise available by law;



(c) making, on a confidential basis, such disclosures as such Person deems necessary or
appropriate to such Person’s legal counsel or accountants, partners or investors (including outside
auditors and legal counsel of such Person’s accountants, partners or investors) or to such Person’s
employees, officers, directors or Affiliates, so long as such parties are notified of the
confidential nature of such information;



(d) making disclosures to prospective transferees or purchasers of any interest in the
Preferred Stock or the Warrant, provided that they have agreed to be bound by the
provisions of this Section 9.11;



(e) making disclosures otherwise consented to by the Company;



(f) making disclosures to a Person that is an investor or prospective investor in a public or
private offering by an Investor or any of its Affiliates or their respective successors and
assigns, of securities which represent an interest in, or which are collateralized, in whole or in
part, by the Preferred Stock or the Warrant (as used in this Section 9.11, a
“Securitization”) that agrees that its access to such confidential information is solely
for purposes of evaluating an investment in such Securitization and who agrees to treat such
information as confidential;



(g) making disclosures to a Person that is a trustee, collateral manager, servicer, backup
servicer, noteholder or other security holder, secured party or other participant in a
Securitization in connection with the administration, servicing and reporting on the assets serving
as collateral for a Securitization and who agrees to treat such information as confidential; or



(h) making disclosures to a nationally recognized rating agency that requires access to
information regarding the Company or any of its Subsidiaries and the Preferred Stock or the Warrant
for purposes of issuing ratings in connection with a Securitization.


 


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In addition to the foregoing, any Investor shall be permitted to (i) disclose information
about such financing transactions in the ordinary course of its business (including to finance
industry publications for the purpose of obtaining league table credit or similar rankings and on
the Investor’s website), (ii) make any disclosures required by or deemed advisable under applicable
Requirements of Law, including federal and state securities laws and applicable securities
exchanges and markets; and (iii) make disclosures to its investors customary in the ordinary course
of its business.



Confidential information shall not include information that either: (i) is in the public
domain, or becomes part of the public domain after disclosure to such Person through no fault of
such Person, or (ii) is disclosed to such Person by a third party, provided the applicable
Investor does not have actual knowledge that such third party is prohibited from disclosing such
information. Notwithstanding any other express or implied agreement, arrangement or understanding
to the contrary, the parties hereto hereby agree that each of the parties hereto (and each of their
respective employees, representatives, or agents) are permitted to disclose to any and all Persons,
without limitation of any kind, the tax treatment and tax aspects of the transactions contemplated
by the Investment Documents, and all materials of any kind (including opinions or other tax
analyses) that are provided to such parties related to such tax treatment and tax aspects.



9.12 Counterparts; Integration; Effectiveness.



This Agreement may be executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an original, but all of which when taken together
shall constitute a single contract. This Agreement and the other Investment Documents constitute
the entire contract among the parties relating to the subject matter hereof and supersede any and
all previous agreements and understandings, oral or written, relating to the subject matter hereof
(except for the Fee Letter). Except as provided in Section 3.1, this Agreement shall become
effective when it shall have been executed by the Investors and when the Investors shall have
received counterparts hereof that, when taken together, bear the signatures of each of the other
parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.



9.13 USA Patriot Act Notice.



Each Investor that is subject to the PATRIOT Act hereby notifies the Company that pursuant to
the requirements of the PATRIOT Act, it is required to obtain, verify and record information that
identifies the Company, which information includes the name and address of the Company and other
information that will allow such Investor to identify the Company in accordance with the PATRIOT
Act.



9.14 Action by Investors.



Except as specifically set forth otherwise herein, any action contemplated or required by the
Investor or Investors hereunder shall be at the direction of the holders of at least a majority of
the Preferred Stock, which action shall be bind all holders of the Preferred Stock.


 


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9.15 Subordination; Payment Restrictions.



(a) Any payment to any Investor under or on account of the obligations under the Investment
Documents (the “Subordinated Obligations”) is hereby expressly subordinated to the extent
and in the manner set forth in this Section 9.15 to the payment in full of the indebtedness (the
“Senior Indebtedness”) of the Company to Wells Fargo Bank, National Association (“Wells
Fargo”), under a Credit and Security Agreement dated as of October 24, 2006, as amended, by and
between the Company, Wells Fargo, as agent, and the lenders thereunder from time to time (such
lenders collectively, the “Senior Lenders”) as the same may hereafter be further amended,
supplemented or restated from time to time (the “Credit Agreement”). The payment rights of
each Investor shall continue to be subordinated to the Senior Indebtedness on the terms set forth
in this Agreement even if the Senior Indebtedness is deemed unsecured, under-secured, subordinated,
avoided or disallowed under the United States Bankruptcy Code or other applicable law.



(b) Until all of the Senior Indebtedness has been paid in full, no Investor shall, without the
prior written consent of the Senior Lenders holding a majority of the Senior Indebtedness, receive
or accept any payment from the Company under or on account of the obligations under the Investment
Documents, or exercise any right of or permit any setoff with respect to the Subordinated
Obligations, except that the Investors may accept (i) scheduled quarterly dividends (but not
prepayments) to be paid under the Certificate of Designations, Preferences and Rights of Series B
Preferred Stock of Pure Earth, Inc. of even date herewith, except upon the occurrence and during
the continuance of an event of default under the Credit Agreement either immediately before or
following any such payment and (ii) any payment made out of funds held in any New Equity Account
(as defined in the Credit Agreement as in effect on the date hereof).



(c) If any Investor receives any payment that the Investor is not entitled to receive under
the provisions of this Agreement, the Investor will hold the amount so received in trust for the
Senior Lenders and will forthwith turn over such payment to the Senior Lenders in the form received
(except for the endorsement of the Investor where necessary) for application to the Senior
Indebtedness (whether or not due), in such manner of application as the Senior Lenders may deem
appropriate. If an Investor exercises any right of setoff which the Investor is not permitted to
exercise under the provisions of this Agreement, the Investor will promptly pay over to the Senior
Lenders, in immediately available funds, an amount equal to the amount of the claims or obligations
offset.



(d) Each Senior Lender shall be a third party beneficiary entitled to enforce the provisions
of this Section 9.15.



(e) Upon the Company’s entry into any other secured credit facility in replacement of or in
addition to the Senior Indebtedness, whether with the Senior Lenders or one or more substitute
lenders, each Investor agrees to enter into documentation with the Company and such lenders
providing the lenders with substantially the same subordination and other rights as are held by the
Senior Lenders pursuant to this Section 9.15.


 


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IN WITNESS WHEREOF, the parties hereto have caused this Investment Agreement to be executed by
their duly authorized officers as of the date first above written.



	 	 	 	 	 
	 	PURE EARTH, INC., as the Company

 	 
	 	By:  	/s/   Mark Alsentzer
 	 
	 	 	Name:  	Mark Alsentzer 	 
	 	 	Title:  	President & CEO 	 
	 








 


 









 










	 	 	 	 	 	 	 	 	 	 	 
	 	 	FIDUS MEZZANINE
CAPITAL L.P., as an Investor	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Fidus Mezzanine Capital GP, LLC, its	 	 
	 	 	 	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ Edward H. Ross	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Edward H. Ross	 	 
	 

	 	 	 	 	 	Title:
	 	Managing Partner	 	 







 


 









 







Schedule 9.4




Notice Addresses




	 	 	 
	Party	 	Address
	 
	 	 
	Company

	 	Pure Earth, Inc.
	 

	 	One Neshaminy Interplex
	 

	 	Suite 201
	 

	 	Trevose, PA 19053
	 

	 	Attn: Brent Kopenhaver
	 

	 	Fax: (215) 639-8756
	 
	 	 
	Fidus Mezzanine Capital, L.P.

	 	190 S. LaSalle Street
	 

	 	Suite 2140
	 

	 	Chicago, IL 60603
	 

	 	Attention : Fidus Capital
	 

	 	Fax: (312) 284-5212