As Filed With The Securities and Exchange Commission April 13, 2001

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

COMMISSION FILE NO. 0-16379

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CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)

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Massachusetts                                    04-2997780
(State or other jurisdiction                           (IRS Employer
of incorporation or organization)                    Identification Number)
1501 Washington Street,                               02184-7535
Braintree, Massachusetts                              (Zip Code)
(Address of principal executive offices)

Registrant's telephone number: (781) 849-1800 ext. 4454
Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

On February 28, 2001, the aggregate market value of the voting stock of the
registrant held by nonaffiliates of the registrant was $14,730,644. Reference
is made to Part III of this report for the assumptions on which this
calculation is based.

On February 28, 2001, there were outstanding 11,317,155 shares of Common
Stock, $.01 par value.

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DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's definitive proxy statement for its 2001
annual meeting of stockholders (which is expected to be filed with the
Commission not later than April 30, 2001) are incorporated by reference into
part III of this report.

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Forward-Looking Statements

In addition to historical information, this Annual Report contains forward-
looking statements, which are generally identifiable by use of the words
"believes," "expects," "intends," "anticipates," "plans to," "estimates,"
"projects," or similar expressions. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in these forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Factors That May Affect
Future Results." Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's opinions only as of the
date hereof. The Company undertakes no obligation to revise or publicly
release the results of any revision to these forward-looking statements.
Readers should carefully review the risk factors described in other documents
the Company files from time to time with the Securities and Exchange
Commission, including the Quarterly Reports on Form 10-Q to be filed by the
Company in the fiscal year 2001.

PART I

ITEM 1. BUSINESS

Clean Harbors, Inc., through its subsidiaries (collectively, the "Company"),
operates in one industry segment providing a wide range of environmental
services to a diversified customer base in the United States and Puerto Rico.
The Company is managed on a regional basis, with a full range of services
being offered in the Northeast, Mid-Atlantic and Midwest regions, and a
presence in the Western region. The Company has a network of sales and
regional logistics offices and service centers located in 27 states and Puerto
Rico. The service centers interface with customers, and perform a variety of
environmental remediation and hazardous waste management activities. The
Company has 12 waste management facilities, which are managed separately from
the regions, that transport, store, treat and dispose of waste. The Company
also provides analytical testing, technical, and consulting and information
management services, which complement its primary services and permit it to
offer complete solutions to its customers' complex environmental requirements.

The Company is one of the largest providers of environmental services in the
United States. The Company has three major competitors, namely, Safety-Kleen
Corp, ONYX-North America (the waste management subsidiary of the Paris-based
Vivendi) and Philip Services Corp. The Company also competes against regional
waste management firms and a number of smaller companies. The Company seeks to
be recognized by customers as the premier supplier of a broad range of value-
added environmental services based upon quality, responsiveness, customer
service, information technologies, breadth of product offerings and cost
effectiveness. The Company's principal customers are utility, chemical,
petroleum, pharmaceutical, transportation and industrial firms, educational
institutions, other environmental service companies and government agencies.

The Company's past earnings were adversely affected by poor conditions in
the environmental services industry. Intense price competition, waste
minimization by industrial firms and unpredictable event business all
contributed to weakness across all segments of the environmental services
industry. The Company responded to industry conditions by implementing
business process review programs, expanding the network of service centers and
by enhancing revenue through increasing market share.

As part of its commitment to employee safety and quality customer service,
the Company has an extensive compliance program and a trained environmental,
health and safety staff. The Company adheres to a risk management program
designed to reduce potential liabilities for the Company and its customers.

The Company was incorporated in Massachusetts in 1980. The principal offices
of the Company are located in Braintree, Massachusetts.

1

Business Strategy

The Company's strategy is to develop and maintain an ongoing relationship
with a diversified group of customers who have recurring needs for treatment
and disposal services, site services, analytical services, and information
technologies and training in managing their overall environmental program. In
order to maintain and enhance its position in the environmental services
industry within the core markets in which it operates, the Company strives to
achieve internal growth through expanding the network of service centers
within the primary regions in which it operates, penetrating the industrial
maintenance services market, improving utilization of existing facilities by
increasing volumes of waste processed, developing new waste management
services, capitalizing on industry consolidation and providing e-commerce
solutions. In addition, the Company expects to achieve growth through
strategic acquisitions.

Expanded Network of Service Centers. The Company currently has 37 service
centers, 5 of which were opened in 2000. By opening additional service centers
within or contiguous to the regions in which it operates, the Company believes
that it can, with minimal expenditure of funds, increase its market share.
Much of the additional waste that is generated can be sent to existing
facilities to increase the utilization of the plants and thereby increase
their profitability.

Penetrating the Industrial Maintenance Services Market. In the second
quarter of 1999, the Company added to its service offerings industrial
cleaning and maintenance. The Company expanded this service to 4 locations, 1
of which was opened in 2000. The Company believes that industrial maintenance
services offer significant opportunities for growth for the Company because of
the multi-billion dollar size of the market and the Company's small current
penetration of this market. The expansion in industrial maintenance services
leverages the Company's hazardous waste disposal assets because hazardous
wastes are often removed in the cleaning process.

Improved Utilization of Waste Management Facilities. The Company currently
has 12 waste management facilities which represent a substantial investment in
permits, plants and equipment. This network of facilities provides the Company
with significant operating leverage. There are opportunities to expand waste
handling capacity at these facilities by modifying the terms of the existing
permits and by adding capital equipment and new technology. Through selected
permit modifications, the Company can expand the range of treatment services
which it offers to its customers without the large capital investment
necessary to acquire or build new waste management facilities.

New Waste Management Services. Industrial waste generators are demanding
alternatives to traditional waste disposal methods in order to increase
recycling and reclamation and to minimize the end disposal of hazardous waste.
The Company utilizes its technological expertise and innovation to improve and
expand the range of services which it offers to its customers, and to develop
less expensive methods of disposing of hazardous waste.

Capitalization on Industry Consolidation. The Company believes that its
large industrial customers are increasingly requiring a comprehensive range of
environmental services including: site services, industrial maintenance
services, emergency response services and waste consulting and information
management services to be provided by a select number of service providers.
This trend should place smaller operators at a competitive disadvantage due to
their size and limited financial resources. To respond to its customers'
needs, the Company has increased the range of environmental services it offers
and has as part of its strategy to acquire companies in existing, contiguous
and new market areas. Acquisitions within the Company's existing areas of
operation will capture incremental market share, while geographic expansion
creates new market opportunities. The Company continues to evaluate other
business opportunities in order to enhance service to its existing customer
base and expand its customer base.

E-commerce. In 1999, the Company enhanced its internet functionality to
provide order fulfillment, waste profiling and transportation scheduling. The
Company believes that its e-commerce capabilities are superior to

2

those of its competitors in the environmental services industry and that
increasing the percentage of transactions that utilize e-commerce will result
in lower costs of services.

Acquisitions

The Company has completed one acquisition since January 1, 1996.

Date of
Acquisition                 Acquisition                  Purchase Price
----------- ------------------------------------------   --------------

1999     The assets of the Texas Transportation and
Brokerage Divisions of American Ecology
Environmental Services Corporation            $1.9 million

Prior to completing any acquisition, the Company strives to investigate the
current and contingent liabilities of the company or assets to be acquired,
including potential liabilities arising from noncompliance with environmental
laws by prior owners for which the Company, as a successor owner, might become
responsible. The Company also seeks to minimize the impact of potential
liabilities by obtaining indemnities and warranties from the sellers which may
be supported by deferring payment of or by escrowing a portion of the purchase
price. See "Legal Proceedings" below for a description of the indemnities
which the Company has received in connection with past acquisitions.

SERVICES PROVIDED BY THE COMPANY

Services

The Company provides a wide range of environmental services. The services
provided can be discussed in three primary categories: treatment and disposal
of industrial wastes ("Treatment and Disposal"); site services provided at
customer sites ("Site Services"); specialized repackaging, treatment and
disposal services for laboratory chemicals and household hazardous wastes
("CleanPack(R)"). The Company also provides transportation for all forms of
hazardous wastes ("Transportation and Logistics Management, and Analytical
Testing Services"); and information management and training services. Although
they are discussed separately to provide an understanding of the services
offered, Site Services, CleanPack(R), and Transportation and Logistics
Management Services are typically provided from one service location. The
Company markets these services through its sales organizations and, in many
instances, services in one area of the business support or lead to work in
other service lines.

Treatment and Disposal

The Company transports, treats and disposes of industrial wastes for
commercial and industrial customers, health care providers, educational and
research organizations, other environmental services companies and
governmental entities. The wastes handled include substances which are
classified as "hazardous" because of their corrosive, ignitable, infectious,
reactive or toxic properties, and other substances subject to federal and
state environmental regulation. Waste types processed or transferred in drums
or bulk quantities include:

. flammables, combustibles and other organics;

. acids and caustics;

. cyanides and sulfides;

. solids and sludges;

. industrial wastewaters;

. items containing PCBs, such as utility transformers and electrical light
ballasts;

. medical waste;

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. other regulated wastes; and

. nonhazardous industrial waste.

The Company receives a detailed waste profile sheet prepared by the customer
to document the nature of the customer's waste. A sample of the delivered
waste is tested to ensure that it conforms to the customer's waste profile
record and to select an appropriate method of treatment and disposal. Once the
wastes are characterized, compatible wastes are consolidated to achieve
economies in storage, handling, transportation and ultimate treatment and
disposal. At the time of acceptance of a customer's waste at the Company's
facility, a unique computer "bar code" identification label is assigned to
each container of waste, enabling the Company to use sophisticated computer
systems to track and document the status, location and disposition of the
waste.

Wastewater Treatment. The Company's wastewater treatment operations involve
processing hazardous and nonhazardous wastes through the use of physical and
chemical treatment methods. The solid waste materials produced by these
wastewater processing operations are then disposed of off-site at facilities
owned and operated by unrelated businesses, while the treated effluent is
discharged to the local sewer system under permit.

The Company treats a broad range of industrial liquid and semi-liquid wastes
containing heavy metals, organics and suspended solids, including:

. acids and caustics;

. ammonias, sulfides and cyanides;

. heavy metals, ink wastes and plating solutions;

. landfill leachates and scrubber waters; and

. oily wastes and water soluble coolants.

Wastewater treatment can be economical as well as environmentally sound, by
combining different wastewaters in a "batching" process that reduces costs for
multiple waste stream disposal. For instance, acidic waste from one source can
be neutralized with alkaline from a second source to produce a neutral
solution.

Physical Treatment. Physical treatment methods include distillation,
separation and stabilization. These methods are used to reduce the volume or
toxicity of waste material or to make it suitable for further treatment,
reuse, or disposal. Distillation uses either heat or vacuum to purify liquids
for resale. Separation utilizes techniques such as sedimentation, filtration,
flocculation and centrifugation to remove solid materials from liquids.
Stabilization refers to a category of waste treatment processes designed to
reduce contaminant mobility or solubility and convert waste to a more
chemically stable form. Stabilization technology includes many classes of
immobilization systems and applications. Stabilization is a frequent treatment
method for metal-bearing wastes received at several Company facilities, which
treat the waste to meet specific federal land disposal restrictions. After
treatment, the waste is tested to confirm that it has been rendered
nonhazardous. It can then be sent to a nonhazardous waste landfill, at
significantly lower cost than disposal at a hazardous waste landfill.

Thermal Treatment. Thermal treatment refers to processes that use high
temperature combustion as the principal means of waste destruction. The
Company's state-of-the-art hazardous waste incinerator in Kimball, Nebraska,
uses a fluidized bed thermal oxidation unit for maximum destruction efficiency
of hazardous waste.

Resource Recovery. Resource recovery involves the treatment of wastes using
various methods which effectively remove contaminants from the original
material to restore its fitness for its intended purpose and to reduce the
volume of waste requiring disposal. The Company operates treatment systems for
the reclamation and reuse of certain wastes, particularly solvent-based wastes
generated by industrial cleaning operations, metal finishing and other
manufacturing processes.

Spent solvents that can be recycled are processed through thin film
evaporators and other processing equipment and are distilled into usable
products. Upon recovery of these products, the Company either returns

4

the recovered solvents to the original generator or sells them to third
parties. Organic liquids and solids with sufficient heat value are blended to
meet strict specifications for use as supplemental fuels for cement kilns,
industrial furnaces and other high-efficiency boilers. The Company has
installed fuels blending equipment at its Chicago and Cincinnati plants to
prepare these supplemental fuels. The Company has established relationships
with a number of supplemental fuel users that are licensed to accept the
blended fuel material. Although the Company pays a fee to the users who accept
this product, this disposal method is substantially less costly than other
disposal methods.

Clean Extraction System. The Clean Extraction System ("CES") is a hazardous
waste treatment system commercialized by the Company at its Baltimore facility
which extracts organic compounds from industrial wastewater. CES removes
organic contaminants such as gasoline, acetone, methylene chloride, pesticides
and other chemicals from industrial wastewater known as "lean water." Lean
water is generated by firms such as oil companies, utilities, and
manufacturers of specialty chemicals and pharmaceuticals.

The CES process enables the Company to handle a broad range of complex,
difficult to treat organic and inorganic wastewaters which would otherwise be
sent to other companies for disposal. CES offers the Company's industrial
customers, such as chemical or pharmaceutical companies, an attractive
recycling alternative to incineration or deep well injection of their waste
waters.

Disposal. After treatment of industrial wastes at the Company's facilities,
the hazardous waste residues (such as sludges), which remain after such
treatment, are disposed of in facilities operated by third parties. The
Company also arranges for the disposal of its customers' hazardous wastes
which cannot be treated at Company-owned facilities. Wastes which cannot be
disposed of in the Nebraska hazardous waste incinerator are sent to other
incinerators, landfills, and disposal facilities operated by third parties. On
occasion, a customer's waste may be shipped directly to another disposal
company, such as a landfill or incinerator, if the size of the waste shipment
or its characteristics are such that the waste does not need to pass through
one of the Company's own waste management facilities. The Company has
negotiated appropriate commercial terms with a number of disposal companies.

Site Services

The Company provides a wide range of environmental site services to maintain
industrial facilities and process equipment, as well as clean up or contain
actual or threatened releases of hazardous materials into the environment.
These services are provided primarily to large chemical, petroleum,
transportation, utility, industrial waste management companies and
governmental agencies. The Company's strategy is to identify, evaluate, and
solve its customers' environmental problems, on a planned or emergency basis,
by providing a comprehensive interdisciplinary response to the specific
requirements of each project.

Industrial Maintenance. Many of the Company's customers have a recurring
need to clean equipment and facilities periodically in order to continue
operations, maintain and improve operating efficiencies of their plants, and
satisfy safety requirements. Industrial maintenance involves chemical
cleaning, hydroblasting, vacuuming, and other methods to remove deposits from
process equipment, such as paint booths and plating lines, and storage
facilities for material used in the manufacturing or production process, such
as feedstocks, chemicals, fuels, paints, oils, inks, metals and many other
items. The Company's service centers are equipped with special equipment, such
as high volume pumps, pressure washers, nonsparking and chemical resistant
tools, and a variety of personal protective equipment, to perform maintenance
services quickly, usually during "off periods" to minimize the customer's
production downtime.

Surface Remediation. Surface remediation projects arise in two principal
areas: the planned cleanup of hazardous waste sites and the cleanup of
accidental spills and discharges of hazardous materials, such as those
resulting from transportation and industrial accidents. In addition, some
surface remediation projects involve the cleanup and maintenance of industrial
lagoons, ponds and other surface impoundments on a recurring basis. In all of
these cases, an extremely broad range of hazardous substances may be
encountered.

5

Surface remediation projects generally require considerable interaction
among technical and project management services. Following the selection of
the preferred remedial alternative, the project team identifies the processes
and equipment for cleanup. Simultaneously, the Company's health and safety
staff develops a site safety plan for the project. Remedial approaches usually
include physical removal, mechanical dewatering and stabilization, or
encapsulation.

Groundwater Restoration. The Company's groundwater restoration services
typically involve response to above ground spills, leaking underground tanks
and lines, hazardous waste landfills, and leaking surface impoundments.
Groundwater restoration efforts often require complex recovery systems,
including recovery drains or wells, air strippers, biodegradation or carbon
filtration systems, and containment barriers. These systems and technologies
can be used individually or in combination to remove a full range of floating
or dissolved organic compounds from groundwater. The Company designs and
fabricates mobile or fixed site groundwater treatment systems.

Site and Facility Decontamination. Site and facility decontamination
involves the cleanup and restoration of buildings, equipment, and other sites
and facilities that have been contaminated by exposure to hazardous materials
during a manufacturing process, or by fires, process malfunctions, spills or
other accidents. The Company's projects have included decontamination of
electrical generating stations, electrical and electronics components,
transformer vaults, and commercial, educational, industrial, laboratory,
research and manufacturing facilities.

Emergency Response. The Company undertakes environmental remediation
projects on both a planned and emergency basis. Emergency response actions may
develop into planned remedial action projects when soil, groundwater,
buildings or facilities are extensively contaminated. The Company has
established specially trained emergency response teams which operate on a 24-
hour basis from their service centers. The Company has also established a
program called CleanER, which is a sub-contractor network responding to
emergency response actions. Many of the Company's remediation activities
result from a response to an emergency situation by one of its response teams.
These incidents can result from transportation accidents involving chemical
substances, fires at chemical facilities or hazardous waste sites, transformer
fires or explosions involving PCBs, and other unanticipated developments when
the substances involved pose an immediate threat to public health or the
environment, such as possible groundwater contamination.

Emergency response projects require trained personnel, equipped with
protective gear and specialized equipment, prepared to respond promptly
whenever these situations occur. To meet the staffing requirements for
emergency response projects, the Company relies in part upon a network of
trained personnel who are available on a contract basis for specific project
assignments. The Company's health and safety specialists and other skilled
personnel assist field managers in supervising these projects during and
subsequent to the cleanup. The steps performed by the Company include rapid
response, containment and control procedures, analytical testing and
assessment, neutralization and treatment, collection, and transportation of
the substances to an appropriate treatment or disposal facility.

Site Remediation. The Company provides technical capabilities and
operational expertise to manage large-scale environmental projects. The
interdisciplinary teams of managers, geologists, chemists, engineers,
scientists, technicians, and compliance experts design and implement solution-
oriented remedial programs incorporating both off-site and on-site treatment.
The areas of expertise include:

. remedial investigations;

. remediation technologies: design, in-house fabrication, installation, and
operations and maintenance;

. decontamination and decommissioning operations;

. high hazard materials handling; and

. mobile treatment services.

6

CleanPack(R) Services

The Company provides specialized handling, packaging, transportation and
disposal of laboratory quantities of outdated hazardous chemicals, household
hazardous wastes, and waste pesticides and herbicides. CleanPack(R) chemists
utilize the Company's CHOICE(TM) waste management software system to support
the Company's lab pack services and complete the regulatory information
required for every pick-up. The CleanPack(R) operation services a wide variety
of customers including:

. pharmaceutical companies;

. engineering, and research and development departments of industrial
companies;

. college, university and high school laboratories;

. commercial laboratories;

. hospital and medical care laboratories and Veterans Administration
facilities;

. state and local municipalities; and

. thousands of agri-businesses and residents through household hazardous
waste and pesticide/herbicide collection programs.

CleanPack(R) chemists collect, identify, label, and package waste into
Department of Transportation approved containers. Lab packed wastes are then
transported to one of the Company's facilities where the waste is consolidated
for recycling, reclamation, fuels blending, aqueous treatment, incineration or
secure chemical landfill.

Other services provided by the Company's CleanPack(R) operations include:

High Hazard Services. Reactive Materials Technicians utilize specialized
equipment and training to stabilize and desensitize highly reactive and
potentially explosive chemicals.

CustomPack(R) Services. The Company provides training, technical support,
and disposal services for customers with the resources and experience to
package their own waste chemicals.

Laboratory Move Services. CleanPack(R) chemists properly and safely
segregate, package, transport, and un-package hazardous chemicals being moved
from older laboratories to newer laboratories.

Transportation and Logistics Management, and Analytical Testing Services

As an integral part of the Company's services, industrial wastes are
collected from customers and transported by the Company to and between its
facilities for treatment or bulking for shipment to final disposal locations.
Customers typically accumulate waste in containers, such as 55-gallon drums,
bulk storage tanks or 20-cubic yard roll-off boxes. In providing this service,
the Company utilizes a variety of specially designed and constructed tank
trucks and semi-trailers as well as third-party transporters, including
railroads. Liquid waste is frequently transported in bulk, but may also be
transported in drums. Heavier sludges or bulk solids are transported in
sealed, roll-off boxes or bulk dump trailers. The Company's fleet is equipped
with a mobile satellite monitoring system and communications network which
allows real-time communication with the transportation fleet.

The Company operates a state-certified analytical testing laboratory at its
waste handling facility in Braintree, Massachusetts, which tests samples
provided by customers to identify and quantify toxic pollutants. The
laboratory staff evaluates the properties of a given material, selects
appropriate analytical methods and executes a laboratory work plan that
results in a comprehensive technical report. The Company also maintains
laboratories at its other principal waste management facilities to identify
and characterize waste materials prior to acceptance for treatment and
disposal.

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Information Management and Personnel Training Services

Information Management Services. The Company provides customers with
software to streamline their environmental programs. The Company has developed
a proprietary software product CHOICE(R), as an on-site software product that
provides such key features as: waste tracking, manifesting, waste profiling,
labeling, least cost procurement and cost allocation reporting. Customers can
link their data via internet to the Company through CleanLink(R) web enabled
software. CHOICE(R) combined with CleanLink(R) provides customers with a total
information package of inventory management, waste shipment and waste tracking
information.

Personnel Training. The Company provides comprehensive personnel training
programs for its own employees and for its customers on a commercial basis.
Such programs are designed to promote safe work practices under potentially
hazardous conditions, whether or not toxic chemicals are present, in
compliance with stringent regulations promulgated under the Federal Resource
Conservation and Recovery Act of 1976 ("RCRA") and the Federal Occupational
Safety and Health Act ("OSHA"). The Company's Technical Training Center
includes confined space entry, exit and extraction equipment, an air-system
demonstration maze, respirator fit testing room, leak and spill response
equipment, and a layout of a mock decontamination zone, all designed to
fulfill the requirements of OSHA Hazardous Waste and Emergency Response
Standards.

Seasonality

The Company's operations may be affected by seasonal fluctuations due to
weather and budgetary cycles influencing the timing of customers' spending for
remedial activities. Typically during the first quarter of each year there is
less demand for environmental services due to the cold weather, particularly
in the Northeast and Midwest regions. In addition, factory closings for the
year end holidays reduce the volume of industrial waste generated, which
results in lower volumes of waste handled by the Company during the first
quarter of the following year.

Customers

The Company's sales efforts are directed toward establishing and maintaining
relationships with businesses which have ongoing requirements for one or more
of the Company's services. The Company's customer list includes many of the
largest industrial companies in the United States. The Company's customers are
primarily chemical, pharmaceutical, petroleum, transportation, utility and
industrial firms, other environmental services companies and government
agencies. Management believes that the Company's diverse customer base, in
terms of number, industry and geographic location, as well as its large
presence in New England, the Mid-Atlantic and Upper Midwest, provide it with a
recurring revenue base. The Company estimates that more than 80% of its
revenues are derived from previously served customers with recurring needs for
the Company's services. For the years ended December 31, 2000, 1999 and 1998,
no single customer accounted for more than five percent of the Company's
revenues. The Company believes the loss of any single customer would not have
a material adverse effect on the Company's financial condition or results of
operations.

Although the Company's customer base is diverse, two industries each
provided over 10% of the Company's revenue in 2000. Approximately 20% of the
Company's revenues in 2000 were from the chemical, pharmaceutical and allied
products industry, while approximately 14% were from the electric, gas and
sanitary industry. In 1999, those same two industries each provided over 10%
of the Company's revenue, with approximately 20% of the Company's revenues in
1999 from the chemical, pharmaceutical and allied products industry and
approximately 14% from the electric, gas and sanitary industry. In addition to
serving industrial customers such as utilities, railroads, pipelines,
pharmaceutical manufacturers, and chemical companies, the Company serves
health care and educational institutions, federal, state and local
governmental bodies, and thousands of small quantity generators.

Under applicable environmental laws and regulations, generators of hazardous
wastes retain legal liability for the proper handling of those wastes up to
and including their ultimate disposal. In response to these potential

8

concerns, many large generators of industrial wastes and other purchasers of
waste management services (such as general contractors on major remediation
projects) have decreased the number of providers they use for such services.
The Company has been selected as an approved vendor by large generators
because the Company possesses comprehensive collection, recycling, treatment,
transportation, disposal, and waste tracking capabilities and has the
expertise necessary to comply with applicable environmental laws and
regulations. By becoming an approved vendor for a large waste generator or
other purchaser, the Company becomes eligible to provide waste management
services to the multiple plants and projects of each generator or purchaser
located in the Company's service areas. However, in order to obtain such
approved vendor status, it may be necessary for the Company to bid against
other qualified competitors in terms of the services and pricing to be
provided. Furthermore, large generators or other purchasers of waste
management services often periodically audit the Company's facilities and
operations to ensure that the Company's waste management services are being
performed in compliance with applicable laws and regulations and other
criteria established by the Company and such customers.

Compliance/Health & Safety

The Company regards compliance with applicable environmental regulations,
and the health and safety of its workforce as critical components of its
overall operations. The Company strives to maintain the highest professional
standards in its compliance, and health and safety activities; its internal
operating requirements are in many instances more stringent than those imposed
by regulation. The Company's compliance program has been developed for each of
its waste management facilities and service centers under the direction of the
Company's corporate staff. The compliance, and health and safety staffs are
responsible for facilities permitting and regulatory compliance, health and
safety, field safety, compliance training, transportation compliance, and
related record keeping. The Company also performs periodic audits and
inspections of the disposal facilities of other firms utilized by the Company.

The Company's treatment, storage and recovery facilities are frequently
inspected and audited by regulatory agencies, as well as by customers.
Although the Company's facilities have been cited on occasion for regulatory
violations, the Company believes that each facility is currently in
substantial compliance with applicable requirements. Major facilities and
service centers have a full-time compliance, or health and safety
representative to oversee the implementation of the Company's compliance
program at the facility or service center. These highly trained regulatory
specialists are independent from operations and report to the Director of
Regulatory Affairs or the Director of Health and Safety, who in turn report to
the General Counsel.

Environmental Liabilities and Capital Expenditures

The Company operates facilities that treat or store hazardous waste. Such
facilities must obtain a RCRA license from the EPA or an authorized state
agency, and must comply with certain operating requirements. The EPA and state
agencies allocate their resources to remediation projects that they determine
to be of high priority. None of the Company's RCRA facilities has been
assessed a high priority by the EPA or state agency. This results in site
investigation and environmental remediation being performed according to the
timetable set by the EPA or state agencies. The following table summarizes
non-reimbursed environmental remediation expenditures capitalized and expenses
incurred for the years ended December 31 (in thousands):

2000 1999 1998
---- ---- ----

Environmental expenditures capitalized....................... $ 92 $274 $674
Environmental expenses incurred..............................  225   37   95
---- ---- ----
$317 $311 $769
==== ==== ====

Although further investigation may cause a change in estimate, the Company
expects remediation expenditures of the magnitude incurred for the last three
years to continue for the foreseeable future. The

9

Company believes that environmental cleanup can be financed out of results
from operations and that compliance with environmental laws will not adversely
affect its competitive position.

Management of Risks

The Company adheres to a program of risk management policies and practices
designed to reduce potential liability, as well as to manage customers'
ongoing environmental exposures. This program includes installation of risk
management systems at the Company's facilities, such as fire suppression,
employee training, environmental auditing and policy decisions restricting the
types of wastes handled. The Company evaluates all revenue opportunities and
declines those which it believes involve unacceptable risks.

The Company disposes of its wastes at the Company's Kimball incineration
facility, the Company's wastewater facilities, or at facilities owned and
operated by firms which the Company has audited and approved. Typically, the
Company applies established technologies to the treatment, storage and
recovery of hazardous wastes. The Company believes its operations are
conducted in a safe and prudent manner and in substantial compliance with
applicable laws and regulations.

Insurance

The Company's insurance programs cover the potential risks associated with
its multifaceted operations from two primary exposures: direct physical damage
and third-party liability. The Company maintains a casualty insurance program
providing coverage for vehicles, workers' compensation, employer's liability
and commercial general liability in the aggregate amount of $30,000,000 per
year, subject to a retention of $250,000 per occurrence, except for general
liability where the retention is $500,000 per occurrence. The workers'
compensation limits are established by state statutes. Since the early 1980s,
casualty insurance policies have typically excluded liability for pollution,
which is covered under a separate pollution liability program.

The Company has pollution liability insurance policies covering the
Company's potential risk in three areas: as a contractor performing services
at customer sites, as a transporter of waste and for waste processing at the
Company's facilities. The Company has contractor's liability insurance of
$10,000,000 per occurrence and $10,000,000 in the aggregate, covering off-site
remedial activities and associated liabilities. Steadfast Insurance Company (a
unit of Zurich Insurance N.A.) provides pollution liability coverage for waste
in-transit with single occurrence and aggregate liability limits of
$30,000,000. This Steadfast policy covers liability in excess of $1,000,000
for pollution caused by sudden and accidental occurrences during
transportation of waste, from the time waste is picked up from a customer
until its delivery to the final disposal site. The Company's $30,000,000
commercial umbrella liability policy provides additional coverage for in-
transit pollution losses from accidents for a total of $60,000,000 of in-
transit coverage.

Federal and state regulations require liability insurance coverage for all
facilities that treat, store or dispose of hazardous waste. The Resource
Conservation Recovery Act (RCRA) and the Toxic Substances Control Act (TOSCA)
and comparable state hazardous waste regulations typically require hazardous
waste handling facilities to maintain pollution liability insurance in the
amount of $1,000,000 per occurrence and $2,000,000 in the aggregate for sudden
occurrences and $3,000,000 per occurrence and $6,000,000 in the aggregate for
non-sudden occurrences. In May 2000, the Company purchased from Steadfast
Insurance Company a policy insuring the Company's treatment, storage and
disposal activities that meets the regulatory requirements. In addition, this
policy provides excess limits above the regulatory requirements up to
$30,000,000.

Operators of hazardous waste handling facilities are also required by
federal and state regulations to provide financial assurance for closure and
post-closure care of those facilities should the facilities cease operation.
Closure would include the cost of removing the waste stored at a facility
which ceased operating and sending the material to another company for
disposal. The Company had purchased closure surety bonds from Frontier
Insurance Company, as had a number of other companies that operate hazardous
waste facilities. In June 2000 due to deteriorating financial condition,
Frontier Insurance Company was dropped from the listing of approved

10

sureties. This required any company that had obtained financial assurance
through Frontier Insurance Company to obtain financial assurance through some
other source. In July 2000, the Company replaced the required financial
assurance for closure through another qualified insurance company. Obtaining
this replacement insurance required the Company to place $5,250,000 of
collateral in the form of a letter of credit. The decrease in available funds
to borrow due to the issuance of the letter of credit was partially offset by
the release to the Company's general use of restricted investments of
$1,152,000. These funds were released when financial assurance that had been
provided by the Company's captive insurance company was placed with Steadfast
Insurance Company. The Company utilizes its captive insurance company to
provide financial assurance for the lagoons and incinerator located at the
Chicago facility. Financial assurance for closure and post-closure relating
the Company's incineration facility located in Kimball, Nebraska is provided
under separate policies issued by Steadfast Insurance Company.

The Company's ability to continue conducting its industrial waste management
operations could be adversely affected if the Company should become unable to
obtain sufficient insurance or surety bonds to meet its business and
regulatory requirements in the future. The availability of insurance may also
be influenced by developments within the insurance industry, although other
businesses in the environmental services industry would be similarly impacted
by such developments.

Under the Company's insurance programs, coverage is obtained for
catastrophic exposures, as well as those risks required to be insured by law
or contract. It is the policy of the Company to retain a significant portion
of certain expected losses related primarily to workers' compensation,
commercial general and vehicle liability. Provisions for losses expected under
these programs are recorded based upon the Company's estimates of the
aggregate liability for claims. The Company believes that policy cancellation
terms are similar to those of other companies in other industries.

Competition

The Company competes with three major companies, namely, Safety-Kleen
Corp., ONYX-North America (the environmental services subsidiary of the Paris-
based Vivendi) and Philip Services Corp. The Company also competes against
regional waste management firms and numerous small companies. Each of these
competitors is able to provide one or more of the environmental services
offered by the Company, and some of which have access to greater financial
resources. The Company believes that it offers a more comprehensive range of
environmental services than its competitors in major portions of its service
territory, that its ability to provide comprehensive services supported by
unique information technologies capable of managing the customers' overall
environmental program constitutes a significant competitive advantage, and
that its stable ownership allows the Company to focus on building long-term
relationships with its customers.

Treatment and disposal operations are conducted by a number of national and
regional environmental services firms. The Company believes that the ability
to collect and transport waste products efficiently, quality of service,
safety, and pricing are the most significant factors in the market for
treatment and disposal services.

In site services and CleanPack, the Company's competitors include several
major national and regional environmental services firms, as well as numerous
smaller local firms. The Company believes that availability of skilled
technical professional personnel, quality of performance, diversity of
services and price are the key competitive factors in this service industry.

Employees

As of February 26, 2001, the Company employed 1,459 full time employees.
None of the Company's employees is subject to a collective bargaining
agreement, and the Company believes that its relationship with its employees
is satisfactory.

11

ITEM 2. PROPERTIES

The properties of the Company consist primarily of its 12 waste management
facilities and 37 service centers, various environmental remediation
equipment, and a fleet of approximately 1,000 registered pieces of
transportation equipment. Most service center locations are leased, and
occasionally move to other locations as operations and space requirements
change. All of the waste management facilities are owned by the Company,
except (i) the Chicago hazardous waste management facility which is leased
with terms (including extensions) that expire September 2020, (ii) the Woburn,
Massachusetts waste oil treatment and storage facility which is leased with
terms (including extensions) that expire February 2013, and (iii) the Virginia
waste oil treatment and storage facility which is leased with terms (including
extensions) that expire February 2002. In connection with the placement of an
industrial revenue bond in 1996, the Company entered into a facilities lease
with the City of Kimball, Nebraska, whereby the City acquired a leasehold
interest in the Kimball incinerator and the Company leased the incinerator
back from the City. The Company retains title to the incinerator.
Substantially all of the Company's properties are pledged as collateral for
its loans.

Hazardous Waste Management Facilities. The Company operates hazardous waste
management facilities at which it processes, treats and temporarily stores
hazardous wastes for later resale, reuse, or off-site treatment or disposal.
Every facility that treats, stores or disposes of hazardous wastes must obtain
a license from the federal EPA or an authorized state agency and must comply
with certain operating requirements. See "Environmental Regulation--Federal
Regulation of Hazardous Waste" below for a description of licenses issued
under RCRA. All of the Company's hazardous waste management facilities are
subject to RCRA licensing and have been issued RCRA Part B licenses, except
for the Cleveland facility, which is regulated under the Clean Water Act.

Some of the facilities described above are waste oil treatment and storage
facilities. Some petroleum products, such as gasoline, are considered
hazardous waste under federal law, and certain operations are located in
states which regulates waste oil as a hazardous waste. In order to handle a
variety of waste oil and petroleum products and support its site service
activities in the Northeast and Mid-Atlantic regions, the Company has obtained
a RCRA license for its Woburn, Massachusetts waste oil facility. The Company's
Virginia waste oil facility currently operates under RCRA interim status.

The Company has made substantial modifications and improvements to the
physical plant, and treatment and process equipment in recent years at its
treatment facilities. These modifications are consistent with the Company's
strategy to upgrade the quality and efficiency of treatment services, to
expand the range of services provided, and to ensure regulatory compliance and
operating efficiencies at these facilities. Major features of this program are
the addition of new treatment systems, expansion of analytical testing
laboratories, drum storage and processing facilities, and equipment
rearrangement and replacement to improve operating efficiency. Further, the
Company believes that it can, with minor modifications at its plants, make
changes such that the existing plants would be able to process significantly
increased volumes of hazardous wastes and that no new facilities will be
required.

Chicago, IL. The Chicago, Illinois facility is located on the south side of
Chicago, on Lake Calumet. It provides treatment of nonhazardous and hazardous
industrial wastewaters, hazardous waste fuels blending, drummed waste
processing and consolidation, and transfer and repackaging of laboratory
chemicals into lab pack containers. In November 1993, the Illinois EPA issued
a Part B license for a ten-year term.

In November, 1995, the Company acquired assets from Chemical Waste
Management, Inc. ("ChemWaste") on an adjoining leased site, together with the
existing improvements, in exchange for sharing the costs of dismantling an
existing hazardous waste incinerator and cleaning up the adjoining site. The
existing improvements on the ChemWaste site, and other improvements completed
from 1995 through 1997 by the Company, have expanded the waste storage and
handling capabilities at the Chicago plant. Waste materials are shipped via
rail and truck to Chicago. The waste materials are either treated or processed
for transshipment in Chicago.

12

Under the sharing arrangement with ChemWaste, the Company could over a
period of 15 years be required to contribute up to a maximum of $2,000,000 for
dismantling and decontaminating the incinerator and other equipment, and up to
a maximum of $7,000,000 for studies and cleanup of the site. Any additional
costs beyond those contemplated by the sharing arrangement during this time
period would be borne by ChemWaste. The Company believes that it can
appropriately capitalize the expenditures in excess of amounts accrued that
are required to clean up the property. In addition, the Company entered into a
five year disposal services agreement with ChemWaste in connection with the
acquisition of the assets on the adjoining site. Pursuant to the terms of the
disposal services agreement, the Company has agreed to use best efforts to
deliver waste materials to ChemWaste facilities for disposal subject to
certain customer preferences, scheduling and other considerations.

Kimball, NE. In May 1995, the Company acquired a newly constructed hazardous
waste incinerator in Kimball, Nebraska from Ecova Corporation, an affiliate of
Amoco Oil Company. The Kimball facility includes a 45,000 ton-per-year
fluidized bed thermal oxidation unit for maximum destruction efficiency of
hazardous waste. The incinerator has a RCRA Part B license issued by the
Nebraska Department of Environmental Quality ("NDEQ") that was issued
effective July 30, 1999 for a period of five years.

The incinerator is located on a 600 acre site, which includes a landfill for
disposal of incinerator ash. If the chemical composition of the ash meets
permit requirements, the ash can be classified as "delisted" and will no
longer be regulated as hazardous waste under federal and state laws. Although
the ash will be classified as nonhazardous, the landfill has been constructed
to meet the same stringent requirements as landfills designed to handle
hazardous waste.

As part of the acquisition, the Company agreed to make royalty payments to
Ecova Corporation through 2004, based on the number of tons processed at the
facility. In 2000, this agreement was amended. The amended agreement reduced
the royalty paid per ton processed and extended the term through 2009.

Braintree, MA. The Braintree facility is located just south of Boston. The
facility is primarily engaged in drummed waste processing and consolidation,
solvent recovery, transformer decommissioning, PCB storage and processing,
blending of waste used as supplemental fuel by cement kilns or industrial
furnaces, and pretreatment of waste to stabilize it before it is sent to
landfills. The facility was acquired by the Company in 1985 and operates under
a state Hazardous Waste Facility License issued by the Massachusetts
Department of Environmental Protection ("DEP") on January 13, 1999 for a five
year term.

Natick, MA. The Natick, Massachusetts facility is located just west of
Boston. The facility has a state Hazardous Waste Facility License (the state
equivalent of a Part B license), which was last issued in 1994 for a five year
term. In January 2000, the Company submitted a permit renewal application,
which allows the facility to maintain its hazardous waste management authority
until a new license is issued. The facility is also authorized by the federal
EPA to handle PCBs. Subsequent to year end the Company decided to sell the
facility and the facility is going through RCRA closure in preparation for
sale.

Cleveland, OH. The Cleveland, Ohio facility is located south of downtown
Cleveland. It is a wastewater treatment facility that treats nonhazardous and
hazardous industrial wastewaters, and it serves as a transfer station for
various types of containerized hazardous and nonhazardous waste. The facility
is not subject to Part B licensing requirements, since its on-site wastewater
treatment activities are regulated pursuant to the Clean Water Act, and
therefore are exempt from RCRA.

Baltimore, MD. The Baltimore, Maryland facility is located in central
Baltimore. It provides treatment of nonhazardous and hazardous industrial
aqueous wastes, treatment of "lean waters" through the CES process, drummed
waste processing, waste stabilization, and transfer of lab pack containers.
The facility has a state Controlled Hazardous Substances permit (the state
equivalent of a Part B license), which was issued January 10, 2000 for a
period of five years. The permit also allows handling of material destined for
fuels blending and rail shipment of hazardous and nonhazardous waste.

13

Bristol, CT. The facility is located in Bristol, Connecticut, approximately
20 miles southwest of Hartford. It provides hazardous wastewater treatment,
drummed waste processing and consolidation, and transfer of lab pack
containers. This facility also provides treatment of special categories of
hazardous wastewaters known as "listed" wastewaters resulting from industrial
processes such as electroplating. The facility has a Part B license which was
last issued in 1995 for a five year term. In December 1999, the Company
submitted a permit renewal application, which allows the operations to
continue until the renewal application is approved.

Cincinnati, OH. The facility is located north of downtown Cincinnati, Ohio.
It provides hazardous wastewater treatment, drummed waste processing and
consolidation, pretreatment of waste to stabilize it before it is sent to
landfills, fuels blending, and transfer of lab pack containers. The facility
is also authorized to handle PCBs. The facility holds a state Hazardous Waste
Facility Installation and Operation permit (RCRA Part B) which was renewed in
December 1993 for a five-year term. A federal permit under the Hazardous and
Solid Waste Amendments to RCRA was issued in December 1996. In December 1998,
the Company submitted a permit application, which allows operations to
continue until the state issues the renewal permit.

Waste Oil Treatment and Storage Facilities. The Company has four waste oil
treatment and storage facilities: two in Massachusetts, one in Maine and one
in Virginia. The Massachusetts facilities are located in Kingston and Woburn,
in the Boston area. The Kingston facility has a state recycling permit and is
able to store oil collected from various activities, ranging from routine
cleaning of oil storage terminals to oil spill cleanups. The facility is also
used for maintenance activities, and for training of employees of the Company
and third-party customers. The Woburn facility is a waste oil storage and
transfer facility, which was issued a Part B license in October 1993 for a
five-year term. A renewal application was submitted to the state in November
1998, which allows operations to continue until the renewal application is
approved.

The facility in South Portland, Maine is a petroleum reclamation facility
that handles most of the waste oil received by the Company, which comes
primarily from the Company's remediation activities. It has a municipal sewer
user permit allowing the discharge of water separated from oil. The Company
also owns another property on Main Street in South Portland, which has a
license to store virgin oil, and it is also permitted for the temporary
storage and transfer of containerized hazardous waste.

The Prince George, Virginia facility is located near Richmond and was
acquired in September 1994. The facility is able to store waste oil and
gasoline-contaminated hazardous wastes collected from various activities,
ranging from routine cleaning of oil storage terminals to oil spill cleanups.
The state has agreed that this facility is regulated under the Clean Water Act
and is, therefore, exempt from the requirement to obtain a RCRA Part B permit.
At this time the facility is proceeding with RCRA closure, and will
subsequently operate as an industrial wastewater treatment facility exempt
from RCRA permitting requirements.

ENVIRONMENTAL REGULATION

While the Company's business has benefited substantially from increased
governmental regulation of hazardous waste transportation, storage and
disposal, the environmental services industry itself has become the subject of
extensive and evolving regulation by federal, state and local authorities. The
Company is required to obtain federal, state and local licenses, or approvals
for each of its hazardous waste facilities. Such licenses are difficult to
obtain and, in many instances, extensive studies, tests, and public hearings
are required before the approvals can be issued. The Company has acquired all
operating licenses and approvals now required for the current operation of its
business, and has applied for or is in the process of applying for, all
licenses and approvals needed in connection with continued operation and
planned expansion or modifications of its operations.

The Company makes a continuing effort to anticipate regulatory, political
and legal developments that might affect its operations, but is not always
able to do so. The Company cannot predict the extent to which any
environmental legislation or regulation that may be enacted or enforced in the
future may affect its operations.

14

Federal Regulation of Hazardous Waste

The most significant federal environmental laws affecting the Company are
RCRA, the Superfund Act and the Clean Water Act.

RCRA. RCRA is the principal federal statute governing hazardous waste
generation, treatment, transportation, storage and disposal. Pursuant to RCRA,
the EPA has established a comprehensive, "cradle-to-grave" system for the
management of a wide range of materials identified as hazardous waste. States
such as Massachusetts, Connecticut, Illinois, Maryland, Ohio and Nebraska,
that have adopted hazardous waste management programs with standards at least
as stringent as those promulgated by the EPA, have been authorized by the EPA
to administer their facility permitting programs in lieu of the EPA's program.

Every facility that treats, stores or disposes of hazardous waste must
obtain a RCRA permit from the EPA or an authorized state agency, unless a
specific exemption exists, and must comply with certain operating
requirements. Under RCRA, hazardous waste management facilities in existence
on November 19, 1980 were required to submit a preliminary license application
to the EPA, the so-called Part A Application. By virtue of this filing, a
facility obtained interim status, allowing it to operate until licensing
proceedings are instituted pursuant to more comprehensive and exacting
regulations (the Part B licensing process). Interim Status facilities may
continue to operate pursuant to the Part A Application until their Part B
licensing process is concluded. Of the Company's 12 waste management
facilities, only the Virginia waste oil facility operates under interim
status. The Cleveland facility operates under a RCRA exemption for wastewater
treatment tank systems and is subject to regulations under the Clean Water
Act.

RCRA requires that Part B licenses contain provisions for required on-site
study and cleanup activities, known as "corrective action," including detailed
compliance schedules and provisions for assurance of financial responsibility.

The Company has begun RCRA corrective action investigations at its Part B
licensed facilities in Braintree, Natick, Chicago, Cincinnati, and Woburn. The
Company is also involved in site studies at its non-RCRA facilities in
Cleveland, Ohio; Kingston, Massachusetts; and on Main Street in South
Portland, Maine. Corrective action at the Bristol, Connecticut, facility was
completed in 1996. The Company spent approximately $317,000, $311,000 and
$769,000 on corrective action at the foregoing facilities for the years ended
December 31, 2000, 1999 and 1998, respectively.

While the final scope of the work to be performed at these sites has not yet
been agreed upon, the Company believes, based upon information known to date
about the nature and extent of contamination at these sites, that accruals
have been established when required and such costs are not expected to have a
material effect on its results of operations or its competitive position, and
that it will be able to finance from operating revenue any additional
corrective action required at the sites.

The Bristol, Connecticut and Cincinnati, Ohio facilities were acquired from
a subsidiary of Southdown, Inc. Southdown Inc. has agreed to indemnify the
Company against any costs incurred or liability arising from contamination on-
site, including the cost of corrective action, or waste disposed of off-site,
including any liability under the Superfund Act, at those facilities.

The Company was also involved in a RCRA corrective action investigation at a
site in Chester, Pennsylvania owned by PECO Energy Company ("PECO"). The site
consists of approximately 30 acres which PECO had leased to various companies
over the years. In 1989, the Company acquired by merger a public company named
ChemClear Inc., which operated a hazardous waste treatment facility on
approximately eight acres of the Chester site leased from PECO. The Company
ceased operations at the Chester site, decontaminated the plant and equipment,
engaged an independent engineer to certify closure, and obtained final
approval from the Pennsylvania regulatory authorities, certifying final
closure of the facility. In 1993, the EPA ordered PECO to perform a RCRA
corrective action investigation at the Chester site. PECO asked the Company to
participate in the site studies, and in October 1994, the Company agreed to be
responsible for seventy-five percent of the cost

15

of these studies, which was estimated to be in the range of $2,000,000, by,
among other things, performing site services work and analytical services
required to complete the site studies and providing other environmental
services to PECO at discounted rates. The Company had provided discounts and
credits to PECO totaling $908,000 through August 2, 1999. The Company and PECO
then negotiated an amendment to their 1994 agreement, whereby the Company's
responsibility for its share of the cost of site studies was capped at
$1,733,000. The Company had accrued $825,000 relating to this liability at
December 31, 1999. The $825,000 balance owed under the amendment was paid in
2000.

The Superfund Act. The Superfund Act provides for immediate response and
removal actions coordinated by the EPA to releases of hazardous substances
into the environment, and authorizes the government to respond to the release
or threatened release of hazardous substances or to order persons responsible
for any such release to perform any necessary cleanup. The statute assigns
joint and several liability for these responses and other related costs,
including the cost of damage to natural resources, and to the parties involved
in the generation, transportation and disposal of such hazardous substances.
Under the statute, the Company may be deemed liable as a generator or
transporter of a hazardous substance which is released into the environment,
or as the owner or operator of a facility from which there is a release of a
hazardous substance into the environment. See "Item 3--Legal Proceedings" for
a description of certain such proceedings involving the Company.

Clean Water Act.  This legislation prohibits discharges into the waters of
the United States without governmental authorization. The EPA has promulgated
"pretreatment" regulations under the Clean Water Act, which establish
pretreatment standards for introduction of pollutants into publicly owned
treatment works ("POTW"). In the course of its treatment process, the
Company's wastewater treatment facilities generate wastewater, which they
discharge to POTW pursuant to permits issued by the appropriate governmental
authority. In December 2000 the EPA promulgated new effluent limitations,
pretreatment standards and source performance standards for centralized waste
treatment ("CWT") facilities. The Company's Bristol, Connecticut; Baltimore,
Maryland; Chicago, Illinois; Cleveland and Cincinnati, Ohio; South Portland,
Maine; and Prince George, Virginia facilities are subject to the CWT
regulations. The Company has until December 22, 2003 to achieve compliance
with the new regulations. Compliance is achieved by meeting the effluent
limits for specific contaminants using the best practicable treatment or
"equivalent" technology. "Equivalent" technology is demonstrated by procedures
negotiated with the local governmental authority responsible for operating the
pretreatment program for the POTW. Until such time as the governmental
authorities issue guidance on procedures to determine "equivalence" there is
no way for the Company to quantify the impact of the CWT regulation on the
facilities.

Other Federal Laws. Company operations are also subject to the Toxic
Substances Control Act ("TSCA"), pursuant to which the EPA regulates over
60,000 commercially produced chemical substances, including the proper
disposal of PCBs. TSCA has established a comprehensive regulatory program for
PCBs, under the jurisdiction of the EPA, which oversees the storage, treatment
and disposal of PCBs at the Company's facilities in Braintree and Natick,
Massachusetts; Cincinnati, Ohio; and Bristol, Connecticut. Under the 1990
Clean Air Act Amendments, the EPA regulates emissions into the air of
potentially harmful substances. The recently promulgated Maximum Achievable
Control Technology ("MACT") rule of the Clean Air Act, effective September 30,
2002, places a new set of technology-based emissions standards on
incinerators, cement kilns and lightweight aggregate kilns. The Company's
Kimball, Nebraska incinerator has demonstrated emissions levels that are at or
below MACT standards with negligible investments or facility modifications.

In its transportation operations, the Company is regulated by the U.S.
Department of Transportation, the Federal Railroad Administration, and the
U.S. Coast Guard, as well as by the regulatory agencies of each state in which
it operates or through which its trucks pass. Health and safety standards
under the Occupational Safety and Health Act are also applicable.

State and Local Regulations

Pursuant to the EPA's authorization of their RCRA equivalent programs,
Massachusetts, Connecticut, Illinois, Maryland, Ohio, and Nebraska have
regulatory programs governing the operations and permitting of

16

hazardous waste facilities. Accordingly, the hazardous waste treatment,
storage and disposal activities of the Company's Braintree, Natick, Woburn,
Bristol, Chicago, Baltimore, Cincinnati, and Kimball facilities are regulated
by the relevant state agencies in addition to federal EPA regulation.

Some states, such as Connecticut and Massachusetts, classify as hazardous
some wastes which are not regulated under RCRA. For example, Massachusetts
considers PCBs and used oil as "hazardous wastes," while RCRA does not.
Accordingly, the Company must comply with state requirements for handling
state regulated wastes, and, when necessary, obtain state licenses for
treating, storing, and disposing of such wastes at its facilities.

The Company believes that each of its facilities is in substantial
compliance with the applicable requirements of RCRA, state laws and
regulations. Eleven of the Company's 12 waste management facilities have been
issued final licenses, except for the Virginia facility which operates as an
interim status facility under RCRA. Once issued, such licenses have maximum
fixed terms of a given number of years which differ from state to state,
ranging from three years to ten years. The issuing state agency may review or
modify a license at any time during its term. The Company anticipates that
once a license is issued with respect to a facility, the license will be
renewed at the end of its term if the facility's operations are in compliance
with applicable requirements. However, there can be no assurance that
regulations governing future licensing will remain static, or that the Company
will be able to comply with such requirements.

The Company's wastewater treatment facilities are also subject to state and
local regulation, most significantly sewer discharge regulations adopted by
the municipalities which receive treated wastewater from the treatment
processes. The Company's continued ability to operate its liquid waste
treatment process at each such facility is dependent upon its ability to
continue these sewer discharges.

The Company's facilities are regulated pursuant to state statutes, including
those addressing clean water and clean air. Local sewer discharge and
flammable storage requirements are applicable to certain of the Company's
facilities. The Company's facilities are subject to local siting, zoning and
land use restrictions. Although the Company's facilities occasionally have
been cited for regulatory violations, the Company believes it is in
substantial compliance with all federal, state and local laws regulating its
business. Superfund legislation permits strict joint and several liability to
be imposed without regard to fault, and as a result one PRP might be required
to bear significantly more than its proportional share of the cleanup costs if
other PRP's do not pay their share of such costs.

ITEM 3. LEGAL PROCEEDINGS

Certain Company subsidiaries have transported or generated waste sent to
sites, which have been designated state or federal Superfund sites. As a
result, the Company has been named as a potentially responsible party ("PRP")
in a number of lawsuits arising from the disposal of wastes at 27 state and
federal Superfund sites.

Fourteen of these sites involve two subsidiaries which the Company acquired
from ChemWaste, a former subsidiary of Waste Management, Inc. As part of the
acquisition, ChemWaste agreed to indemnify the Company with respect to any
liability of its Braintree and Natick subsidiaries for waste disposed of
before the Company acquired them. Accordingly, Waste Management is paying all
costs of defending the Company's Braintree and Natick subsidiaries in these 14
cases, including legal fees and settlement costs.

The Company's subsidiary which owns the Bristol, Connecticut facility is
involved in one Superfund site. As part of the acquisition of the Bristol,
Connecticut and Cincinnati, Ohio facilities, the seller and its now parent
company, Cemex, S.A., agreed to indemnify the Company with respect to any
liability for waste disposed of before the Company acquired the facilities,
which would include any liability arising from Superfund sites.

Six of the sites involve former subsidiaries of ChemClear Inc. One of the
six sites is the Strasburg Landfill site in Pennsylvania, which the Company
settled with the U.S. Government in late 1998. The Company is also a

17

settling party at the other five ChemClear sites. The Company believes its
ultimate exposure in these cases will not have a material impact on its
financial position or results of operations.

Mr. Frank, Inc., which was acquired by the Company in July 1992, is involved
in four Superfund sites, as a transporter of waste generated by others prior
to the Company's purchase of Mr. Frank, Inc. The Company acquired Mr. Frank,
Inc. in exchange for 233,000 shares of the Company's common stock, of which
33,222 shares were deposited into an escrow account to be held as security for
the sellers' agreement to indemnify the Company against potential liabilities,
including environmental liabilities arising from prior ownership and operation
of Mr. Frank, Inc. The Company has been identified as a PRP at two sites, at
which the Company believes that it has no liability.

The Company believes that any future settlement costs arising from any or
all of the 27 Superfund sites described above will not be material to the
Company's operations or financial position. The Company routinely reviews each
Superfund site in which the Company's subsidiaries are involved, considers
each subsidiary's role at each site and its relationship to the Company and
other PRPs at the site, the quantity and content of the waste it disposed of
at the site, and the number and financial capabilities of the other PRPs at
the site. Based on reviews of the various sites and currently available
information, and management's judgment and prior experience with similar
situations, expense accruals are provided by the Company for its share of
future site cleanup costs, and existing accruals are revised as necessary. As
of December 31, 2000 and 1999, the Company had accrued environmental costs of
$144,000 and $285,000, respectively, for cleanup of Superfund sites.

Environmental regulations stipulate the amount of transit and holding time
that shipments of hazardous waste are allowed. Certain federal agencies,
including the EPA, conducted an inquiry concerning certain railcars which were
destined for the Company's Kimball, Nebraska incinerator. Several railcars
containing waste materials generated by the Company's waste treatment plants
were not delivered to the Company's Sterling, Colorado rail transfer facility
in a timely manner by the railroad company. The Company has cooperated fully
with federal and state authorities and has arranged for company personnel to
be interviewed and has produced records, documents and other materials
concerning the railcars in question. The Company has conducted its own
internal investigation and believes that there has been no wrongdoing on the
part of the Company with respect to the late delivery of railcars. However,
assurances cannot be given that the government authorities may not reach a
different conclusion or may attempt to levy penalties. The Company is engaged
in settlement negotiations with the government.

In October 1995 an employee was killed in an accident when a drum exploded
at a facility in Cincinnati, Ohio operated by a subsidiary, Spring Grove
Resource Recovery, Inc. ("Spring Grove"). During 1999 the Company was notified
by the Justice Department that the Department believed it had a cause of
action against a subsidiary for potential civil and/or criminal violations of
its permit issued under the Federal Resources Conservation and Recovery Act of
1976 ("RCRA") as a result of the 1995 accident. The Company has conducted an
exhaustive internal review of the circumstances leading up to the accident and
believes that the subsidiary did not knowingly violate any relevant terms of
its RCRA permit. The Company has also engaged the services of external legal
and regulatory experts to review the situation and they have also concluded
that the available evidence does not support a conclusion that the subsidiary
knowingly violated its permit. Assurances can not be given, however, that
government authorities will not reach a different conclusion and proceed with
legal action or attempt to levy penalties. The Company has executed tolling
agreements with the government and is presently engaged in discussions with
the government in an effort to resolve this matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during
the fourth quarter of 2000.

18

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock began trading publicly in the over-the-counter
market on November 24, 1987 and was added to the NASDAQ National Market System
effective December 15, 1987. The Company's common stock trades on The Nasdaq
Stock Market under the symbol: CLHB. The following table sets forth the high
and low sales prices of the Company's common stock for the indicated periods
as reported by NASDAQ.

High   Low
------ ------

1999
First Quarter................................................ $2.438 $1.563
Second Quarter...............................................  2.000  1.563
Third Quarter................................................  1.813  1.313
Fourth Quarter...............................................  1.813  1.063

High   Low
------ ------

2000
First Quarter................................................ $4.250 $1.188
Second Quarter...............................................  2.969  1.531
Third Quarter................................................  3.250  1.563
Fourth Quarter...............................................  3.000  1.500

On February 26, 2001 there were 656 holders of record of the Company's
common stock, excluding stockholders whose shares were held in nominee name.

The Company has never declared nor paid any cash dividends on its common
stock, and the Company is prohibited under its loan agreements from paying
dividends on its common stock. In February 1993, the Board of Directors
authorized the issuance of up to 156,416 shares designated as Series B
Convertible Preferred Stock (the "Preferred Stock"), with a cumulative
dividend of 7% during the first year and 8% thereafter, payable either in cash
or by the issuance of shares of common stock. On February 16, 1993, 112,000
shares of Preferred Stock were issued in partial payment of the purchase price
for the Cincinnati facility. Except for payment of dividends on the Preferred
Stock, the Company intends to retain all earnings for use in the Company's
business and therefore does not anticipate paying any cash dividends on its
common stock in the foreseeable future.

Dividends on the Company's Preferred Stock are payable on the 15th day of
January, April, July and October, at the rate of $1.00 per share, per quarter;
112,000 shares are outstanding. The Company currently is restricted in the
payment of cash dividends due to covenants in its loan agreements. Under the
terms of the Preferred Stock, the Company can elect to pay dividends in cash
or in common stock with a market value equal to the amount of the dividend
payable. The Company was required to pay the 2000 dividends in common stock
due to restrictions under its loan agreements. The share price of the common
stock and the shares of common stock issued to holders of preferred stock
during 2000 were as follows:

Record Date                                 Share Price Common Stock Issued
-----------                                 ----------- -------------------

January 1, 2000............................   $1.206          92,849
April 1, 2000..............................    2.859          39,169
July 1, 2000...............................    2.025          55,308
October 1, 2000............................    2.831          39,558

The Company anticipates that commencing in the third quarter of 2001 the
Preferred Stock dividends will be paid in cash.

19

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial information should be reviewed
in conjunction with Item 7-- Management's Discussion and Analysis of Financial
Condition and Results of Operations and Item 8--Financial Statements and
Supplementary Data of this report.

For the Year Ended December 31,
------------------------------------------------
Income Statement Data:          2000      1999      1998      1997      1996
----------------------        --------  --------  --------  --------  --------
(in thousands except per share amounts)

Revenues....................  $233,466  $202,965  $197,439  $183,767  $200,213
Cost of revenues............   166,303   149,637   147,214   140,926   154,773
Selling, general and
administrative expenses....    42,238    37,190    34,976    34,114    36,161
Depreciation and
amortization of intangible
assets.....................    10,656     9,501     9,112     9,228     9,827
--------  --------  --------  --------  --------
Income (loss) from
operations.................    14,269     6,637     6,137      (501)     (548)
Other income, net...........        --        --        --       800        --
Interest expense, net.......     9,167     8,599     9,631     9,182     9,170
--------  --------  --------  --------  --------
Income (loss) before
provision for (benefit
from)
income taxes...............     5,102    (1,962)   (3,494)   (8,883)   (9,718)
Provision for (benefit from)
income taxes...............    (2,016)      282       360     4,845    (2,775)
--------  --------  --------  --------  --------
Net income (loss)...........  $  7,118  $ (2,244) $ (3,854) $(13,728) $ (6,943)
========  ========  ========  ========  ========
Basic earnings (loss) per
share......................  $   0.60  $  (0.25) $  (0.42) $  (1.42) $  (0.77)
========  ========  ========  ========  ========
Diluted earnings (loss) per
share......................  $   0.59  $  (0.25) $  (0.42) $  (1.42) $  (0.77)
========  ========  ========  ========  ========
Weighted average number of
common shares outstanding..    11,085    10,649    10,309     9,959     9,653
========  ========  ========  ========  ========
Weighted average common
shares plus potentially
dilutive common shares.....    11,305    10,649    10,309     9,959     9,653
========  ========  ========  ========  ========
Financial Data:
Earnings before interest,
taxes, depreciation and
amortization (EBITDA)......  $ 24,925  $ 16,138  $ 15,249  $  9,527  $  9,279
Working capital.............  $(33,474) $ 14,565  $ 11,245  $ 10,448  $ 14,245
Total assets................  $149,568  $145,247  $145,910  $147,850  $177,997
Debt........................  $ 67,727  $ 74,797  $ 74,032  $ 73,707  $ 75,373
Stockholders' equity........  $ 41,635  $ 34,171  $ 36,310  $ 40,024  $ 53,584

No cash dividends have been declared on the Company's common stock.

Provision for (benefit from) income taxes. The 1997 provision for income
taxes was primarily due to an increase in the valuation allowance for deferred
taxes. The 2000 benefit from income taxes was primarily due to the partial
reversal of this valuation reserve. See item captioned Income Taxes in Item 7,
Management's Discussion and Analysis of Financial Condition.

Other Income. During 1997, the Company recorded a $950,000 receivable in
connection with the settlement of a lawsuit and incurred approximately
$150,000 in costs related to the litigation. The Company recognized a pre-tax
gain, net of related legal fees, of $800,000 resulting from the settlement,
which is included in other income, net in the consolidated statement of
income.

20

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations

The following table sets forth for the periods indicated certain operating
data associated with the Company's results of operations. This table and
subsequent discussions should be read in conjunction with Item 6 Selected
Financial Data and Item 8 Financial Statements and Supplementary Data of this
report.

Percentage Of Total Revenues
------------------------------------
Twelve-month Year
Ended December 31,
------------------------------------
2000   1999    1998    1997    1996
-----  -----   -----   -----   -----

Revenues............................... 100.0% 100.0%  100.0%  100.0%  100.0%
Cost of revenues:
Disposal costs paid to third
parties.............................  10.9   12.5    14.3    13.9    13.8
Other costs..........................  60.3   61.2    60.3    62.8    63.4
-----  -----   -----   -----   -----
Total cost of revenues.............  71.2   73.7    74.6    76.7    77.2
Selling, general and administrative
expenses..............................  18.1   18.3    17.7    18.6    18.2
Depreciation and amortization of
intangible assets.....................   4.6    4.7     4.6     5.0     4.9
-----  -----   -----   -----   -----
Income (loss) from operations..........   6.1    3.3     3.1    (0.3)   (0.3)
Other income, net......................    --     --      --     0.4      --
Interest expense, net..................   3.9    4.3     4.9     4.9     4.6
-----  -----   -----   -----   -----
Income (loss) before provision for
(benefit from) income taxes...........   2.2   (1.0)   (1.8)   (4.8)   (4.9)
Provision for (benefit from) income
taxes.................................  (0.8)   0.1     0.2     2.7    (1.4)
-----  -----   -----   -----   -----
Net income (loss)....................   3.0%  (1.1)%  (2.0)%  (7.5)%  (3.5)%
=====  =====   =====   =====   =====

Revenues for 2000 were $233,466,000 up $30,501,000 or 15.0% compared to
revenues of $202,965,000 for 1999. Of the total revenue increase for the year,
approximately 52% came from site services, which includes higher margin
emergency response events, and 48.0% came from transportation and disposal
services. The volume of waste processed through the Company's facilities
increased 16.9%. The pricing of waste processed was flat. The Company cannot
predict whether or not recent trends in volumes or pricing will continue.

Revenues for 1999 were $202,965,000 as compared to $197,439,000 for 1998, an
increase of $5,526,000 or 2.8%. Of the total revenue increase for the year,
approximately $7,722,000 came from site services, due to a greater amount of
services performed, which was partially offset by a $2,196,000 decrease in
transportation and disposal services. The acquisition of the Texas
Transportation and Brokerage Divisions of American Ecology Environmental
Services resulted in a 0.4% increase in revenues. The volume of waste
processed through the Company's facilities declined by 8.1%. Most of the
decrease in the volume of waste processed through the Company's facilities was
due to the Company's decision to increase the selling prices on certain waste
streams that were determined to be unprofitable or only marginally profitable.
Pricing on waste processed through the Company's facilities decreased by 3.3%.

In June 2000, a major competitor of the Company, Safety-Kleen Corp.,
announced that it had filed for Chapter 11 bankruptcy protection. The Company
does not believe that revenues for the year ended December 31, 2000 were
significantly impacted by Safety-Kleen's announcement.

There are many factors which have impacted, and continue to impact, the
Company's revenues. These factors include: competitive industry pricing;
continued efforts by generators of hazardous waste to reduce the amount of
hazardous waste they produce; significant consolidation among treatment and
disposal companies; industry-wide overcapacity; direct shipment by generators
of waste to the ultimate treatment or disposal location; and budgetary cycles
influencing the timing of customers' spending for remedial activities.

21

Cost of Revenues. Cost of revenues was $166,303,000 for 2000 compared to
$149,637,000 for 1999, an increase of $16,666,000. As a percentage of
revenues, cost of revenues decreased from 73.7% for 1999 to 71.2% for 2000.
One of the largest components of cost of revenues is the cost of sending waste
to other companies for disposal. Disposal costs paid to third parties as a
percentage of revenue declined from 12.5% for 1999 to 10.9% for 2000. This
decrease was due to disposal revenues decreasing as a percentage of total
revenues due to the revenue mix, and to continuing efforts to internalize the
disposal of waste, to develop alternative lower cost disposal technologies and
to identify lower cost suppliers. Other costs of revenues as a percentage of
revenues declined from 61.2% for 1999 to 60.3% for 2000. This decrease was
primarily due to increased margins on site service work performed due to the
mix of jobs performed and due to increased margins on waste processed through
the Company's facilities due to the increase in the volume of waste processed
and fixed cost nature of the facilities.

Cost of revenues was $149,637,000 for 1999 compared to $147,214,000 for
1998. As a percentage of revenues, cost of revenues decreased from 74.6% for
1998 to 73.7% for 1999. One of the largest components of cost of revenues is
the cost of sending waste to other companies for disposal. Disposal costs paid
to third parties declined from 14.3% for 1998 to 12.5% for 1999. The costs of
sending waste to third parties decreased as a percentage of revenues primarily
due to the decline in the volume of waste processed by the Company and the
decrease in the proportion of disposal revenues to total revenues. In
addition, the Company has continued to upgrade the quality and efficiency of
its waste treatment services through the development of new technology and
continued modifications and upgrades at its facilities. In 1999, other costs
of revenues as a percentage of revenues increased largely due to the inclusion
of the settlement of an insurance claim in cost of revenues in 1998 for an
amount, net of legal expenses of $1,168,000.

The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. The Company
continues to upgrade the quality and efficiency of its waste treatment
services through the development of new technology and continued modifications
and upgrades at its facilities. In addition during the first quarter 1999, the
Company commenced a strategic sourcing initiative in order to reduce operating
costs by identifying suppliers that are able to supply goods and services at
lower costs, by obtaining volume discounts where the Company is currently
purchasing goods and services from various suppliers and consolidating these
purchases with a small number of suppliers, and by reducing the internal costs
of purchasing goods and services by reducing the number of suppliers that the
Company uses through reducing the number of purchase orders that must be
prepared and invoices that must be processed. No assurance can be given that
the Company's efforts to manage future operating expenses will be successful.
Efforts to reduce costs are ongoing.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $42,238,000 for 2000 from $37,190,000 for
1999, an increase of $5,048,000 or 13.6%. The increase in amounts earned under
management incentive and commission plans due to improved results of
operations and increased sales, as well as 401(K) contributions linked to the
Company's performance, accounted for the largest portion of the increase in
selling, general and administrative expenses. The next largest components of
the increase resulted from increases in headcount due to higher levels of
revenues, increases in headcount in sales and marketing due to strategic
business initiatives and increases in compensation to remain competitive in
the employment markets in which the Company operates. Strategic initiatives
related to e-commerce and Harbor Industrial Services also resulted in
increases in selling, general and administrative expenses. Partially
offsetting these increases were decreases achieved across a number of expense
categories through cost reductions.

Selling, general and administrative expenses increased to $37,190,000 in
1999 from $34,976,000 in 1998 an increase of $2,214,000 or 6.3%. In the third
quarter of 1998, the Company formed Harbor Management Consultants and in the
second quarter of 1999 initiated Harbor Industrial Services. Just under a
majority of the increase in selling, general and administrative expenses for
1999 as compared to 1998 is due to expenses of these new divisions. Salaries
and benefits increased due to increases in headcount due to higher revenues,
increases in headcount in sales and marketing due to strategic business
initiatives and increases in compensation to remain competitive in the
employment markets in which the Company operates. Expenses relating to
information

22

technologies increased due to initiatives to improve the quality of management
information. Partially offsetting these increases were decreases achieved
across a number of expense categories through cost reductions.

Interest Expense, Net. Interest expense increased from $8,599,000 in 1999 to
$9,167,000 in 2000. A large part of the increase was due to interest income of
$439,000 recorded on an income tax refund in 1999. The remainder of the
increase was due primarily to higher variable interest rates on the revolving
credit facility and term notes.

Interest expense decreased during 1999 to $8,599,000 from $9,631,000 in
1998. A large part of the decrease was due to interest income recorded on an
income tax refund. The remainder of the decrease in interest expense was due
primarily to decreases in the average balance of loans outstanding.

Income Taxes. In 2000, an income tax benefit of $2,016,000 was recorded on
pre-tax income $5,102,000, for an effective tax rate of (39.5%), as compared
to income tax expense of $282,000 that was recorded on a pre-tax loss of
$(1,962,000) for an effective tax rate of (14.4%) in 1999, and as compared to
tax expense of $360,000 that was recorded on a pre-tax loss of $(3,494,000)
for an effective tax rate of (10.3%) for the year ended 1998. SFAS 109,
"Accounting for Income Taxes," requires that a valuation allowance be
established when, based on an evaluation of objective verifiable evidence,
there is a likelihood that some portion or all of the deferred tax assets will
not be realized. The Company continually reviews the adequacy of the valuation
allowance for deferred tax assets, and in 1997, based upon this review, the
valuation allowance was increased to cover almost all net deferred tax assets.
In 1998 and 1999 the valuation allowance was adjusted so as to reserve all net
deferred tax assets. In the fourth quarter of 2000, the Company once again
reviewed the valuation allowance for deferred tax assets. Based on the level
of earnings for 2000 and management's projections for profits in future years,
it was determined that it was more likely than not that $2,400,000 of the net
deferred tax assets would be utilized. Accordingly, the 2000 provision for
income taxes included a $2,400,000 benefit related to adjusting the valuation
allowance. The actual realization of the net operating loss carryforwards and
other tax assets depend on having future taxable income of the appropriate
character prior to their expiration. The 1998 tax expense consists of $247,000
of state income tax expense, which was primarily due to tangible property
taxes and net worth taxes that are levied as a component of state income
taxes, and providing a valuation allowance for $113,000 of additional net
deferred tax assets. Income tax expense for the year ended 1999 consists
primarily of tangible property and net worth taxes that are levied as a
component of state income taxes. Partially offsetting these taxes in 1999 was
a $79,000 federal income tax refund that was filed for in 1999. The 2000 tax
benefit consists of the $2,400,000 partial reversal of the valuation allowance
and an $81,000 federal income tax refund. These benefits were partially offset
by $360,000 of tangible property and net worth taxes that are levied as a
component of state income taxes and $105,000 of federal alternative minimum
taxes.

The actual realization of the net operating loss carryforwards and other tax
assets depend on having future taxable income of the appropriate character
prior to their expiration under the tax laws. If the Company reports losses in
the future, some portion or all of the 2000 benefit of $2,400,000 may be
reversed which would increase income tax expense in future years. If the
Company reports earnings from operations in the future, and depending on the
level of these earnings, some portion or all of the $2,217,000 valuation
reserve at December 31, 2000 would be reversed, which would increase net
income reported in future periods.

During the ordinary course of its business, the Company is audited by
federal and state tax authorities which may result in proposed assessments.
The Company has received a notice of intent to assess state income taxes from
one of the states in which it operates. The case is currently undergoing
administrative appeal. If the Company loses the administrative appeal, the
Company may be required to make a payment of approximately $3,000,000 to the
state. The Company cannot currently predict when the decision for the
administrative appeal will be made. The Company believes that it has properly
reported its state income and intends to contest the assessment vigorously.
While the Company believes that the final outcome of the dispute will not have
a material adverse effect on the Company's financial condition or results of
operations, no assurance can be given as to the final outcome of the dispute,
the amount of any final adjustments or the potential impact of such
adjustments on the Company's financial condition or results of operations.

23

Factors That May Affect Future Results

From time to time, the Company and employees acting on behalf of the Company
make forward-looking statements concerning the expected revenues, results of
operations, capital expenditures, capital structure, plans and objectives of
management for future operations, and future economic performance. This report
contains forward-looking statements. There are many factors which could cause
actual results to differ materially from those projected in a forward-looking
statement, and there can be no assurance that such expectations will be
realized.

The Company's future operating results may be affected by a number of
factors, including the Company's ability to: utilize its facilities and
workforce profitably, in the face of intense price competition; maintain or
increase market share in an industry which appears to be downsizing and
consolidating; realize benefits from cost reduction programs; and generate
incremental volumes of waste to be handled through its facilities from
existing sales offices and service centers.

The future operating results of the Kimball incinerator may be affected by
factors such as its ability to: obtain sufficient volumes of waste at prices
which produce revenue sufficient to offset the operating costs of the
facility; minimize downtime and disruptions of operations; and compete
successfully against other incinerators which have an established share of the
incineration market.

The recently promulgated Maximum Achievable Control Technology ("MACT") rule
of the Clean Air Act, places a new set of technology-based emissions standards
on incinerators, cement kilns and lightweight aggregate kilns. Although the
Company's only impacted facility, its Kimball, Nebraska incinerator, has
demonstrated emissions levels that are at or below MACT standards with
negligible investments or facility modifications, the Company believes that
facilities owned or operated by others may be uneconomic to upgrade to the new
MACT standards. Management believes this could result in the closure of
facilities, causing a reduction in incineration capacity and lead to improved
pricing for incineration. However, no assurance can be given that this will
happen.

The Company's operations may be affected by the commencement and completion
of major site remediation projects; cleanup of major spills or other events;
seasonal fluctuations due to weather and budgetary cycles influencing the
timing of customers' spending for remedial activities; the timing of
regulatory decisions relating to hazardous waste management projects; changes
in regulations governing the management of hazardous waste; secular changes in
the waste processing industry towards waste minimization and the propensity
for delays in the remedial market; suspension of governmental permits; and
fines and penalties for noncompliance with the myriad of regulations governing
the Company's diverse operations. As a result of these factors, the Company's
revenue and income could vary significantly from quarter to quarter, and past
financial performance should not be considered a reliable indicator of future
performance.

Typically during the first quarter of each calendar year there is less
demand for environmental remediation due to the cold weather, particularly in
the Northeast and Midwest regions, and increased possibility of unplanned
weather related plant shutdowns. In addition, customer factory closings for
the yearend holidays reduce the volume of industrial waste generated, which
results in lower volumes of waste handled by the Company during the first
quarter of the following year.

The Company participates in a highly volatile industry with multiple
competitors, several of which have taken large write-offs and asset write-
downs, operated under Chapter 11 bankruptcy protection and undergone major
restructurings during the past several years. Periodically, the Company
reviews long-lived assets for financial impairment. At the end of 2000, the
Company determined based on this review that no asset write-downs were
required; however, if conditions in the industry deteriorate further, certain
assets could be determined to be impaired and an asset write-off could be
required. Also, industry conditions may result in significant volatility of
the Company's common stock price, as well as that of its competitors.

24

Environmental Contingencies

While increasing environmental regulation often presents new business
opportunities to the Company, it likewise often results in increased operating
and compliance costs. The Company strives to conduct its operations in
compliance with applicable laws and regulations, including environmental rules
and regulations, and has 100% compliance as its goal.

This effort requires programs to promote compliance, such as training
employees and customers, purchasing health and safety equipment, and in some
cases hiring outside consultants and lawyers. Even with these programs,
management believes that in the ordinary course of doing business, companies
in the environmental services industry are routinely faced with governmental
enforcement proceedings resulting in fines or other sanctions and will likely
be required to pay civil penalties or to expend funds for remedial work on
waste management facilities.

From time to time, the Company has paid fines or penalties in governmental
environmental enforcement proceedings, usually involving its waste treatment,
storage and disposal facilities. The possibility always exists that
substantial expenditures could result from governmental proceedings, which
would have a negative impact on earnings for a particular reporting period.
More importantly, federal, state and local regulators have the power to
suspend or revoke permits or licenses needed for operation of the Company's
plants, equipment, and vehicles, based on the Company's compliance record, and
customers may decide not to use a particular disposal facility or do business
with a company because of concerns about the compliance record. Suspension or
revocation of permits or licenses would impact the Company's operations and
could have a material adverse impact on financial results.

Certain Company subsidiaries have transported or generated waste sent to
sites which have been designated state or federal Superfund sites. As a
result, the Company has been named as a potentially responsible party at 27
state and federal Superfund sites. Fourteen of these sites involve two
subsidiaries which the Company acquired from Chemical Waste Management, Inc.
("ChemWaste"), a former subsidiary of Waste Management, Inc. and one site
involves a subsidiary, which the Company acquired from Southdown, Inc., a
public company. As part of these acquisitions, ChemWaste and Southdown, Inc.
agreed to indemnify the Company with respect to any liability of such
subsidiaries for waste disposed of before the Company acquired them. With
respect to the other Superfund sites, the Company has established reserves or
escrows, which it believes are appropriate, such that any future settlement
costs of lawsuits arising from any or all of the 27 Superfund sites are not
expected to be material to the Company's operations or financial position. The
Company had accrued environmental costs of approximately $144,000 and $285,000
for cleanup of Superfund sites at December 31, 2000 and 1999, respectively.

The Company operates facilities that are subject to RCRA regulation. Under
RCRA, every facility that treats, stores or disposes of hazardous waste must
obtain a RCRA permit from the EPA or an authorized state agency and must
comply with certain operating requirements. Of the Company's 12 waste
management facilities, nine are subject to RCRA licensing. RCRA requires that
permits contain a schedule of required on-site study and cleanup activities,
known as "corrective action," including detailed compliance schedules and
provisions for assurance of financial responsibility.

The EPA or applicable state agency have begun RCRA corrective action
investigations at the Company's RCRA licensed facilities in Baltimore,
Maryland; Chicago, Illinois; Braintree, Massachusetts; Natick, Massachusetts;
Woburn, Massachusetts; and Cincinnati, Ohio. The Company is also involved in
site studies at its non-RCRA facilities in Cleveland, Ohio; Kingston,
Massachusetts; and South Portland, Maine.

In January 1995, the Company entered into a definitive agreement with
ChemWaste to lease a site previously leased by ChemWaste which adjoins the
Company's Chicago facility. During November 1995, the Company acquired the
existing improvements on the ChemWaste site in exchange for agreeing to share
the costs of dismantling an existing hazardous waste incinerator and cleaning
up the site. The improvements on the

25

ChemWaste site allowed the Company to increase processing capacity at the
location and introduce efficiency initiatives relative to collection,
transportation, treatment and disposal of routinely created hazardous wastes
throughout its facility network. Under the sharing arrangement with ChemWaste,
the Company will manage the RCRA corrective action investigation at the site
and over a period of 15 years could be required to contribute up to a maximum
of $2,000,000 for dismantling and decontaminating the incinerator and other
equipment and up to a maximum of $7,000,000 for studies and cleanup of the
site. Any additional costs beyond those contemplated by the sharing
arrangement during this time period would be borne by ChemWaste. The Company
had accruals of $1,729,000 and $1,627,000 relating to this liability at
December 31, 2000 and 1999, respectively, which are the unused amounts of a
remediation accrual that was established as part of the acquisition of
ChemWaste's Chicago Facility. In addition, the Company believes that it would
be able to appropriately capitalize the remediation expenditures, in excess of
the amounts accrued, that it may be obligated to make under the agreement. No
estimate can be made as to when the remediation activities will be completed.

The Company acquired its RCRA facilities in Bristol, Connecticut and
Cincinnati, Ohio from a subsidiary of Southdown, Inc. Southdown has agreed to
indemnify the Company against any costs incurred or liability arising from
contamination on-site arising from prior ownership, including corrective
action. The prior owner of the Woburn facility provided a limited indemnity
for any costs or liability arising from contamination on-site due to prior
ownership.

The following table summarizes non-reimbursed environmental remediation
expenditures capitalized and expenses incurred relating to the Company's
facilities for the years ended December 31, (in thousands):

2000 1999 1998
---- ---- ----

Environmental expenditures capitalized..................... $ 92 $274 $674
Environmental expenses incurred............................  225   37   95
---- ---- ----
$317 $311 $769
==== ==== ====

The Company expects environmental remediation expenditures of the magnitude
incurred for the last three years to continue for the foreseeable future.
While the final scope of work to be performed at these sites has not yet been
agreed upon, the Company believes, based upon information known to date about
the nature and extent of contamination at these sites, that accruals have been
established when required and such costs are not expected to have a material
effect on its results of operations or its competitive position, and that it
will be able to finance from operating revenue any additional corrective
action required at the sites.

The Company was also involved in a RCRA corrective action investigation at a
site in Chester, Pennsylvania owned by PECO Energy Company ("PECO"). The site
consists of approximately 30 acres which PECO had leased to various companies
over the years. In 1989, the Company acquired by merger a public company named
ChemClear Inc., which operated a hazardous waste treatment facility on
approximately eight acres of the Chester site leased from PECO. The Company
ceased operations at the Chester site, decontaminated the plant and equipment,
engaged an independent engineer to certify closure, and obtained final
approval from the Pennsylvania regulatory authorities, certifying final
closure of the facility. In 1993, the EPA ordered PECO to perform a RCRA
corrective action investigation at the Chester site. PECO asked the Company to
participate in the site studies, and in October 1994, the Company agreed to be
responsible for seventy-five percent of the cost of these studies, which was
estimated to be approximately $2,000,000, by, among other things, performing
site services work and analytical services required to complete the site
studies and providing other environmental services to PECO at discounted
rates. The Company had provided discounts and credits to PECO totaling
$908,000 through August 2, 1999. The Company and PECO then negotiated an
amendment to their 1994 agreement, whereby the Company's responsibility for
its share of the cost of site studies was capped at $1,733,000. The Company
had accrued $825,000 relating to this liability at December 31, 1999. The
$825,000 balance owed under the amendment was paid in 2000.

26

Environmental regulations stipulate the amount of transit and holding time
that shipments of hazardous waste are allowed. Certain federal agencies,
including the EPA, are conducting an inquiry concerning certain railcars,
which were destined for the Company's Kimball, Nebraska incinerator. Several
railcars containing waste materials generated by the Company's waste treatment
plants were not delivered to the Company's Sterling, Colorado rail transfer
facility in a timely manner by the railroad Company. The Company has
cooperated fully with federal and state authorities and has arranged for
company personnel to be interviewed and has produced records, documents and
other materials concerning the railcars in question. The Company has conducted
its own internal investigation and believes that there has been no wrongdoing
on the part of the Company with respect to the late delivery of railcars.
However, assurances cannot be given that the government authorities may not
reach a different conclusion or attempt to levy penalties.

Liquidity and Capital Resources

For the year ended December 31, 2000, the Company generated $13,569,000 of
cash from operations. Sources of cash consisted primarily of $7,118,000 of net
income for the period and non-cash expenses of $10,656,000 for depreciation
and amortization, $684,000 for the allowance for doubtful accounts and
$345,000 for the amortization of deferred financing costs. Partially
offsetting the non-cash expenses of $11,685,000 was a non-cash tax benefit
related to the partial reversal of the valuation allowance for deferred taxes
of $2,400,000 and a $70,000 gain on sale of fixed assets. Additional sources
of cash from operations totaled $2,686,000 and consisted primarily of
increases in other accrued expenses, accrued disposal costs and accounts
payable. These increases in accrued expenses and accounts payable were
primarily due to the greater amount of business performed in the fourth
quarter of 2000 as compared to the fourth quarter of 1999. Partially
offsetting these sources of cash were uses of cash from operations which
totaled $5,450,000 and consisted primarily of a $4,105,000 increase in
accounts receivable which was due to the greater amount of business performed
in the fourth quarter of 2000 as compared to the fourth quarter of 1999.

The Company defines free cash flow as cash provided by operations less cash
required to maintain property, plant and equipment and additions to permits.
In 2000, additions to property, plant and equipment totaled $7,403,000 which
consisted of approximately $2,500,000 relating to the purchase of vehicles and
rolling stock that had previously been leased under operating leases and
approximately $4,900,000 in expenditures to maintain property, plant and
equipment. The purchase of the vehicles and rolling stock was financed by
borrowings under a $3,000,000 term note. Additions to permits were $92,000.
The Company utilized the approximately $8,577,000 of free cash flow together
with the $500,000 in term note borrowings in excess of vehicles and rolling
stock purchased, a net reduction in restricted cash of $384,000, proceeds from
the employee stock purchase plan of $154,000, proceeds from the exercise of
stock options of $156,000, proceeds from the sale of fixed assets of $148,000
and a $154,000 reduction in cash on hand to reduce debt by $10,070,000.

The Company expects 2001 capital expenditures to be approximately
$7,500,000. This consists of $5,000,000 that is required to maintain existing
property, plant and equipment and $2,500,000 of strategic initiatives to
expand the Company's capabilities. The Company believes that it has all of the
facilities required for the foreseeable future. Thus, capital expenditures are
expected to be limited to maintaining existing capital assets, replacing site
services equipment, upgrading information technology hardware and software,
and specific strategic initiatives. The Company continues to evaluate
potential acquisitions and opening additional site services offices within and
next to the Company's service areas. Thus, it is possible that capital
additions could exceed the $7,500,000 currently planned.

The goal of the Company is to maximize shareholder value over time. The
Company believes that shareholder value will be maximized by using free cash
flow to make strategic investments in fixed assets to expand the Company's
capabilities, to expand operations within or contiguous to the regions in
which it operates, to expand its capabilities through acquisitions and to
reduce debt. However, no assurance can be given that the Company will be able
to generate free cash flow in the future.

27

For the year ended December 31, 1999, the Company generated $6,106,000 from
operations even though the net loss was $(2,244,000) for the period. This
result was due to sources and uses of cash that vary from when the related
revenues and expenses were recorded. The primary sources of cash from
operations were non-cash expenses that totaled $10,528,000 and consisted of
depreciation and amortization of $9,501,000, additions to the allowance for
doubtful accounts of $683,000 and amortization of deferred financing costs of
$344,000. A major additional source of cash was an income tax refund of
$1,114,000. These sources of cash were partially offset by uses of cash of
$2,800,000 due to increased levels of accounts receivable and the net loss for
the period of $(2,244,000).

For the year ended December 31, 1999, the Company obtained $896,000 from
financing activities. Sources of cash from financing activities were
$4,139,000 due to additional borrowings under the term promissory note and
$131,000 due to the issuance of additional stock under the employee stock
purchase plan. Partially offsetting these sources of cash was $3,050,000 in
payments on long-term obligations and net repayments of $324,000 on the
revolving credit agreement.

For the year ended December 31, 1999, the Company had proceeds of $1,225,000
from the sales and maturities of restricted investments, which was almost
completely due to the release of restricted funds that were held in a debt
service reserve fund at December 31, 1998. These proceeds together with cash
from operations and financing activities were used to acquire property, plant
and equipment of $5,080,000, to acquire two divisions of American Ecology
Environmental Services Corporation for $1,900,000 and to increase the amount
of cash and cash equivalents by $888,000.

As amended, the Company had at December 31, 2000, a $33,500,000 Loan
Agreement (the "Loan Agreement") with a financial institution. The Loan
Agreement provided for a $24,500,000 revolving credit portion (the
"Revolver"), a $6,000,000 term promissory note (the "Term Note"), and a
$3,000,000 term promissory note (the "2000 Term Note"). In May 1999, the Term
Note was amended. The Term Note as amended allowed the Company to increase the
amount borrowed under the Term Note by $4,139,000 from the $1,861,000 owed
prior to the amendment of the Term Note to the $6,000,000 principal amount of
the Term Note as amended. The Term Note had monthly principal payments of
$100,000 with the last payment due in May, 2004. In March of 2000, the Loan
Agreement was amended and an additional term promissory note, the 2000 Term
Note, was entered into with the financial institution. The original principal
amount of the 2000 Term Note is $3,000,000, and it is payable in 36 monthly
installments commencing on May 1, 2000. The funds provided from the 2000 Term
Note have been used primarily to purchase vehicles and rolling stock that the
Company previously leased under operating leases. The Revolver allowed the
Company to borrow up to $24,500,000 in cash and letters of credit, based on a
formula of eligible accounts receivable. Letters of credit may not exceed
$20,000,000 at any one time. At December 31, 2000 and 1999, funds available to
borrow under the Revolver were $12,760,000 and $8,603,000, respectively. The
Revolver requires the Company to pay a line fee of one- half of one percent on
the unused portion of the line. In March 2000, the term of the Revolver was
extended from May 8, 2001 to May 8, 2003.

The Loan Agreement allowed for up to 80% of the outstanding balance of the
Revolver and 100% of the balance of the term notes to bear interest at the
Eurodollar rate plus three percent; the remaining balance bears interest at a
rate equal to the "prime" rate plus one and one-half percent. The Loan
Agreement was collateralized by substantially all of the Company's assets, and
the Loan Agreement provided for certain covenants including, among others,
maintenance of a minimum level of working capital and adjusted net worth. The
Loan Agreement as amended in March 2000 redefined the working capital covenant
to specifically exclude the Senior Notes as a component of working capital and
required that the Company maintain $6,000,000 of working capital, excluding
the Senior Notes. The net worth covenant was changed to require $30,000,000 of
adjusted net worth. At December 31, 2000, the Company had working capital and
adjusted net worth of $16,526,000 and $41,635,000, respectively. The Company
was required to maintain borrowing availability of not less than $4,500,000
for sixty consecutive days prior to paying principal and interest on its other
indebtedness and dividends in cash on its preferred stock. In the first half
of 1999 and the first quarter of 2000, the Company violated this covenant,
which was waived by the financial institution through May 15, 1999 and 2000,
respectively. Since May 15, 2000 the Company has been in compliance with this
covenant.

28

In 1996 the Company assumed $10,000,000 of 10.75% Economic Development
Revenue Bonds due September 1, 2026 issued by the City of Kimball, Nebraska
(the "Bonds"). In connection with the issuance of the Bonds, the Company
entered into a facilities lease with the City of Kimball, whereby the City
acquired a leasehold interest in the facility and the Company leased the
facility back from the City. The Company retains title to the facility. The
Bonds were issued at 100% of their principal value. The Bonds are not
redeemable prior to September 1, 2006. From that date until September 1, 2008,
the Bonds are redeemable at a premium. After September 1, 2008, the Bonds are
redeemable at par. Sinking fund payments began on September 1, 1999 in the
amount of $100,000 annually and continue in this amount until the year 2008,
when the annual sinking fund payment will gradually increase.

Effective June 1, 2000, the Bond Documents were amended in order to modify
the limitation on additional debt covenant and certain related debt service
reserve fund requirements. Under the amended Bond Documents, the Company may
now issue Bank Debt up to $35,000,000 provided that after the issuance, the
ratio of the Company's total debt to total capital (debt plus stockholders'
equity) does not exceed 72% (which ratio will be reduced to 70% on January 1,
2006 and 65% on January 1, 2011).

The amended Bond Documents require that the Company make six equal monthly
payments of $125,000 each for a total of $750,000 into a debt service reserve
fund held by the trustee, if either of the following occurs: (i) the Company's
ratio of earnings before interest, taxes, depreciation and amortization
("EBITDA") to total interest (the "EBITDA coverage ratio") for most recently
completed fiscal year is less than 1.5 to 1.0, or (ii) the Company's ratio of
debt to total capital at the end of such fiscal year is greater than 65%. The
amended bond documents required that the Company satisfy these ratios
retroactively to December 31, 1999. Because the Company did not satisfy both
of these ratios as of December 31, 1999, the amended Bond Documents required
that the Company make six monthly payments of $125,000 each into the debt
service reserve fund commencing on June 1, 2000, for total of $750,000. In
addition to the $750,000 required to be deposited into the debt service
reserve fund based upon the level of the Company's additional debt, the
Company could be required to make additional payments to bring the total of
the debt service reserve fund to a maximum of approximately $1,200,000
(including the $750,000 described above) if the EBITDA coverage ratio for any
fiscal year is less than 1.25 to 1.0. The EBITDA coverage ratio for the year
ended December 31, 1999 was 1.39 to 1.0, and the Company was therefore not
required to make any such additional payments into the debt service reserve
fund based upon the Company's EBITDA coverage ratio. The maximum amount of the
debt service reserve fund of approximately $1,200,000 is the same as under the
Bond Documents prior to the amendment, but the amendment modified the terms
under which the Company may be required to make payments into the fund
described above.

As of December 31, 2000, Bank Debt totaled $7,927,000 which was less than
the $35,000,000 allowed; the Company's total debt to total capital ratio was
61.9% which is less than the 72.0% allowed; and the EBITDA coverage ratio was
2.24 to 1.0 which is greater than the 1.50 to 1.0 required. The Company
expects to be in compliance with the Bond covenants at December 31, 2001.
Under the Bond covenants, if the Company attains an EBITDA coverage ratio at
the end of a calendar year of greater than 1.5 to 1.0, the balance on deposit
in the debt service reserve fund in excess of $750,000 will be released for
the Company's general use. The Bond Documents require that a minimum balance
of $750,000 be maintained in the debt service reserve fund until the Bonds
mature.

The Company has outstanding $50,000,000 of 12.50% Senior Notes due May 15,
2001 (the "Senior Notes"). The Senior Notes are not collateralized, and the
Senior Note indenture does not provide for the maintenance of certain
financial covenants, although it does limit, among other things, the issuance
of additional debt by the Company or its subsidiaries and the payment of
dividends on, and redemption of, capital stock of the Company and its
subsidiaries. Interest is paid twice each year on the Senior Notes. The Senior
Notes require that the Company provide not less than 30-day prior notice if
the Senior Notes are to be redeemed prior to the due date. Notice of
redemption has been given to the holders of the Senior Notes, providing for
redemption on April 30, 2001. As described below, on April 12, 2001, the
Company signed two agreements with lenders which provide that such lenders
will provide the funds required to redeem the Senior Notes on the redemption
date.

29

As described previously, the Company had at December 31, 2000 a $33,500,000
Loan Agreement (the "Loan Agreement") with a financial institution (the
"Lender"). The Loan Agreement provided for a $24,500,000 revolving credit
facility (the "Revolver"), a $6,000,000 term promissory note (the "Term
Note"), and a $3,000,000 term promissory note (the "2000 Term Note"). On April
12, 2001, the Company signed and closed a $51,000,000 Amended and Restated
Loan Agreement (the "Amended Loan Agreement") with the Lender. The Amended
Loan Agreement increased the amount available to borrow under the Revolver to
$30,000,000 and extended the term of the Revolver to April 12, 2004. The
Revolver allows the Company to borrow up to $30,000,000 in cash and letters of
credit, based on a formula of eligible accounts receivable. Letters of credit
may not exceed $20,000,000 at any one time. The Revolver requires the Company
to pay an unused line fee of one-half of one percent on the unused portion of
the line. The Amended Loan Agreement required the payment on April 12 of the
then $3,800,000 outstanding balance on the Term Note and provided for the
issuance of a new $19,000,000 term promissory note (the "Term Note B"). On
April 12, 2001, $4,000,000 was advanced under Term Note B to pay the Term Note
and other amounts then borrowed by the Company. The Amended Loan Agreement
provides for the $15,000,000 balance of Term Note B to be advanced on April 30
to redeem the Senior Notes on that date, provided the representations of the
Company in the Amended Loan Agreement remain true and correct in all material
respects, the Company is not then in default of the Amended Loan Agreement,
and the Company has then issued the Subordinated Notes described below. The
interest rate for Term Note B is the greater of the prime rate plus 3.50% or
12.00%, and it is payable in 84 monthly installments commencing May 1, 2001.
The terms of the 2000 Term Note remain unchanged.

The Amended Loan Agreement allows for up to 80% of the outstanding balance
of the Revolver and 100% of the balance of the 2000 Term Note to bear interest
at the Eurodollar rate plus three percent; the remaining balance bears
interest at the "prime" rate plus one and one-half percent. The Amended Loan
Agreement is collateralized by substantially all of the Company's assets, and
the Amended Loan Agreement provides for certain covenants including, among
others, maintenance of a minimum level of working capital, adjusted net worth
and earnings before interest, income taxes, depreciation and amortization
("EBITDA"). The Amended Loan Agreement requires that the Company maintain
$10,000,000 of working capital excluding the current portion of liabilities
under the Amended Loan Agreement and the Subordinated Note Agreement. The
Company had $18,726,000 of working capital calculated on a pro forma basis as
if the redemption had taken place on December 31, 2000. The net worth covenant
requires that the Company maintain $35,000,000 of net worth until the
Subordinated Notes described below are funded and, once the Notes are funded,
the net worth covenant requires adjusted net worth, defined as net worth plus
the the balance owned on the Subordinated Notes, to be greater than
$60,000,000. At December 31, 2000, the pro forma adjusted net worth calculated
as if the redemption had taken place on December 31, 2000 was $76,635,000. The
Amended Loan Agreement requires that the Company maintain on a rolling four
quarter basis a minimum EBITDA of $20,000,000. For the four quarter period
ended December 31, 2000, the Company reported EBITDA of $24,925,000. The
Amended Loan Agreement also requires that the Company maintain a Senior Debt
to EBITDA ratio of not more than 2.25 to 1.0. At December 31, 2000, the pro
forma ratio calculated as if the redemption had taken place on December 31,
2000 was 1.33 to 1.0. The Amended Loan Agreement also has conditions precedent
to making loans (including the Revolver) including no material adverse change
in assets, business or prospects of the Company.

On April 12, 2001, the Company also signed a Securities Purchase Agreement
(the "Subordinated Note Agreement") providing for the Company to issue on
April 30, 2001, $35,000,000 of 16% Senior Subordinated Notes (the
"Subordinated Notes"). Until October 30, 2006, the Company, at its option, may
pay the interest at the 16% rate or may pay interest at 14% and defer payment
of the remaining 2% until the Subordinated Notes are due. Interest payable in
cash on the Subordinated Notes is due in semi-annual payments on April 30 and
October 30. In conjunction with the Subordinated Notes, the Company will issue
detachable warrants for 1,519,020 shares of common stock that are exercisable
at $0.01 per share. One-half of the Subordinated Notes are due on April 30,
2007 with the balance due on April 30, 2008. The Subordinated Note Agreement
calls for the $35,000,000 to be advanced on April 30, 2001 in order to redeem
the Senior Notes. The Subordinated Note Agreement contains conditions of
closing the most restrictive of which are that representations by the Company
in the Agreement remain true, that the Company have not less than $3,500,000
available under the Revolver on

30

April 30, 2001, and that no material adverse change shall have occurred prior
to April 30, 2001 in the business and financial condition of the Company. The
Subordinated Note Agreement provides that the holders of the Subordinated
Notes will be able to call the Notes in the event of a change in control of
the Company.

The Subordinated Note Agreement contains covenants the most restrictive of
which require that the Company maintain a rolling four quarter fixed charge
coverage ratio of not less than 1.10 to 1.0. For the year ended December 31,
2000, the fixed charge coverage ratio was 1.82 to 1.0. The Subordinated Notes
require that the Company maintain a tangible capital base of not less than
$27,000,000 for the quarters ending March 31 and June 30, 2001, not less than
$30,500,000 for the quarter ending September 30, 2001, not less than
$33,000,000 for the quarter ending December 31, 2001 and not less than
$35,500,000 for quarters ending thereafter. At December 31, 2000, the tangible
capital base was $45,169,000. The Company is required to maintain rolling four
quarter earnings before interest, income taxes, depreciation and amortization
(EBITDA) of not less than $18,000,000. For the four quarter period ended
December 31, 2000, EBITDA was $24,925,000. The Company shall maintain a
priority debt to EBITDA ratio calculated as of the last day of each fiscal
quarter of not more than 2.25 to 1.0. Priority debt currently consists of debt
issued under the Amended Loan Agreement. At December 31, 2000, the pro forma
priority debt to EBITDA ratio calculated as if the redemption had taken place
on December 31, 2000 was 1.33 to 1.0. The Company is required to maintain a
ratio of total liabilities to tangible capital base of not more than 3.00 to
1.0 for the fiscal quarters ending June 30, September 30 and December 31, 2001
and for the quarters ending March 31, 2002 and thereafter a ratio of not more
than 2.75 to 1.0. At December 31, 2000 the total liabilities to tangible
capital base ratio was 1.61 to 1.0.

The Company believes that cash generated from operations in the future
together with availability under its Revolver will be sufficient to operate
the business and fund capital expenditures. In addition, the Company believes
that interest expense in 2001 will be somewhat higher than in 2000 with an
increase in interest expense due to higher average interest rates being
partially offset by lower average debt outstanding.

Dividends on the Company's Series B Convertible Preferred Stock are payable
on the 15th day of January, April, July and October, at the rate of $1.00 per
share, per quarter; 112,000 shares are outstanding. Under the terms of the
preferred stock, the Company can elect to pay dividends in cash or in common
stock with a market value equal to the amount of the dividend payable. Since
March 1995, the Company has been required to pay the dividends in common stock
due to restrictions under its loan agreements. The Company issued a total of
227,000 shares of common stock to the holders of the preferred stock for the
year 2000. The Company anticipates that commencing in the third quarter of
2001 the preferred stock dividends will be paid in cash.

New Accounting Pronouncements

In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No.
25 and, among other issues, clarifies the following: the definition of an
employee for purposes of applying APB Opinion No. 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the
accounting consequences of various modifications to the terms of previously
fixed stock options or awards; and the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1,
2000 but certain conclusions in FIN 44 cover specific events that occurred
after either December 15, 1998 or January 12, 2000. The application of FIN 44
did not have a material impact on the Company's results of operations or its
financial position.

In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." This bulletin summarizes certain views of the staff on applying
generally accepted accounting principles to revenue recognition in financial
statements. The staff believes that revenue is realized or realizable and
earned when all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
seller's price to the buyer is fixed or determinable; and collectibility is
reasonably assured. The Company believes that its current revenue recognition
policy complies with the Commission's guidelines. SAB 101 became effective in
the fourth quarter of 2000.

31

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk on the interest that it pays on its
debt due to changes in the general level of interest rates. The Company
manages its interest rate exposure by borrowing at fixed rates for longer time
horizons to finance non-current assets and by borrowing at variable rates for
working capital and other short term needs. As previously discussed, the
Company has outstanding $50,000,000 of 12.50% Senior Notes due May 15, 2001.
The Senior Notes require that the Company provide not less than 30-day notice
if the Senior Notes are to be redeemed prior to the due date. Notice of
redemption has been given to the holders of the Senior Notes, providing for
redemption on April 30, 2001. The following table provides information
regarding the Company's fixed rate borrowings assuming that the Senior Notes
are redeemed as expected and partially replaced with $35,000,000 of
Subordinated Notes (dollars in thousands):

Scheduled Maturity Dates        2001  2002  2003  2004  2005  Thereafter  Total
------------------------        ----  ----  ----  ----  ----  ---------- -------

Economic Development Revenue
Bonds........................  $100  $100  $100  $100  $100   $ 9,300   $ 9,800
Subordinated Notes............    --    --    --    --    --    35,000    35,000
----  ----  ----  ----  ----   -------   -------
Total.........................  $100  $100  $100  $100  $100   $44,300   $44,800
====  ====  ====  ====  ====   =======   =======
Weighted average interest rate
on fixed rate borrowings
excluding amortization of
debt discount for warrants
issued.......................  13.8% 14.9% 14.9% 14.9% 14.9%
====  ====  ====  ====  ====

In addition to the fixed rate borrowings described in the table above, the
Company had at December 31, 2000 borrowings at variable interest rates of
$7,927,000 under the Revolver and Term Notes which bear interest at the
"prime" rate (9.50% at December 31, 2000) plus 1.5% or at the Eurodollar rate
(6.64% at December 31, 2000) plus 3.0%. As previously discussed, notice of
redemption has been given to the holders of the Senior Notes. The redemption
of the Senior Notes is expected to result in a larger amount of variable rate
debt being outstanding in 2001 as compared to the amount of variable rate debt
outstanding at December 31, 2000. If the redemption of the Senior Notes had
occurred on December 31, 2000, the amount of variable rate debt outstanding at
December 31, 2000 would have been $22,927,000. The following table presents
hypothetical situations of the amount of interest expense that would be
incurred in 2001 if the redemption had taken place December 31, 2000, assuming
that this amount remained outstanding for the entire year and assuming three
scenario for interest rates: (i) interest rates remain unchanged from those on
December 31, 2000, (ii) interest rates increase by 200 basis points and (iii)
interest rates decrease by 200 basis points (dollars in thousands):

Pro Forma   Interest if       Interest if       Interest if
Principal  Interest Rates   Interest Rates    Interest Rates
Description of Debt       Balance  Remain Unchanged Increase 200 b.p. Decrease 200 b.p.
-------------------      --------- ---------------- ----------------- -----------------

Term Note B.............  $19,000       $2,470           $2,850            $2,280
2000 Term Note..........    2,333          225              271               178
Revolver................    1,594          171              203               139
-------       ------           ------            ------
Total...................  $22,927       $2,866           $3,324            $2,597
=======       ======           ======            ======

The Company is not subject to market risk arising from transactions in
foreign currencies since substantially all revenues and expenses are
transacted in U.S. dollars. The Company is subject to minimal market risk
arising from purchases of commodities since no significant amount of
commodities are used in the treatment of hazardous waste.

32

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Clean Harbors, Inc.:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) present fairly, in all material respects, the
financial position of Clean Harbors, Inc. and its subsidiaries (the "Company")
at December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2000,
in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)(2) presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These
financial statements and the financial statement schedule are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 6, 2001 (except for Note 16, as to which
the date is April 12, 2001)

33

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

For the years ended
December 31,
----------------------------
2000      1999      1998
--------  --------  --------

Revenues........................................ $233,466  $202,965  $197,439
Cost of revenues................................  166,303   149,637   147,214
Selling, general and administrative expenses....   42,238    37,190    34,976
Depreciation and amortization of intangible
assets.........................................   10,656     9,501     9,112
--------  --------  --------
Income from operations..........................   14,269     6,637     6,137
Interest expense, net...........................    9,167     8,599     9,631
--------  --------  --------
Income (loss) before provision for (benefit
from) income taxes.............................    5,102    (1,962)   (3,494)
Provision for (benefit from) income taxes.......   (2,016)      282       360
--------  --------  --------
Net income (loss)............................... $  7,118  $ (2,244) $ (3,854)
========  ========  ========
Basic earnings (loss) per share................. $   0.60  $  (0.25) $  (0.42)
========  ========  ========
Diluted earnings (loss) per share............... $   0.59  $  (0.25) $  (0.42)
========  ========  ========
Weighted average common shares outstanding......   11,085    10,649    10,309
========  ========  ========
Weighted average common shares outstanding plus
potentially dilutive common shares.............   11,305    10,649    10,309
========  ========  ========

The accompanying notes are an integral part of these consolidated financial
statements.

34

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

(dollars in thousands)

As of December
31,
-----------------
2000     1999
-------- --------

Current assets:
Cash and cash equivalents.................................. $  2,629 $  2,783
Restricted cash or investments.............................      768    1,116
Accounts receivable, net of allowance for doubtful accounts
of $1,549 and $1,157, respectively........................   47,201   43,780
Prepaid expenses...........................................    1,563    1,094
Supplies inventories.......................................    3,379    2,808
Income tax receivable......................................      203      122
Deferred tax assets........................................    2,400       --
-------- --------
Total current assets.....................................   58,143   51,703
-------- --------
Property, plant and equipment:
Land.......................................................    8,478    8,478
Buildings and improvements.................................   42,700   40,612
Vehicles and equipment.....................................   90,794   84,528
Furniture and fixtures.....................................    2,225    2,219
Construction in progress...................................      794    1,224
-------- --------
144,991  137,061
Less--accumulated depreciation and amortization............   89,389   80,849
-------- --------
55,602   56,212
-------- --------
Other assets:
Goodwill, net..............................................   19,799   20,566
Permits, net...............................................   11,667   12,633
Other......................................................    4,357    4,133
-------- --------
35,823   37,332
-------- --------
Total assets............................................. $149,568 $145,247
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

35

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

(dollars in thousands)

As of December
31,
------------------
2000      1999
--------  --------

Current liabilities:
Current maturities of long-term obligations.............. $ 52,300  $  1,300
Accounts payable.........................................   19,100    17,830
Accrued disposal costs...................................    7,479     6,591
Other accrued expenses...................................   12,601    11,360
Income taxes payable.....................................      137        57
--------  --------
Total current liabilities..............................   91,617    37,138
--------  --------
Other liabilities:
Long-term obligations, less current maturities...........   14,958    72,683
Other....................................................    1,358     1,255
--------  --------
Total other liabilities................................   16,316    73,938
--------  --------
Commitments and contingent liabilities (Notes 5, 7, 9, 10,
11 and 16)
Stockholders' equity:
Preferred stock, $.01 par value:
Series A convertible preferred stock:
Authorized 2,000,000 shares; issued and outstanding--
none..................................................       --        --
Series B convertible preferred stock:
Authorized 156,416 shares; issued and outstanding
112,000 shares (liquidation preference of
$5,600,000)...........................................        1         1
Common stock, $.01 par value:
Authorized 20,000,000 shares; issued and outstanding
11,216,107 and 10,798,007 shares, respectively........      112       108
Additional paid-in capital...............................   61,999    61,245
Accumulated other comprehensive loss.....................       --       (36)
Accumulated deficit......................................  (20,477)  (27,147)
--------  --------
Total stockholders' equity.............................   41,635    34,171
--------  --------
Total liabilities and stockholders' equity............. $149,568  $145,247
========  ========

The accompanying notes are an integral part of these consolidated financial
statements.

36

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the years ended
December 31,
-------------------------
2000     1999     1998
-------  -------  -------

Cash flows from operating activities:
Net income (loss)................................. $ 7,118  $(2,244) $(3,854)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization...................  10,656    9,501    9,112
Allowance for doubtful accounts.................     684      683      559
Amortization of deferred financing costs........     345      344      490
Deferred income taxes...........................  (2,400)      --      113
(Gain) loss on sale of fixed assets.............     (70)      --       15
Changes in assets and liabilities, net of
acquisition:
Accounts receivable...........................  (4,105)  (2,800)  (4,132)
Prepaid expenses..............................    (469)    (155)     579
Supplies inventories..........................    (571)      50      (47)
Income tax receivable.........................     (81)   1,114      433
Other assets..................................    (224)     463     (198)
Accounts payable..............................     374     (231)   4,107
Accrued disposal costs........................     888      256     (765)
Other accrued expenses........................   1,241     (769)  (2,573)
Income taxes payable..........................      80        7       40
Other liabilities.............................     103     (113)      17
-------  -------  -------
Net cash provided by operating activities.....  13,569    6,106    3,896
-------  -------  -------
Cash flows from investing activities:
Additions to property, plant and equipment........  (7,403)  (5,080)  (4,534)
Acquisition.......................................      --   (1,900)      --
Proceeds from sales and maturities of restricted
investments......................................   1,152    1,225      150
Cost of restricted investments purchased..........    (768)      --   (1,425)
Proceeds from sale of fixed assets................     148       --       83
Increase in permits...............................     (92)    (359)    (674)
-------  -------  -------
Net cash used in investing activities.........  (6,963)  (6,114)  (6,400)
-------  -------  -------
Cash flows from financing activities:
Payments on long-term obligations.................  (1,867)  (3,050)  (4,037)
Net borrowings (payments) under long-term
revolver.........................................  (8,203)    (324)   4,363
Issuance of long-term debt........................   3,000    4,139       --
Proceeds from employee stock purchase plan........     154      131      133
Proceeds from exercise of stock options...........     156       --        5
-------  -------  -------
Net cash provided by (used in) financing
activities...................................  (6,760)     896      464
-------  -------  -------
Increase (decrease) in cash and cash equivalents...    (154)     888   (2,040)
Cash and cash equivalents, beginning of year.......   2,783    1,895    3,935
-------  -------  -------
Cash and cash equivalents, end of year............. $ 2,629  $ 2,783  $ 1,895
=======  =======  =======

Supplemental information:
Cash payments (receipts) for interest and income
taxes:
Interest, net..................................... $ 9,172  $ 7,463  $ 9,967
Income taxes, net.................................     381   (1,236)    (201)
Non cash investing and financing activities:
Stock dividend on preferred stock................. $   448  $   448  $   448
Property, plant & equipment accrued...............     896      194      131

The accompanying notes are an integral part of these consolidated financial
statements.

37

CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(in thousands)

Series B
Preferred
Stock     Common Stock                           Accumulated
------------ ------------                              Other       Retained
Number $0.01 Number $0.01 Additional Comprehensive Comprehensive  Earnings/       Total
of    Par    of    Par   Paid-in      Income        Income     (Accumulated Stockholders'
Shares Value Shares Value  Capital      (Loss)        (Loss)       Deficit)      Equity
------ ----- ------ ----- ---------- ------------- ------------- ------------ -------------

Balance at December 31,
1997...................   112    $ 1  10,101 $101   $60,087           --        $(12)       $(20,153)     $40,024
Net loss...............    --     --      --   --        --      $(3,854)         --          (3,854)      (3,854)
Other comprehensive
loss, net of tax
Unrealized holding
gains arising in the
period................    --     --      --   --        --            2          --              --           --
Reclassification
adjustment for gains
included in net loss..    --     --      --   --        --           --          --              --           --
-------
Other comprehensive
income................    --     --      --   --        --            2           2              --            2
-------
Comprehensive loss.....    --     --      --   --        --      $(3,852)         --              --           --
=======
Preferred stock
dividends:
Series B...............    --     --     229    2       446           --          --            (448)          --
Employee stock purchase
plan..................    --     --      88    1       132           --          --              --          133
Proceeds from exercise
of stock options......    --     --       3   --         5           --          --              --            5
---    ---  ------ ----   -------      -------        ----        --------      -------
Balance at December 31,
1998...................   112    $ 1  10,421 $104   $60,670           --        $(10)       $(24,455)     $36,310
Net Loss...............    --     --      --   --        --      $(2,244)         --          (2,244)      (2,244)
Other comprehensive
loss, net of tax
Unrealized holding
gains arising in the
period................    --     --      --   --        --           --          --              --           --
Unrealized losses on
securities, net of
reclassification
adjustment............           --      --   --        --          (26)         --              --           --
-------
Other comprehensive
loss..................    --     --      --   --        --          (26)        (26)             --          (26)
-------
Comprehensive loss.....    --     --      --   --        --      $(2,270)         --              --           --
=======
Preferred stock
dividends:
Series B...............    --     --     279    3       445           --          --            (448)          --
Employee stock purchase
plan..................    --     --      98    1       130           --          --              --          131
---    ---  ------ ----   -------      -------        ----        --------      -------
Balance at December 31,
1999...................   112    $ 1  10,798 $108   $61,245           --        $(36)       $(27,147)     $34,171
Net Income.............    --     --      --   --        --      $ 7,118          --           7,118        7,118
Other comprehensive
income, net of tax
Unrealized holding
gains arising in the
period................    --     --      --   --        --           --          --              --           --
Reclassification
adjustment for losses
included in net
income................    --     --      --   --        --           36          --              --           --
-------
Other comprehensive
income................    --     --      --   --        --           36          36              --           36
-------
Comprehensive income...    --     --      --   --        --      $ 7,154          --              --           --
=======
Preferred stock
dividends:
Series B...............    --     --     227    2       446           --          --            (448)          --
Employee stock purchase
plan..................    --     --     115    1       153           --          --              --          154
Proceeds from exercise
of stock options......    --     --      76    1       155           --          --              --          156
---    ---  ------ ----   -------      -------        ----        --------      -------
Balance at December 31,
2000...................   112    $ 1  11,216 $112   $61,999           --        $ --        $(20,477)     $41,635
===    ===  ====== ====   =======      =======        ====        ========      =======

The accompanying notes are an integral part of these consolidated financial
statements.

38

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) OPERATIONS

Clean Harbors, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") provide a broad range of environmental services including:
industrial waste management services involving transportation, treatment and
disposal of industrial wastes; site services provided at customer sites;
industrial cleaning and maintenance; and specialized handling of laboratory
chemicals and household hazardous wastes. The Company provides these services
to a diversified customer base across the United States, primarily in the
Northeast, Mid-Atlantic, Midwest and Western Regions.

(2) SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements of the Company reflect
the application of certain significant accounting policies as described below:

(a) Principles of Consolidation

The accompanying consolidated statements include the accounts of Clean
Harbors, Inc. and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.

(b) Revenue Recognition

The Company recognizes revenues and accrues the related cost of treatment
and disposal upon the receipt of waste materials, except for incineration
where revenue is recognized as waste is burned. Other revenues are recognized
as the related costs are incurred.

(c) Income Taxes

Deferred tax assets and liabilities are determined based upon the difference
between the financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse. Deferred tax expense or benefit is the result of changes
between deferred tax assets and liabilities.

A valuation allowance is established when, based on an evaluation of
objective verifiable evidence, there is a likelihood that some portion or all
of deferred tax assets will not be realized.

(d) Earnings per Share

Basic EPS is calculated by dividing income available to common shareholders
by the weighted-average number of common shares outstanding during the period.
Diluted EPS gives effect to all potential dilutive common shares that were
outstanding during the period.

(e) Segment Information

The Company operates in a single segment as a full service provider of
environmental services within the United States and Puerto Rico, and no
individual customer accounts for more than 5% of revenues.

(f) Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with original
maturities of less than three months to be cash equivalents.

39

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(2) SIGNIFICANT ACCOUNTING POLICIES--(Continued)

(g) Investments

Debt securities are classified as "available for sale" or "held to
maturity." Available for sale securities are recorded at fair value with the
offsetting unrealized gain or loss included, net of tax, in stockholders'
equity. Held to maturity securities are recorded at amortized cost.

(h) Supplies inventory

Supplies inventory, stated at the lower of cost or market, is charged to
operations on a first-in, first-out basis.

(i) Property, Plant and Equipment

Property, plant and equipment are stated at cost. The Company depreciates
and amortizes the cost of these assets, less the estimated salvage value,
using the straight-line method as follows:

Estimated
Asset Classification                                            Useful Life
--------------------                                            -----------

Buildings and improvements..................................... 5-30 years
Vehicles and equipment......................................... 3-15 years
Furniture and fixtures.........................................  5-8 years

Leaseholds are amortized over the shorter of the life of the lease or the
asset. Depreciation expense includes depreciation of property, plant and
equipment, and equipment capitalized under capital leases. Depreciation
expense was $8,831,000 for 2000, $7,694,000 for 1999 and $7,461,000 for 1998.
Upon retirement or other disposition, the cost and related accumulated
depreciation of the assets are removed from the accounts and the resulting
gain or loss is reflected in income.

Repairs and maintenance costs are expensed as incurred.

(j) Goodwill and Permits

Goodwill and permits, as further discussed in Note 6, are stated at cost and
are being amortized using the straight-line method over 20 years for permits
and periods ranging from 20 to 40 years for goodwill.

An impairment in the carrying value of long-lived assets, including goodwill
and permits, is recognized when the expected future undiscounted cash flows
derived from the assets are less than its carrying value. In addition, the
Company's evaluation considers nonfinancial data such as market trends and
changes in management's market emphasis.

(k) Deferred Financing Costs

Deferred financing costs are amortized over the life of the related debt
instrument, and they are carried as a component of long-term debt.

(l) Costs to Treat Environmental Contamination

Costs relating to environmental cleanup resulting from operating activities
are expensed as incurred. Environmental cleanup costs that improve properties,
as compared with the condition of that property when originally acquired, are
capitalized to the extent that they are recoverable.

40

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(2) SIGNIFICANT ACCOUNTING POLICIES--(Continued)

(m) Letters of Credit

The Company utilizes letters of credit to provide collateral assurance to
regulatory authorities that certain funds will be available for closure as
described in Note 5. In addition the Company utilizes letters of credit to
provide collateral for casualty insurance programs, to provide collateral for
the vehicle lease line and to provide collateral for a transportation permit.
As of December 31, 2000 and 1999, the Company had outstanding letters of
credit amounting to $10,347,000 and $6,299,000, respectively.

As of December 31, 2000, the Company had no significant concentrations of
credit risk.

(n) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.

(o) Reclassifications

Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 2000 presentation.

(3) ACQUISITION

On May 25, 1999, the Company acquired the assets of the Texas Transportation
and Brokerage Divisions of American Ecology Services Corporation for a cash
price of $1,900,000. The divisions operate out of locations in Dallas and
Houston, Texas. The divisions provide waste management services primarily to
small quantity generators throughout Texas and transportation services for
both solid and liquid wastes. This acquisition has been accounted for under
the purchase method of accounting. The purchase price has been allocated based
on estimated fair values of assets acquired at the date of acquisition. The
acquisition resulted in $272,000 of acquired goodwill, which is being
amortized on the straight-line basis over 20 years. The results of the
acquired businesses have been included in the consolidated financial
statements since the acquisition date. The acquisition did not materially
affect revenues or results of operations for the years ended December 31, 2000
and 1999.

Assuming this acquisition had occurred January 1, 1998, consolidated, pro
forma revenues, net loss and loss per share would not have been materially
different than the amounts reported for the years ended December 31, 1998 and
1999. Such unaudited pro forma amounts are not indicative of what the actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of 1998.

41

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(4) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents approximate fair value.
The fair value of restricted investments is based on quoted market prices for
these securities. The fair values of the Company's bank borrowings approximate
fair value because the interest rates are based on floating rates identified
by reference to market rates. The fair values of the Company's senior notes
and industrial development revenue bonds (the "Bonds") cannot be determined,
since there is no active market in these securities. At December 31, 2000 and
1999, the estimated fair values of the Company's financial instruments are as
follows (in thousands):

Net
Carrying  Fair  Unrealized
Amount  Value     Loss
-------- ------ ----------

December 31, 2000
Cash and cash equivalents......................  $2,629  $2,629    $ --
Restricted cash and cash equivalents...........     768     768      --
Senior Notes and Bonds for which no quoted
market prices
are available.................................  59,800      --      --
Other long-term obligations....................   7,827   7,827      --
December 31, 1999
Cash and cash equivalents......................  $2,783  $2,783    $ --
Restricted investments available for sale......     840     840     (55)
Restricted investments held to maturity........     276     276      --
Long-term obligations for which no quoted
market prices
are available.................................  59,900      --      --
Other long-term obligations....................  14,897  14,897      --

Restricted cash and cash equivalents at December 31, 2000, as further
discussed in Note 9, consists of investments in money market funds held in a
debt service reserve fund. Available for sale securities are mortgage backed
securities. Held to maturity securities consists primarily of collateralized
mortgage obligations. Contractual maturities as of December 31, 1999 range
from one to ten years, with the majority being five years or less. As further
discussed in Note 5, securities available for sale and held to maturity were
sold in 2000 when financial assurance for closure and post closure care of
facilities was placed with a qualified insurance company.

(5) RESTRICTED INVESTMENTS

Operators of hazardous waste handling facilities are required by federal and
state regulations to provide financial assurance for closure and post-closure
care of those facilities, should the facilities cease operation. Closure would
include the cost of removing the waste stored at a facility which ceased
operating and sending the material to another company for disposal. The
Company had purchased closure insurance from Frontier Insurance Company, as
had a number of other companies that operate hazardous waste facilities. In
June 2000 due to deteriorating financial condition, Frontier Insurance Company
was dropped from the listing of approved sureties. This required any company
that had obtained financial assurance through Frontier Insurance Company to
obtain financial assurance through some other source within 60 days. In July
2000, the Company obtained the required closure insurance through a qualified
insurance company. As part of this transaction, closure insurance that had
been placed with a wholly-owned captive insurance company was cancelled and
placed with insurance from a third party insurer. The cancellation of the
insurance with the wholly-owned captive insurance company allowed for the sale
of the previously restricted securities. No restricted securities were held by
the wholly-owned captive insurance company at December 31, 2000.

42

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(5) RESTRICTED INVESTMENTS--(Continued)

At December 31, 1999 the wholly-owned captive insurance company held
securities that were restricted for future payment of insurance claims. These
securities had an amortized cost of $1,171,000. A valuation allowance of
$55,000 was recorded to reflect the fair value of available for sale
securities of $840,000. No valuation allowance was required to reflect the
fair value of held to maturity securities of $276,000.

In 2000 as further discussed in Note 9, the Company was required to pay
funds into a debt service reserve fund. These funds were restricted as to use
and were to provide additional security to the holders of the bonds. At
December 31, 2000, these payments plus interest earned totaled $768,000.

(6) INTANGIBLE ASSETS

Below is a summary of intangible assets at December 31, 2000 and 1999 (in
thousands):

2000    1999
------- -------

Goodwill.................................................. $28,948 $28,948
Permits...................................................  20,693  20,601
------- -------
49,641  49,549
Less accumulated amortization.............................  18,175  16,350
------- -------
$31,466 $33,199
======= =======

Permits consist of the value of permits acquired through acquisition and
environmental cleanup costs that improve facilities, as compared with the
condition of that property when originally acquired. Amounts capitalized as
permits were $92,000 and $359,000 in 2000 and 1999, respectively.

Amortization expense approximated $1,825,000, $1,807,000 and $1,651,000, for
the years 2000, 1999, and 1998, respectively.

(7) LEGAL MATTERS AND OTHER CONTINGENCIES AND COMMITMENTS

(a) Legal Matters

In the ordinary course of conducting its business, the Company becomes
involved in environmentally related lawsuits and administrative proceedings.
Some of these proceedings may result in fines, penalties or judgments against
the Company.

As of December 31, 2000, the Company has been named as a potentially
responsible party ("PRP") in a number of lawsuits arising from the disposal of
wastes by certain Company subsidiaries at 27 state and federal Superfund
sites. Fourteen of these cases involve two subsidiaries which the Company
acquired from Chemical Waste Management, Inc. ("ChemWaste"), a former
subsidiary of Waste Management, Inc. ("Waste Management"). As part of the
acquisition, ChemWaste agreed to indemnify the Company with respect to any
liability of its Braintree and Natick subsidiaries for waste disposed of
before the Company acquired them. Accordingly, Waste Management is paying all
costs of defending the Natick and Braintree subsidiaries in these 14 cases,
including legal fees and settlement costs. Four cases involve Mr. Frank, Inc.
and one case involves Connecticut Treatment Center ("CTC"). Southdown, Inc.,
from which the Company bought CTC, has agreed to indemnify the Company with
respect to any liability for waste disposed of by CTC before the Company
acquired CTC, and the sellers of Mr. Frank, Inc. agreed to a limited indemnity
against certain environmental liabilities arising from prior operations of Mr.
Frank, Inc. Six pending cases involve subsidiaries which the Company acquired
in January 1989, when it purchased all of the outstanding shares of ChemClear
Inc., a publicly traded

43

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(7) LEGAL MATTERS AND OTHER CONTINGENCIES AND COMMITMENTS--(Continued)

company ("ChemClear"). The Company has also been identified as a PRP at two
additional sites at which the Company believes it has no liability.

Management routinely reviews each Superfund site in which the Company's
subsidiaries are involved, considers each subsidiary's role at each site and
its relationship to the other PRPs at the site, the quantity and content of
the waste it disposed of at the site, and the number and financial
capabilities of the other PRPs at the site. Based on reviews of the various
sites and currently available information, and management's judgment and prior
experience with similar situations, expense accruals are provided by the
Company for its share of future site cleanup costs, and existing accruals are
revised as necessary. The Company had accrued environmental costs, based on
the Company's estimate of its expected liability of $144,000 and $285,000 for
cleanup of Superfund sites at December 31, 2000 and 1999, respectively.
However, Superfund legislation permits strict joint and several liability to
be imposed without regard to fault and, as a result, one PRP might be required
to bear significantly more than its proportional share of the cleanup costs if
other PRPs do not pay their share of such costs.

Environmental regulations stipulate the amount of transit and holding time
that shipments of hazardous waste are allowed. Certain federal agencies,
including the United States Environmental Protection Agency, conducted an
inquiry concerning certain railcars which were destined for the Company's
Kimball, Nebraska incinerator. Several railcars containing waste materials
generated by the Company's waste treatment plants were not delivered to the
Company's Sterling, Colorado rail transfer facility in a timely manner by the
railroad company. The Company has cooperated fully with the federal and state
authorities and has arranged for company personnel to be interviewed and has
produced records, documents and other materials concerning the railcars in
question. The Company has conducted its own internal investigation and
believes that there has been no wrongdoing on the part of the Company with
respect to the late delivery of railcars. However, assurances cannot be given
that the government authorities may not reach a different conclusion or
attempt to levy penalties. The Company is engaged in settlement negotiations
with the government.

In October 1995 an employee was killed in an accident when a drum exploded
at a facility in Cincinnati, Ohio operated by a subsidiary, Spring Grove
Resource Recovery, Inc. ("Spring Grove"). During 1999 the Company was notified
by the Justice Department that the Department believed it had a cause of
action against the subsidiary for potential civil and/or criminal violations
of its permit issued under the Federal Resources Conservation and Recovery Act
of 1976 ("RCRA") as a result of the 1995 accident. The Company has conducted
an exhaustive internal review of the circumstances leading up to the accident
and believes that the subsidiary did not knowingly violate relevant terms of
its RCRA permit. The Company has also engaged the services of external legal
and regulatory experts to review the situation and they have also concluded
that the available evidence does not support a conclusion that the subsidiary
knowingly violated its permit. No assurances can be given, however, that
government authorities will not reach a different conclusion and proceed with
legal action or attempt to levy penalties. The Company has executed tolling
agreements with the government and is presently engaged in discussions with
the government in an effort to resolve this matter.

(b) Environmental Matters

Under the Federal Resources Conservation and Recovery Act of 1976 ("RCRA"),
every facility that treats, stores or disposes of hazardous waste must obtain
a RCRA permit from the EPA or an authorized state agency and must comply with
certain operating requirements. Of the Company's 12 waste management
facilities, nine are subject to RCRA licensing. RCRA requires that permits
contain a schedule of required on-site study and

44

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(7) LEGAL MATTERS AND OTHER CONTINGENCIES AND COMMITMENTS--(Continued)

cleanup activities, known as "corrective action," including detailed
compliance schedules and provisions for assurance of financial responsibility.

The EPA or applicable state agency have begun RCRA corrective action
investigations at the Company's RCRA licensed facilities in Baltimore,
Maryland; Chicago, Illinois; Braintree, Massachusetts; Natick, Massachusetts;
Woburn, Massachusetts; and Cincinnati, Ohio. The Company is also involved in
site studies at its non-RCRA facilities in Cleveland, Ohio; Kingston,
Massachusetts; and South Portland, Maine.

In January 1995, the Company entered into a definitive agreement with
ChemWaste to lease a site previously leased by ChemWaste which adjoins the
Company's Chicago facility. During November 1995, the Company acquired the
existing improvements on the ChemWaste site in exchange for agreeing to share
the costs of dismantling an existing hazardous waste incinerator and cleaning
up the site. Under the sharing arrangement with ChemWaste, the Company will
manage the RCRA corrective action investigation at the site and over a period
of 15 years could be required to contribute up to a maximum of $2,000,000 for
dismantling and decontaminating the incinerator and other equipment, and up to
a maximum of $7,000,000 for studies and cleanup of the site. Any additional
costs beyond those contemplated by the sharing arrangement during this time
period would be borne by ChemWaste. The Company had accruals of $1,729,000 and
$1,627,000 relating to this liability at December 31, 2000 and 1999,
respectively, which are the unused amounts of a remediation accrual plus
accrued interest that was established as part of the acquisition of
ChemWaste's Chicago Facility. In addition, the Company believes that it would
be able to appropriately capitalize the remediation expenditures in excess of
the amount accrued that it may be obligated to make under the agreement. No
estimate can be made as to when the remediation activities will be completed.

Two RCRA facilities in Bristol, Connecticut and Cincinnati, Ohio were
acquired from a subsidiary of Southdown, Inc. Southdown has agreed to
indemnify the Company against any costs incurred or liability arising from
contamination on-site arising from prior ownership, including the cost of
corrective action. The prior owner of the Woburn facility provided a limited
indemnity for any costs incurred or liability arising from contamination on-
site due to prior ownership.

The following table summaries non-reimbursed environmental remediation
expenditures capitalized and expenses incurred relating to the Company's
facilities for the years ended December 31 (in thousands):

2000 1999 1998
---- ---- ----

Environmental expenditures capitalized..................... $ 92 $274 $674
Environmental expenses incurred............................  225   37   95
---- ---- ----
$317 $311 $769
==== ==== ====

The Company was also involved in a RCRA corrective action investigation at a
site in Chester, Pennsylvania owned by PECO Energy Company ("PECO"). The site
consists of approximately 30 acres which PECO had leased to various companies
over the years. In 1989, the Company acquired by merger a public company named
ChemClear Inc., which operated a hazardous waste treatment facility on
approximately eight acres of the Chester site leased from PECO. The Company
ceased operations at the Chester site, decontaminated the plant and equipment,
engaged an independent engineer to certify closure, and obtained final
approval from the Pennsylvania regulatory authorities, certifying final
closure of the facility. In 1993, the EPA ordered PECO to perform a RCRA
corrective action investigation at the Chester site. PECO asked the Company to
participate in the site studies, and in October 1994, the Company agreed to be
responsible for seventy-five percent of the cost of these studies, which was
estimated to be in the range of $2,000,000, by, among other things, performing
field

45

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(7) LEGAL MATTERS AND OTHER CONTINGENCIES AND COMMITMENTS--(Continued)

services work and analytical services required to complete the site studies
and providing other environmental services to PECO at discounted rates. The
Company had provided discounts and credits to PECO totaling $908,000 through
August 2, 1999. The Company and PECO then negotiated an amendment to their
1994 agreement, whereby the Company's responsibility for its share of the cost
of site studies was capped at $1,733,000. The studies were completed in 2000,
whereupon the EPA's order will terminate. The Company had accrued $825,000
relating to this liability at December 31, 1999. The $825,000 balance owed
under the amendment at the end of 1999 was paid in 2000.

(c) Other Contingencies

The Company is subject to various regulatory requirements, including the
procurement of requisite licenses and permits at its facilities. These
licenses and permits without which the Company's operations would be adversely
affected are subject to periodic renewal. The Company anticipates that, once a
license or permit is issued with respect to a facility, the license or permit
will be renewed at the end of its term if the facility's operations are in
compliance with the applicable regulatory requirements.

Under the Company's insurance programs, coverage is obtained for
catastrophic exposures, as well as those risks required to be insured by law
or contract. It is the policy of the Company to retain a significant portion
of certain expected losses related primarily to workers' compensation,
comprehensive general and vehicle liability. Provisions for losses expected
under these programs are recorded based upon the Company's estimates of the
aggregate liability for claims.

(8) OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following (in thousands):

2000    1999
------- -------

Insurance.................................................. $ 2,597 $ 2,329
Other items................................................  10,004   9,031
------- -------
$12,601 $11,360
======= =======

46

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(9) FINANCING ARRANGEMENTS

The following table is a summary of the Company's long-term debt
obligations:

December 31,
2000    1999
------- -------
(in thousands)

Long-term obligations consist of the following:
Economic development revenue bonds, bearing interest at
10.75%....................................................  $ 9,800 $ 9,900
Revolving credit with a financial institution, bearing
interest at the Eurodollar rate (6.64% at December 31,
2000) plus 3.00% or the "prime" rate (9.50% at December
31, 2000) plus 1.50%, collateralized by substantially all
assets....................................................    1,394   9,597
Term note payable, bearing interest at the Eurodollar rate
(6.64% at December 31, 2000) plus 3.00% or the "prime"
rate (9.50% at December 31, 2000) plus 1.50%
collateralized by substantially all assets................    4,200   5,300
2000 Term Note payable, bearing interest at the Eurodollar
rate (6.64% at December 31, 2000 plus 3.00% or the "prime"
rate (9.50% at December 31, 2000) plus 1.50%
collateralized by substantially all assets................    2,333      --
Senior notes payable, bearing interest at 12.50%...........   50,000  50,000
------- -------
67,727  74,797
Less current maturities....................................   52,300   1,300
Less unamortized financing costs...........................      469     814
------- -------
Long-term obligations......................................  $14,958 $72,683
======= =======

Below is a summary of minimum principal payments due under the Company's
long-term obligations (in thousands):

Year                                                              Amount
----                                                              -------

2001............................................................. $52,300
2002.............................................................   2,300
2003.............................................................   3,027
2004.............................................................     700
2005.............................................................     100
Thereafter.......................................................   9,300
-------
Total minimum payments due under long-term obligations including
current maturities.............................................. $67,727
=======

As amended, the Company had a $33,500,000 Loan Agreement (the "Loan
Agreement") with a financial institution. Subsequent to year end and as
further disclosed in Note 16, the Company signed and closed on a $51,000,000
Amended and Restated Loan Agreement with the same financial institution. The
Loan Agreement provided for a $24,500,000 revolving credit portion (the
"Revolver"), a $6,000,000 term promissory note (the "Term Note"), and a
$3,000,000 term promissory note (the "2000 Term Note"). In May 1999, the Term
Note was amended. The Term Note as amended allowed the Company to increase the
amount borrowed under the Term Note by $4,139,000 from the $1,861,000 owed
prior to the amendment of the Term Note to the $6,000,000 principal amount of
the Term Note as amended. The Term Note had monthly principal payments of
$100,000 with the last payment due in May, 2004. In March of 2000, the Loan
Agreement was amended and an additional

47

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(9) FINANCING ARRANGEMENTS--(Continued)

term promissory note, the 2000 Term Note, was entered into with the financial
institution. The original principal amount of the 2000 Term Note is
$3,000,000, and it is payable in 36 monthly installments commencing on May 1,
2000. The funds provided from the 2000 Term Note have been used primarily to
purchase vehicles and rolling stock that the Company previously leased under
operating leases. The Revolver allowed the Company to borrow up to $24,500,000
in cash and letters of credit, based on a formula of eligible accounts
receivable. Letters of credit may not exceed $20,000,000 at any one time. At
December 31, 2000 and 1999, funds available to borrow under the Revolver were
$12,760,000 and $8,603,000, respectively. The Revolver requires the Company to
pay a line fee of one half of one percent on the unused portion of the line.
In March 2000, the term of the Revolver was extended from May 8, 2001 to May
8, 2003.

The Loan Agreement allowed for up to 80% of the outstanding balance of the
Revolver and 100% of the balance of the term notes to bear interest at the
Eurodollar rate plus three percent; the remaining balance bears interest at a
rate equal to the "prime" rate plus one and one-half percent. The Loan
Agreement was collateralized by substantially all of the Company's assets, and
the Loan Agreement provided for certain covenants including, among others,
maintenance of a minimum level of working capital and adjusted net worth. The
Loan Agreement, as amended in March 2000, redefined the working capital
covenant to specifically exclude the Senior Notes as a component of working
capital and required that the Company maintain $6,000,000 of working capital,
excluding the Senior Notes. The net worth covenant was changed to require
$30,000,000 of adjusted net worth. At December 31, 2000, the Company had
working capital and adjusted net worth of $16,526,000 and $41,635,000,
respectively. The Company must also maintain borrowing availability of not
less than $4,500,000 for sixty consecutive days prior to paying principal and
interest on its other indebtedness and dividends in cash on its preferred
stock. In the first half of 1999 and the first quarter of 2000, the Company
violated this covenant, which was waived by the financial institution through
May 15, 1999 and 2000, respectively. Since May 15, 2000 the Company has been
in compliance with this covenant.

In 1996 the Company assumed $10,000,000 of 10.75% Economic Development
Revenue Bonds due September 1, 2026 issued by the City of Kimball, Nebraska
(the "Bonds"). In connection with the issuance of the Bonds, the Company
entered into a facilities lease with the City of Kimball, whereby the City
acquired a leasehold interest in the facility and the Company leased the
facility back from the City. The Company retains title to the facility. The
Bonds were issued at 100% of their principal value. The Bonds are not
redeemable prior to September 1, 2006. From that date until September 1, 2008,
the Bonds are redeemable at a premium. After September 1, 2008, the Bonds are
redeemable at par. Sinking fund payments began on September 1, 1999 in the
amount of $100,000 annually and continue in this amount until the year 2008,
when the annual sinking fund payment will gradually increase.

Effective June 1, 2000, the Bond Documents were amended in order to modify
the limitation on additional debt covenant and certain related debt service
reserve fund requirements. Under the amended Bond Documents, the Company may
now issue Bank Debt up to $35,000,000 provided that after the issuance, the
ratio of the Company's total debt to total capital (debt plus stockholders'
equity) does not exceed 72% (which ratio will be reduced to 70% on January 1,
2006 and 65% on January 1, 2011).

The amended Bond Documents require that the Company make six equal monthly
payments of $125,000 each for a total of $750,000 into a debt service reserve
fund held by the trustee, if either of the following occurs: (i) the Company's
ratio of earnings before interest, taxes, depreciation and amortization
("EBITDA") to total interest (the "EBITDA coverage ratio") for most recently
completed fiscal year is less than 1.5 to 1.0, or (ii) the Company's ratio of
debt to total capital at the end of such fiscal year is greater than 65%. The
amended bond documents required that the Company satisfy these ratios
retroactively to December 31, 1999. Because the

48

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(9) FINANCING ARRANGEMENTS--(Continued)

Company did not satisfy both of these ratios as of December 31, 1999, the
amended Bond Documents required that the Company make six monthly payments of
$125,000 each into the debt service reserve fund commencing on June 1, 2000,
for total of $750,000. In addition to the $750,000 required to be deposited
into the debt service reserve fund based upon the level of the Company's
additional debt, the Company could be required to make additional payments to
bring the total of the debt service reserve fund to a maximum of approximately
$1,200,000 (including the $750,000 described above) if the EBITDA coverage
ratio for any fiscal year is less than 1.25 to 1.0. The EBITDA coverage ratio
for the year ended December 31, 1999 was 1.39, and the Company was therefore
not required to make any such additional payments into the debt service
reserve fund based upon the Company's EBITDA coverage ratio. The maximum
amount of the debt service reserve fund of approximately $1,200,000 is the
same as under the Bond Documents prior to the amendment, but the amendment
modified the terms under which the Company may be required to make payments
into the fund described above.

As of December 31, 2000, Bank Debt totaled $7,927,000 which was less than
the $35,000,000 allowed; the Company's total debt to total capital ratio was
61.9% which is less than the 72.0% allowed; and the EBITDA coverage ratio was
2.24 to 1.0 which is greater than the 1.50 to 1.0 required. Under the Bond
covenants, if the Company attains an EBITDA coverage ratio of greater than 1.5
to 1.0, the balance on deposit in the debt service reserve fund in excess of
$750,000 will be released for the Company's general use. The Bond Documents
require that a minimum balance of $750,000 be maintained in the debt service
reserve fund until the Bonds mature.

The Company has outstanding $50,000,000 of 12.50% Senior Notes due May 15,
2001. The Senior Notes are not collateralized, and the Senior Note indenture
does not provide for the maintenance of certain financial covenants, although
it does limit, among other things, the issuance of additional debt by the
Company or its subsidiaries and the payment of dividends on, and redemption
of, capital stock of the Company and its subsidiaries. Interest is paid twice
each year on the Senior Notes. The Senior Notes require that the Company
provide not less than 30-day prior notice if the Senior Notes are to be
redeemed prior to the due date. Notice of redemption has been given to the
holders of the Senior Notes, providing for redemption on April 30, 2001. As
further described in Note 16, the Company signed two agreements with lenders
which provide that such lenders will provide the funds required to redeem the
Senior Notes on the redemption date.

In October 1999, the Company made the final $1,000,000 installment payment
on its 10% senior convertible notes.

49

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(10) LEASES

The Company leases facilities and personal property under certain operating
leases in excess of one year. Some of these lease agreements contain an
escalation clause for increased taxes and operating expenses and are renewable
at the option of the Company. Future minimum lease payments under operating
leases are as follows (in thousands):

Total
Operating
Year                                                               Leases
----                                                              ---------

2001.............................................................  $ 5,929
2002.............................................................    4,988
2003.............................................................    4,070
2004.............................................................    2,861
2005.............................................................    1,746
Thereafter.......................................................    1,167
-------
$20,761
=======

During the years 2000, 1999 and 1998 rent expense was approximately
$13,289,000, $14,058,000, and $13,328,000, respectively.

(11) FEDERAL AND STATE INCOME TAXES

The provision for income taxes consists of the following (in thousands):

2000    1999  1998
-------  ----  ----

Federal: Current........................................ $    24  $(78) $ --
Deferred..............................................  (2,025)   --    --
State: Current..........................................     360   360   247
Deferred..............................................    (375)   --   113
-------  ----  ----
Net provision for (benefit from) income taxes........... $(2,016) $282  $360
=======  ====  ====

The effective income tax rate varies from the amount computed using the
statutory federal income tax rate as follows:

2000    1999    1998
------   -----   -----

Statutory rate............    34.0%  (34.0)% (34.0)%
Increase (decrease) in
taxes resulting from:
Valuation allowance.....  (120.5)   20.4    32.5
Adjustment of prior
year's estimated
attributes.............    24.7    (9.4)     --
State income taxes, net
of federal benefit.....    12.7    18.4     7.1
Goodwill amortization...     5.1    12.6     7.0
Meals and
entertainment..........     4.5    10.4     5.8
Other permanent
differences............      --    (4.0)   (8.1)
------   -----   -----
Net provision for (benefit
from) income taxes.......   (39.5)%  14.4%   10.3%
======   =====   =====

50

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(11) FEDERAL AND STATE INCOME TAXES--(Continued)

The components of the total net deferred tax asset at December 31, 2000 and
1999 were as follows (in thousands):

2000    1999
------  -------

Current:
Net operating loss carryforwards............................. $  778  $    --
Workmens' compensation accrual...............................    745      731
Accrued closure..............................................     14      506
Provision for doubtful accounts..............................    624      466
Litigation accruals..........................................    250      279
Accrued rent holiday.........................................     99      104
Health insurance accrual.....................................     34       34
Miscellaneous................................................     81      197
Permits......................................................   (225)    (226)
Valuation allowance..........................................     --   (2,091)
------  -------
Total current deferred tax asset............................. $2,400  $    --
------  -------
Long-term:
Net operating loss carryforwards............................. $6,374  $11,198
Tax credit carryforwards.....................................  1,951    1,927
Property, plant and equipment................................ (3,915)  (4,410)
Permits...................................................... (2,193)  (2,440)
Valuation allowance.......................................... (2,217)  (6,275)
------  -------
Total long-term deferred tax asset........................... $   --  $    --
------  -------
Net deferred tax asset....................................... $2,400  $    --
======  =======

SFAS 109, "Accounting for Income Taxes," requires that a valuation allowance
be established when, based on an evaluation of objective verifiable evidence,
there is a likelihood that some portion or all of the deferred tax assets will
not be realized. The Company continually reviews the adequacy of the valuation
allowance for deferred tax assets, and, in 1997, based upon this review, the
valuation allowance was increased to cover almost all net deferred tax assets.
In 1998 and 1999 the valuation allowance was adjusted so as to reserve all net
deferred tax assets. In the fourth quarter of 2000, the Company once again
reviewed the valuation allowance for deferred tax assets. Based on the level
of earnings for 2000 and management's projections for profits in future years,
it was determined that it was more likely than not that $2,400,000 of the net
deferred tax assets would be utilized. Accordingly, the 2000 provision for
income taxes included a $2,400,000 benefit related to adjusting the valuation
allowance. The actual realization of the net operating loss carryforwards and
other tax assets depend on having future taxable income of the appropriate
character prior to their expiration.

For federal income tax purposes at December 31, 2000, the Company had
regular tax net operating loss carryforwards of $14,887,000 which expire in
2010 and thereafter. The Company also had $3,333,000 of SRLY net operating
loss carryforwards which may only be used to offset future taxable income, if
any, of former ChemClear entities. These net operating loss carryforwards
expire in the amounts of $489,000, $648,000 and $2,196,000 in the years 2001,
2002 and 2003, respectively.

During the ordinary course of its business, the Company is audited by
federal and state tax authorities, which may result in proposed assessments.
In 1996, the Company received a notice of intent to assess state income taxes
from one of the states in which it operates. This case is currently undergoing
administrative appeal.

51

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(11) FEDERAL AND STATE INCOME TAXES--(Continued)

If the Company loses the administrative appeal, the Company may be required to
make a payment of approximately $3,000,000 to the state. The Company cannot
currently predict when the decision for the administrative appeal will be
made. The Company believes that it has properly reported its state income and
intends to contest the assessment vigorously. While the Company believes that
the final outcome of the dispute will not have a material adverse effect on
the Company's financial condition or results of operations, no assurance can
be given as to the final outcome of the audit, the amount of any final
adjustment or the potential impact of such adjustments on the Company's
financial condition or results of operations.

(12) INCOME (LOSS) PER SHARE

The following is a reconciliation of basic and diluted loss per share
computations (in thousands except for per share amounts):

Year Ended 2000
-----------------------------------
Income       Shares     Per-Share
(Numerator) (Denominator)  Income
----------- ------------- ---------

Net income.............................   $ 7,118
Less preferred dividends...............       448
-------      ------      ------
Basic EPS (income available to
shareholders).........................     6,670      11,085        0.60
Effect of dilutive securities..........        --         220       (0.01)
-------      ------      ------
Diluted EPS
Income available to common
shareholders plus assumed
conversions..........................   $ 6,670      11,305      $ 0.59
=======      ======      ======

Year Ended 1999
-----------------------------------
Income       Shares     Per-Share
(Numerator) (Denominator)   Loss
----------- ------------- ---------

Net loss...............................   $(2,244)
Less preferred dividends...............       448
-------      ------      ------
Basic and diluted EPS
(loss available to shareholders)......   $(2,692)     10,649      $(0.25)
=======      ======      ======

Year Ended 1998
-----------------------------------
Income       Shares     Per-Share
(Numerator) (Denominator)   Loss
----------- ------------- ---------

Net loss...............................   $(3,854)
Less preferred dividends...............       448
-------      ------      ------
Basic and diluted EPS
(loss available to shareholders)......   $(4,302)     10,309      $(0.42)
=======      ======      ======

The Company has issued options, warrants and convertible preferred stock
which are potentially dilutive to earnings. For the year ended December 31,
2000, some of the options outstanding but none of the warrants or convertible
preferred stock are dilutive. Only those options where the options' exercise
price was less than the average market price of the common shares for the
period are included in the above calculations. For the years ended December
31, 1999 and 1998, the options, warrants and convertible stock outstanding
have not been included in the above calculations, since their inclusion would
have been antidilutive for the period.

52

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) STOCKHOLDERS' EQUITY

(a) Stock Option Plans

In 1987, the Company adopted a nonqualified stock option plan ("1987 Plan"),
in 1992 the Company adopted an equity incentive plan, which provides for a
variety of incentive awards, including stock options ("1992 Plan"), and in
2000, the Company adopted a stock incentive plan, which provides for awards in
the form of incentive stock options, non-qualified stock options and
restricted stock ("2000 Plan"). As of December 31, 2000, all awards under the
1992 and 2000 Plans were in the form of non-qualified stock options. These
options generally become exercisable after a period of one to five years from
the date of grant, subject to certain employment requirements, and terminate
ten years from the date of grant. At December 31, 2000, the Company has
reserved 955,600, 1,250,000 and 800,000 shares of common stock for issuance
under the 1987, 1992 and 2000 Plans, respectively.

Under the terms of the 1987, 1992 and 2000 Plans, as amended, options may be
granted to purchase shares of common stock at an exercise price less than the
fair market value on the date of grant. No compensation expense related to
stock option grants was recorded in 2000, 1999 or 1998, as the option exercise
prices were equal to, or greater than, the fair market value on the date of
grant.

(b) Supplemental Disclosures for Stock-Based Compensation

The Company applies APB Opinion No. 25 and related Interpretations in
accounting for the Plans. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", ("SFAS 123"), issued in 1995,
defined a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period. The Company elected to
continue to apply the accounting provisions of APB Opinion No. 25 for stock
options. The required disclosures under SFAS 123 as if the Company had applied
the new method of accounting are made below.

Activity under the Plans for the three years ended December 31, 2000 is as
follows:

Number of  Weighted Average
Shares     Exercise Price
---------  ----------------

Outstanding at December 31, 1997................ 1,302,560       $2.21
Granted at fair value.........................   618,125        1.77
Forfeited.....................................  (516,536)       2.16
Exercised.....................................    (2,700)       2.13
---------       -----
Outstanding at December 31, 1998................ 1,401,449        2.04
Granted at fair value.........................    40,500        1.91
Granted at a value greater than fair value....     2,750        1.50
Forfeited.....................................  (145,286)       2.07
Exercised.....................................        --          --
---------       -----
Outstanding at December 31, 1999................ 1,299,413        2.03
Granted at fair value.........................   603,894        2.32
Forfeited.....................................  (280,035)       2.25
Exercised.....................................   (75,800)       2.06
---------       -----
Outstanding at December 31, 2000................ 1,547,472       $2.10
=========       =====

53

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) STOCKHOLDERS' EQUITY--(Continued)

Summarized information about stock options outstanding at December 31, 2000
is as follows:

Exercisable
------------------
Weighted
Average     Weighted             Weighted
Range of      Number of     Remaining    Average    Number    Average
Exercise       Options     Contractual   Exercise     of      Exercise
Prices      Outstanding      Life        Price     Options    Price
--------     -----------   -----------   --------   -------   --------

$1.44-1.75      113,250        6.64        $1.50      52,400    $1.52
1.81-1.81      344,025        7.32         1.81     139,050     1.81
1.88-2.06      241,250        7.68         1.98      16,000     1.97
2.13-2.13      476,403        3.74         2.13     453,533     2.13
2.42-13.25     372,544        8.19         2.58      74,694     2.89

Options exercisable at December 31, 2000, 1999 and 1998 were 735,677,
747,263 and 599,605, respectively. The weighted average exercise prices for
the exercisable options at December 31, 2000, 1999 and 1998 were $2.10, $2.17,
and $2.28, respectively.

The fair value of each option granted during 2000, 1999 and 1998 is
estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:

2000  1999  1998
----  ----  ----

Dividend yield........................................... none  none  none
Expected volatility...................................... 80.5% 75.2% 75.0%
Risk-free interest rate..................................  6.3%  5.4%  5.8%
Expected life............................................  6.0   6.0   6.0

Weighted average fair value of options granted at fair value during:

2000................................................................. $2.32
=====
1999................................................................. $1.91
=====
1998................................................................. $1.81
=====

Weighted average fair value of options granted at greater than fair value
during:

2000................................................................. $  --
=====
1999................................................................. $1.50
=====
1998................................................................. $  --
=====

54

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) STOCKHOLDERS' EQUITY--(Continued)

Had compensation cost for the Company's stock option grants been determined
based on the fair value at the grant dates, as calculated in accordance with
SFAS 123, the Company's net income and net income per common share for the
years ended December 31, 2000, 1999 and 1998, would approximate the pro forma
amounts as compared to the amounts reported:

Net Income   Net Income (Loss)
(Loss)     per Diluted Share
-----------  -----------------

As reported:
2000........................................ $ 7,118,000       $ 0.59
1999........................................  (2,244,000)       (0.25)
1998........................................  (3,854,000)       (0.42)
Pro forma:
2000........................................ $ 6,261,000       $ 0.55
1999........................................  (2,945,000)       (0.28)
1998........................................  (3,947,000)       (0.43)

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. Additional awards in future years are
anticipated.

(c) Employee Stock Purchase Plan

In May of 1995, the Company's stockholders approved an Employee Stock
Purchase Plan (the "ESPP"), which is a qualified employee stock purchase plan
under Section 423 of the Internal Revenue Code of 1986, as amended, through
which employees of the Company are given the opportunity to purchase shares of
common stock. A total of one million shares of common stock under the ESPP has
been reserved for offering to employees through April 1, 2005. Employees who
elect to participate in an offering may utilize up to 10% of their pay for the
purchase of common stock at 85% of the closing price of the stock on the first
day of such quarterly offering or, if lower, 85% of the closing price on the
last day of the offering. For the years ended December 31, 2000 and 1999,
114,991 and 98,200 shares, respectively, of common stock had been purchased
under the ESPP. The weighted average fair per share value of the purchase
rights granted under the ESPP during 2000, 1999 and 1998 were $0.92, $0.25 and
$0.41, respectively.

(d) Warrants

In connection with the issuance of senior subordinated notes payable in May
1989, the Company issued warrants to purchase 100,000 shares of common stock
at $20.75 per share in exchange for $300,000. In April 1990, the exercise
price of the warrants was reduced to $9 per share. In February 1991, in
connection with the refinancing of the Company's short-term debt, the exercise
price was further reduced to $5 per share. These warrants expired on February
1, 2001.

In connection with the refinancing of the Company's short-term debt in
February 1991, the Company issued warrants to purchase 425,000 shares of
common stock at $5 per share to the three banks which provided the Revolver.
These warrants expired on February 6, 2001.

55

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(13) STOCKHOLDERS' EQUITY--(Continued)

(e) Preferred

On February 16, 1993 the Company issued 112,000 shares of Series B
Convertible Preferred Stock, $0.01 par value ("Preferred Stock"), for the
acquisition of its Spring Grove facility. The liquidation value of each
preferred share is the liquidation preference of $50 plus unpaid dividends.
Preferred Stock may be converted by the holder into Common Stock at a
conversion rate of $18.63. There is no expiration date associated with the
conversion option. The Company had the option to redeem such Preferred Stock
at liquidation value plus a redemption premium of 2%, if the redemption
occurred on or before August 16, 2000; thereafter, the redemption premium
declines 1% each year. Each preferred share entitles its holder to receive a
cumulative annual cash dividend of $4.00 per share, or at the election of the
Company, a common stock dividend of equivalent value.

Dividends on the Preferred Stock are payable on the 15th day of January,
April, July and October, at the rate of $1.00 per share, per quarter. The
Company elected to pay the 2000 dividends in common stock with a market value
equal to the amount of the dividend payable. During 2000 the Company issued
226,884 shares of common stock to the holders of the Preferred Stock. The
Company anticipates that commencing in the third quarter of 2001 the Preferred
Stock dividends will be paid in cash.

(14) EMPLOYEE BENEFIT PLAN

The Company has a profit-sharing plan under Section 401(K) of the Internal
Revenue Code covering substantially all employees. The plan allows employees
to make contributions up to a specified percentage of their compensation. The
Company accrued $600,000 for the plan in 2000 which was paid in 2001. No
contribution was made by the Company for 1999 or 1998.

(15) QUARTERLY DATA (UNAUDITED)

First   Second   Third  Fourth
Quarter  Quarter Quarter Quarter
-------  ------- ------- -------
(in thousands except per share
amounts)

2000
Revenue.................................. $52,737  $62,242 $60,290 $58,197
Income from operations...................     938    6,094   4,366   2,871
Net income (loss)........................  (1,440)   3,639   1,907   3,012
Basic earnings (loss) per share..........   (0.14)    0.32    0.16    0.26
Diluted earnings (loss) per share........   (0.14)    0.32    0.15    0.25

1999
Revenue.................................. $44,648  $51,118 $54,602 $52,597
Income (loss) from operations............    (523)   2,995   2,635   1,530
Net income (loss)........................  (2,842)     705     317    (424)
Basic and diluted earnings (loss) per
share...................................   (0.28)    0.06    0.02   (0.05)

As further discussed in Note 11, included in the net income for the fourth
quarter of 2000 is a $2,400,000 benefit related to the partial reversal of a
valuation allowance for deferred tax assets. With the exception of the partial
reversal of the valuation allowance, the above quarterly data reflects all
adjustments that are necessary to fairly state the results of the interim
periods presented, and adjustments required are of a normal recurring nature.

Earnings per share are computed independently for each of the quarters
presented. Due to this, the 2000 quarterly diluted earnings (loss) per share
do not equal the total computed for the year.

56

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(16) SUBSEQUENT EVENT

The Company has outstanding $50,000,000 of 12.50% Senior Notes due May 15,
2001 (the "Senior Notes"). The Senior Notes require that the Company provide
not less than 30-day prior notice if the Senior Notes are to be redeemed prior
to the due date. Notice of redemption has been given to the holders of the
Senior Notes, providing for redemption on April 30, 2001. As described below,
on April 12, 2001, the Company signed two agreements with lenders which
provide that such lenders will provide the funds required to redeem the Senior
Notes on the redemption date.

As described in Note 9, the Company had at December 31, 2000 a $33,500,000
Loan Agreement (the "Loan Agreement") with a financial institution (the
"Lender"). The Loan Agreement provided for a $24,500,000 revolving credit
facility (the "Revolver"), a $6,000,000 term promissory note (the "Term
Note"), and a $3,000,000 term promissory note (the "2000 Term Note"). On April
12, 2001, the Company signed and closed a $51,000,000 Amended and Restated
Loan Agreement (the "Amended Loan Agreement") with the Lender. The Amended
Loan Agreement increased the amount available to borrow under the Revolver to
$30,000,000 and extended the term of the Revolver to April 12, 2004. The
Revolver allows the Company to borrow up to $30,000,000 in cash and letters of
credit, based on a formula of eligible accounts receivable. Letters of credit
may not exceed $20,000,000 at any one time. The Revolver requires the Company
to pay an unused line fee of one-half of one percent on the unused portion of
the line. The Amended Loan Agreement required the payment on April 12 of the
then $3,800,000 outstanding balance on the Term Note and provided for the
issuance of a new $19,000,000 term promissory note (the "Term Loan B"). On
April 12, 2001, $4,000,000 was advanced under Term Note B to pay the Term Note
and other amounts then borrowed by the Company. The Amended Loan Agreement
provides for the $15,000,000 balance of Term Note B to be advanced on April 30
to redeem the Senior Notes on that date, provided the representations of the
Company in the Amended Loan Agreement remain true and correct in all material
respects, the Company is not then in default of the Amended Loan Agreement,
and the Company has then issued the Subordinated Notes described below. The
interest rate for Term Note B is the greater of the prime rate plus 3.50% or
12.00%, and it is payable in 84 monthly installments commencing May 1, 2001.
The terms of the 2000 Term Note remain unchanged.

The Amended Loan Agreement allows for up to 80% of the outstanding balance
of the Revolver and 100% of the balance of the 2000 Term Note to bear interest
at the Eurodollar rate plus three percent; the remaining balance bears
interest at the "prime" rate plus one and one-half percent. The Amended Loan
Agreement is collateralized by substantially all of the Company's assets, and
the Amended Loan Agreement provides for certain covenants including, among
others, maintenance of a minimum level of working capital, adjusted net worth
and earnings before interest, income taxes, depreciation and amortization
("EBITDA"). The Amended Loan Agreement requires that the Company maintain
$10,000,000 of working capital excluding the current portion of liabilities
under the Amended Loan Agreement and the Subordinated Note Agreement. The
Company had $18,726,000 of working capital calculated on a pro forma basis as
if the redemption had taken place on December 31, 2000. The net worth covenant
requires that the Company maintain $35,000,000 of adjusted net worth until the
Subordinated Notes described below are funded, and once the Notes are funded,
the net worth covenant requires adjusted net worth, defined as net worth plus
the balance owed on the subordinated notes, to be greater than $60,000,000. At
December 31, 2000, the pro forma adjusted net worth calculated as if the
redemption had taken place on December 31, 2000 was $76,635,000. The Amended
Loan Agreement requires that the Company maintain on a rolling four quarter
basis a minimum EBITDA of $20,000,000. For the four quarter period ended
December 31, 2000 the Company reported EBITDA of $24,925,000. The Amended Loan
Agreement also requires that the Company maintain a Senior Debt to EBITDA
ratio of not more than 2.25 to 1.0. At December 31, 2000 the pro forma ratio
calculated as if the redemption had taken place on December 31, 2000 was 1.33
to 1.0. The Amended Loan Agreement also has conditions precedent to making
loans (including the Revolver) including no material adverse change in the
assets, business or prospects of the Company.

57

CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(16) SUBSEQUENT EVENT--(Continued)

On April 12, 2001, the Company also signed a Securities Purchase Agreement
(the "Subordinated Note Agreement") providing for the Company to issue on
April 30, 2001, $35,000,000 of 16% Senior Subordinated Notes (the
"Subordinated Notes"). Until October 30, 2006, the Company, at its option, may
pay the interest at the 16% rate or may pay interest at 14% and defer payment
of the remaining 2% until the Subordinated Notes are due. Interest payable in
cash on the Subordinated Notes is due in semi-annual payments on April 30 and
October 30. In conjunction with the Subordinated Notes, the Company will issue
detachable warrants for 1,519,020 shares of common stock that are exercisable
at $0.01 per share. One-half of the Subordinated Notes are due on April 30,
2007 with the balance due on April 30, 2008. The Subordinated Note Agreement
calls for the $35,000,000 to be advanced on April 30, 2001 in order to redeem
the Senior Notes. The Subordinated Note Agreement contains conditions of
closing the most restrictive of which are that representations by the Company
in the Agreement remain true, that the Company have not less than $3,500,000
available under the Revolver on April 30, 2001, and that no material adverse
change shall have occurred prior to April 30, 2001 in the business and
financial condition of the Company. The Subordinated Note Agreement provides
that the holders of the Subordinated Notes will be able to call the Notes in
the event of a change in control of the Company.

The Subordinated Note Agreement contains covenants the most restrictive of
which require that the Company maintain a rolling four quarter fixed charge
coverage ratio of not less than 1.10 to 1.0. For the year ended December 31,
2000, the fixed charge coverage ratio was 1.82 to 1.0. The Subordinated Notes
require that the Company maintain a tangible capital base of not less than
$27,000,000 for the quarters ending March 31 and June 30, 2001, not less than
$30,500,000 for the quarter ending September 30, 2001, not less than
$33,000,000 for the quarter ending December 31, 2001 and not less than
$35,500,000 for quarters ending thereafter. At December 31, 2001, the tangible
capital base was $45,169,000. The Company is required to maintain rolling four
quarter earnings before interest, income taxes, depreciation and amortization
(EBITDA) of not less than $18,000,000. For the four quarter period ended
December 31, 2000, EBITDA was $24,925,000. The Company shall maintain a
priority debt to EBITDA ratio calculated as of the last day of each fiscal
quarter of not more than 2.25 to 1.0. Priority debt currently consists of debt
issued under the Amended Loan Agreement. At December 31, 2000, the pro forma
priority debt to EBITDA ratio calculated as if the redemption had taken place
on December 31, 2000 was 1.33 to 1.0. The Company is required to maintain a
ratio of total liabilities to tangible capital base of not more than 3.00 to
1.0 for the fiscal quarters ending June 30, September 30 and December 31, 2001
and for the quarters ending March 31, 2002 and thereafter a ratio of not more
than 2.75 to 1.0. At December 31, 2000 the total liabilities to tangible
capital base ratio was 1.61 to 1.0.

58

CLEAN HARBORS, INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

For the Three Years Ended December 31, 2000

(in thousands)

Additions
Balance  Charged to Deductions  Balance
Allowance for                           Beginning Operating     From     End of
Doubtful Accounts                       of Period  Expense   Reserves(a) Period
-----------------                       --------- ---------- ----------- -------

1998.................................  $1,050      $559       $596     $1,013
1999.................................   1,013       683        539      1,157
2000.................................   1,157       684        292      1,549

--------
(a) Amounts deemed uncollectible, net of recoveries.

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

The information called for by Item 10 (Directors and Executive Officers of
the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership
of Certain Beneficial Owners and Management) and Item 13 (Certain
Relationships and Related Transactions) is incorporated herein by reference to
the registrant's definitive proxy statement for its 2001 Annual Meeting of
Stockholders, which definitive proxy statement is expected to be filed with
the Commission not later than April 30, 2001.

For the purpose of calculating the aggregate market value of the voting
stock of the registrant held by nonaffiliates as shown on the cover page of
this report, it has been assumed that the directors and executive officers of
the registrant, as will be set forth in the Company's definitive proxy
statement for its 2001 Annual Meeting of Stockholders, are the only affiliates
of the registrant. However, this should not be deemed to constitute an
admission that all of such persons are, in fact, affiliates or that there are
not other persons who may be deemed affiliates of the registrant.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents Filed as a Part of this Report

Page
-----

1. Financial Statements:

Report of Independent Accountants...................................... 33

Consolidated Statements of Income for the Three Years Ended December    34
31, 2000.............................................................

Consolidated Balance Sheets, December 31, 2000 and 1999................ 35-36

Consolidated Statements of Cash Flows for the Three Years Ended         37
December 31, 2000....................................................

Consolidated Statements of Stockholders' Equity for the Three Years
Ended December 31, 2000.............................................. 38

Notes to Consolidated Financial Statements............................. 39-58

2. Financial Statement Schedule:

Schedule II Valuation and Qualifying Accounts.......................... 59

All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the financial
statements or notes thereto.

60

3. Exhibits:

Exhibits to the Form 10-K have been included only with the copies of the
Form 10-K filed with the Commission. Upon request to the Company and payment
of a reasonable fee, copies of the individual exhibits will be furnished. The
Company undertakes to furnish to the Commission upon request copies of
instruments (in addition to the exhibits listed below) relating to the
Company's long-term debt.

Item No.                        Description                          Location
-------- ---------------------------------------------------------   ---------

See Note:
3.1     Restated Articles of Organization of Clean Harbors, Inc.
and amendments thereto...................................   (1)
3.2     Certificate of Vote of Directors Establishing a Series of
a Class of Stock (Series B Convertible Preferred Stock)..   (2)
3.4A    Amended and Restated By-laws of Clean Harbors, Inc.......   (3)
4.1     Senior Note Indenture dated as of August 4, 1994, between
Clean Harbors, Inc., the Guarantor Subsidiaries of the
Company, and Shawmut Bank, N.A., as trustee for the
holders of the Company's 12.50% Senior Notes due May 15,
2001.....................................................   (4)
4.2     Loan and Security Agreement dated May 8, 1995 by and
between Congress Financial Corporation (New England) and
the Company's Subsidiaries as Borrowers..................   (5)
4.3     Term Promissory Note dated May 8, 1995 from the Company's
Subsidiaries as Debtors to Congress Financial Corporation
(New England) in the amount of $10,000,000...............   (5)
4.4     Guarantee dated May 8, 1995 by Clean Harbors, Inc. to
Congress Financial Corporation (New England) of the
obligations of the Company's Subsidiaries under the
Financing Agreements.....................................   (5)
4.5     General Security Agreement dated May 8, 1995 by Clean
Harbors, Inc. in favor of Congress Financial Corporation
(New England)............................................   (5)
4.6     Letter Agreement dated November 21, 1995 by and between
Congress Financial Corporation (New England) and the
Company's Subsidiaries as Borrowers......................   (8)
4.7     Second Amendment to Financing Agreements dated March 20,
1996 by and between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers and
Clean Harbors, Inc. as Guarantor.........................   (8)
4.8     Amended and Restated Term Promissory Note dated March 20,
1996 from the Company's Subsidiaries as Debtors to
Congress Financial Corporation (New England) in the
amount of $15,000,000....................................   (8)
4.9     Third Amendment to Financing Agreements dated September
6, 1996 by and between Congress Financial Corporation
(New England), the Company's Subsidiaries as Borrowers,
and Clean Harbors, Inc. as Guarantor.....................   (8)
4.10     Fourth Amendment to Financing Agreements dated June 20,
1997 by and between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers, and
Clean Harbors, Inc. as Guarantor.........................   (9)
4.11     Fifth Amendment to Financing Agreements dated January 1,
1998 by and between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers, and
Clean Harbors, Inc. as Guarantor.........................   (9)
4.12     Sixth Amendment to Financial Agreements dated June 23,
1998 by and between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers, and
Clean Harbors, Inc. as Guarantor.........................   (11)

61

Item No.                      Description                          Location
-------- ----------------------------------------------------   --------------

4.13    Seventh Amendment to Financial Agreements dated May
24, 1999 by and between Congress Financial
Corporation (New England), the Company's
Subsidiaries as Borrowers, and Clean Harbors, Inc.
as Guarantor........................................   (13)
4.14    Second Amendment and Restated Term Promissory Notes
Dated May 24, 1999 by and between Congress Financial
Corporation (New England), the Company's
Subsidiaries as Borrowers, and Clean Harbors, Inc.
as Guarantor........................................   (13)
4.15    Eighth Amendment to Financial Agreements dated March
28, 2000 by and between Congress Financial
Corporation (New England), the Company's
Subsidiaries as Borrowers, and Clean Harbors, Inc.
as Guarantor........................................   (14)
4.16    2000 Term Promissory Note dated March 28, 2000 by
and between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers,
and Clean Harbors, Inc. as Guarantor................   (14)
4.17    Amended and Restated Loan and Security Agreement
dated April 12, 2001 by and between Congress
Financial Corporation (New England), the Company's
Subsidiaries as Borrowers, And Clean Harbors, Inc.
as Guarantor........................................   Filed herewith
4.18    Term Promissory Note B dated April 12, 2001 by and
between Congress Financial Corporation (New
England), the Company's Subsidiaries as Borrowers,
and Clean Harbors, Inc. as Guarantor................   Filed herewith
4.19    Securities Purchase Agreement dated April 12, 2001
by and between institutional investors and Clean
Harbors, Inc........................................   Filed herewith
4.20    Subordination Agreement dated April 12, 2001 by and
between Clean Harbors, Inc. and its subsidiaries,
Congress Financial Corporation (New England) and
institutional investors.............................   Filed herewith
10.35    Stock Purchase Agreement among Clean Harbors, Inc.,
Southdown Environmental Treatment Systems, Inc. and
Southdown, Inc. dated as of June 23, 1992...........   (2)
10.36    Stock Purchase Agreement among Clean Harbors, Inc.,
Southdown Environmental Treatment Systems, Inc. and
Southdown, Inc. dated as of February 16, 1993.......   (2)
10.37    Clean Harbors, Inc. 1987 Stock Option Plan..........   (6)
10.38    Clean Harbors, Inc. 1992 Equity Incentive Plan......   (6)
10.39    Asset Purchase Agreement among Clean Harbors of
Chicago, Inc., Clean Harbors, Inc., CWM Chemical
Services, Inc. and Chemical Waste Management, Inc.
dated as of January 30, 1995........................   (7)
10.40    Asset Purchase Agreement among Clean Harbors
Technology Corporation, Clean Harbors Inc. and Ecova
Corporation dated as of March 31, 1995..............   (5)
10.41    Disposal Services Agreement by and between Chemical
Waste Management, Inc. and its subsidiary and
affiliated companies and Clean Harbors Environmental
Services, Inc. and its affiliated companies dated as
of October 31, 1995.................................   (8)
10.42    Clean Harbors, Inc. 2000 Stock Incentive Plan.......   (15)
10.43    Key Employee Retention Plan.........................   (12)
21       Subsidiaries........................................   Filed herewith
23       Consent of Independent Accountants..................   Filed herewith

62

Item No.                      Description                          Location
-------- -----------------------------------------------------  --------------

24       Power of Attorney for Christy W. Bell, John F.
Kaslow, Daniel J. McCarthy, John T. Preston, Thomas
J. Shields and Lorne R. Waxlax.......................  Filed herewith

---------------------
(1) Incorporated by reference to Exhibit 3.1 to the Company's Form S-1
Registration Statement (No. 33-17565).

(2) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1992.

(3) Incorporated by reference to Exhibit 3.4A to the Company's Form 10-K
Annual Report for the Fiscal Year Ended February 28, 1991.

(4) Incorporated by reference to Exhibit 4.1 to the Company's Form S-2
Registration Statement (No. 33-54191).

(5) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-Q Quarterly Report for the Quarterly Period Ended June
30, 1995.

(6) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1993.

(7) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1994.

(8) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1995.

(9) Incorporated, by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1996.

(10) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-Q Quarterly Report for the Quarterly Period ended
September 30, 1996.

(11) Incorporated by reference to Exhibit 4.12 to the Company's Form 10-Q
Quarterly Report for the Quarterly Period ended June 30, 1998.

(12) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-Q Quarterly Report for the Quarterly Period ended March
31, 1999.

(13) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-Q Quarterly Report for the Quarterly Period ended June
30, 1999.

(14) Incorporated by reference to the similarly numbered exhibit to the
Company's Form 10-K Annual Report for the Year 1999.

(15) Incorporated by reference to the Company's Form DEF 14A Proxy Statement
filed on April 28, 2000.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the fourth quarter of 2000.

63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on April 12, 2001.

Clean Harbors, Inc.

/s/ Alan S. McKim
By: _______________________________________
Alan S. McKim
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature                            Title                  Date
---------                            -----                  ----

/s/ Alan S. McKim              Chairman Of The Board Of    April 12, 2001
___________________________________________  Directors and Chief
Alan S. McKim                 Executive Officer

/s/ Roger A. Koenecke            Senior Vice President and   April 12, 2001
___________________________________________  Chief Financial Officer
Roger A. Koenecke

*                      Director                    April 12, 2001
___________________________________________
Christy W. Bell

*                      Director                    April 12, 2001
___________________________________________
John F. Kaslow

*                      Director                    April 12, 2001
___________________________________________
Daniel J. McCarthy

*                      Director                    April 12, 2001
___________________________________________
John T. Preston

*                      Director                    April 12, 2001
___________________________________________
Thomas J. Shields

*                      Director                    April 12, 2001
___________________________________________
Lorne R. Waxlax

/s/ Alan S. McKim
*By: ______________________________________
Alan S. McKim
(Attorney-in-Fact )

64

Exhibit 4.17

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

by and between

CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
as Lender

and

CLEAN HARBORS, INC.
CLEAN HARBORS ENVIRONMENTAL SERVICES, INC.
CLEAN HARBORS KINGSTON FACILITY CORPORATION
CLEAN HARBORS OF BRAINTREE, INC.
CLEAN HARBORS SERVICES, INC.
CLEAN HARBORS OF NATICK, INC.
CLEAN HARBORS OF CONNECTICUT, INC.
MURPHY'S WASTE OIL SERVICE, INC.
MR. FRANK, INC.
SPRING GROVE RESOURCE RECOVERY, INC.
HARBOR MANAGEMENT CONSULTANTS, INC.

as Borrowers

Dated: April 12, 2001

TABLE OF CONTENTS
-----------------

SECTION 1.  DEFINITIONS.....................................   1

SECTION 2.  CREDIT FACILITIES...............................  11

2.1    Revolving Loans......................................  11
2.2    Letter of Credit Accommodations......................  12
2.3    Term Loan............................................  14
2.3A   2000 Term Loan.......................................  15
2.4    Availability Reserves................................  15
2.5    Appointment of CHES as Agent for Requesting Loans
and Receipt of Statements............................  15

SECTION 3.  INTEREST AND FEES...............................  15

3.1    Interest.............................................  15
3.2    Closing Fee..........................................  17
3.3    Servicing Fee; Administrative Fee; Anniversary Fee...  17
3.4    Unused Line Fee......................................  17
3.5    Changes in Laws and Increased Costs of Loans.........  17

SECTION 4.  CONDITIONS PRECEDENT............................  18

4.1    Conditions Precedent to Initial Loans and Letter of
Credit Accommodations................................  18
4.2    Conditions Precedent to All Loans and Letter of
Credit Accommodations................................  20
4.3    Conditions Subsequent................................  21

SECTION 5.  GRANT OF SECURITY INTEREST......................  21

SECTION 6.  COLLECTION AND ADMINISTRATION...................  22

6.1    Borrowers' Loan Account..............................  22
6.2    Statements...........................................  23
6.3    Collection of Accounts...............................  23
6.4    Payments.............................................  24
6.5    Authorization to Make Loans..........................  24
6.6    Use of Proceeds......................................  25

SECTION 7.  COLLATERAL REPORTING AND COVENANTS..............  25

7.1    Collateral Reporting.................................  25
7.2    Accounts Covenants...................................  25
7.3    Equipment Covenants..................................  27
7.4    Power of Attorney....................................  27
7.5    Right to Cure........................................  28
7.6    Access to Premises...................................  28
7.7    Surveys of Real Property.............................  28

SECTION 8.  REPRESENTATIONS AND WARRANTIES..................  29

8.1    Corporate Existence, Power and Authority;
Subsidiaries.........................................  29
8.2    Financial Statements; No Material Adverse Change.....  29
8.3    Chief Executive Office; Collateral Locations.........  29
8.4    Priority of Liens; Title to Properties...............  29
8.5    Tax Returns..........................................  30
8.6    Litigation...........................................  30
8.7    Compliance with Other Agreements and Applicable Laws.  30

i

8.8    Environmental Compliance.............................  30
8.9    Employee Benefits....................................  31
8.10   Interrelated Businesses..............................  32
8.11   Accuracy and Completeness of Information.............  32
8.12   Bank Accounts........................................  32
8.13   Survival of Warranties; Cumulative...................  32

SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS..............  33

9.1    Maintenance of Existence.............................  33
9.2    New Collateral Locations.............................  33
9.3    Compliance with Laws, Regulations, Etc...............  33
9.4    Payment of Taxes and Claims..........................  35
9.5    Insurance............................................  35
9.6    Financial Statements and Other Information...........  36
9.7    Sale of Assets, Consolidation, Merger, Dissolution,
Etc..................................................  37
9.8    Encumbrances.........................................  37
9.9    Indebtedness.........................................  38
9.10   Loans, Investments, Guarantees, Etc..................  39
9.11   Dividends and Redemptions............................  39
9.12   Transactions with Affiliates.........................  39
9.13   Working Capital......................................  39
9.14   Adjusted Net Worth...................................  40
9.14A  Senior Debt to EBITDA................................  40
9.14B  Minimum EBITDA.......................................  40
9.15   Compliance with ERISA................................  40
9.16   Costs and Expenses...................................  40
9.17   Further Assurances...................................  41

SECTION 10.  EVENTS OF DEFAULT AND REMEDIES.................  42

10.1   Events of Default....................................  42
10.2   Remedies.............................................  44

SECTION 11.  JURY TRIAL WAIVER; OTHER WAIVERS AND 
CONSENTS; GOVERNING LAW........................  45

11.1   Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver....................................  45
11.2   Waiver of Notices....................................  47
11.3   Amendments and Waivers...............................  47
11.4   Waiver of Counterclaims..............................  47
11.5   Indemnification......................................  47

SECTION 12.  TERM OF AGREEMENT; MISCELLANEOUS...............  48

12.1   Term.................................................  48
12.2   Notices..............................................  49
12.3   Partial Invalidity...................................  49
12.4   Successors...........................................  49
12.5   Participant's Security Interest......................  49
12.6   Confidentiality......................................  49
12.7   Joint and Several Liability..........................  50
12.8   Suretyship Waivers and Consents......................  50
12.9   Contribution Agreement...............................  53
12.10  Prejudgment Remedies.................................  53
12.11  Entire Agreement.....................................  53
12.12  Original Loan Agreement..............................  53
12.13  Parent Security Documents............................  54

ii

INDEX TO
EXHIBITS AND SCHEDULES
----------------------

Exhibit A         Information Certificate for each Borrower

Schedule 8.4      Existing Liens
Schedule 8.12     Bank Accounts
Schedule 9.11     Permitted Refinancings, Payments And Dividends

1

AMENDED AND RESTATED
--------------------
LOAN AND SECURITY AGREEMENT
---------------------------

This Amended and Restated Loan and Security Agreement dated April 12, 2001
is entered into by and between Congress Financial Corporation (New England), a
Massachusetts corporation ("Lender") and Clean Harbors, Inc., a Massachusetts
corporation ("Parent"), Clean Harbors Environmental Services, Inc., a
Massachusetts corporation ("CHES"), Clean Harbors Kingston Facility Corporation,
a Massachusetts corporation, Clean Harbors of Braintree, Inc., a Massachusetts
corporation, Clean Harbors Services, Inc., a Massachusetts corporation, Clean
Harbors of Natick, Inc., a Massachusetts corporation, Clean Harbors of
Connecticut, Inc., a Connecticut corporation, Murphy's Waste Oil Service, Inc.,
a Massachusetts corporation, Mr. Frank, Inc., an Illinois corporation, Spring
Grove Resource Recovery, Inc., a Delaware corporation, and Harbor Management
Consultants, Inc., a Massachusetts corporation (each, a "Borrower" and,
collectively, the "Borrowers").

W I T N E S S E T H:
-------------------

WHEREAS, Borrowers (excluding the Parent, which was a guarantor) (together
with Clean Harbors Technology Corporation, a Massachusetts corporation, which
has since been merged into CHES, and Clean Harbors of Cleveland, Inc., a
Massachusetts corporation, which has since been merged into Parent) and Lender
entered into a Loan and Security Agreement dated May 8, 1995 (as amended and
modified, the "Original Loan Agreement"), pursuant to which the Lender extended
certain credit facilities to the Borrowers, and the Borrowers and the Lender
desire that the Original Loan Agreement be amended and restated in its entirety
as set forth in this Agreement, provided that all other Financing Agreements (as
defined in the Original Loan Agreement) shall remain valid and binding except as
otherwise provided hereunder;

WHEREAS, the Borrowers have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers; and

WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.  DEFINITIONS

All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement.  All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural.  All references to
Borrowers and Lender pursuant to the definitions set 

-1-

forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:

1.1.   "Accounts" shall mean all accounts and all present and future rights
of each Borrower to payment for goods sold or leased or for services rendered,
which are not evidenced by instruments or chattel paper, and whether or not
earned by performance.

1.2.   "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing  the Eurodollar Rate for such Interest Period by a percentage equal to:
(i) one (1) minus (ii) the Reserve Percentage.  For purposes hereof, "Reserve
Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans.  The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

1.3.   "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, after deducting from such book
values all appropriate reserves in accordance with GAAP (including all reserves
for doubtful receivables, obsolescence, depreciation and amortization) and (ii)
the aggregate amount of the indebtedness and other liabilities of such Person
and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated by
written agreement in right of payment to the full and final payment of all of
the Obligations on terms and conditions acceptable to Lender.

1.4.   "Availability Reserves" shall mean the sum of (A) as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrowers under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies
or risks which, as determined by Lender in good faith, (i) do affect or have a
reasonable likelihood of affecting either the Collateral or any other property
which is security for the Obligations or its value or the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) (ii) have 

-2-

a reasonable likelihood of resulting in or causing a material adverse change in
the assets, business or prospects of any Borrower or any Obligor or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or any Obligor to Lender
is or may have been incomplete, inaccurate or misleading in any material respect
or (c) in respect of any state of facts which Lender determines in good faith
constitutes a Default or an Event of Default, plus such amounts as Lender may
determine in good faith to be necessary to reserve for rent and other amounts
that may be payable from time to time to the owners of real property leased or
used by Borrowers which owners do not sign agreements satisfactory to Lender in
accordance with Section 4.1(d).

1.5.   "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.

1.6.   "Business Day" shall mean (a) for the Prime Rate Loans, any day other
than a Saturday, Sunday, or other day on which commercial banks are authorized
or required to close under the laws of the Commonwealth of Massachusetts, State
of New York or the Commonwealth of Pennsylvania, and a day on which the
Reference Bank and Lender are open for the transaction of business, and (b) for
all Eurodollar Rate Loans, any such day as described in (a) above in this
definition of Business Day, excluding any day on which banks are closed for
dealings in US dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.

1.7.   "CHES" shall mean Clean Harbors Environmental Services, Inc., a
Massachusetts corporation, and its successors and assigns.

1.8.   "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.

1.9.   "Collateral" shall have the meaning set forth in Section 5 hereof.

1.10.  "Default" shall mean any event or condition the occurrence of which
might, with notice, or the passage of time or both, unless cured or waived as
provided herein, become an Event of Default.

1.10A. "EBITDA" shall mean, as to any Person, for any period, net income
(determined on a consolidated basis without duplication in accordance with GAAP)
for such period calculated before interest, taxes, depreciation, amortization
and any other non-cash income or charges accrued for such period including, to
the extent such items were added or deducted in computing net income (a) any
extraordinary and unusual gains or losses during such period and (b) the
proceeds from any casualty to property or disposition of property other than in
the ordinary course.

1.11.  "Eligible Accounts" shall mean Accounts created by Borrowers which
are and continue to be acceptable to Lender based on the criteria set forth
below.  In general, Accounts of the Borrowers shall be Eligible Accounts if:

-3-

(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by a Borrower or rendition of services by such Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;

(b) such Accounts are not unpaid more than ninety (90) days after the
date of the original invoice for them;

(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;

(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;

(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, Canada or Puerto Rico
or if located in another jurisdiction, at Lender's option, either: (i) the
account debtor has delivered to a Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Lender, sufficient to cover such
Account, in form and substance satisfactory to Lender and, if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);

(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, unless a
Borrower shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to pay such invoice;

(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of such Accounts that is verified to not be subject to such
counterclaim, defense, dispute or right of setoff may be deemed an Eligible
Account);

(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;

(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;

-4-

(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is affiliated with any Borrower
directly or indirectly by virtue of ownership or control;

(k) the account debtors with respect to such Accounts are not any
foreign government;

(l) such Accounts are Federal Government Accounts that satisfy the
other criteria for Eligible Accounts, provided that upon Lender's request, the
Federal Assignment of Claims Act of 1940, as amended shall be complied with in a
manner satisfactory to Lender;

(m) such Accounts are Municipal Government Accounts that satisfy the
other criteria for Eligible Accounts, provided that upon Lender's request, any
state or local law establishing filing or notification requirements for the
recognition of Lender's security interest shall be complied with in a manner
satisfactory to Lender;

(n) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;

(o) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);

(p) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;

(q) such Accounts are owed by account debtors whose total indebtedness
to Borrowers does not exceed the credit limit with respect to such account
debtors as determined by Lender from time to time (but the portion of the
Accounts not in excess of such credit limit may still be deemed Eligible
Accounts); and

(r) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.

General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith.  Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.

1.12   "Environmental Laws" shall mean all applicable federal, state,
district, local and foreign laws, rules, regulations, ordinances, and consent
decrees relating to health, safety, Hazardous Materials, pollution and
environmental matters, as now or at any time hereafter in effect, applicable to
Borrowers' businesses and facilities (whether or not owned),  including laws

-5-

relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes.

1.13   "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.

1.14   "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower or any of their subsidiaries under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.

1.15   "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to:  (a) the lesser of (i) the amount of the
Revolving Loans available to Borrowers as of such time based on the applicable
lending formulas multiplied by the Net Amount of Eligible Accounts, as
determined by Lender, and subject to the sublimits and Availability Reserves
from time to time established by Lender hereunder and (ii) Revolving Credit
Limit, minus (b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations (but not including for this purpose the then outstanding principal
amount of the Term Loans), plus (ii) the aggregate amount of all trade payables
of Borrowers which are more than sixty (60) days past due as of such time.

1.16   "Existing Senior Notes" shall mean the 12.5% Senior Notes due May 15,
2001 issued under the Indenture dated as of August 4, 1994, between the Parent,
certain subsidiaries of the Parent and Shawmut Bank, N.A., as trustee of the
holders of such notes.

1.16A  "Existing Senior Note Redemption Date" means April 30, 2001, the date
on which the Parent has notified the holders of the Existing Senior Notes that
the Existing Senior Notes will be redeemed in accordance with the terms of the
Indenture for a cash payment equal to the Existing Senior Note Redemption Price.

1.16B  "Existing Senior Note Redemption Price" means $52,864,583.00, which
equals the principal and accrued interest on the Existing Senior Notes on the
Existing Senior Note Redemption Date.

1.17   "Eurodollar Rate Loans" shall mean any Loans (excluding the Term Loan
B) or portion thereof on which interest is payable based on the Adjusted
Eurodollar Rate in accordance with the terms hereof.

1.18   "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per 

-6-

annum equal to the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the next one-sixteenth (1/16) of one (1%)
percent) at which Reference Bank is offered deposits of United States dollars in
the London interbank market (or other Eurodollar Rate market selected by
Borrowers and approved by Lender) on or about 9:00 a.m. (New York time) two (2)
Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to Borrowers in accordance with this Agreement, with
a maturity of comparable duration to the Interest Period selected by Borrowers.

1.19   "Equipment" shall mean all of Borrowers' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

1.20   "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.

1.21   "Federal Government Account" shall mean an Account in which the
account debtor with respect to such Account is the United States of America or a
department, agency or instrumentality thereof.

1.22   "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, Mortgages, security agreements and other agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by any Borrower or any Obligor in connection with this Agreement, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.  Financing Agreements also shall mean Loan
Documents.

1.23   "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.13, 9.14, 9.14A, and 9.14B hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.

1.24   "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law 

-7-

(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).

1.25   "Information Certificates" shall mean the Information Certificates of
Borrowers constituting Exhibit A hereto containing material information with
respect to Borrowers, their business and assets provided by or on behalf of
Borrowers to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

1.26   "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrowers may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers may
not elect an Interest Period which will end after the last day of the then-
current term of this Agreement.

1.27   "Interest Rate" shall mean as to Prime Rate Loans, a rate of one and
one-half (1-1/2%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of three (3.0%) percent per annum in excess of the
Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrowers as in effect three (3) Business Days after
the date of receipt by Lender of the request of Borrowers for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to Borrower); provided, that, the Interest
Rate shall mean the rate of four (4.0%) percent per annum in excess of the Prime
Rate as to Prime Rate Loans and the rate of five and one-half (5.5%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at
Lender's option, without notice, (a) for the period on and after the date of
termination  hereof, or the date of the occurrence of any Event of Default or
event which with notice or passage of time or both would constitute an Event of
Default, and for so long as such Event of Default or other event is continuing
as determined by Lender and until such time as all Obligations are indefeasibly
paid in full (notwithstanding entry of any judgment against any Borrower) and
(b) on the Revolving Loans at any time outstanding in excess of the amounts
available to Borrowers under Section 2 (whether or not such excess(es), arise or
are made with or without Lender's knowledge or consent and whether made before
or after an Event of Default).

1.28   "Inventory" shall mean all of Borrowers' now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.

1.29   "Investment Property" shall mean all of Borrowers' now owned or
hereafter existing or acquired securities, financial assets, securities
accounts, securities entitlements and all other investment property of
whatsoever kind or nature, wherever located.

1.29A  "Kimball IRB Documents" means the Lease Agreement dated as of
September 1, 1996 between Clean Harbors Technology Corporation and the City of
Kimball, Nebraska, and the related Guarantee of Lease Obligations and Indenture
pursuant to which $10,000,000 of City 

-8-

of Kimball, Nebraska Economic Development Bonds (Clean Harbors, Inc.) Series
1996 were issued, as amended, and the related agreements, instruments and
documents relating thereto.

1.30   "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of any Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by any Borrower of its obligations to such issuer.

1.31   "Loan Documents" shall mean the Financing Agreements.

1.32   "Loans" shall mean the Revolving Loans, the Term Loan B and the 2000
Term Loan.

1.33   "Maximum Credit" shall mean $51,000,000.00.

1.34   "Mortgages" shall mean, individually and collectively, each of the
mortgages or deeds of trust (as the same now exist or  may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced) by Borrowers in
favor of Lender with respect to the Real Property and related assets of
Borrowers.

1.35   "Municipal Government Account" shall mean an Account in which the
account debtor with respect to such Account is a state or a political
subdivision, department, agency or instrumentality thereof.

1.36   "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.

1.37   "Obligations" shall mean any and all Revolving Loans, the Term Loan
B, the 2000 Term Loan, Letter of Credit Accommodations and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by any Borrower to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any Borrower
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.

1.38   "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations including, without
limitation, Clean Harbors of 

-9-

Baltimore, Inc., a Pennsylvania corporation, or who is the owner of any property
which is security for the Obligations, other than Borrowers.

1.39   "Parent" shall mean Clean Harbors, Inc., a Massachusetts corporation,
and its successors and assigns.

1.40   "Participant" shall mean any person which at any time participates
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.

1.41   "Payment Account" shall have the meaning set forth in Section 6.3
hereof.

1.42   "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.

1.43   "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.

1.44   "Prime Rate Loans" shall mean any Loans (excluding the Term Loan B)
or portion thereof on which interest is payable based on the Prime Rate in
accordance with the terms thereof.

1.45   "Real Property" shall mean all now owned and hereafter acquired real
property of Borrowers, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including
without limitation, the real property and related assets more particularly
described in the Mortgages.

1.46   "Records" shall mean all of Borrowers' present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrowers with respect to the
foregoing maintained with or by any other person).

1.47   "Reference Bank" shall mean First Union National Bank or such other
bank as Lender may from time to time designate.

1.48   "Revolving Credit Limit" shall mean the amount of $30,000,000.00.

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1.49   "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.

1.50   "Senior Subordinated Notes" shall mean the 16% Senior Subordinated
Notes due 2008 issued pursuant to the Securities Purchase Agreement.

1.51   "Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of April 12, 2001 between Parent and the purchasers
thereunder with respect to the Senior Subordinated Notes.

1.51A  "Senior Debt" shall mean the sum of the Loans, Letter of Credit
Accommodations and all other Obligations hereunder, plus senior secured purchase
money obligations, and capital lease obligations of any of the Borrowers.

1.52   "Term Loan B" shall mean the term loan made by Lender to Borrowers as
provided for in Section 2.3 hereof.

1.53   "Term Loans" shall mean the 2000 Term Loan and the Term Loan B.

1.54   "2000 Term Loan" shall mean the term loan previously made by Lender
to Borrowers as provided for in Section 2.3A hereof.

1.55   "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between:  (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), and (b) all current
liabilities of such Person and its subsidiaries (as determined in accordance
with GAAP), provided, that, as to Borrowers, for purposes of Section 9.13, the
liabilities of Borrowers and their subsidiaries to Lender under this Agreement
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP) and, as to Borrowers, for purposes
of Section 9.13, the liabilities of Borrowers on the Senior Subordinated Notes
shall not be considered current liabilities (whether or not classified as
current liabilities in accordance with GAAP).

SECTION 2.  CREDIT FACILITIES

2.1    Revolving Loans.

(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrowers from time to time in amounts
requested by CHES, as agent for Borrowers pursuant to Section 2.5, up to the
amount equal to the sum of:

(i) eighty (80%) percent of the Net Amount of Eligible Accounts
(including all Municipal Government Accounts that are Eligible Accounts), plus

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(ii) sixty-five (65%) percent of the Net Amount of Federal Government
Accounts that are Eligible Accounts, less 

(iii) one hundred (100%) percent of the then undrawn amounts of the
outstanding Letter of Credit Accommodations, less

(iv) any Availability Reserves;

(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to CHES,  (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in good faith
that: (A) the dilution with respect to the Accounts for any period (based on the
ratio of (1) the aggregate amount of reductions in Accounts other than as a
result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined in any material respect.  In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts or in establishing Availability Reserves.

(c) Except in Lender's discretion, the aggregate amount of the
Revolving Loans and the Letter of Credit Accommodations outstanding at any time
shall not exceed the Revolving Credit Limit. In the event that the outstanding
amount of any component of the Revolving Loans, or the aggregate amount of the
outstanding Revolving Loans and Letter of Credit Accommodations, exceed the
amounts available under the lending formulas, the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(c) or the Revolving Credit Limit as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrowers shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.

2.2    Letter of Credit Accommodations.

(a) Subject to, and upon the terms and conditions contained herein, at
the request of CHES, as agent for Borrowers, Lender agrees to provide or arrange
for Letter of Credit Accommodations for the account of any Borrower containing
terms and conditions acceptable to Lender and the issuer thereof.  Letters of
credit issued pursuant to Letter of Credit Accommodations shall be issued by
First Union National Bank or other banks acceptable to Lender and CHES.  Any
payments made by Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations shall constitute additional
Revolving Loans to Borrowers pursuant to this Section 2.

(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Lender a letter of credit fee at a rate equal to three (3%) percent
per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part 

-12-

thereof), payable in arrears as of the first day of each succeeding month;
provided that the letter of credit fee shall mean the rate of five and one half
percent (5.5%) per annum at Lender's option, without notice, for the period on
or after the date of termination hereof, or the date of the occurrence of an
Event of Default, and for so long as such Event of Default is continuing as
determined by Lender and until such time as all Obligations are indefeasibly
paid in full (notwithstanding entry of any judgment against any Borrower). Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrowers to pay
such fee shall survive the termination or non-renewal of this Agreement.

(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrowers (subject to the Revolving Credit Limit
and any Availability Reserves) are equal to or greater than an amount equal to
one hundred (100%) percent of the face amount thereof and all other commitments
and obligations made or incurred by Lender with respect thereto.  Effective on
the issuance of each Letter of Credit Accommodation, the amount of Revolving
Loans which might otherwise be available to Borrowers shall be reduced by the
applicable amount set forth in this Section 2.2(c).

(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed
$20,000,000.00.  At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrowers will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrowers shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.

(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation.  Borrowers assume all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrowers' agent.  Borrowers assume all risks for, and agree to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder.  Borrowers hereby release and hold Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
any Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation.  The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or non-
renewal of this Agreement.

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(f) Nothing contained herein shall be deemed or construed to grant
Borrowers any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrowers shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of any Borrower.  Lender shall have the sole and exclusive right
and authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral.  Lender may take such actions either in its
own name or in any Borrower's name.

(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrowers to any issuer or correspondent in any application for any Letter of
Credit Accommodations, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrowers to Lender.  Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by all Borrowers to
Lender and to apply in all respects to all Borrowers.

2.3    Term Loan B.  Lender hereby  agrees to make the Term Loan B to
Borrowers in the original principal amount of $19,000,000 in two advances of (a)
$4,000,000 at such time as the conditions precedent in Sections 4.1 and 4.2
(other than Section 4.2(c)) are satisfied and (b) $15,000,000 on the Existing
Senior Note Redemption Date; provided, that, at such time Borrowers satisfy the
conditions of Section 4.2 (including the conditions of Section 4.2(c)). The
proceeds of Term Loan B will be used to repay the outstanding principal of the
original Term Loan made on May 8, 1995 (as increased to $15,000,000 on March 20,
1996 and decreased to $6,000,000 on May 24, 1999), with the excess proceeds to
be used to pay  $15,000,000 of the Existing Senior Notes Redemption Price.  The
Term Loan B is (a) evidenced by a Term Promissory Note B (the "Term Note B") in
such original principal amount duly executed and delivered by the Borrowers to
Lender concurrently herewith; (b) to be repaid, together with interest and other
amounts, in accordance with this Agreement, the Term Note B, and other Financing
Agreements; and (c) secured by all of the Collateral.

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2.3A   2000 Term Loan.  On or about March 28, 2000, Lender made a term
loan to Borrowers in the original principal amount of $3,000,000 (the "2000 Term
Loan").  The 2000 Term Loan (a) is evidenced by a 2000 Term Promissory Note
dated March 28, 2000 (the "2000 Term Promissory Note"); (b) is to be repaid,
together with interest and other amounts, in accordance with this Agreement, the
2000 Term Promissory Note, and other Financing Agreements; and (c) is secured by
all of the Collateral.

2.4    Availability Reserves.  All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.

2.5    Appointment of CHES as Agent for Requesting Loans and Receipt of
Statements.

(a) Each Borrower hereby irrevocably appoints and constitutes CHES as
its agent to request Revolving Loans, Letter of Credit Accommodations and the
Term Loans, to select the interest rates applicable to the Loans pursuant to
Section 3 and to otherwise take action pursuant to this Agreement in the name or
on behalf of each of and all of the Borrowers.  Lender may distribute Loans to
such Borrowers' account(s) or otherwise make such Loans to Borrowers as
specified by CHES, or as otherwise determined by Lender,  without notice to any
other Borrower or any Obligor.

(b) Each Borrower hereby irrevocably appoints and constitutes CHES as
its agent to receive statements of account and all other notices and materials
from Lender under this Agreement and the other Financing Agreements or otherwise
in connection with or related to the Obligations.

(c) No purported termination of the appointment of CHES as agent as
aforesaid shall be effective, except after thirty (30) business days prior
written notice to Lender and appointment of a substitute agent acceptable to
Lender in all respects.

SECTION 3.  INTEREST AND FEES

3.1    Interest.

(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations (excluding the Term Loan B)
at the Interest Rate.  Borrowers shall pay to Lender interest on the outstanding
principal amount of the Term Loan B at the interest rate provided in the Term
Note B.  All interest accruing hereunder on and after the date of any Event of
Default or termination or non-renewal hereof shall be payable on demand.

(b) CHES, as agent for Borrowers, may from time to time request that
Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period.  Such request
from CHES shall specify the amount of 

-15-

the Prime Rate Loans which will constitute Eurodollar Rate Loans (subject to the
limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from CHES,
such Prime Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no
Event of Default, or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing, (ii) no
party hereto shall have sent any notice of termination or non-renewal of this
Agreement, (iii) Borrowers shall have complied with such customary procedures as
are established by Lender and specified by Lender to Borrowers from time to time
for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than four (4)
Interest Periods may be in effect at any one time, (v) the aggregate amount of
the Eurodollar Rate Loans must be in an amount not less than $5,000,000.00 or an
integral multiple of $1,000,000.00 in excess thereof, (vi) the maximum amount of
the Eurodollar Rate Loans at any time requested by Borrowers shall not exceed
the amount equal to (A) the principal amount of the 2000 Term Loan which it is
anticipated will be outstanding as of the last day of the applicable Interest
Period plus (B) eighty (80%) percent of the daily average of the principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Revolving Loans) and (vii) Lender shall
have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Lender through the Reference Bank and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers. Any
request by Borrowers to convert Prime Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.

(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof.  Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrowers, convert to Prime Rate Loans in the event that (i) an
Event of Default or event which with the notice or passage of time or both would
constitute an Event of Default, shall exist, (ii) this Agreement shall terminate
or not be renewed, or (iii) the aggregate principal amount of the Prime Rate
Loans which have previously been converted to Eurodollar Rate Loans or existing
Eurodollar Rate Loans continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period exceed either (A)
the aggregate principal amount of the Loans then outstanding, or (B) the sum of
the then outstanding principal amount of the  2000 Term Loan, plus the Revolving
Loans then available to Borrowers under Section 2 hereof.  Borrowers shall pay
to Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account(s) of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.

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(d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed.  The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs.  In no event shall
charges constituting interest payable by Borrowers to Lender exceed the maximum
amount or the rate permitted under any applicable law or regulation, and if any
such part or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.

3.2    Closing Fee.  Borrowers shall pay to Lender as a closing fee the
amount of $390,000, which shall be fully earned as of and payable on the date
hereof.

3.3    Servicing Fee; Administrative Fee; Facility Fee.

(a)  Borrowers shall pay to Lender a servicing fee in an amount equal
to $17,500.00 in respect of Lender's services for each calendar quarter (or part
thereof) while this Agreement remains in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of July, October,
January and April hereafter.

(b)  Borrowers shall pay to Lender an administrative fee of $2,000 per
month in respect of the Term Loan B (the "Administrative Fee") for each month
(or part thereof) while the Term Loan B remains outstanding, which fee shall be
fully earned as of and payable in advance on the date hereof and on the first
day of each calendar month.

(c) Borrowers shall pay to Lender an annual facility fee in respect of
the Term Loan B (the "Facility Fee") on each anniversary of the date hereof that
the Term Loan B remains outstanding, commencing on April 12, 2002 in the amount
equal to 1% of the then outstanding principal balance of the Term Loan, which
fee shall be fully earned as of and payable on each such anniversary.

3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line fee
equal to one half of one (1/2 of 1%) percent per annum calculated upon the
amount by which Revolving Credit Limit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.

3.5 Changes in Laws and Increased Costs of Loans.

(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to CHES, convert to Prime
Rate Loans in the event that 

-17-

(i) any change in applicable law or regulation (or the interpretation or
administration thereof) shall either (A) make it unlawful for Lender, Reference
Bank or any Participant to make or maintain Eurodollar Rate Loans or to comply
with the terms hereof in connection with the Eurodollar Rate Loans, by an amount
deemed by Lender to be material, or (B) shall result in the increase in the
costs to Lender, Reference Bank or any Participant of making or maintaining any
Eurodollar Rate Loans or (C) reduce the amounts received or receivable by Lender
in respect thereof, by an amount deemed by Lender to be material or (ii) the
cost to Lender, Reference Bank or any Participant of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to
be material. Borrowers shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan account of any Borrower) any amounts
required to compensate Lender, the Reference Bank or any Participant with Lender
for any loss (including loss of anticipated profits), cost or expense incurred
by such person as a result of the foregoing, including, without limitation, any
such loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting
forth the basis for the determination of such amount necessary to compensate
Lender as aforesaid shall be delivered to Borrowers and shall be conclusive,
absent manifest error.

(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan accounts of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.

SECTION 4.  CONDITIONS PRECEDENT

4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations . Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:

(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;

(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, 

-18-

without limitation, records of requisite corporate action and proceedings which
Lender may have requested in connection therewith, such documents where
requested by Lender or its counsel to be certified by appropriate corporate
officers or governmental authorities;

(c) no material adverse change shall have occurred in the assets,
business or prospects of any Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of any Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;

(d) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, acknowledgments by lessors,
mortgagees and warehousemen of Lender's security interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by such
persons to the Collateral and agreements permitting Lender access to, and the
right to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral;

(e) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $3,500,000.00 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;

(f) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;

(g) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrowers with respect to the
Financing Agreements and such other matters as Lender may request;

(h) Lender shall have received evidence, satisfactory to Lender, that
Borrowers have obtained and are in material compliance with all material
licenses, permits, certificates, approvals and similar authorizations that
Borrowers are required to obtain under Environmental Laws and that all such
licenses, permits, certificates, approvals and similar authorizations are in
full force and effect and Borrower shall have furnished to Lender a complete
listing of all operating permits and approvals for its waste processing, storage
and transportation facilities with the expiration dates thereof;

(i) Borrowers and the holders of the Senior Subordinated Notes shall
have entered into the Securities Purchase Agreement in the form previously
delivered to Lender;

-19-

(j) Lender and the holders of the Senior Subordinated Notes shall have
entered into a Subordination Agreement in form and substance satisfactory to
Lender;

(k) Lender shall have received (or shall have previously received) the
original certificates of title for all motor vehicles and other rolling stock of
Borrowers that are subject to state certificate of title statutes and duly
executed, undated applications and other documents required to note Lender's
lien thereon;

(l) Lender shall have received a schedule (which may serve as Schedule
8.4 hereto) of all outstanding purchase money indebtedness, including capital
leases, of the Borrowers that is secured by Equipment or Real Property showing
payee, outstanding amount of such indebtedness and the specific collateral
securing such indebtedness; and

(m) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.

4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrowers, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:

(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
(except for changes permitted by the covenants in Section 9 hereof) with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan or providing each such Letter of
Credit Accommodation and after giving effect thereto;

(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing each such Letter of Credit Accommodation and after giving effect
thereto; and

(c) in the case of the funding on the Existing Senior Note Redemption
Date of $15,000,000 of the proceeds of the Term Note B as provided in Section
2.3, (i) the Securities Purchase Agreement shall have closed in accordance with
the terms thereof and (ii) such $15,000,000, together with the proceeds of the
Securities Purchase Agreement and approximately $2,900,000 of Revolving Loans
then to be funded in accordance with Section 2.1, shall be sufficient to pay in
full the Existing Senior Note Redemption Price as evidenced by a letter from the
Trustee of the Existing Senior Notes to Lender confirming that, under the
Indenture, the amount of the Existing Senior Note Redemption Price on the
Existing Senior Note Redemption Date is $52,864,583.00 and, upon deposit with
the Trustee of such amount in immediately available funds by not later than
11:00 A.M. Boston time on the Existing Senior Note Redemption Date, the Existing
Senior Notes will cease to be outstanding and interest on them will cease to
accrue. All of such proceeds shall then be delivered to the trustee for the

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Existing Senior Notes solely for the purpose of paying the Existing Senior Note
Redemption Price.

4.3 Conditions Subsequent. (a) Within sixty (60) days of the date of this
Agreement, Borrowers shall (i) deliver to Lender in form and substance
satisfactory to Lender, valid and effective title insurance policies issued by
companies and agents acceptable to Lender for the Borrowers' Real Property in
Cincinnati, Ohio, Baltimore, Maryland and Bristol, Connecticut (collectively,
the "Parcels") (A) insuring the priority, amount and sufficiency of the
Mortgages of the Lender on such Parcels, (B) insuring against matters that would
be disclosed by surveys and (C) containing any reasonably available
endorsements, assurances or affirmative coverage requested by Lender for
protection of its interests, and (ii) deliver to Lender ALTA surveys and
surveyor certificates with respect to such Parcels.

(b) Within thirty (30) days of the Existing Senior Note Redemption
Date, Borrowers will obtain a letter from the Trustee of the Existing Senior
Notes that the Existing Senior Notes have been paid in full and that the
indenture therefore has been terminated (except as to the provisions thereof
that expressly survive such termination).

(c) Within forty-five (45) days of this Agreement, Borrowers shall
cause to be delivered to Lender, certificates of title with Lender's first
priority lien duly noted thereon by the appropriate state agencies for all
certificates of title for motor vehicles and rolling stock of Borrowers owned by
Borrowers that do not currently have Lender's first priority lien so noted
thereon.

(d) Within thirty (30) days of the date of this Agreement, Borrowers
shall cause to be duly executed and recorded in favor of Lender, Mortgages, in
form and substance satisfactory to Lender, and cause to be delivered to Lender,
mortgagee title commitments, in form and substance satisfactory to Lender, with
respect to the following parcels of Real Property: 21207 County Road 32-2
Sterling, Co; South Portland, ME (adjacent to the Borrowers' other South
Portland, ME Real Property parcels); and 14 Main Street, Portland, ME.  In
addition, within thirty (30) days of the date of this Agreement, Borrowers shall
cause to be duly executed and recorded an amendment to the Lender's existing
Mortgage on the Real Property parcel located at 131 N. Richey St., Pasadena, TX.

SECTION 5.  GRANT OF SECURITY INTEREST

To secure payment and performance of all Obligations, each Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):

5.1    Accounts;

5.2    all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, 

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copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, permits, authorizations, approvals and other similar
rights, choses in action and other claims and existing and future leasehold
interests in equipment, real estate and fixtures), chattel paper, documents,
instruments, letters of credit, letter of credit rights, commercial tort claims,
payment in tangibles, software, supporting obligations, bankers' acceptances and
guaranties;

5.3    all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation,  (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;

5.4    Inventory;

5.5    Equipment;

5.6    Real Property;

5.7    Investment Property;

5.8    Records; and

5.9    all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.

SECTION 6.  COLLECTION AND ADMINISTRATION

6.1    Borrowers' Loan Account.  Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest.  All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.

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6.2    Statements.  Lender shall render to CHES each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses.  Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from Borrowers of any specific exceptions of Borrowers thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to CHES a written statement as
provided above, the balance in Borrowers' loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrowers.

6.3    Collection of Accounts.

(a) Borrowers shall establish and maintain, at their  expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrowers shall promptly deposit and direct their account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of other Collateral in the identical form in which such payments are made,
whether by cash, check or other manner.  The banks at which the Blocked Accounts
are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account").  Borrowers agree that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Accounts or as proceeds of other Collateral or otherwise
shall be the property of Lender.

(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) business day following the date of
receipt of immediately available funds by Lender in the Payment Account.  For
purposes of calculating the amount of the Revolving Loans available to Borrowers
such payments will be applied (conditional upon final collection) to the
Obligations on the business day of receipt by Lender in the Payment Account, if
such payments are received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to credit
Borrowers' loan account on such day, and if not, then on the next business day.

(c) Borrowers and all of their affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts, Equipment, or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked

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Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrowers' own funds.
Borrowers agree to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.

6.4    Payments.  All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time.  Lender may apply payments received or collected from Borrowers or for
the account of Borrowers (including, without limitation, the monetary proceeds
of collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines.  At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrowers.
Borrowers shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind.  If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender.  Borrowers shall be liable to pay to Lender, and do
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned.  This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds.  This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

6.5    Authorization to Make Loans.  Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon written or
telephonic (confirmed promptly in writing) instructions received from an
authorized officer of CHES or other authorized person (as initially set forth in
the Information Certificates) or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations.  All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a business day) and the amount of the requested Loan.  Requests
received after 11:00 a.m. Boston, Massachusetts time on any day shall be deemed
to have been made as of the opening of business on the immediately following
business day.  All Loans and Letter of Credit Accommodations under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrowers when deposited to the credit of
Borrowers or otherwise disbursed or established in accordance with the
instructions of CHES or in accordance with the terms and conditions of this
Agreement.

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6.6    Use of Proceeds.  Borrowers shall use the initial proceeds of
the Loans provided by Lender to Borrowers hereunder only for:  (a) payments to
each of the persons listed in the disbursement direction letter furnished by
Borrowers to Lender on or about the date hereof, (b) payment of a portion of the
Existing Senior Note Redemption Price in accordance with Sections 2.3 and
4.3(c), and (c) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements.  All other Loans made or Letter of Credit Accommodations provided by
Lender to Borrowers pursuant to the provisions hereof shall be used by Borrowers
only for general operating, working capital and other proper corporate purposes
of Borrowers not otherwise prohibited by the terms hereof.  None of the proceeds
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System, as amended.

SECTION 7.  COLLATERAL REPORTING AND COVENANTS

7.1    Collateral Reporting.  Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender:  (a) on a regular basis as
required by Lender, a schedule of Accounts; (b) on a monthly basis or more
frequently as Lender may request, agings of accounts payable, (c) upon Lender's
request, (i) copies of customer statements and credit memos, remittance advices
and reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, and (iii) copies of purchase orders, invoices
and delivery documents for Equipment acquired by Borrower; (d) agings of
accounts receivable on a weekly basis or more frequently as Lender may request;
and (e) such other reports as to the Collateral as Lender shall request from
time to time.  If any of Borrowers' records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrowers hereby irrevocably authorize such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.

7.2    Accounts Covenants.

(a) Borrowers shall notify Lender promptly of: (i) any material delay
in any Borrower's performance of any of its obligations to any account debtor or
the assertion of any material claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information known to
any Borrower relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to any Borrower's knowledge would cause Lender
to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrowers' business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrowers shall
settle, adjust or

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compromise any claim, offset, counterclaim or dispute with any account debtor.
At any time that an Event of Default exists or has occurred and is continuing,
Lender shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors or
grant any credits, discounts or allowances.

(b) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrowers' business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.

(c) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.  Lender will notify CHES of its conducting
telephone verifications after doing so.

(d) Borrowers shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrowers, all
chattel paper and instruments which any Borrower now owns or may at any time
acquire immediately upon such Borrower's receipt thereof, except as Lender may
otherwise agree.

(e) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof nor for the negligence of its agents or attorneys with
respect thereto and (iv) take whatever other action Lender may deem necessary or
desirable for the protection of its interests.  At any time that an Event of
Default exists or has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Lender and are payable directly
and only to Lender and Borrowers shall 

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deliver to Lender such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as Lender
may require.

7.3    Equipment Covenants.  With respect to the Equipment:  (a) upon
Lender's request, Borrowers shall, at their expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Equipment in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender; (b) Borrowers shall keep the Equipment in good order, repair, running
and marketable condition (ordinary wear and tear excepted); (c) Borrowers shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrowers' business and not for
personal, family, household or farming use;  (e) Borrowers shall not remove any
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
the business of Borrowers or to move Equipment directly from one location set
forth or permitted herein to another such location and except for the movement
of motor vehicles used by or for the benefit of Borrowers in the ordinary course
of business; (f) subject to Section 4.3(c) hereof, Borrowers for all motor
vehicles and rolling stock hereafter owned or acquired by any Borrower, upon the
acquisition of such vehicles, Borrowers shall cause to be delivered to Lender
original certificates of title for such motor vehicles and other rolling stock
together with Lender's first priority  lien noted thereon; (g) the Equipment is
now and shall remain personal property and Borrowers shall not permit any of the
Equipment to be or become a part of or affixed to real property; and (h)
Borrowers assume all responsibility and liability arising from the use of the
Equipment.

7.4    Power of Attorney.  Each Borrower hereby irrevocably designates
and appoints Lender (and all persons designated by Lender) as Borrowers' true
and lawful attorney-in-fact, and authorizes Lender, in any Borrowers' or
Lender's name, to: (a) at any time a Default or an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrowers' rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account,  (vii) prepare, file and sign Borrowers' name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrowers' mail to an address designated by Lender, and open and dispose of all
mail addressed to any Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill Borrower's obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment or proceeds thereof, (ii) have
access to any lockbox into which any Borrower's mail is deposited, (iii) endorse
any Borrower's name upon any items of payment or proceeds thereof and deposit
the same in the Lender's account for application to the Obligations, (iv)
endorse any Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign any Borrower's name on any
verification of Accounts and notices thereof to account debtors,  (vi) execute
in any Borrower's name and file any UCC 

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financing statements or amendments thereto or any application or other document
to note Lender's lien on any certificate of title, and (viii) execute in any
Borrower's name and file any application or document necessary to obtain,
extend, modify or amend any order, license, permit, certificate, approval, or
similar authorization necessary or appropriate for the conduct of any Borrower's
business. Each Borrower hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Lender's own gross negligence or willful misconduct as determined
pursuant to a final non- appealable order of a court of competent jurisdiction.

7.5    Right to Cure.  Lender may, at its option, (a) cure any default by
any Borrower under any agreement with a third party if such default might have a
material adverse effect on the business, operations or prospects of any Borrower
or pay or bond on appeal any judgment entered against any Borrower, if the
execution of such judgment is not effectively stayed, on appeal or otherwise,
(b) discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (c) pay any amount,
incur any expense or perform any act which, in Lender's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto.  Lender may add any amounts so expended
to the Obligations and charge Borrowers' account(s) therefor, such amounts to be
repayable by Borrower(s) on demand.  Lender shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of any Borrower.  Any payment made or
other action taken by Lender under this Section shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed accordingly.

7.6    Access to Premises.  From time to time as requested by Lender, at
the cost and expense of Borrowers, (a) Lender or its designee shall have
complete access to all of Borrowers' premises during normal business hours and
after notice to CHES, or at any time and without notice to any Borrower if an
Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrowers' books
and records, including, without limitation, the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrowers' personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.

7.7    Surveys of Real Property.  Lender reserves the right at any time in
its discretion,  with respect to all Real Property (other than the Parcels
identified in Section 4.3 for which ALTA surveys will be provided in accordance
with such Section), (i) upon and following a Default or an Event of Default, or
(ii) any time that the Excess Availability is less than $2,500,000.00, to
require that Borrowers cause ALTA surveys to be conducted with respect to such
Real Property and that Borrowers obtain title insurance endorsements without any
survey exceptions; provided, however, that Lender may at any time require an
instrument survey and such title insurance endorsements with respect to any
parcel of Real Property if any third party claim is made or threatened.

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SECTION 8.  REPRESENTATIONS AND WARRANTIES

Each Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrowers:

8.1    Corporate Existence, Power and Authority; Subsidiaries.  Each
Borrower is a corporation duly organized and in good standing under the laws of
its state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on any Borrower's financial
condition, results of operation or business or the rights of Lender in or to any
of the Collateral.  The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of any Borrower's
certificate of incorporation, by-laws, or other organizational documentation, or
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its property are bound.  This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of each
Borrower enforceable in accordance with their respective terms.  Borrowers do
not have any subsidiaries except as set forth on the Information Certificates.

8.2    Financial Statements; No Material Adverse Change.  All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein.  Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrowers,
since the date of the most recent audited financial statements furnished by
Borrowers to Lender prior to the date of this Agreement.

8.3    Chief Executive Office; Collateral Locations.  The chief executive
office of each Borrower and Borrowers' Records concerning Accounts are located
only at the addresses set forth below and their only other places of business
and the only other locations of Collateral, if any, are the addresses set forth
in the Information Certificates, subject to the right of Borrowers to establish
new locations in accordance with Section 9.2 below.  The Information
Certificates correctly identify any of such locations which are not owned by any
Borrowers and sets forth the owners and/or operators thereof.

8.4    Priority of Liens; Title to Properties.  The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof.  

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Borrowers have good and marketable title to all of their properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.

8.5    Tax Returns.  Borrowers have filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by them (without requests for extension except as previously disclosed in
writing to Lender).  All information in such tax returns, reports and
declarations is complete and accurate in all material respects.  Borrowers have
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on their books.  Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

8.6    Litigation.  Except as set forth on the Information Certificates,
there is no present investigation by any governmental agency pending, or to the
best of Borrowers' knowledge threatened, against or affecting any Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrowers' knowledge threatened, against any
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against any
Borrower would result in any material adverse change in the assets, business or
prospects of such Borrower or would impair the ability of such Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce any Obligations or realize upon
any Collateral.

8.7    Compliance with Other Agreements and Applicable Laws.  Borrowers
are not in default in any material respect under, or in violation in any
material respect of any of the terms of, any agreement, contract, instrument,
lease or other commitment to which any of them is a party or by which any of
them or any of their assets are bound and Borrowers are in compliance in all
material respects with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any foreign, Federal, State or local
governmental authority.

8.8    Environmental Compliance. Except as shown or reflected in the
financial statements of Borrowers previously furnished to Lender and to be
furnished to Lender under Section 9.6 hereof, unless such matters would not have
a material adverse effect upon the business, assets or prospects of the
Borrowers on a consolidated basis:

(a)  No Borrower has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any order, license, permit,
certificate, approval or similar authorization thereunder and the operations of
Borrowers comply in all material respects with all Environmental

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Laws and all orders, licenses, permits, certificates, approvals and similar
authorizations thereunder.

(b) There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any other
person, nor is any pending, with respect to any non-compliance with or violation
of the requirements of any Environmental Law by any Borrower or the release,
spill or discharge, threatened or actual, of any Hazardous Material or any
properties at or from which any Borrower has transported, stored or disposed of
any Hazardous Materials, and all handling, production or disposal of any
Hazardous Materials by Borrowers has been conducted in compliance with all
applicable Environmental Laws, all laws and regulations relating to health and
safety matters and all orders, licenses, permits, certificates, approvals and
similar authorizations relating thereto.

(c) Borrowers have no material liability (contingent or otherwise) in
connection with (i) a release, spill or discharge, threatened or actual, of any
Hazardous Materials, (ii) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or (iii) any service or remediation performed by any Borrower at any
location.

(d) Borrowers have obtained and are in material compliance with all
licenses, permits, certificates, approvals or similar authorizations required in
connection with the operations of Borrowers under any Environmental Law and, to
the best of Borrowers' knowledge, all of such licenses, permits, certificates,
approvals or similar authorizations are valid and in full force and effect.

8.9    Employee Benefits. (a) Borrowers have not engaged in any
transaction in connection with which any Borrower or any of its ERISA Affiliates
could be subject to either a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Code, including any accumulated
funding deficiency described in Section 8.9(c) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.9(d) hereof.

(b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by Borrowers to be incurred with respect to any employee pension
benefit plan of any Borrower or any of its ERISA Affiliates.  There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit plan of any
Borrower or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.

(c) Full payment has been made of all amounts which any Borrower or
any of its ERISA Affiliates is required under Section 302 of ERISA and Section
412 of the Code to have paid under the terms of each employee pension benefit
plan as contributions to such plan as of the last day of the most recent fiscal
year of such plan ended prior to the date hereof, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any employee pension benefit plan,

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including any penalty or tax described in Section 8.9(a) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.9(d)
hereof.

(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrowers that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof.  The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.

(e) No Borrower nor any ERISA Affiliates thereof is or has ever been
obligated to contribute to any "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.

8.10   Interrelated Businesses.  (a) Parent owns beneficially and of
record all the outstanding capital stock of each other Borrower, subject to no
liens or encumbrances of any kind; (b) the financial condition and business
prospects of each Borrower are of direct economic benefit to the other
Borrowers; and (c) each Borrower's access to the financing arrangements through
Lender significantly enhances its own financial condition and business prospects
and, consequently, directly benefits all other Borrowers.

8.11   Accuracy and Completeness of Information.  All information
furnished by or on behalf of Borrowers in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificates is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a material adverse affect on the business, assets or prospects
of Borrowers, which has not been fully and accurately disclosed to Lender in
writing.

8.12   Bank Accounts.  All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.12 hereto, subject to
the right of Borrowers to establish new accounts in accordance with Section 9.17
hereof.

8.13   Survival of Warranties; Cumulative.  All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender.  The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.

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SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS

9.1    Maintenance of Existence.  Each Borrower shall at all times
preserve, renew and keep in full force and effect its corporate existence and
rights and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted.  Each Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and such Borrower shall deliver to Lender a copy of the
amendment to the Certificate of Incorporation, Articles of Organization or other
charter document of such Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation of Borrower as soon as
it is available.

9.2    New Collateral Locations.  Borrowers may open any new location
within the continental United States provided (a) Borrowers give Lender written
notice (i) thirty (30) days prior to the intended opening of any such new
location where the value of the Collateral located or to be located at such
location does or will equal or exceed $100,000 and (ii) within ten (10) days of
the opening of any new location where the value of the Collateral located or to
be located at such location is less than $100,000 and (b) execute and deliver,
or cause to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral at such location, including, without limitation, UCC
financing statements.

9.3    Compliance with Laws, Regulations, Etc.  Each Borrower shall, at
all times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
requirements of any Federal, State or local governmental authority, including,
without limitation, the Employee Retirement Security Act of 1974, as amended,
the Occupational Safety and Hazard Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including, without limitation, all of the Environmental Laws, if
failure to so comply could result in the imposition of substantial fines or
penalties or otherwise materially and adversely affect the business, assets or
prospects of the Borrowers on a consolidated basis.

(a) Each Borrower shall establish and maintain, at its expense, a
system and policies to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system and policies shall
include periodic reviews of such compliance by employees or agents of Borrowers
who are familiar with the requirements of the Environmental Laws.  Copies of all
such periodic reviews shall be made available by Borrowers for inspection by
Lender and, upon Lender's request, copies of all environmental reviews, surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Borrowers shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.

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(b) Borrowers shall give both oral and written notice to Lender
promptly upon any Borrower's receipt of any notice of, or any Borrower's
otherwise obtaining knowledge of, any of the following which could result in the
imposition of substantial fines or penalties or otherwise materially and
adversely affect the business, assets or prospects of the Borrowers on a
consolidated basis: (i) the occurrence of any event involving the release, spill
or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by any Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material in a manner that is not in compliance with
Environmental Laws or any order, license, permit, certificate, approval or
similar authorization relating thereto, (D) any other environmental, health or
safety matter, which may materially and adversely affect any Borrower or its
business, operations or assets, or (E) any properties at which any Borrower
transported, stored or disposed of any Hazardous Materials.

(c) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law which could result in the
imposition of substantial fines or penalties or otherwise materially and
adversely affect the business, assets or prospects of the Borrowers on a
consolidated basis, Borrowers shall, at Lender's request and Borrowers' expense:
(i) cause an independent environmental engineer acceptable to Lender to conduct
such assessments, investigations or tests of the site where any Borrower's non-
compliance or alleged non-compliance with such Environmental Laws has occurred
as to such non-compliance and prepare and deliver to Lender a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.

(d) Borrowers shall maintain in full force and effect all orders,
licenses, permits, certificates, approvals and similar authorizations necessary
or appropriate for the conduct of their business, unless the failure to have or
maintain the same will not have a material adverse effect on the business assets
or prospects of Borrowers on a consolidated basis, and shall promptly give
notice to Lender of any rescission, termination, lapse, breach (including all
citations, fines or notices of non-compliance), modification or amendment
thereof which might have a material adverse effect on the business, assets or
prospects of Borrowers on a consolidated basis.

(e) Each Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or 

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presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of any Borrower and the preparation and implementation of any
closure, remedial or other required plans or any actions of Lender relating
thereto.

(f) Borrowers acknowledge and agree that neither the Financing
Agreements or the actions of Lender pursuant thereto shall operate or be deemed
(i) to place upon Lender any responsibility for the operation, control, care,
service, management, maintenance or repair of property or facilities of
Borrowers or (ii) to make Lender the "owner" or "operator" of any property or
facilities of Borrowers or a "responsible party" within the meaning of
applicable Environmental Laws.  For purposes of this Section 9.3, "substantial
fines or penalties" will be determined based upon fines or penalties that have
been assessed by governmental agencies or courts in other instances of
noncompliance or violation of Environmental Laws by similarly situated entities.
All representations, warranties, covenants and indemnifications in Sections 8.8
and 9.3 shall survive the payment of the Obligations and the termination or non-
renewal of this Agreement.

9.4    Payment of Taxes and Claims.  Each Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrowers and with respect to which adequate reserves have been
set aside on its books.  Borrowers shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrowers to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender.  The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.

9.5    Insurance.  Borrowers shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated.  Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer.  Borrowers shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrowers fail to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrowers.  All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance.
Borrowers shall cause Lender to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and Borrowers shall obtain non-contributory lender's loss payable
endorsements to all insurance policies in form and substance satisfactory to
Lender.  Such lender's loss payable endorsements shall specify that the proceeds

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of such insurance shall be payable to Lender as its interests may appear and
further specify that Lender shall be paid regardless of any act or omission by
Borrowers or any of their affiliates.  At its option, Lender may apply any
insurance proceeds received by Lender at any time to the cost of repairs or
replacement of Collateral and/or to payment of the Obligations, whether or not
then due, in any order and in such manner as Lender may determine or hold such
proceeds as cash collateral for the Obligations.

9.6    Financial Statements and Other Information.

(a) Borrowers shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrowers and their and its subsidiaries
(if any) in accordance with GAAP and Borrowers shall furnish or cause to be
furnished to Lender:  (i) within thirty (30) days after the end of each fiscal
month (or forty-five (45) days, if such month is the last month of a fiscal
quarter), monthly unaudited consolidated financial statements of the Parent,
Borrowers and their subsidiaries (including in each case balance sheets,
statements of income and loss and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Parent, Borrowers and their respective subsidiaries as of the
end of and through such fiscal month and (ii) within ninety (90) days after the
end of each fiscal year, audited consolidated financial statements (120 days in
the case of the financial statements for the fiscal year ended December 31,
2000) of Parent, Borrower and their subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Parent, Borrowers and their respective subsidiaries as of the end
of and for such fiscal year, together with the opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Parent and Borrowers and reasonably acceptable to Lender, that such
financial statements have been prepared in accordance with GAAP, and present
fairly the results of operations and financial condition of Parent, Borrowers
and their respective subsidiaries as of the end of and for the fiscal year then
ended.

(b) Borrowers shall promptly notify Lender in writing of the details
of (i) any material loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in any
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.

(c) Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Parent
sends to its stockholders generally and copies of all reports and registration
statements which Parent or any Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.

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(d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request.  Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to any
court or other government agency or to any participant or assignee or
prospective participant or assignee.  Borrowers hereby irrevocably authorize and
direct all accountants or auditors to deliver to Lender, at Borrowers' expense,
copies of the financial statements of Borrowers and any reports or management
letters prepared by such accountants or auditors on behalf of Borrowers and to
disclose to Lender such information as they may have regarding the business of
Borrowers.  Any documents, schedules, invoices or other papers delivered to
Lender may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by Borrowers to
Lender in writing.

9.7    Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrowers
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with any Borrower (except for merger or consolidations among Borrowers and
mergers of subsidiaries of Borrowers into Borrowers), or (b) sell, assign,
lease, transfer, abandon or otherwise dispose of any stock or indebtedness to
any other Person or any of their assets to any other Person (except for (i) the
Real Property now owned by Clean Harbors of Natick, Inc. at 10 Mercer Road,
Natick, Massachusetts or (ii) the disposition of Equipment or Equipment no
longer used or useful in the business of Borrowers so long as any proceeds are
paid to Lender and such sales do not involve Equipment having an aggregate fair
market value in excess of $500,000.00 for all such Equipment disposed of in any
fiscal year of Borrowers), or (c) form or acquire any subsidiaries, or (d) wind
up, liquidate or dissolve (unless the Borrower being wound up, liquidated or
dissolved is neither Parent nor CHES and the business of the Borrower being
wound up, liquidated or dissolved is continued by another Borrower), or (e)
agree to do any of the foregoing.

9.8    Encumbrances.  Borrowers shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrowers and with
respect to which adequate reserves have been set aside on its books; (c) non-
consensual statutory liens (other than liens securing the payment of taxes or
clean-up, containment, removal, remediation or restoration of property of
Borrowers or their subsidiaries under any applicable Environmental Laws) arising
in the ordinary course of Borrowers' business to the extent: (i) such liens
secure indebtedness which is not overdue or (ii) such liens secure indebtedness
relating to claims or liabilities which (subject to normal deductibles) are
fully insured and being defended at the sole cost and expense and at the sole
risk of the insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to Borrowers, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on their books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of any Real Property which do not interfere in any material respect with
the use of such Real Property 

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or ordinary conduct of the business of Borrower as presently conducted thereon
or materially impair the value of the real property which may be subject
thereto; (e) pledges or deposits under workers' compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of indebtedness) or leases
to which a Borrower is a party, or deposits to secure public or statutory
obligations of a Borrower or deposits or cash or United States government bonds
to secure surety or appeal bonds to which a Borrower is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case incurred in the ordinary course of business; (f) purchase money
security interests in Equipment (including capital leases) and purchase money
mortgages on real estate not to exceed $5,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrower other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; (g) debt service reserve funds in
an aggregate amount not to exceed $1,275,000 at any one time which may be
required under the Kimball IRB Documents to be deposited from time to time with
the Trustee thereunder; and (h) the security interests and liens set forth on
Schedule 8.4 hereto. This covenant is not intended to restrict Borrowers from
entering into operating leases, as determined in accordance with GAAP.

9.9    Indebtedness.  Borrowers shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any indebtedness,
except (a) the Obligations; (b) trade obligations and normal accruals in the
ordinary course of business not yet due and payable, or with respect to which
the Borrowers are contesting in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and available to Borrowers, and with
respect to which adequate reserves have been set aside on their books; (c)
obligations and indebtedness under the Kimball IRB Documents and lease
obligations or purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement; provided, that, (i) Borrowers may only
make regularly scheduled payments of principal and interest (and, in the case of
the Kimball IRB Documents, debt service reserve fund payments) in respect of
such indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose (except as otherwise permitted in
this Agreement), and (iii) Borrowers shall furnish to Lender all notices or
demands in connection with such indebtedness either received by any Borrower or
on its behalf, promptly after the receipt thereof, or sent by any Borrower or on
its behalf, concurrently with the sending thereof, as the case may be; (d)
guaranty, suretyship or indemnification obligations in connection with the
Borrowers' performance of services in the ordinary course of business; (e)
indebtedness under the Existing Senior Notes (provided that such indebtedness
shall remain outstanding only until the Existing Senior Notes are redeemed in
accordance with Sections 2.3 and 4.3(c)); (f) the Senior Subordinated Notes and
guaranties provided in connection with the Senior Subordinated Notes; provided,
that, (i) Borrowers shall not make payments on the Senior Subordinated Notes
except as permitted under the terms and conditions of the Subordination
Agreement between the Lender and the holders of the Senior

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Subordinated Notes, (ii) Borrowers shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof except as
provided in the Subordination Agreement, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose (except as permitted by the
Subordination Agreement), and (iii) Borrowers shall furnish to Lender all
notices or demands in connection with such indebtedness either received by any
Borrower or on its behalf, promptly after the receipt thereof, or sent by any
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be; and (g) refinancings of the Senior Subordinated Notes as provided in
Schedule 9.11 hereto.

9.10   Loans, Investments, Guarantees, Etc. Borrowers shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated A1 or P1; provided, that,
as to any of the foregoing, unless waived in writing by Lender, Borrowers shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments; (c) the guarantees set forth in the
Information Certificates; (d) guarantees and loans among Borrowers entered into
in the ordinary course of Borrowers' business; and (e) loans and advances to
employees in the ordinary course of business in an aggregate amount not to
exceed $200,000 at any time outstanding.

9.11   Dividends and Redemptions.  Borrowers shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except as set forth on Schedule 9.11
hereto.

9.12   Transactions with Affiliates.  Borrowers shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrowers' business and upon fair and
reasonable terms no less favorable to Borrowers than Borrowers would obtain in a
comparable arm's length transaction with an unaffiliated person.

9.13   Working Capital. Parent shall, at all times, maintain Working
Capital of not less than $10,000,000.00.

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9.14   Adjusted Net Worth.  Parent shall, at all times, maintain an
Adjusted Net Worth of not less than (i) until such time as the Senior
Subordinated Notes are issued and are outstanding, $35,000,000.00 and (ii) upon
the issuance of the Senior Subordinated Notes and thereafter, $60,000,000.00.

9.14A  Senior Debt to EBITDA.  During the period that the Term Loan B (or
any portion thereof) is outstanding, Parent shall maintain, on a consolidated
basis, as of the last day of each fiscal quarter, a ratio of: (i) Senior Debt as
of such date; to (ii) EBITDA, for the period of twelve consecutive months ending
on such date, of not more than 2.25 to 1.00.

9.14B  Minimum EBITDA. During the period that the Term Loan B (or
any portion thereof) is outstanding, Parent shall maintain, on a consolidated
basis, as of the last day of each fiscal quarter, EBITDA, for the period of
twelve consecutive months ending on such date, of not less than $20,000,000:

9.15   Compliance with ERISA.  Borrowers shall not with respect to any
"employee pension benefit plans" maintained by any Borrower or any of its ERISA
Affiliates.

(i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject any Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist
any accumulated funding deficiency, whether or not waived, with respect to any
such employee pension benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation or
(vi) incur any withdrawal liability with respect to any multiemployer pension
plan.

As used in this Section 9.15, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.

9.16   Costs and Expenses.  Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable by Lender and
Participants in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation, enforcement and
defense of the Obligations, Lender's rights in the Collateral, this Agreement,
the other Financing Agreements and all other documents related hereto or
thereto, including any amendments, supplements or consents which may hereafter
be contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs 

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and expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) all title insurance and
other insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c) costs
and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) customary
issuance, transfer and other charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Lender, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Lender or any Participant arising out of the transactions
contemplated hereby and thereby (including, without limitation, preparations for
and consultations concerning any such matters); (g) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Lender and any
Participant during the course of periodic field examinations of the Collateral
and Borrower's operations, plus a per diem charge at the rate of $600 per person
per day for Lender's examiners in the field and office; and (h) the fees and
disbursements of counsel (including legal assistants) to Lender and any
Participant in connection with any of the foregoing.

9.17   Additional Bank Accounts.  Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.12 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.

9.18   Further Assurances.  At the request of Lender at any time and
from time to time, Borrowers shall, at their expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements.  Lender may at any time and from time to time request a certificate
from an officer of CHES or any other Borrower representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied.  In the event of such request by Lender, Lender
may, at its option, cease to make any further Loans or provide any further
Letter of Credit Accommodations until Lender has received such certificate and,
in addition, Lender has determined that such conditions are satisfied.  Where
permitted by law, Borrowers hereby authorize Lender to execute and file one or
more UCC financing statements signed only by Lender.

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SECTION 10.  EVENTS OF DEFAULT AND REMEDIES

10.1   Events of Default.  The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":

(a) (i)  Any Borrower fails to pay any of the Obligations (other than
third party fees and expenses as set forth in Section 10.1(a)(ii)) when the same
becomes due and payable, or (ii) any Borrower fails to pay any third party fees
or expenses of Lender within five (5) Business Days of the due date, or (iii)
any Borrower or any Obligor fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than as described in Section 10.1(a)(i) or (ii) and
such failure shall continue unremedied for fourteen (14) days; provided, that,
such fourteen (14) day period shall not apply in the case of: (A) any failure to
observe any such term, covenant, condition or provision which is not capable of
being cured at all or within such fourteen (14) day period or which has been the
subject of a prior failure within a six (6) month period or (B) an intentional
breach by any Borrower or any Obligor of any such term, covenant, condition or
provision, or (C) the failure to observe or perform any of the covenants or
provisions contained in Sections 4.3, 6, 7, 9.1, 9.5, 9.7, 9.8, 9.9, 9.11, 9.13,
9.14, 9.14A or 9.14B of this Agreement or any covenants or agreements covering
substantially the same matters as such specified sections in any of the other
Financing Agreements; or

(b) any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;

(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;

(d) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $100,000.00 in any one case or in excess of
$250,000.00 in the aggregate (after deducting any undisputed insurance coverage)
and shall remain undischarged (or provision made for such discharge),  unvacated
and unbonded for a period in excess of sixty (60) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
Borrower or any Obligor or any of their assets which has a material adverse
effect on the business, assets or prospects of Borrowers on a consolidated
basis;

(e) any Borrower or any Obligor, which is a partnership or
corporation, dissolves or suspends or discontinues doing business (except as
permitted by Section 9.7);

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(f) any Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;

(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;

(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or

(i) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000.00, which default continues unwaived for more
than the applicable cure period, if any, with respect thereto, or any default by
any Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues unwaived for
more than the applicable cure period, if any, with respect thereto;

(j) any change in the ownership of any Borrower or in the controlling
ownership of Parent;

(k) the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any Obligor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of any Borrower or such Obligor;

(l) there shall be a default under the Securities Purchase Agreement
or under any of the agreements, instruments or documents relating thereto;

(m) there shall be a material adverse change in the business, assets
or prospects of any Borrower or any Obligor after the date hereof;

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(n) there shall be an event of default under any of the other
Financing Agreements; or

(o) there shall be a default under the Kimball IRB Documents.

10.2   Remedies.

(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law.  All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower of this
Agreement or any of the other Financing Agreements.  Lender may, at any time or
times, proceed directly against any Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.

(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrowers, which right or equity of redemption
is hereby expressly waived and released by Borrowers and/or (vii) terminate this
Agreement.  If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a result
thereof until payment therefor is finally collected by Lender.  If notice of
disposition of Collateral is required by law, five (5) days prior notice by
Lender to Borrowers designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and

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Borrower waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Borrower waives the posting of any bond which might otherwise be
required.

(c) Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due and regardless of the adequacy of
any Collateral.  Borrowers shall remain liable to Lender for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including attorneys' fees and legal
expenses.

(d) Without limiting the foregoing, upon the occurrence of a Default
or an Event of Default, Lender may, at its option, without notice, (i) cease
making Loans or arranging for Letter of Credit Accommodations or reduce the
lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrowers and/or (ii)  terminate any provision of
this Agreement providing for any future Loans or Letter of Credit Accommodations
to be made by Lender to Borrowers.

(e) Whether or not any Borrower is or all Borrowers are then
insolvent, and whether or not any deficiency balance is anticipated, any rights
of the Lender hereunder may be exercised by a court appointed receiver.  In
connection therewith, such a receiver shall be appointed upon a petition,
motion, or application filed by the Lender with any court of competent
jurisdiction and, effective after the occurrence and during the continuation of
an Event of Default.  Each Borrower hereby irrevocably consents to and approves,
without prior notice or hearing, the immediate appointment of a receiver (in
connection with a foreclosure action or otherwise) and waives any right to
object thereto without regard to the value of the Collateral or the adequacy of
any Collateral.

(f) As the subject matter of this Agreement involves general
intangibles such as permits, licenses, certificates, approvals, and
authorizations by governmental authorities which by their nature are unique, the
Borrowers agree and acknowledge that their failure to observe the provisions
hereof will cause irreparable harm to the Lender for which there is no adequate
remedy at law and so the provisions hereof shall be specifically enforceable by
Lender in a court of equity by injunctive relief without any requirement for
Lender to provide a bond or other security or prove or allege that its remedies
at law are inadequate.

SECTION 11.  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

11.1   Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the Commonwealth of Massachusetts
(without giving effect to principles of conflicts of law).

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(b) each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Courts of the Commonwealth of Massachusetts
and the United States District Court for the District of Massachusetts and waive
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Lender shall have the
right to bring any action or proceeding against any Borrower or its property in
the courts of any other jurisdiction which Lender deems necessary or appropriate
in order to realize on the Collateral or to otherwise enforce its rights against
Borrower or its property).

(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option, by service upon Borrowers in any other manner provided under
the rules of any such courts.  Within thirty (30) days after such service,
Borrowers shall appear in answer to such process, failing which Borrowers shall
be deemed in default and judgment may be entered by Lender against Borrowers for
the amount of the claim and other relief requested.

(d) EACH BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION  ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR  IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH BORROWER AND LENDER HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

(e) (i)  Lender shall not have any liability to Borrowers (whether in
tort, contract, equity or otherwise) for losses suffered by any Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, 

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Lender shall be entitled to the benefit of the rebuttable presumption that it
acted in good faith and with the exercise of ordinary care in the performance by
it of the terms of this Agreement.

(ii) The exercise by Lender of any one or more of the rights and
remedies set forth herein shall not operate or be deemed (A) to place upon
Lender any responsibility for the operation, control, care, service, management,
maintenance or repair of any property or facilities of Borrowers, or (B) make
Lender the "owner" or "operator" of any property or facilities of Borrowers or a
"responsible party" within the meaning of applicable Environmental Laws.

11.2   Waiver of Notices.  Each Borrower hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein.  No notice to or demand on any Borrower which Lender may
elect to give shall entitle any Borrower to any other or further notice or
demand in the same, similar or other circumstances.

11.3   Amendments and Waivers.  Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender.  Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender.  Any such waiver shall be enforceable only to the extent specifically
set forth therein.  A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.

11.4   Waiver of Counterclaims.  Each Borrower waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other
then compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.

11.5   Indemnification.  Each Borrower shall indemnify and hold
Lender, and its directors, agents, employees and counsel, harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel.  To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers shall pay the maximum portion which
it is 

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permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

SECTION 12.  TERM OF AGREEMENT; MISCELLANEOUS

12.1   Term.

(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Termination Date"), unless, at the Borrowers' request, the
Lender and each Participant elect in their sole and absolute discretion to
extend the Termination Date.   Unless extended with the consent of the Lender
and Participants,  this Agreement and the other Financing Agreements shall
terminate effective on the Termination Date.  Upon the effective date of
termination of the Financing Agreements, Borrower shall pay to Lender, in full,
all outstanding and unpaid Obligations and shall furnish cash collateral or a
letter of credit, from a bank and in form acceptable to Lender, to Lender in
such amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment.  Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in its
discretion, designate in writing to Borrower for such purpose.  Interest shall
be due until and including the next business day, if the amounts so paid by
Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, Boston, Massachusetts time.

(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.

(c) If for any reason this Agreement is terminated prior to the end of
the term of this Agreement, in view of the impracticality and extreme difficulty
of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrowers
agree to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount of:  1 1/4% of the Revolving Credit Limit plus the
outstanding amount of the 2000 Term Loan.  Such early termination fee shall be
presumed to be the amount of damages sustained by Lender as a result of such
early termination and Borrowers agree that it is reasonable under the
circumstances currently existing.  The Term Loan B may be prepaid in part or in
whole as provided in the Term Note B without premium or termination fee.  The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations.

-48-

12.2   Notices.  All notices, requests and demands hereunder shall be in 
writing and (a) made to Lender at its address set forth below and to Borrowers
at the addresses set forth below, or to such other address as either party may
designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon
delivery; if by facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.

12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

12.4   Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.

12.5   Participant's Security Interest.  If a Participant shall at any
time participate with Lender in the Loans, Letter of Credit Accommodations or
other Obligations, Borrowers hereby grant to such Participant and such
Participant shall have and is hereby given, a continuing lien on and security
interest in any money, securities and other property of Borrowers in the custody
or possession of the Participant, including the right of setoff, to the extent
of the Participant's participation in the Obligations and regardless of the
adequacy of any Collateral, and such Participant shall be deemed to have the
same right of setoff to the extent of its participation in the Obligations, as
it would have if it were a direct lender.

12.6   Confidentiality.

(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrower pursuant to this Agreement which is clearly and conspicuously marked
as confidential at the time such information is furnished by Borrowers to
Lender, provided, that, nothing contained herein shall limit the

-49-

disclosure of any such information: (i) to the extent required by statute, rule,
regulation, subpoena or court order, (ii) to bank examiners and other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Lender is a party, (iv) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) shall have first agreed in writing to treat such
information as confidential in accordance with this Section 12.6, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).

(b) In no event shall this Section 12.6 or any other provision of this
Agreement or applicable law be deemed:  (i) to apply to or restrict disclosure
of information that has been or is made public by Borrowers or any third party
without breach of this Section 12.6 or otherwise become generally available to
the public other than as a result of a disclosure in violation hereof, (ii) to
apply to or restrict disclosure of information that was or becomes available to
Lender on a non-confidential basis from a person other than Borrowers, (iii)
require Lender to return any materials furnished by Borrowers to Lender or (iv)
prevent Lender from responding to routine informational requests in accordance
with the Code of Ethics for the Exchange of Credit Information promulgated by
The Robert Morris Associates or other applicable industry standards relating to
the exchange of credit information.  The obligations of Lender under this
Section 12.6 shall supersede and replace the obligations of Lender under any
confidentiality letter signed prior to the date hereof.

12.7   Joint and Several Liability.  All Loans made hereunder are made to
or for the benefit of each of the Borrowers.  The Borrowers are jointly and
severally, directly and primarily liable for the full and indefeasible payment
when due and performance of all Obligations and for the prompt and full payment
and performance of all of the promises, covenants, representations, and
warranties made or undertaken by each Borrower under the Financing Agreements
and Borrowers agree that such liability is independent of the duties,
obligations, and liabilities of each of the joint and several Borrowers.  In
furtherance of the foregoing, each Borrower jointly and severally, absolutely
and unconditionally guaranties to Lender and agrees to be liable for the full
and indefeasible payment and performance when due of all the Obligations.

12.8   Suretyship Waivers and Consents.

(a) Each Borrower acknowledges that the obligations of such Borrower
undertaken herein might be construed to consist, at least in part, of the
guaranty of obligations of persons other than such Borrower (including the other
Borrowers) and, in full recognition of that fact, each Borrower consents and
agrees that Lender may, at any time and from time to time, without notice or
demand (except as provided in and in accordance with the terms of this
Agreement), whether before or after any actual or purported termination,
repudiation or revocation of this Agreement by any Borrower, and without
affecting the enforceability or continuing effectiveness hereof as to each
Borrower: (i) increase, extend, or otherwise change the time for payment or the
terms of the Obligations or any part thereof; (ii) supplement, restate, modify,
amend, increase, decrease, or waive, or enter into or give any agreement,
approval or consent with respect to, the Obligations or any part thereof, or any
of the Financing Agreements or any additional security or guarantees, or any
condition, covenant, default, remedy, right, 

-50-

representation, or term thereof or thereunder; (iii) accept new or additional
instruments, documents, or agreements in exchange for or relative to any of the
Financing Agreements or the Obligations or any part thereof; (iv) accept partial
payments on the Obligations; (v) receive and hold additional security or
guarantees for the Obligations or any part thereof; (vi) release, reconvey,
terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute,
transfer, or enforce any security or guarantees, and apply any security and
direct the order or manner of sale thereof as Lender in its sole and absolute
discretion may determine; (vii) release any person from any personal liability
with respect to the Obligations or any part thereof; (viii) settle, release on
terms satisfactory to Lender or by operation of applicable laws or otherwise
liquidate or enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and bid and
purchase at any sale; or (ix) consent to the merger, change, or any other
restructuring or termination of the corporate or partnership existence of any
Borrower, and correspondingly restructure the Obligations, and any such merger,
change, restructuring, or termination shall not affect the liability of any
Borrower or the continuing effectiveness hereof, or the enforceability hereof
with respect to all or any part of the Obligations.

(b) Lender may enforce this Agreement independently as to each
Borrower and independently of any other remedy or security Lender at any time
may have or hold in connection with the Obligations, and it shall not be
necessary for Lender to marshal assets in favor of any Borrower or any Obligor
or to proceed upon or against or exhaust any security or remedy before
proceeding to enforce this Agreement.  Each Borrower expressly waives any right
to require Lender to marshal assets in favor of any Borrower or any guarantor of
the Obligations or to proceed against any other Borrower, and agrees that Lender
may proceed against Borrowers or any Collateral in such order as Lender shall
determine in its sole and absolute discretion.

(c) Lender may file a separate action or actions against any Borrower,
whether such action is brought or prosecuted with respect to any security or
against any guarantor of the Obligations, or whether any other person is joined
in any such action or actions.  Each Borrower agrees that Lender and each
Borrower and any affiliate of any Borrower may deal with each other in
connection with the Obligations or otherwise, or alter any contracts or
agreements now or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the continuing efficacy
of this Agreement.  Each Borrower, as a joint and several Borrower hereunder,
expressly waives the benefit of any statute of limitations affecting its joint
and several liability hereunder (but not its primary liability) or the
enforcement of the Obligations or any rights of Lender created or granted
herein.

(d) Lender's rights hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by Lender, all as though such amount had not been
paid.  The rights of Lender created or granted herein and the enforceability of
this Agreement at all times shall remain effective to cover the full amount of
all the Obligations even though the Obligations, including any part thereof or
any other security or guaranty therefor, may be or hereafter may become invalid
or otherwise 

-51-

unenforceable as against any Borrower and whether or not any Borrower shall have
any personal liability with respect thereto.

(e) Each Borrower expressly waives any and all defenses now or
hereafter arising or asserted by reason of (i) any disability or other defense
of the other Borrower with respect to the Obligations; (ii) the unenforceability
or invalidity of any security or guaranty for the Obligations or the lack of
perfection or continuing perfection or failure of priority of any security for
the Obligations; (iii) the cessation for any cause whatsoever of the liability
of the any Borrower (other than by reason of the full payment and performance of
all Obligations); (iv) any failure of Lender to marshall assets in favor of any
Borrower; (v) any failure of Lender to give notice to any Borrower of sale or
other disposition of Collateral of another Borrower or any defect in any notice
that may be given in connection with any such sale or disposition of Collateral
of any Borrower securing the Obligations; (vi) any failure of Lender to comply
with applicable law in connection with the sale or other  disposition of any
Collateral or other security of any Borrower, for any Obligation, including any
failure of Lender to conduct a commercially reasonable sale or other disposition
of any Collateral or other security of the other Borrower for any Obligation;
(vii) any act or omission of Lender or others that directly or indirectly
results in or aids the discharge or release of the other Borrower or the
Obligations of the other Borrower or any security or guaranty therefor by
operation of law or otherwise; (viii) any law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation; (ix) any
failure of Lender to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Borrower; (x) the avoidance of any lien or
security interest in assets of the other Borrower in favor of Lender for any
reason; or (xi) any action taken by Lender that is authorized by this section or
any other provision of any Loan Document.  Until such time, if any, as all of
the Obligations have been indefeasibly paid and performed in full and no portion
of any commitment of Lender to Borrowers under any Financing Agreement remains
in effect, Borrowers' rights of subrogation, contribution, reimbursement, or
indemnity against the other shall be fully and completely subordinated to the
indefeasible repayment in full of the Obligations, and each Borrower expressly
waives any right to enforce any remedy that it now has or hereafter may have
against any other Person and waives the benefit of, or any right to participate
in, any Collateral now or hereafter held by Lender.

(f) To the fullest extent permitted by applicable law, each Borrower
expressly waives and agrees not to assert, any and all defenses in its favor
based upon an election of remedies by Lender which destroys, diminishes, or
affects such Borrower's subrogation rights against the other Borrowers, or
against any Obligor, and/or (except as explicitly provided for herein) any
rights to proceed against each other Borrower, or any other party liable to
Lender, for reimbursement, contribution, indemnity, or otherwise.

(g) Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy, or otherwise adversely affect rights which Borrowers
otherwise may have against each other, Lender, or others, or against Collateral,
and 

-52-

that, under the circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of the waivers or
consents herein are determined to be contrary to any applicable law or public
policy, such waivers and consents shall be effective to the maximum extent
permitted by law.

12.9   Contribution Agreement.  As an inducement to Lender to enter into
the Financing Agreements and to make the loans and extend credit to the
Borrowers, each Borrower and each Obligor agrees to indemnify and hold the other
harmless from and each shall have a continuing right of contribution against the
other Borrowers and any Obligors, if and to the extent that a Borrower makes or
is caused to make disproportionate payments in excess of that Borrower's
Proportionate Share of the Loans or contributions (from dispositions of its
assets or otherwise) to the repayment and satisfaction of the Obligations.
These indemnification and contribution obligations shall be unconditional and
continuing obligations of the Borrowers and Obligors and shall not be waived,
rescinded, modified, limited or terminated in any way whatsoever without the
prior written consent of Lender, in its sole discretion.  For purposes hereof,
the Proportionate Share of a Borrower shall mean the Adjusted Net Worth of such
Borrower divided by the Adjusted Net Worth of all the Borrowers in the aggregate
on the date of this Agreement.

12.10  PREJUDGMENT REMEDIES.  EACH BORROWER HEREBY WAIVES SUCH RIGHTS AS
IT MAY HAVE TO NOTICE AND/OR HEARING UNDER ANY APPLICABLE FEDERAL OR STATE LAWS
INCLUDING, WITHOUT LIMITATION, CONNECTICUT GENERAL STATUTES SECTIONS 52-278A,
ET-SEQ., AS AMENDED, PERTAINING TO THE EXERCISE BY LENDER OF SUCH RIGHTS AS THE
LENDER MAY HAVE INCLUDING, BUT NOT LIMITED TO, THE RIGHT TO SEEK PREJUDGMENT
REMEDIES AND/OR DEPRIVE ANY BORROWER OF OR AFFECT THE USE OF OR POSSESSION OR
ENJOYMENT OF A BORROWER'S PROPERTY PRIOR TO THE RENDITION OF A FINAL JUDGMENT
AGAINST A BORROWER.  EACH BORROWER FURTHER WAIVES ANY RIGHT IT MAY HAVE TO
REQUIRE LENDER TO PROVIDE A BOND OR OTHER SECURITY AS A PRECONDITION TO OR IN
CONNECTION WITH ANY PREJUDGMENT REMEDY SOUGHT BY LENDER.

12.11  Entire Agreement.  This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.

12.12  Original Loan Agreement and Financing Agreements.  The Borrowers
and the Lender agree that, upon the satisfaction of each of the conditions set
forth in Section 4.1, this Agreement amends, restates, and supercedes the
Original Loan Agreement, provided that each of the Obligations outstanding under
the Original Loan Agreement (other than the Term Loan which will be repaid with
the Term Loan B) shall become Obligations under this Agreement and 

-53-

all interest, fees and charges payable under the Original Loan Agreement shall
continue in effect and be payable as provided under this Agreement subject to
any change or modification thereto that is provided in this Agreement. The
Borrower acknowledges and agrees that from and after the date of this Agreement
that (i) all Financing Agreements shall continue without any diminution thereof
and shall remain in full force and effect, (ii) each reference in the Financing
Agreements to "Lender" shall be references to "Lender" as defined in this
Agreement, (iii) each reference in the Financing Agreements to "Borrowers" shall
be references to "Borrowers" as defined in this Agreement, (iv) each reference
in the Financing Agreements to "Obligations" shall be references to
"Obligations" as defined in this Agreement, and (v) each reference in the
Financing Agreements to "Loan Agreement", "Loan and Security Agreement" or
"Agreement" shall be references to this "Agreement" as defined in this
Agreement.

12.13  Parent Security Documents.  In connection with the Original Loan
Agreement and Parent's Guarantee dated May 8, 1995 and in order to secure the
obligations thereunder, Parent executed and delivered to the Lender a General
Security Agreement, Pledge And Security Agreement (Stock and Other Securities),
Trademark Collateral Assignment And Security Agreement, and Patent Collateral
Assignment and Security Agreement, each dated May 8, 1995 (together with all
other instruments, financing statements, documents and agreements executed
and/or delivered from time to time by Parent, as each has been amended, modified
and/or supplemented, the "Parent Security Documents").  Notwithstanding that the
Parent Security Documents were initially executed and/or delivered at a time
when Parent was a guarantor and not a borrower, Parent hereby ratifies and
confirms that each of the Parent Security Documents, the security interests and
liens granted thereunder, and the collateral and property to which such security
interests and liens attach, shall secure Parent's Obligations as a Borrower
under this Loan Agreement and the other Financing Agreements.

IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.

[SIGNATURES CONTINUED ON NEXT PAGE]

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LENDER                               BORROWERS
------                               ---------

CONGRESS FINANCIAL CORPORATION       CLEAN HARBORS, INC.
(NEW ENGLAND)

By: /s/ Edward Shifman               By: /s/ Stephen H. Moynihan
----------------------------            --------------------------------   
Name: Edward Shifman                    Name:  Stephen H. Moynihan
Title: Senior Vice President            Title: Senior Vice President

Address:                             Chief Executive Office
-------                              ----------------------
One Post Office Square               1501 Washington Street
Boston, MA  02109                    Braintree, MA  02184

CLEAN HARBORS ENVIRONMENTAL
SERVICES, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office
----------------------

1501 Washington Street
Braintree, MA 02184

CLEAN HARBORS KINGSTON FACILITY CORPORATION

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

-55-

CLEAN HARBORS OF BRAINTREE, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

CLEAN HARBORS SERVICES, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

CLEAN HARBORS OF NATICK, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

-56-

CLEAN HARBORS OF CONNECTICUT, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

761 Middle Street
Bristol, CT  06010

MURPHY'S WASTE OIL SERVICE, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

MR. FRANK, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

1501 Washington Street
Braintree, MA 02184

-57-

SPRING GROVE RESOURCE RECOVERY, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office:

4879 Spring Grove Avenue
Cincinnati, OH  45232

HARBOR MANAGEMENT CONSULTANTS, INC.

By: /s/ Stephen H. Moynihan         
-------------------------------- 
Name:  Stephen H. Moynihan       
Title: Senior Vice President     

Chief Executive Office

1501 Washington Street
Braintree, MA 02184

-58-

SCHEDULE 8.4
------------

EXISTING LIENS

There are no existing liens (other than liens permitted under Section 9.8
which secure debt now outstanding)

-1-

SCHEDULE 9.11

PERMITTED REFINANCINGS, PAYMENTS AND DIVIDENDS

1.     Refinancing of Senior Subordinated Notes.  So long as no Default or
Event of Default exists and is continuing or would occur as a result of an
action taken hereby, Borrowers may refinance the Senior Subordinated Notes as
long as (i) the material terms and conditions (including, without limitation,
term, interest rate, fees, covenants and events of default) of the replacement
subordinated notes are no less advantageous to the Borrowers than the terms and
conditions of the Senior Subordinated Notes, (ii) the original principal amount
of such replacement subordinated notes does not exceed the principal amount of
the Senior Subordinated Notes on the date of such refinancing, and (iii) the
holders of the replacement subordinated notes enter into a Subordination
Agreement on substantially the same terms and conditions as the Subordination
Agreement between Lender and the holders of the Senior Subordinated Notes.

2.     Payments on the Kimball IRB Documents.  Subject to Section 9.11, the
Borrowers may make regularly scheduled interest and sinking fund payments, and
any debt service reserve fund payments, as are required by the Kimball IRB
Documents as in effect on the date of the Agreement.

3.     Dividends on Outstanding Preferred Stock.  So long as no Default or
Event of Default exists and is continuing or would occur as the result of a
payment made hereby, the Parent may make regularly scheduled dividend payments
upon its 112,000 outstanding shares of Series B Convertible Preferred Stock
(which require quarterly payments at an annual rate of $4.00 per share).

-1-

Exhibit 4.18

TERM PROMISSORY NOTE B

$19,000,000.00                                           Boston, Massachusetts
April 12, 2001

FOR VALUE RECEIVED, the undersigned, (collectively, the "Debtors"), hereby
unconditionally and jointly and severally promise to pay to the order of
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND), a Massachusetts corporation (the
"Payee"), at the offices of Payee at One Post Office Square, Boston,
Massachusetts 02109, or at such other place as the Payee or any holder hereof
may from time to time designate, the principal sum of NINETEEN MILLION DOLLARS
($19,000,000.00) in lawful money of the United States of America and in
immediately available funds, in eighty-four (84) consecutive monthly
installments (or earlier as hereinafter provided) on the first day of each month
commencing May 1, 2001 of which the first eighty-three (83) installments shall
each be in the amount of TWO HUNDRED TWENTY-SIX THOUSAND ONE HUNDRED NINETY AND
48/100 DOLLARS ($226,190.48), and the last installment, which shall be due and
payable on the third anniversary of the date of the Loan Agreement (as
hereinafter defined), shall be in the amount of the entire unpaid balance of
this Note.

Each Debtor hereby further promises jointly and severally to pay interest
to the order of Payee on the unpaid principal balance hereof at the Interest
Rate. Such interest shall be paid in like money at said office or place from the
date hereof, commencing May 1, 2001 and on the first day of each month
thereafter until the indebtedness evidenced by this Note is paid in full.
Interest payable upon and after an Event of Default or termination or non-
renewal of the Loan Agreement shall be payable upon demand.

For purposes hereof,

a)     The term "Interest Rate" shall mean, a rate of three and one-half
(3.5%) percent per annum in excess of the greater of (i) eight and one-half
percent (8.5%) or (ii) Prime Rate; provided, that, upon and after an Event of
Default or termination of the Loan Agreement, at Payee's option, the Interest
Rate shall mean a rate of six (6.0%) percent per annum in excess of the greater
of (i) eight and one-half percent (8.5%) or (ii) Prime Rate.

b)     The term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank,

c)     The term "Event of Default" shall mean an Event of Default as such
term is defined in the Loan Agreement, and

d)     The term "Loan Agreement" shall mean the Amended and Restated Loan
and Security Agreement, dated April 12, 2001, as amended, between Debtors and
Payee, as the same

-1-

now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

Unless otherwise defined herein, all capitalized terms used herein shall
have the meaning assigned thereto in the Loan Agreement.

The Interest Rate payable hereunder shall increase or decrease by an amount
equal to each increase or decrease, respectively, in the Prime Rate, effective
on the first day of the month after any change in the Prime Rate is announced.
The increase or decrease shall be based on the Prime Rate in effect on the last
day of the month in which any such change occurs. Interest shall be calculated
on the basis of a three hundred sixty (360) day year and actual days elapsed. In
no event shall the interest charged hereunder exceed the maximum permitted under
the laws of the Commonwealth of Massachusetts or other applicable law.

This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan B by Payee to Debtors. This Note is secured
by the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at any
time hereafter executed and/or delivered by any Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, being collectively referred to herein as the
"Financing Agreements"), and is entitled to all of the benefits and rights
thereof and of the other Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
any Debtor maintained by Payee.

If any payment of principal or interest is not made when due hereunder, or
if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, in addition to all rights and remedies of Payee under the
Financing Agreements, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently, Payee may, at its option, declare any or all of Debtors'
obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full, plus the costs and expenses
of collection hereof, including, but not limited to, attorneys' fees and legal
expenses.

Each Debtor (i) waives diligence, demand, presentment, protest and notice
of any kind, (ii) agrees that it will not be necessary for Payee to first
institute suit in order to enforce payment of this Note and (iii) consents to
any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. The pleading of any statute of
limitations as a defense to any demand against Debtor is expressly hereby waived
by each Debtor. Upon any Event of

-2-

Default or termination or non-renewal of the Loan Agreement, Payee shall have
the right, but not the obligation to setoff against this Note all money owed by
Payee to any Debtor.

Payee shall not be required to resort to any Collateral for payment, but
may proceed against any Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.

The validity, interpretation and enforcement of this Note and the other
Financing Agreements and any dispute arising in connection herewith or therewith
shall be governed by the internal laws of the Commonwealth of Massachusetts
(without giving effect to principles of conflicts of law).

Each Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Courts of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts and waives any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------                                      
therein arising under this Note or any of the other Financing Agreements or in
any way connection with or related or incidental to the dealings of Debtors and
Payee in respect of this Note or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute arising out of the relationship between Debtor and Payee
or the conduct of such persons in connection with this Note or otherwise shall
be heard only in the courts described above (except that Payee shall have the
right to bring any action or proceeding against any Debtor or its property in
the courts of any other jurisdiction which Payee deems necessary or appropriate
in order to realize on the Collateral or to otherwise enforce its rights against
Debtor or its property).

Each Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Payee's option, by service upon Debtor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Debtors shall appear in answer to such process, failing which Debtor
shall be deemed in default and judgment may be entered by Payee against Debtors
for the amount of the claim and other relief requested.

EACH DEBTOR WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (i) ARISING UNDER THIS NOTE, OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN
RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY.

-3-

The execution and delivery of this Note has been authorized by the Board of
Directors and by any necessary vote or consent of the stockholders of Debtors.
Each Debtor hereby authorizes Payee to complete this Note in any particulars
according to the terms of the loan evidenced hereby.

This Note shall be binding upon the successors and assigns of each Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby. This Note is an
instrument under seal under Massachusetts law.

WITNESS/ATTEST:                     CLEAN HARBORS, INC.

By: /s/ Stephen H. Moynihan
-----------------                      --------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                 CLEAN HARBORS ENVIRONMENTAL
SERVICES, INC.

By: /s/ Stephen H. Moynihan
-----------------                      --------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                 CLEAN HARBORS KINGSTON FACILITY
CORPORATION

By: /s/ Stephen H. Moynihan
-----------------                      --------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

-4-

WITNESS/ATTEST:                     CLEAN HARBORS OF BRAINTREE, INC.

/s/ Stephen H. Moynihan
___________________________         By:--------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                     CLEAN HARBORS SERVICES, INC.

/s/ Stephen H. Moynihan
___________________________         By:-------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                     CLEAN HARBORS OF NATICK, INC.

/s/ Stephen H. Moynihan
---------------------------         By:--------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                     CLEAN HARBORS OF CONNECTICUT, INC.

/s/ Stephen H. Moynihan
---------------------------         By:--------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                     MURPHY'S WASTE OIL SERVICE, INC.

/s/ Stephen H. Moynihan
---------------------------         By:--------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

WITNESS/ATTEST:                     MR. FRANK, INC.

/s/ Stephen H. Moynihan
---------------------------         By:--------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

-5-

WITNESS/ATTEST:                 SPRING GROVE RESOURCE RECOVERY,
INC.

/s/ Stephen H. Moynihan
---------------------------     By: ------------------------------
[Corporate Seal]                    Name: Stephen H. Moynihan
Title:Senior Vice President

WITNESS/ATTEST                  HARBOR MANAGEMENT CONSULTANTS,
INC.

/s/ Stephen H. Moynihan
---------------------------     By: --------------------------------
[Corporate Seal]                    Name:  Stephen H. Moynihan
Title: Senior Vice President

-6-

EXHIBIT 4.19

-------------------------------------------------------------------------------

CLEAN HARBORS, INC.

16% SENIOR SUBORDINATED NOTES DUE 2008

WITH DETACHABLE WARRANTS FOR COMMON STOCK

-------------------------------------------------------------------------------

SECURITIES PURCHASE AGREEMENT

-------------------------------------------------------------------------------

Dated as of April 12, 2001

-------------------------------------------------------------------------------

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT, dated as of April 12, 2001, is among
CLEAN HARBORS, INC., a Massachusetts corporation (together with its successors
and assigns, the "COMPANY"), and the institutional investors identified on ANNEX
1 (the "PURCHASERS").

RECITAL

The Company desires to sell to the Purchasers and the Purchasers are
willing to purchase upon and subject to the terms and conditions of this
Agreement, Thirty-Five Million Dollars ($35,000,000) in aggregate original
principal amount of the Company's 16% Senior Subordinated Notes due 2008, with
detachable warrants entitling the holders to purchase, in the aggregate,
1,519,020 shares of common stock, $.01 par value of the Company (the "COMMON
STOCK") at the time of issue.

AGREEMENT

NOW, THEREFORE,  it is agreed:

1.   AUTHORIZATION; RANKING.

1.1  AUTHORIZATION OF ISSUE OF THE NOTES AND WARRANTS.

(i)  The Company will authorize the issue and sale of its 16% Senior
Subordinated Notes in the aggregate principal amount of $35,000,000 to be
dated the date of issue, to be due on April 30, 2008 and to otherwise be
repaid and to bear interest as provided herein, which Notes shall be in the
form of EXHIBIT A (the "NOTES").

(ii) The Company will authorize the issue and sale, pursuant to the
Warrant Agreement, of warrants (collectively, the "WARRANTS"; together with
the Notes, the "SECURITIES") to be dated the date of issue, entitling the
holders thereof to purchase, in the aggregate, 1,519,020 shares of Common
Stock of the Company at the time of issue.

Certain capitalized terms used in this Agreement are defined in SECTION 10;
references to a "SCHEDULE", "ANNEX" or an "EXHIBIT" are, unless otherwise
specified, to a Schedule, Annex or an Exhibit attached to this Agreement.

1.2  RANKING. The Notes are expressly subordinated to the Senior
Indebtedness as set forth in the Subordination Agreement and will otherwise rank
not less than pari passu in priority of payment with each other and all other
outstanding Debt of the Company, present or future, except to the extent such
other Debt is preferred as a result of being secured (but only to the extent
such security is not prohibited by SECTION 6.2 and then only to the extent of
such security).

1.3  INTEREST ON THE NOTES. The Company shall pay to the Holders interest
on the unpaid principal amount of the Notes owing to each Holder at the rates,
time and manner set forth below.

(i)  RATE OF INTEREST. Each Note shall bear interest on the unpaid
principal amount thereof, including accrued interest compounded and added
to the principal of each Note pursuant to clause (ii) of this SECTION 1.3,
from the date issued through maturity (whether by prepayment, acceleration
or otherwise) at the annual rate of 16%.

(ii) INTEREST PAYMENTS. Interest on each Note shall be payable semi-
annually in arrears on October 30th and April 30th of each year (each, an
"INTEREST PAYMENT DATE"), commencing on the first of such dates to follow
the Closing Date, and upon any prepayment or repayment of such Note.
Interest shall be paid as follows:

(a)  on each Interest Payment Date through the Interest Payment
Date occurring on October 30, 2006 (1) interest accrued on the Notes
since the last Interest Payment Date at an annual rate of 14% shall be
paid in cash and (2) interest in excess thereof accrued on the Notes
since the last Interest Payment Date shall be compounded, shall be
added to and from thereafter shall be deemed to be principal amount
outstanding of such Note and shall itself bear interest as provided in
clause (i) of this SECTION 1.3 or, at the election of the Company
given by irrevocable written notice at least 30 days, and not more
than 60 days, prior to an Interest Payment Date, shall be paid in
cash;

(b)  on each Interest Payment Date after October 30, 2006, all
then accrued interest on each Note shall be due and payable in cash;
and

(c)  upon any date on which principal is prepaid or repaid, all
accrued interest on the principal amount being prepaid or repaid shall
be due and payable in cash.

(iii) DEFAULT INTEREST. After the occurrence and during the
continuance of any default in payment of any amount due on the Notes, the
Notes shall bear interest on the unpaid principal amount thereof at a rate
per annum (the "DEFAULT RATE") equal to the lesser of, (a) the highest rate
allowed by applicable law; or (b) 18%. After the occurrence and during the
continuance of any other Event of Default (other than a default in payment
on the Notes), at the election of the Required Holders, the Notes shall
bear interest on the unpaid principal amount thereof at the Default Rate.

(iv) COMPUTATION OF INTEREST. Interest on the Notes shall be computed
on the basis of a 360-day year and twelve 30-day months. In computing
interest on the Notes, the date of the issuance of the Notes shall be
included and the date of payment shall be excluded.

2.   PURCHASE AND SALE OF THE SECURITIES; CLOSING.

2.1  PURCHASE AND SALE OF THE SECURITIES. Subject to the terms and
conditions of this Agreement, the Company shall sell to each Purchaser, and each
Purchaser shall purchase from the Company, Notes in the principal amount
specified below such Purchaser's name in ANNEX 1, at a price equal to 100% of
such principal amount. The Warrants will be issued to the Purchasers pro rata in
the same proportion as the principal amount of Notes purchased by each Purchaser
bears to the aggregate original principal amount of the Notes. Notwithstanding
the foregoing, each Purchaser's obligations under this Agreement are several and
not joint and no 

-2-

Purchaser shall have any obligation or liability for the performance or non-
performance by any other Purchaser of such other Purchaser's obligations under
this Agreement.

2.2  CLOSING. The purchase and sale of the Securities shall take place at
the offices of Sullivan & Worcester LLP, One Post Office Square, Boston,
Massachusetts 02109 at a closing (the "CLOSING") to be held on April 30, 2001 or
on such other Business Day or at such other place as the Purchasers and the
Company may agree (the "CLOSING DATE"). At the Closing, the Company will deliver
to each Purchaser the Securities to be purchased by it, against payment of the
purchase price therefor by transfer of immediately available funds in accordance
with the wiring instructions set forth on ANNEX 2. If at the Closing, the
Company fails to tender any Securities to any Purchaser as provided in this
SECTION 2.2, or if any of the conditions specified in SECTION 3 shall not have
been fulfilled to a Purchaser's satisfaction, such Purchaser may, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights such Purchaser may have by reason of such failure or
non-fulfillment.

2.3  CERTAIN AGREEMENTS OF THE COMPANY AND THE HOLDERS. The Company and
each Holder, by such Holder's acceptance of the Notes, acknowledges and agrees
that the Company's obligations under this Agreement and the Notes, and all
rights and remedies of the Holders under this Agreement, the Subsidiary
Guaranties and the Notes, are expressly subordinated to the Bank Debt and all
rights of the lenders under the Bank Loan Documents pursuant to the terms of the
Subordination Agreement. The Company and the Holders further acknowledge and
agree that so long as any portion of the Bank Debt shall remain outstanding, the
Notes shall bear the following legend:

THIS NOTE IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS OF APRIL 12,
2001 AMONG THE HOLDER, THE COMPANY, THE SUBSIDIARIES, AND CONGRESS
FINANCIAL CORPORATION (NEW ENGLAND) WHICH, AMONG OTHER THINGS, SUBORDINATES
THE COMPANY'S OBLIGATIONS TO THE HOLDER TO THE COMPANY'S OBLIGATIONS TO THE
HOLDERS OF SENIOR INDEBTEDNESS AS DEFINED IN SAID AGREEMENT.

3.   CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and pay
for its Securities is subject to the fulfillment to its satisfaction or its
written waiver, on or before the Closing Date, of the following conditions:

3.1  ARTICLES OF ORGANIZATION AND PROCEEDINGS. On or before the Closing
Date, the Articles of Organization of the Company and each other organizational
document of the Company and all other proceedings taken or to be taken in
connection with the Transaction Documents and all documents incidental hereto
and thereto shall be satisfactory in form and substance to the Purchasers, and
the Purchasers shall have received the following items, each of which shall be
in form and substance satisfactory to the Purchasers and, unless otherwise
noted, dated the Closing Date, and in sufficient copies (except for the
Securities) for each Purchaser:

(i)   Certified copies of resolutions of the Board of Directors of the
Company approving this Agreement, the issuance of Securities, and other
Transaction Documents to which the Company is or is to be a party, and of
all documents evidencing other necessary corporate action and governmental
and other third party approvals and 

-3-

consents, if any, with respect to this Agreement, the Securities, and each
other Transaction Document.

(ii)  A copy of the Articles of Organization and each amendment
thereto of the Company, certified (as of a date reasonably near the Closing
Date) by the Secretary of State of the Commonwealth of Massachusetts as
being a true and correct copy thereof.

(iii) Copies of the By-Laws of the Company certified by the Clerk or
an Assistant Clerk as being a true, complete and correct copy as in effect
as of the Closing Date.

(iv)  Copies of certificates (as of a date reasonably near the Closing
Date) of the Secretary of State of the Commonwealth of Massachusetts, and
of each State in which the Company is identified on SCHEDULE 8.1 as being
qualified in such State, stating that the Company, is duly qualified and in
good standing in such State and, if the form of such certificate so
provides, has filed all annual reports required to be filed to the date of
such certificate.

(v)   An Officers' Certificate from the Company, dated the Closing
Date (and the statements made in such certificate shall be true on and as
of the Closing Date) certifying as to (a) the absence of any amendments to
its Articles of Organization since the date of the Secretary of State's
certificate referred to in subsection (ii) above, (b) the absence of any
proceeding for the dissolution or liquidation of the Company, (c) the
matters set forth in SECTION 3.4, (d) the absence of any Default or an
Event of Default, (e) the names and true signatures of its officers
authorized to sign this Agreement, the Securities, each other Transaction
Document to which it is or is to be a party and the other documents to be
delivered hereunder and thereunder and (f) the Solvency of the Company and
the Consolidated Group both immediately before and immediately after giving
effect to consummation of the incurrence of the Bank Debt and the
transactions contemplated by the Transaction Documents.

(vi)  Originals of this Agreement, the Securities to be issued to each
Purchaser in the respective principal amounts set forth below such
Purchaser's name on ANNEX 1 and each other Transaction Document executed by
a Senior Officer of the Company to the extent a party thereto.

3.2  OPINION OF COMPANY COUNSEL. The Purchasers shall have received a
favorable opinion, dated the Closing Date and addressed to them, from Davis,
Malm & D'Agostine, P.C. counsel to the Company, in the form of EXHIBIT B and
such other matters as any Purchaser or Special Counsel may reasonably request in
form and substance reasonably acceptable to the Purchasers. To the extent that
any opinion referred to in this SECTION 3.2 is rendered in reliance upon the
opinion of any other counsel, the Purchasers shall have received a copy of the
opinion of such other counsel, dated the Closing Date and addressed to them, or
a letter from such other counsel, dated the Closing Date and addressed to them,
authorizing them to rely on such other counsel's opinion. The opinions of
counsel to the Company and any such other counsel shall be in form and substance
reasonably satisfactory to the Purchasers and Special Counsel.

3.3  OPINION OF PURCHASERS' SPECIAL COUNSEL. The Purchasers shall have
received from Special Counsel an opinion satisfactory to them as to such matters
incident to the 

-4-

transactions contemplated by this Agreement as they may reasonably request and
confirmation that Special Counsel has completed a satisfactory review of the
environmental permits held by the Company and its Subsidiaries.

3.4  REPRESENTATIONS AND WARRANTIES AND COMPLIANCE. The representations and
warranties contained in SECTION 8 shall be true on and as of the Closing Date
after giving effect to the issue and sale of the Securities (and application of
the proceeds as contemplated by SECTION 5.9), no Default or Event of Default
shall have occurred or be continuing, and the Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it at or prior to the Closing.

3.5  PURCHASE PERMITTED BY APPLICABLE LAWS. The offering, issuance,
purchase and sale of and payment for, the Securities on the Closing Date on the
terms and conditions of this Agreement (including the use of the proceeds of
such sale) shall be permitted by the laws and regulations of each jurisdiction
to which a Purchaser is subject, without recourse to provisions (such as Section
1405(a)(8) of the New York Insurance Law) permitting limited investments by life
insurance companies without restriction as to the character of the particular
investment, shall not violate any applicable law or governmental regulation
(including, without limitation, section 5 of the Securities Act or Regulation T,
U or X of the Board of Governors of the Federal Reserve System) and shall not
subject any Purchaser to any tax, penalty, liability or other condition adverse
to it under or pursuant to any applicable law or governmental regulation, and
the Purchasers shall have received such certificates or other evidence as to
matters of fact as they may reasonably request to enable them to determine
whether such purchase is so permitted.

3.6  PRIVATE PLACEMENT NUMBERS. Private Placement Numbers shall have been
assigned to the Notes and the Warrants by Standard & Poor's CUSIP Service
Bureau.

3.7  SALE OF ALL SECURITIES.  The Company shall have sold to each other
Purchaser, and each other Purchaser shall have purchased, the Securities to be
purchased by it as set forth in ANNEX 1.

3.8  CONSENT OF OTHER PERSONS.  The Company shall have received all
authorizations, consents and approvals necessary in connection with the
transactions contemplated hereby, including those identified in SCHEDULE 8.12,
in form and substance satisfactory to the Purchasers.

3.9  PAYMENT OF SPECIAL COUNSEL FEES.  Without limiting the provisions of
SECTION 12.1, the Company shall have paid the reasonable fees, charges and
disbursements of Special Counsel (which may include a reasonable reserve for
anticipated fees and expenses) to the extent reflected in a statement of Special
Counsel rendered to the Company at or before the Closing.

3.10 GUARANTIES. Each Subsidiary of the Company, other than Northeast
Casualty, shall have executed and delivered to the Purchasers a guaranty of all
obligations of the Company under the Notes and the other Transaction Documents
in the form of EXHIBIT C (each a "SUBSIDIARY GUARANTY" and collectively,
including any Subsidiary Guaranties executed after the date hereof pursuant to
SECTION 5.12, the "SUBSIDIARY GUARANTIES").

-5-

3.11 OTHER TRANSACTION DOCUMENTS. The Company shall have executed and
delivered to the Purchasers (a) the Registration Rights Agreement in the form of
EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT"); and (b) the Warrant Agreement
in the form of EXHIBIT E (the "WARRANT AGREEMENT").

3.12 BANK LOAN DOCUMENTS. The Purchasers shall have received a complete and
correct copy of each of the Bank Loan Documents (including all Exhibits and
Schedules thereto), certified in each case by a Senior Officer as being true,
complete and correct copies of the executed versions thereof. The Bank Loan
Documents shall be in full force and effect and unmodified since the date of
this Agreement and the Purchasers shall have received evidence satisfactory to
them that the full amount of the Term Loan B (as such term is defined in the
Bank Loan Agreement) shall be extended by the Bank simultaneously with the
Closing and that the Company has not less than $3,500,000 of undrawn
availability under the Revolving Loans (as such term is defined in the Bank Loan
Agreement).

3.13 EXISTING SENIOR NOTES. The contemporaneous redemption in full of the
Existing Senior Notes.

3.14 2000 FINANCIAL STATEMENTS. The Company's auditors shall have released
their audit of the Consolidated Group's balance sheet dated as of December 31,
2000 and the related statement of income, retained earnings and cash flows for
the 12 months ended on such date in a form containing no material changes from
the draft previously delivered to the Purchasers.

3.15 CLOSING FEE. The Company shall have paid each Purchaser a fee equal to
1% of the principal amount of Notes purchased by such Purchaser.

4.   PREPAYMENT AND REPAYMENT. The Notes may be prepaid only under the
circumstances set forth in SECTIONS 4.1 and 4.4 and shall be repaid in
accordance with SECTION 4.3 and upon any acceleration of final maturity as
provided in SECTION 7.2.

4.1  OPTIONAL PREPAYMENT OF NOTES AT ANY TIME.  The Company may prepay the
Notes, in full, or in part in integral multiples of $1,000,000 on any date.
Prepayments of the principal of any Notes shall be made together with (a)
interest accrued on the principal amount being prepaid to the Settlement Date
and (b) the Make Whole Amount.

4.2  NOTICE OF OPTIONAL PREPAYMENT.  The Company shall give each Holder
irrevocable written notice of any prepayment to be made pursuant to SECTION 4.1
at least 30 days, and not more than 60 days, prior to the Settlement Date
specifying:

(i)   the Settlement Date and the aggregate amount of the Called
Principal of the Notes;

(ii)  that such prepayment is to be made pursuant to SECTION 4.1; and

(iii) an estimate of the Make Whole Amount payable on the Called
Principal of the Notes (calculated as if the date of such notice were the date
of prepayment), together with the details of such computation.

-6-

Upon the giving of such notice, the Called Principal of the Notes together
with interest accrued thereon to the Settlement Date and the Make Whole Amount
shall become due and payable on the Settlement Date.

4.3  SCHEDULED REPAYMENT OF NOTES. On April 30, 2007 the Company shall
repay one half of all outstanding principal of the Notes and on April 30, 2008
(the "MATURITY DATE") the Company shall repay in full all outstanding principal
of the Notes. In each case outstanding principal shall include interest deemed
to be principal pursuant to clause (a) of SECTION 1.3(II).

4.4  PREPAYMENT OF NOTES UPON A CHANGE OF CONTROL.  The Company shall give
written notice (a "CHANGE OF CONTROL NOTICE") to each Holder not less than 30,
and not more than 60 days, prior to the occurrence of any event which may
reasonably be expected to result in a Change of Control.  The Change of Control
Notice shall identify the event, the reason why such event may result in or has
resulted in a Change of Control and the Persons involved, and shall include such
financial and other information as is available to the Company or which may be
obtained by the Company with reasonable effort that would be reasonably
necessary for a Holder to make an informed decision as to whether to elect to
require prepayment of its Notes under this SECTION 4.4 and shall set forth the
proposed effective date for, or if the Change of Control has occurred, the
actual date, of such Change of Control.  Any Holder, by giving written notice to
the Company of such election (an "ELECTION NOTICE") not later than 5 Business
Days prior to the effective date of such Change of Control, if the Change of
Control Notice is given at least 30 days prior to such effective date, shall
have the option to require the Company to prepay all of its Notes at 100% of the
principal amount thereof plus interest accrued thereon to the Settlement Date
and the Make Whole Amount.  Once given, any Election Notice may be revoked, by
notice, given at any time up to the last date an Election Notice could have been
given with respect to the Change of Control Notice.  If the proposed terms of a
Change of Control change substantially, or if any other event which may result
in a Change of Control may or has occurred, the Company shall give each Holder a
revised Change of Control Notice and each Holder shall then have another
opportunity to elect to require prepayment of its Notes under this SECTION 4.4
by delivering to the Company a new Election Notice or to revoke, by written
notice to the Company, any prior Election Notice, not later than 30 days
following the date such revised Change of Control Notice is given.  The
prepayment of a Holder's Notes pursuant to this SECTION 4.4 shall occur on the
later of (a) the effective date of such Change of Control or (b) 5 Business Days
following the date such Holder's Election Notice is given.  Notwithstanding the
foregoing, no prepayment shall be required pursuant to this SECTION 4.4 unless a
Change of Control occurs or has occurred.

If the Company fails to give a Change of Control Notice and a Change of
Control occurs, or fails to give a proper Change of Control Notice as to a
Change of Control which has occurred, any Holder may, at any time after the
occurrence of such Change of Control, without waiver of any right on the part of
the Holder to accelerate its Notes pursuant to SECTION 7.2, require the Company,
on demand pursuant to this SECTION 4.4, to prepay all of such Holder's Notes
issued by the Company at 100% of the principal amount thereof plus accrued
interest to the Settlement Date and the Make Whole Amount.

4.5  PAYMENTS PRO RATA; APPLICATION OF PAYMENTS.  Upon any prepayment or
repayment of the Notes, the principal amount so repaid plus the interest accrued
thereon and the Make Whole Amount shall be allocated among the Holders in
proportion to the respective outstanding principal amounts of the Notes held by
them to which such prepayment or repayment applies.

-7-

4.6  RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Affiliates to, prepay or otherwise retire any Note in whole or in part,
prior to its stated maturity (other than by prepayment pursuant to SECTION 4.1
or 4.4, scheduled repayment pursuant to SECTION 4.3 or upon acceleration of
final maturity pursuant to SECTION 7.2), or purchase or otherwise acquire,
directly or indirectly, any Note held by any Holder unless the Company or such
Affiliate shall have offered to prepay or otherwise retire, purchase, redeem or
otherwise acquire, as the case may be, the same proportion of the aggregate
outstanding principal amount of Notes held by each other Holder at the time
outstanding upon the same terms and conditions. Any such offer shall provide
each Holder with sufficient information to enable it to make an informed
decision with respect to such offer, and shall remain open for at least 10
Business Days. If the Required Holders accept such offer, the Company shall
promptly notify the remaining Holders of such fact and the expiration date for
the acceptance by such Holders of such offer shall be extended by the number of
days necessary to give each such Holder at least 10 Business Days from its
receipt of such notice to accept such offer. No Notes so prepaid or otherwise
retired or purchased or otherwise acquired by the Company or any of its
Affiliates shall thereafter be reissued or deemed to be outstanding for any
purpose under this Agreement.

4.7  MANNER OF PAYMENT.

(i)   MANNER OF PAYMENT. Except as specified in clause (a) of SECTION
1.3(II), the Company shall pay all amounts payable with respect to each
Note (without any presentment of such Note, unless such payment is the
final payment thereon, in which case the original of the Note shall be
delivered to the Company promptly thereafter, and without any notation of
such payment being made thereon) by crediting, by federal funds bank wire
transfer, the account of the Holder thereof in any bank in the United
States of America as may be designated in writing by such Holder, or in
such other manner or to such other address in the United States of America
as may be reasonably designated in writing by such Holder. Absent
subsequent notice from a Purchaser, ANNEX 1 shall constitute the
designation by the Purchasers to the Company with respect to payments to be
made to the Purchasers on their Notes. In the absence of a written
designation by a Holder, all amounts payable with respect to each Note held
by such Holder shall be paid by check mailed and addressed to the
applicable Holder at such Holder's Home Office. All payments of principal,
interest, Make Whole Amount, Expenses and fees hereunder and under the
Notes by the Company shall be made without defense, set-off or
counterclaim.

(ii)  PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with respect
to, any Note shall fall due on a day other than a Business Day, then such
payment shall be made on the first Business Day following the day on which
such payment was due; provided that if all or any portion of such payment
shall consist of a payment of interest, for purposes of calculating such
interest, such payment shall be deemed to have been originally due on such
first following Business Day, such interest shall accrue and be payable to
(but not including) the actual date of payment, and the amount of the next
succeeding interest payment shall be adjusted accordingly.

(iii) PAYMENTS, WHEN RECEIVED. Any payment to be made to the Holders
hereunder or under the Notes shall be deemed to have been made on the Business
Day such payment actually becomes available at such Holder's bank prior to 1:00
p.m. local time of such bank.

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4.8  TAXES.

(i)   Any and all payments by the Company hereunder or under the Notes
shall be made free and clear of and without deduction for any and all
present or future Taxes and all liabilities with respect thereto,
excluding, (A) in the case of each Holder, net income taxes or withholding
obligations therefor that are imposed by the United States and net income
taxes (or franchise taxes imposed in lieu thereof) that are imposed on such
Holder by the state or foreign jurisdiction under the laws of which such
Holder is organized or any political subdivision thereof, and (B) in the
case of each Holder, that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) and that does not comply with
SECTION 4.8(IV), any taxes imposed by the United States by means of
withholding at the source unless such withholding results from a change in
applicable law, treaty or regulations or the interpretation or
administration thereof (including, without limitation, any guideline or
policy not having the force of law) by any authority charged with the
administration thereof subsequent to the date such Holder becomes a Holder,
(all such Taxes and liabilities other than those excluded in clauses (A)
and (B) being referred to as "COVERED TAXES"). If the Company shall be
required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder or under any Note to any Holder, (a) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this SECTION 4.8) such Holder receives an amount equal to the sum it
would have received had no such deductions been made, (b) the Company shall
make such deductions and (c) the Company shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.

(ii)  In addition, the Company shall pay any present or future stamp,
documentary, excise, property or similar Taxes that arise from or in
connection with or as a result of the issuance of the Securities, any
payment made hereunder or under the Securities or the execution, delivery
or registration of, performing under, or otherwise with respect to, this
Agreement or the Securities, or any modification, waiver or amendment of
this Agreement, the Securities or any other Transaction Document ("OTHER
TAXES").

(iii) Without reduction of the rights under SECTION 4.8(I), the
Company shall indemnify each Holder for the full amount of Covered Taxes
and Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 4.8, imposed on or paid by such Holder and any liability (including
penalties, additions to tax, interest and expenses) arising therefrom or
with respect thereto, whether or not such Covered Taxes were correctly or
legally imposed. This indemnification shall be made within thirty (30) days
from the date such Holder makes written demand on the Company specifying in
reasonable detail the basis therefor.

(iv)  Each Holder that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Company prior to the Closing Date, or in the case of a Holder that becomes
a Holder after the Closing Date, on or prior to the date of such assignment
to such Holder, becomes a Holder together with any other certificate or
statement of exemption required under the Code to establish that such
Holder is not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Holder, two accurate and
complete original 

-9-

signed copies of IRS Form W-8 or W-8ECI (or successor forms) certifying to
such Holder's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement
and under any Note. In addition, each Holder agrees that from time to time
after the Closing Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Company two new accurate and complete
original signed copies of IRS Form W-8 or W-8BEN and W-8ECI, or Form W-8
and a Section 4.7(d)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement
of such Holder to a continued exemption from or reduction in United States
withholding Tax with respect to payments under this Agreement and any Note,
or it shall immediately notify the Company of its inability to deliver any
such form or certificate. Notwithstanding anything to the contrary
contained in SECTION 4.8(I), or in the immediately succeeding sentence, (x)
the Company shall be entitled, to the extent it is required to do so by
law, to deduct or withhold income or similar Taxes imposed by the United
States (or any political subdivision or taking authority thereof or
therein) from interest, fees or other amounts payable hereunder for the
account of any Holder which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for United States Federal
income tax purposes to the extent that such Holder has not provided to the
Company IRS Forms that establish a complete exemption from such deduction
or withholding and (y) shall be obligated pursuant to SECTION 4.8(I) hereof
to gross-up payments to be made to such Holder in respect of income or
similar Taxes imposed by the United States unless upon timely notice from
the Company, such Holder has not provided to the Company the IRS Forms
required to be provided to the Company pursuant to this SECTION 4.8(IV).
Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this SECTION 4.8, the Company agrees to pay
additional amounts and to indemnify each Holder in the manner set forth in
SECTION 4.8(I) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any amounts deducted
or withhold by it as described in the immediately preceding sentence as a
result of any changes after the Closing Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of income or similar
Taxes.

(v)   Within thirty (30) days after the date of any payment of Covered
Taxes or Other Taxes, the Company shall furnish to the subject Holder a
copy of the original receipt, certified as true and correct by a Senior
Officer. If the Company determines that no Covered Taxes or Other Taxes are
payable in respect thereof, the Company shall furnish, or shall cause such
payor to furnish, to the Holders an opinion of counsel or other reasonably
satisfactory evidence stating that such payment is exempt from Covered
Taxes or Other Taxes.

4.9  MAKE WHOLE AMOUNT. The Company acknowledges that the Make Whole Amount
due at any optional or required prepayment of the Notes (including any
prepayment required pursuant to any provision of SECTION 4 or SECTION 7.2) has
been negotiated with the Purchasers to provide a bargained for rate of return on
the Purchasers' investment in the Notes and is not a penalty.

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5.   AFFIRMATIVE COVENANTS.

5.1  FINANCIAL AND OTHER REPORTING BY THE COMPANY. The Company will deliver
to each Holder:

(i)   as soon as practicable, and in any event not more than 45 days
after the end of each Fiscal Quarter (other than the fourth quarter), the
unaudited consolidated balance sheet of the Consolidated Group as at the
end of such Fiscal Quarter (other than the fourth quarter) and the related
unaudited consolidated statements of income and retained earnings and of
cash flows of the Consolidated Group for such Fiscal Quarter and for the
Fiscal Year to date, setting forth, in each case in comparative form the
amounts set forth for such period(s), figures for the corresponding
period(s) in the preceding Fiscal Year, all in reasonable detail and in
accordance with GAAP, and certified by the chief accounting officer or
chief financial officer of the Company as fairly presenting the financial
condition of the Consolidated Group as at the dates indicated and the
results of its operations and cash flows, in each case for the periods
indicated, in conformity with GAAP (except as disclosed in such
certificate) with any changes in accounting policies discussed in
reasonable detail, subject to changes resulting from year-end adjustments
not material in scope or amount;

(ii)  as soon as practicable, and in any event not more than 90 days
after the end of each Fiscal Year, the consolidated balance sheet of the
Consolidated Group as of the end of such Fiscal Year and the related
consolidated statements of income and retained earnings and of cash flows
of the Consolidated Group for such year, and setting forth, in each case,
in comparative form, corresponding figures for the preceding Fiscal Year,
all in reasonable detail and in accordance with GAAP, and accompanied by an
opinion thereon of the Approved Auditor, which opinion shall be without
limitation as to the scope of the audit and shall state that such financial
statements present fairly in all material respects, the consolidated
financial condition of the Consolidated Group as at the dates indicated and
the results of their consolidated operations and cash flows for the periods
indicated in conformity with GAAP (except as otherwise specified in such
report) and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and provides a reasonable basis for such opinion;

(iii) together with each delivery of financial statements of the
Consolidated Group pursuant to subsection (ii) of this SECTION 5.1 and
within 45 days of the end of each Fiscal Quarter (other than the fourth
Fiscal Quarter), a certificate of the chief financial officer of the
Company (a) stating that the signer has reviewed the terms of the
Transaction Documents and has made, or caused to be made under such
signer's supervision, a review in reasonable detail of the transactions and
condition of the Consolidated Group during the fiscal period covered by
such financial statements and that such review has not disclosed the
existence during or at the end of such fiscal period, of any Default or
Event of Default or, if any such Default or Event of Default existed or
exists, specifying the nature and period of existence thereof and what
action the Company has taken or is taking or proposes to take with respect
thereto; (b) demonstrating (if applicable, with computations in reasonable
detail) compliance by the Company with the provisions of SECTION 6.10; and
(c) analyzing the principal changes in the results of operations of the
Consolidated Group for such Fiscal Year or Fiscal

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Quarter from the results of operations of the Consolidated Group for the
immediately preceding Fiscal Year or Fiscal Quarter, if any;

(iv)  together with each delivery of financial statements pursuant to
subsection (ii) of this SECTION 5.1, a certificate by the Approved Auditor
stating (a) that their audit examination has included a review of the terms
of this Agreement as they relate to accounting matters and that such review
is sufficient to enable them to make the statement referred to in clause
(c) of this subsection (iv), (b) whether, in the course of their audit
examination, there has been disclosed the existence during the fiscal year
covered by such financial statements (and whether they have knowledge of
the existence as of the date of such accountants' certificate) of any
condition or event which constitutes a Default or Event of Default under
SECTION 6.10 and if during their audit examination there has been disclosed
(or if they have knowledge of) such a condition or event, specifying the
nature and period of existence thereof (it being understood, however, that
such accountants shall not be liable to any Person by reason of their
failure to obtain knowledge of any Default or Event of Default which would
not be obtained in the course of an audit conducted in accordance with
generally accepted auditing standards), and (c) that based on their annual
examination nothing came to their attention which causes them to believe
that the information contained in the certificate of the chief financial
officer of the Company delivered therewith pursuant to subsection (iii) of
this SECTION 5.1 is not correct or that the matters set forth in such
certificate are not stated in accordance with the terms of this Agreement;

(v)   promptly after receipt thereof by the Company, copies of all
management letters, if any, submitted to any member of the Consolidated
Group by independent public accountants or consultants in connection with
each annual, interim or special audit of the books of the Consolidated
Group;

(vi)  promptly after any Senior Officer obtains actual knowledge (a)
of any Default or Event of Default, (b) that any Holder has given notice to
the Company or taken any other action with respect to a claimed Default or
Event of Default under this Agreement, or (c) that any Person has given any
notice to the Company or any other member of the Consolidated Group or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection (iii) of SECTION 7.1, an
Officers' Certificate specifying the nature and period of existence of any
such Default or Event of Default, or specifying the notice given or action
taken by such Holder or Person and the nature of such claimed Default,
Event of Default, event or condition, and what action the Company or such
member has taken, is taking or proposes to take with respect thereto;

(vii) promptly, and in any event within 5 days after any Senior
Officer obtains knowledge of any of the following, a written notice setting
forth the nature thereof and the action, if any, that the Company or any of
their ERISA Affiliates proposes to take with respect thereto:

(a)  with respect to any Plan, any "reportable event" (as defined
in section 4043(b) of ERISA) for which notice thereof has not been
waived pursuant to regulations of the DOL or "prohibited transaction"
(as such term is defined in section 406 of ERISA or section 4975 of
the Code) in connection with any Plan or any trust created thereunder;
or

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(b)  the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, and any distress termination notice
delivered to the PBGC under section 4041 of ERISA in respect of any
Plan, and any determination of the PBGC in respect thereof;

(c)  the placement of any Multiemployer Plan in reorganization
status under Title IV of ERISA, any Multiemployer Plan becoming
"insolvent" (as such term is defined in section 4245 of ERISA) under
Title IV of ERISA, or the whole or partial withdrawal of the Company
or any of their ERISA Affiliates from any Multiemployer Plan and the
withdrawal liability incurred in connection therewith; or

(d)  any event, transaction or condition that could reasonably be
expected to result in the incurrence of any liability by the Company
or any of its ERISA Affiliates, or the imposition of any Lien on any
of the rights, properties or assets of the Company or any of their
ERISA Affiliates, pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;

(viii) (a) promptly after transmission thereof, copies of all
financial statements, proxy statements, notices and reports as the
Company shall send or make available to its stockholders or holders of
public debt and copies of all registration statements (with exhibits),
prospectuses and all periodic reports which it files with the SEC or
any stock exchange and of all press releases and other statements made
available generally by the Company to the public concerning material
developments and (b) promptly after receipt thereof, copies of any
reports, statements and notices the Company may receive in accordance
with Section 13(d) or 14(d) of the Exchange Act or the rules and
regulations of any stock exchange;

(ix)  promptly after the commencement of any action or proceeding
relating to any member of the Consolidated Group in any court or before any
Governmental Authority or arbitration board or tribunal as to which there
is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect, a notice specifying the nature and period of existence
thereof and what action such member has taken, is taking or proposes to
take with respect thereto; and

(x)   with reasonable promptness, such other information and data with
respect to any member of the Consolidated Group or relating to the ability
of the Company to perform its obligations under the Transaction Documents
as may from time to time be reasonably requested by any Holder.

5.2  INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of any Holder, provide to such Holder, and any Qualified Institutional Buyer
designated by such Holder, such financial and other information as such Holder
may reasonably determine to be necessary in order to permit compliance with the
information requirements of Rule 144A in connection with a resale or proposed
resale of any Security.

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5.3  INSPECTION OF PROPERTY. Each member of the Consolidated Group will
permit the representatives of any Holder to visit and inspect any of its
Properties, to examine its books of account, records, reports and other papers,
to make copies and extracts therefrom, and to discuss its affairs, finances and
accounts with its and each other member's officers, employees and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the finances and affairs of the Consolidated Group) all
at such reasonable times and as often as may be reasonably requested in advance.
At all times during which there exists a Default or Event of Default, any
reasonable out-of-pocket expenses incurred by the Holders in connection with
this SECTION 5.3 shall be paid by the Company in accordance with SECTION 12.1.

5.4  EXISTENCE, ETC. Except as otherwise specifically permitted by this
Agreement, each member of the Consolidated Group will at all times preserve and
keep in full force and effect its existence as a corporation or other legal
entity, and rights and franchises material to its business, and qualify and
maintain its qualification to do business and good standing in any jurisdiction
where the failure to do so individually or in the aggregate would have a
Material Adverse Effect.

5.5  PAYMENT OF TAXES AND CLAIMS.

(i)    Each member of the Consolidated Group will file all Tax returns
required to be filed in any jurisdiction and pay all Taxes shown to be due
and payable on such returns and all other Taxes imposed upon it or any of
its Properties or in respect of any of its franchises, business, income,
sales and services, or profits when the same become due and payable, but in
any event before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which have or
might become a Lien upon any of its properties or assets, provided, that no
such Tax or claim need be paid if (a) it is being actively contested in
good faith by appropriate proceedings and if adequate surety bonds or
reasonable reserves or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor, and (b) the failure to pay
such Tax or claim is not expected, if such contest were adversely
determined, to have a Material Adverse Effect.

(ii)   No member of the Consolidated Group will consent to or permit
the filing of or be a party to any consolidated income tax return on its
behalf or on behalf of any member of the Consolidated Group with any Person
(other than a consolidated return that includes solely the Consolidated
Group).

5.6  COMPLIANCE WITH LAWS, ETC. Each member of the Consolidated Group will
comply with all applicable laws, rules, regulations and orders of any
Governmental Authority to which it is subject, and obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its Properties or to the conduct of
its businesses, in each case to the extent necessary to reasonably ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, permits, franchises
and other governmental authorizations in the aggregate do not, and could not
reasonably be expected to, have a Material Adverse Effect.

5.7  MAINTENANCE OF PROPERTIES AND LEASES. Each member of the Consolidated
Group will maintain, in good repair and working order and condition (ordinary
wear and tear and 

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obsolescence excepted) all Properties used in the Consolidated Group's business
(except to the extent the failure to so maintain, repair and keep in good
working order does not, and is not reasonably expected to, have a Material
Adverse Effect), and from time to time make or cause to be made all appropriate
repairs, renewals, replacements, additions and improvements thereof as needed
and comply in all material respects with the provisions of all leases or
licenses under which it leases or licenses any such properties (except to the
extent the failure to do so does not, and is not reasonably expected to, have a
Material Adverse Effect).

5.8  INSURANCE. Each member of the Consolidated Group will maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business of such types and in such forms and amounts (including
deductibles, co-insurance and self-insurance if adequate reserves are maintained
with respect thereto) and against such risks as is reasonable and prudent in the
circumstances and as are customarily insured against by Persons of established
reputation engaged in the same or similar business and similarly situated.

5.9  USE OF PROCEEDS. The Company will use the proceeds it receives from
the sale of the Notes only for repayment of the Existing Senior Notes and for
working capital and not for any purpose which would violate any applicable law
or governmental regulation or which is otherwise prohibited under SECTION 8.10.

5.10 ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION.

5.10.1 Each member of the Consolidated Group will (a) obtain and maintain
all permits, licenses, and other authorizations that are required of it under
all Environmental Laws other than those which the failure to obtain or maintain
individually or in the aggregate do not, and could not reasonably be expected to
have, a Material Adverse Effect, and (b) comply with all terms and conditions of
all such permits, licenses, and authorizations and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables contained in all Environmental Laws or in any
regulation, ordinance or code applicable to it or in any, plan, order, decree,
judgment, injunction, notice, or demand letter issued, entered, promulgated, or
approved thereunder directly applicable to it, except to the extent of
noncompliance which, in the aggregate, does not, and could not reasonably be
expected to, have a Material Adverse Effect, and (c) operate all property owned
or leased by it such that no claims or obligations, including clean-up
obligations, which in the aggregate, have, or could reasonably be expected to
have, a Material Adverse Effect, shall arise under any Environmental Law, and if
any claim is made against it or any such obligation shall arise under any
Environmental Law, it shall at its own cost and expense, timely satisfy such
claim or obligation, provided no such claim or obligation need be satisfied for
so long as (1) it is being actively contested in good faith by appropriate
proceedings and (2) adequate surety bonds or such reserves or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor.

5.10.2 Each member of the Consolidated Group will defend, indemnify
and hold the Purchasers, each Holder and their respective affiliates, employees,
agents, officers and directors harmless from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature, known or unknown, contingent or otherwise, arising out
of, or in any way relating to the violation of, noncompliance with or liability
under any Environmental Laws applicable to any member of the Consolidated Group
(whether or not such noncompliance constitutes a violation of the other
covenants set 

-15-

forth in this SECTION 5.10) or any orders, requirements or demands of any
Governmental Authority related thereto, including, with limitation, reasonable
attorney's and consultants' fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing directly result from
the gross negligence or willful misconduct of the party seeking indemnification
therefor.

5.11 MAINTENANCE OF BOOKS AND RECORDS. Each member of the Consolidated
Group will: (i) keep proper records and books of account with respect to its
business activities in which proper entries are made in the ordinary course of
all dealings or transactions of or in relation to its business and affairs; (ii)
set up on its books adequate reserves with respect to all Taxes, assessments,
charges, levies and claims; and (iii) set up on its books reserves against
doubtful accounts receivable, advances and all other proper reserves (including
reserves for depreciation, obsolescence or amortization of its property). All
determinations pursuant to this SECTION 5.11 shall be made in accordance with,
or as required by, GAAP in order to fairly reflect all of the Consolidated
Group's financial transactions. Notwithstanding the foregoing, the members of
the Consolidated Group may make adjustments and changes in the manner in which
their books and records are kept, provided, that:

(a)  all such adjustments and changes shall be required or
permitted by GAAP, but need not conform with the prior accounting
practice of such member or its predecessor;

(b)  each Holder shall be given written notice of all such
changes or adjustments together with the financial statements required
by subsection (i) of SECTION 5.1 for the Fiscal Quarter in which such
change occurred, and together with the financial statements required
by subsection (ii) of SECTION 5.1, a year-end listing and description
of all such changes and adjustments and the effect thereof by the
chief financial officer of the Company;

(c)  the financial covenants and ratios set forth in SECTION 6.10
shall continue to be calculated without regard to such adjustments or
changes unless and until the Required Holders have consented thereto;
and

(d)  the Company may not change its Fiscal Year unless and until
the Required Holders have consented thereto, such consent not to be
unreasonably withheld, delayed or conditioned.

5.12 SUBSIDIARY GUARANTIES. The Company will cause each of its
Subsidiaries, other than Northeast Casualty, hereafter existing to guaranty the
obligations of the Company under this Agreement, the Notes and the other
Transaction Documents by executing and delivering to each Holder
contemporaneously with the organization or acquisition of such Subsidiary, a
Subsidiary Guaranty accompanied by copies of the organizational documents of
such Subsidiary and corporate resolutions (or equivalent) authorizing such
transaction, in each case certified as true and correct by an appropriate
officer of such Subsidiary and such opinions of counsel with respect thereto as
the Required Holders reasonably request.

5.13 BOARD VISITATION RIGHTS. While any of the Notes shall remain
outstanding, the Required Holders shall be entitled to designate one
representative who is reasonably acceptable to the Company who shall receive
prior notice of and shall have the right to attend or participate telephonically
in any meetings of the Board of Directors or any committee thereof.

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6.   NEGATIVE COVENANTS.

6.1  INDEBTEDNESS. After the Closing, no member of the Consolidated Group
will create, incur, assume or permit to exist (regardless of when incurred) any
Debt, except:

6.1.1 the Senior Indebtedness;

6.1.2 the Notes;

6.1.3 Debt existing on the date hereof which is set forth in SCHEDULE 6.1
and has been designated on such schedule as Debt that will remain outstanding
following the Closing (such Debt, "EXISTING DEBT"), and any extension, renewal,
refunding or replacement of any such Debt that does not increase the principal
amount thereof;

6.1.4 Debt of any Subsidiary Guarantor to the Company or any other
Subsidiary Guarantor except that the aggregate amount of all Debt of Northeast
Casualty to the other members of the Consolidated Group at any time shall not
exceed $500,000;

6.1.5 other Debt of the Consolidated Group (determined on a consolidated
basis without duplication in accordance with GAAP) consisting of Capitalized
Lease Obligations and/or secured by Liens permitted under SECTION 6.2.8, in an
aggregate principal amount at any time outstanding not in excess of $1,000,000
(which amount shall include Existing Debt consisting of Capitalized Lease
Obligations or Debt secured by Liens permitted under SECTION 6.2.8) at any one
time outstanding;

6.1.6 Subordinated Debt;

6.1.7 Guarantees permitted under SECTION 6.3; and

6.1.8 other unsecured Debt not expressly permitted under SECTIONS 6.1.1
through 6.1.6 in an aggregate amount not to exceed $1,000,000 at any time.

6.2   LIENS. No member of the Consolidated Group will create, incur, assume
or permit to exist any Lien on any Property now owned or hereafter acquired by
it, or assign or sell any income or revenues (including accounts receivable) or
rights in respect of any thereof, except (the following being called "PERMITTED
LIENS"):

6.2.1 Liens created under the Bank Loan Documents and any Refinancing Debt
Documents;

6.2.2 any Lien on any Property existing on the date hereof and set forth in
SCHEDULE 6.1 provided that (i) after the Closing Date such Lien is not extended
to any other property or asset and (ii) such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;

6.2.3 Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet delinquent or (in the case of property taxes and assessments not
exceeding $200,000 in the aggregate more than 90 days overdue) which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Consolidated Group in
accordance with GAAP;

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6.2.4 landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens, and vendors' Liens imposed by statute or common
law not securing the repayment of Debt, arising in the ordinary course of
business which are not overdue for a period of more than 60 days or which are
being contested in good faith and by appropriate proceedings and Liens securing
judgments (including, without limitation, pre-judgment attachments) but only to
the extent for an amount and for a period not resulting in an Event of Default
under SECTION 7.1(XIII);

6.2.5 pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation and pledges or deposits to
secure the performance of bids, tenders, trade contracts (other than for
borrowed money), leases (other than capital leases), utility purchase
obligations, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business;

6.2.6 easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of Property or
minor imperfections in title thereto which, in the aggregate, are not material
in amount, and which do not, in the aggregate, materially detract from the value
of the Property or materially interfere with the ordinary conduct of the
business of any member of the Consolidated Group;

6.2.7 Liens consisting of bankers' liens and rights of setoff, in each
case, arising by operation of law, and Liens on documents presented in letter of
credit drawings; and

6.2.8 Liens on fixed or capital assets, including real or personal
property, acquired, constructed or improved by a member of the Consolidated
Group after the Closing Date, provided that (A) such Liens secure solely Debt
(including Capitalized Lease Obligations) permitted under SECTION 6.1.5, (B)
such Liens and the Debt secured thereby are incurred prior to or within 90 days
after such acquisition or the completion of such construction or improvement or
were in effect at the time such member acquired such fixed or capital asset, (C)
the Debt secured thereby does not exceed the cost of acquiring, constructing or
improving such fixed or capital assets, and (D) such security interests shall
not apply to any other Property of any other member of the Consolidated Group.

6.3  CONTINGENT LIABILITIES. No member of the Consolidated Group will
Guarantee the Debt or other obligations of any Person, or Guarantee the payment
of dividends or other distributions upon the stock of, or the earnings of, any
Person, except:

6.3.1 endorsements of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;

6.3.2 Guarantees of obligations of a member of the Consolidated Group to
the extent constituting Debt incurred under the Bank Loan Agreement or the
Transaction Documents (provided that the other members of the Consolidated Group
shall not guarantee, in the aggregate, more than $500,000 of Debt of Northeast
Casualty at any time);

6.3.3 Guarantees and letters of credit in effect on the date hereof which
are disclosed in SCHEDULE 6.1, and any replacements thereof in amounts not
exceeding such Guarantees; and

-18-

6.3.4 obligations in respect of letters of credit issued under the Bank
Loan Agreement.

6.4  FUNDAMENTAL CHANGES; ASSET SALES.

6.4.1 No member of the Consolidated Group will enter into any transaction
of merger or consolidation or amalgamation, or liquidate, wind up or dissolve
(or suffer any liquidation or dissolution). No member of the Consolidated Group
will acquire any business or Property from, or capital stock of, or other equity
interests in, or be a party to any acquisition of, any Person except for
purchases of Property to be used in the ordinary course of business, Investments
permitted under SECTION 6.5 and Capital Expenditures. No member of the
Consolidated Group will form or acquire any Subsidiary after the Closing Date
unless such Subsidiary has entered into a Subsidiary Guaranty pursuant to
SECTION 5.12.

6.4.2 No member of the Consolidated Group will convey, sell, lease,
transfer or otherwise dispose (including any Disposition) of, in one transaction
or a series of transactions, any part of its business or Property, whether now
owned or hereafter acquired, including, without limitation, receivables and
leasehold interests, but excluding obsolete or worn-out property (including
leasehold interests), tools or equipment no longer used or useful in its
business and any inventory or other property sold or disposed of in the ordinary
course of business and on ordinary business terms, provided that each may
sublease real property to the extent such sublease would not interfere with the
operation of the business of any member of the Consolidated Group.

6.4.3 Notwithstanding the foregoing provisions of this SECTION 6.4:

(i)   any Subsidiary (other than Northeast Casualty) may be merged or
combined with or into any Subsidiary Guarantor or the Company; provided
that if any such transaction shall be between a Subsidiary and the Company
or a Wholly-Owned Subsidiary, the Company or such Wholly-Owned Subsidiary,
as applicable, shall be the continuing or surviving corporation;

(ii)  any Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its Property (upon voluntary liquidation or otherwise) to the
Company or a Wholly-Owned Subsidiary (provided that no member of the
Consolidated Group shall transfer any Property to Northeast Casualty other
than Debt permitted under SECTION 6.1.4, Guarantees permitted under SECTION
6.3.2 and Investments permitted under SECTION 6.5.1);

(iii) any Wholly-Owned Subsidiary (other than Northeast Casualty) may
be merged or combined with any other Person not a Subsidiary if (a) such
Wholly-Owned Subsidiary is the surviving entity, (b) immediately after
giving effect to such transaction, such Wholly-Owned Subsidiary will not be
liable with respect to any Debt, or its property subject to any Lien, which
it could not incur or become liable for or allow its property to be or
become subject to, under this Agreement on the date of such merger or
combination, (c) after giving effect to such merger or combination the
Consolidated Group would, if such merger or combination occurred on the
last day of the most recently ended Fiscal Quarter, have been in compliance
with its financial covenants set forth in SECTION 6.10, and (d) immediately
before and immediately after giving effect to such merger or combination,
no Default or Event of Default shall exist; and

-19-

(iv)  the capital stock of any Subsidiary may be sold, transferred or
otherwise disposed of to the Company or a Wholly-Owned Subsidiary (other
than Northeast Casualty).

6.5  INVESTMENTS; INTEREST RATE PROTECTION PRODUCTS.

6.5.1 No member of the Consolidated Group will make or permit to remain
outstanding any Investment, other than:

(i)   Investments consisting of Guarantees permitted by SECTION 6.3.3
and Debt permitted by SECTION 6.1; loans and advances by the Company to any
Wholly-Owned Subsidiary or by any Subsidiary to the Company or another
wholly-owned Subsidiary in the ordinary course of business; and capital
contributions by the Company to any Wholly-Owned Subsidiary or by any
Wholly-Owned Subsidiary to a Wholly-Owned Subsidiary; provided that the
aggregate amount of all loans, advances, Guaranties and capital
contributions made by the Consolidated Group to Northeast Casualty after
the Closing Date shall not exceed $500,000;

(ii)  Permitted Investments; and

(iii) Checking and deposit accounts with banks used in the ordinary
course of business.

6.5.2 No member of the Consolidated Group will enter into any Interest Rate
Protection Product, other than Interest Rate Protection Products required to be
entered into under the terms of the Bank Loan Agreement and such other Interest
Rate Protection Products entered into in the ordinary course of business to
hedge or mitigate risks to which the Consolidated Group is exposed in the normal
conduct of its businesses or the management of its liabilities.

6.6  RESTRICTED JUNIOR PAYMENTS. No member of the Consolidated Group will
declare or make any Restricted Junior Payment at any time; provided, however,
(i) that any Subsidiary Guarantor may pay dividends to the Company or any other
Subsidiary Guarantor which is a Wholly-Owned Subsidiary (except that no
dividends shall be paid to Northeast Casualty); (ii) a member of the
Consolidated Group may make regularly scheduled payments of principal and
interest on Subordinated Debt if such payments are not otherwise prohibited
under the terms under which such Subordinated Debt has been subordinated to the
Notes; and (iii) so long as no Default shall have occurred and be continuing and
no Default shall be caused thereby, the Company may make required quarterly
dividends payable on the Outstanding Preferred Stock.

6.7  TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by this
Agreement, no member of the Consolidated Group will directly or indirectly (a)
make any Investment in an Affiliate; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate
with an Affiliate, or purchase or acquire Property from an Affiliate; or (d)
enter into any other transaction directly or indirectly with or for the benefit
of an Affiliate (including, without limitation, guarantees and assumptions of
obligations of an Affiliate); provided that:

(i)   any Affiliate who is an individual may serve as a director,
officer, employee or consultant of the Company or any Subsidiary, receive
reasonable 

-20-

compensation for his or her services in such capacity and benefit from
Permitted Investments to the extent specified in clause (v) of the
definition thereof;

(ii)  each may engage in and continue the transactions with or for the
benefit of Affiliates which are referred to in SECTION 6.6 (but only to the
extent specified in such section); and

(iii) each may engage in transactions with Affiliates in the ordinary
course of business on terms which are no less favorable to it those likely
to be obtained in an arms' length transaction between it and a non-
Affiliated third party.

6.8  RESTRICTIVE AGREEMENTS. No member of the Consolidated Group will,
directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement (other than the Transaction Documents and the Bank Loan
Documents) that prohibits, restricts or imposes any condition upon (a) the
ability of any member of the Consolidated Group to pay dividends or other
distributions with respect to any shares of their Equity Interests or to make or
repay loans or advances to any other member of the Consolidated Group or to
Guarantee Debt of any other member of the Consolidated Group; provided that (i)
the foregoing shall not apply to restrictions and conditions imposed by law,
(ii) the foregoing shall not apply to restrictions and conditions existing on
the date hereof identified on SCHEDULE 8.8 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of
stock or Property of a Subsidiary pending such sale, provided such restrictions
and conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder.

6.9  SALE-LEASEBACK TRANSACTIONS; BILL-AND-HOLD SALES, ETC.

6.9.1  No member of the Consolidated Group will, directly or indirectly,
enter into any arrangements with any Person whereby such entity shall sell or
transfer (or request another Person to purchase) any property, real, personal or
mixed, used or useful in its business, whether now owned or hereafter acquired,
and thereafter rent or lease such property from any Person.

6.9.2  No member of the Consolidated Group will make any sale to any
customer on a bill-and-hold, guaranteed sale, sale and return, sale-on-approval,
or consignment basis, or any sale on a repurchase or return basis.

6.10 CERTAIN FINANCIAL COVENANTS. All of the following covenants shall be
measured at the end of each Fiscal Quarter, based on the four immediately
preceding Fiscal Quarters.

6.10.1 FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage Ratio as of
the end of each Fiscal Quarter shall not be less than 1.10 to 1.

6.10.2 TANGIBLE CAPITAL BASE. The Tangible Capital Base as of the end of
each Fiscal Quarter set forth below shall not be less than the amount set forth
opposite such Fiscal Quarter below:

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Fiscal Quarter             Minimum Tangible Capital Base Amount
-------------------------------   -------------------------------------
Fiscal Quarter ending 3/31/01                    $27,000,000
Fiscal Quarter ending 6/30/01                    $27,000,000
Fiscal Quarter ending 9/30/01                    $30,500,000
Fiscal Quarter ending 12/31/01                   $33,000,000
Each Fiscal Quarter thereafter                   $35,500,000

6.10.3 TOTAL LIABILITIES TO TANGIBLE CAPITAL BASE RATIO. The Total
Liabilities to Tangible Capital Base Ratio as of the end of each Fiscal Quarter
set forth below shall not exceed the ratio set forth opposite such Fiscal
Quarter below:

Fiscal Quarter                               Ratio
----------------------------------------------------------------     ---------
Fiscal Quarters ending 6/30/01, 9/30/01 and 12/31/01                 3.00 to 1
Fiscal Quarter ending 3/31/02 and each Fiscal Quarter thereafter     2.75 to 1

6.10.4 CAPITAL EXPENDITURES. Neither the Company nor any Subsidiary
Guarantor shall make any Capital Expenditures (including, without limitation,
incurring any Capitalized Lease Obligations) during any Fiscal Year which, in
the aggregate in any Fiscal Year, exceed 20% of the Tangible Capital Base as of
the end of the Fiscal Year then most recently ended.

6.10.5 MINIMUM EBITDA. EBITDA as at the end of each Fiscal Quarter shall be
not less than $18,000,000.

6.10.6 PRIORITY DEBT TO EBITDA. The Company shall maintain, on a
consolidated basis, as of the last day of each fiscal quarter, a ratio of:
(i) Priority Debt as of such date; to (ii) EBITDA of not more than 2.25 to 1.00.

6.11 LINES OF BUSINESS. No member of the Consolidated Group will engage to
any substantial extent in any line or lines of business activity other than (i)
the types of businesses engaged in by the members of the Consolidated Group as
of the date hereof and businesses substantially related thereto, and (ii) such
other lines of business as may be consented to by the Required Holders.

6.12 OTHER INDEBTEDNESS. No member of the Consolidated Group will purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount owing in respect of any
Subordinated Debt, except to the extent permitted by SECTION 6.6.

6.13 MODIFICATIONS OF CERTAIN DOCUMENTS. No member of the Consolidated
Group will consent to any modification, supplement or waiver of any of the
provisions of any documents or agreements evidencing or governing any
Subordinated Debt. Without limiting the 

-22-

generality of the foregoing, no Subsidiary Guarantor will Guarantee any
Subordinated Debt without the prior consent of the Required Holders.

6.14 AMENDMENTS TO SENIOR INDEBTEDNESS DOCUMENTS. No member of the
Consolidated Group will enter into or amend any Bank Debt Document or enter into
any agreement governing, evidencing or otherwise executed in connection with
Refinancing Debt (a "REFINANCING DEBT DOCUMENT"), if such amendment or the terms
of such Bank Debt Document or Refinancing Debt Document would (i) directly
prohibit the Company or any Subsidiary Guarantor from making payments in respect
of the Notes in any manner which is not already specifically prohibited in the
Subordination Agreement; (ii) cause the terms and conditions of any financial
covenant or defined term used therein in any Bank Loan Document or in any
Refinancing Debt Document to be less favorable to the Consolidated Group than
those set forth in Section 9.13 through Section 9.14B of the Bank Loan Agreement
and the defined terms used therein as of the date hereof or provide for new
financial covenants or defined terms which do not correspond to the financial
covenants set forth in Section 9.13 through 9.14B of the Bank Loan Agreement and
the defined terms used therein as of the date hereof, unless prior to such
amendment or agreement taking effect, the Holders are given written notice
describing such less favorable or different terms and at the option of the
Required Holders, exercised within five (5) Business Days of the Holders'
receipt of the notice describing such less favorable or different terms,
conforming amendments to this Agreement are made contemporaneously with such
amendment or the execution of such agreement; (iii) extend the maturity of any
Bank Debt or Refinancing Debt to a date beyond April 30, 2008; (iv) permit the
maximum principal amount of the Senior Indebtedness to exceed at any time
$65,000,000; or (v) amend the definition of "Collateral" as set forth in the
Bank Loan Agreement as in effect as of the date of this Agreement except as may
be necessary to conform to amendments to the Uniform Commercial Code.

6.15 COMPLIANCE WITH ERISA.  The Company and its ERISA Affiliates will not:

(i)    engage in any transaction in connection with which the Company
or any ERISA Affiliate could be subject to either a civil penalty assessed
pursuant to section 502(i) of ERISA or a tax imposed by section 4975 of the
Code, terminate or withdraw from any Plan (other than a Multiemployer Plan)
in a manner, or take any other action with respect to any such Plan
(including, without limitation, a substantial cessation of business
operations or an amendment of a Plan within the meaning of section 4041(e)
of ERISA), which could reasonably be expected to result in any liability to
the PBGC, to a Plan, to a Plan participant, to the Department of Labor or
to a trustee appointed under section 4042(b) or (c) of ERISA, incur any
liability to the PBGC or a Plan on account of a withdrawal from or a
termination of a Plan under section 4063 or 4064 of ERISA, incur any
liability for post-retirement benefits under any and all welfare benefit
plans (as defined in section 3(1) of ERISA), fail to make full payment when
due of all amounts which, under the provisions of any Plan or applicable
law, it is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency, whether or not waived, with respect to any
Plan (other than a Multiemployer Plan) other than such penalties, taxes,
liabilities, failures or deficiencies which individually and in the
aggregate do not, and are not reasonably e xpected to have in the future, a
Material Adverse Effect;

(ii)   at any time permit the termination of any defined benefit
pension plan intended to be qualified under section 401(a) and section
501(a) of the Code unless such plan is funded so that the value of all
benefit liabilities upon the termination date 

-23-

does not exceed the then current value of all assets in such plan by an
amount the payment of which would have a Material Adverse Effect; or

(iii)  at any time permit the aggregate complete or partial withdrawal
liability under Title IV of ERISA with respect to Multiemployer Plans
incurred by the Company and any ERISA Affiliate, or the aggregate liability
under Title IV of ERISA incurred by the Consolidated Group and any ERISA
Affiliate, to exceed an amount the payment of which would have a Material
Adverse Effect.

For the purposes of subsection (iii) of this SECTION 6.15, the amount of the
withdrawal liability of the Company and its ERISA Affiliates at any date shall
be the aggregate present value of the amounts claimed to have been incurred less
any portion thereof as to which the Company reasonably believes, after
appropriate consideration of possible adjustments arising under subtitle E of
Title IV of ERISA, that no member of the Consolidated Group nor any ERISA
Affiliate will have any liability, provided, that the Company shall promptly
obtain written advice from independent actuarial consultants supporting such
determination.  The Company will (x) once in each calendar year, beginning in
2001, request and obtain a current statement of withdrawal liability from each
Multiemployer Plan to which any member of the Consolidated Group or any ERISA
Affiliate is or has been obligated to contribute and (y) transmit a copy of such
statement to each Holder, within 15 days after the Company receives the same.
As used in this SECTION 6.15, the term "accumulated funding deficiency" has the
meaning specified in section 302 of ERISA and section 412 of the Code, the terms
"present value" and "current value" have the meanings specified in section 3 of
ERISA, the term "benefit liabilities" has the meaning specified in section
4001(a)(16) of ERISA and the term "amount of unfunded liabilities" has the
meaning specified in section 4001(18) of ERISA.

7.   EVENTS OF DEFAULT.

7.1  EVENTS OF DEFAULT.  If any of the following events shall occur or
conditions shall exist and be continuing for any reason whatsoever, and whether
such occurrence or condition shall be voluntary or involuntary or come about or
be effected by operation of law or otherwise, such occurrence or condition and
continuance shall constitute an "EVENT OF DEFAULT":

(i)    the Company defaults in the payment of any principal or Make
Whole Amount on any of the Notes when due; or

(ii)   the Company defaults in the payment of any interest on any of
the Notes when due and such default continues for 3 days; or

(iii)  any default by the Company or any member of the Consolidated
Group under any Debt in favor of any Person other than the Notes, in any
case in an amount in excess of $500,000.00, which default continues
unwaived for more than the applicable cure period, if any, with respect
thereto, or any default by the Company or any member of the Consolidated
Group under any material contract, lease, license or other obligation to
any Person pursuant to the Transaction Documents, which default continues
unwaived for more than the applicable cure period, if any, with respect
thereto; or

(iv)   any representation or warranty made by the Company or any other
member of the Consolidated Group in any Transaction Document or in any
writing 

-24-

furnished pursuant to a Transaction Document shall be false, incorrect or
misleading in any material respect; or

(v)    the Company or any other member of the Consolidated Group fails
to perform or observe or comply with any covenant contained in SECTION 5.1,
5.9, 6.1 through 6.14 inclusive; or

(vi)   the Company or any other member of the Consolidated Group fails
to perform or observe or comply with any covenant set forth in SECTION 5.2,
5.4, 5.5, 5.6, 5.10, 5.12, 5.13 or 6.15 and such failure shall not be
remedied within 30 days after the earlier of (x) actual knowledge by a
Senior Officer or (y) notice thereof to the Company from any Holder; or

(vii)  any member of the Consolidated Group fails to perform or
observe or comply with any other agreement, term or condition of any of the
Transaction Documents (other than as specified in clauses (i), (ii), (v)
and (vi)) and such failure shall not be remedied within 30 days from the
date of notice thereof to the Company from any Holder; or

(viii) (a) any Subsidiary Guaranty shall cease to be in full force and
effect or shall be declared by a court or other Governmental Authority of
competent jurisdiction to be void, voidable or unenforceable against such
Subsidiary or (b) the validity or enforceability of any Subsidiary Guaranty
against such Subsidiary shall be contested by such Subsidiary, the Company
or any of their Affiliates, or (c) any Subsidiary, the Company or any of
their Affiliates shall deny that such Subsidiary has any further liability
or obligation under its Subsidiary Guaranty; or

(ix)   any member of the Consolidated Group (other than Northeast
Casualty) voluntarily or involuntarily suspends or discontinues operation
or liquidates all or substantially all of its assets (except, in the case
of the voluntary suspension of operation or the liquidation of a
Subsidiary, if the Company or a Wholly-Owned Subsidiary continues the
business or such liquidation is in favor of the Company or a Wholly-Owned
Subsidiary); or

(x)    any member of the Consolidated Group is generally not paying
its debts as such debts become due or admits in writing that it is not able
to pay its debts as such debts become due or otherwise becomes insolvent;
or files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction; or makes an assignment for the benefit
of its creditors; or consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property; or takes corporate action
for the purpose of any of the foregoing; or

(xi)   a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation, dissolution or winding up of
any member of the Consolidated Group or for the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to any
member of the Consolidated Group or with respect to any substantial part of
any member's Property to take advantage of any bankruptcy or insolvency law
of any jurisdiction is filed against any member of the 

-25-

Consolidated Group without its consent or other acquiescence and such
petition is not dismissed within 60 days or any holder of a Lien on all or
substantially all of the assets of the Company or any other member of the
Consolidated Group take any action to foreclose on such Lien and such
action remains unstayed and in effect for 60 days; or

(xii)  a Governmental Authority enters an order appointing a
custodian, receiver, trustee or other officer with similar powers with
respect to any member of the Consolidated Group or with respect to any
substantial part of their Property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up
or liquidation of any member of the Consolidated Group without its consent
and such order remains unstayed and in effect for 30 days; or

(xiii) a final judgment or judgments for the payment of money
aggregating in excess of $2,000,000 is rendered against one or more members
of the Consolidated Group and within 60 days of the entry thereof such
judgment or judgments are not bonded or discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment or judgments are not discharged.

7.2  ACCELERATION ON EVENT OF DEFAULT.

(i)    AUTOMATIC. If any Event of Default specified in subsections
(x), (xi) or (xii) of this SECTION 7.1 shall exist, all of the Notes at the
time outstanding shall automatically become immediately due and payable in
full at 100% of the outstanding principal amount thereof together with
interest accrued thereon without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.

(ii)   BY ACTION OF HOLDERS. If any Event of Default other than those
specified in subsections (x), (xi) or (xii) of SECTION 7.1 shall exist, the
Required Holders shall have the right to declare all the Notes then
outstanding to be immediately due and payable in full at 100% of the
outstanding principal amount thereof together with all interest accrued
thereon and the Make Whole Amount, without any presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived.

(iii)  ACCELERATION ON PAYMENT DEFAULT. During the existence of an
Event of Default described in subsection (i) of SECTION 7.1 and
irrespective of whether the Notes then outstanding shall have become due
and payable pursuant to subsections (i) or (ii) of this SECTION 7.2, any
Holder who or which shall have not consented to any waiver with respect to
such Event of Default may, at its option, declare its Notes to be
immediately due and payable in full at 100% of the outstanding principal
amount thereof together with all interest accrued thereon and the Make
Whole Amount, without any presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived.

7.3  RESCISSION OF ACCELERATION. At any time after any Note shall have been
declared immediately due and payable pursuant to subsection (ii) or (iii) of
SECTION 7.2, the Holders of Notes representing not less than two-thirds of the
aggregate outstanding principal amount of the Notes may, by written notice to
the Company, rescind and annul any such declaration if (i) the Company shall
have paid all interest, principal and Make Whole Amount, 

-26-

payable with respect to any such Note which have become due otherwise than by
reason of such declaration, including any interest on any such overdue interest,
principal and Make Whole Amount, at the amount specified therein or otherwise in
this Agreement, (ii) the Company shall not have paid any amounts which have
become due solely by reason of such declaration, (iii) all Events of Default and
Defaults, other than non-payment of amounts which have become due solely by
reason of such declaration, shall have been cured or waived pursuant to SECTION
12.2, and (iv) no judgment or decree shall have been entered for the payment of
any amounts due pursuant to the Transaction Documents solely by reason of such
declaration. Any such action by the Holders of Notes representing not less than
two-thirds of the aggregate outstanding principal amount of the Notes shall be
binding on all Holders of all such Notes. No such recision or annulment shall
extend to or affect any subsequent Default or Event of Default or impair any
right arising therefrom.

7.4  NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to subsection (ii) or (iii) of
SECTION 7.2, or any such declaration shall be rescinded and annulled pursuant to
SECTION 7.3, the Company shall forthwith give written notice thereof to each
other Holder at the time outstanding, provided, the failure to give such notice
shall not affect the validity of any such declaration, recision or annulment.

7.5  OTHER REMEDIES, NO WAIVERS OR ELECTION OF REMEDIES. If any one or more
Events of Default shall occur and be continuing, irrespective of whether any
Notes have become or have been declared immediately due and payable, any Holder
may proceed to protect and enforce its rights under the Transaction Documents by
exercising such remedies as are available to such Holder in respect thereof
under applicable law, either by suit in equity or by action at law or by any
other appropriate proceeding, whether for specific performance of any covenant
or other agreement contained in any Transaction Document or in aid of the
exercise of any power granted in a Transaction Document, in such order as the
Holder may determine in its sole discretion; provided, that the maturity of a
Holder's Notes may be accelerated only in accordance with SECTION 7.2. No remedy
conferred in a Transaction Document upon any Holder is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy conferred herein or now or hereafter
existing at law or in equity or by statute or otherwise. No course of dealing or
failure or delay by any Holder in exercising any right, power or remedy under a
Transaction Document or any other document executed in connection therewith
shall operate as a waiver thereof or otherwise prejudice such Holder's rights,
powers or remedies, nor shall any single or partial exercise of any such right
or remedy preclude any other right or remedy hereunder or thereunder.

8.   REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
that:

8.1  ORGANIZATION, ETC.

(i)    The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts
and is qualified and in good standing in each jurisdiction in which it is
required to be qualified to do business (other than those jurisdictions in
which the failure to be so qualified, individually and in aggregate, could
not reasonably be expected to have a Material Adverse Effect) and has all
requisite power and authority to own, operate and lease its property and to
carry on 

-27-

its business as now being conducted. The Company has all requisite power
and authority to execute, deliver and perform each Transaction Document to
which it is a party and to issue and sell the Securities to be issued by
it. SCHEDULE 8.1 identifies the Company's and each Subsidiary's correct
legal name, the jurisdiction of organization, the jurisdictions in which
qualified to do business and its directors and officers.

(ii)   Each Transaction Document has been duly authorized by all
necessary action on the part of the Company to the extent a party thereto
and has been (or will have been as of the Closing Date) duly executed and
delivered by authorized officers of the Company and constitutes (or will
constitute upon execution thereof) its legal, valid and binding
obligations, enforceable against the Company as applicable in accordance
with their respective terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).

8.2  STOCK OWNERSHIP.

(i)    The authorized capital stock of the Company will consist, as of
the Closing, of (subject to exercises of stock options outstanding as of
the date of this Agreement): (a) 20,000,000 shares of Common Stock, of
which 11,395,988 shares are issued and 11,395,988 shares are outstanding,
and 2,640,227 shares are reserved for issuance to employees pursuant to the
plans described in SCHEDULE 8.2; (b) 2,000,000 shares of Series A
Convertible Preferred Stock, $.01 par value, of which none are issued or
outstanding; and (c) 156,416 shares of Series B Convertible Preferred
Stock, $.01 par value, of which 112,000 shares are issued and outstanding.
All such shares outstanding on the date hereof have been duly authorized
and validly issued and are fully paid and nonassessable.

(ii)   Except as set forth in SCHEDULE 8.2, the Company has no
outstanding rights, options, warrants or other agreements which would
require it to issue any additional Equity Interests after the Closing Date.

8.3  FINANCIAL STATEMENTS. The Company has furnished the Purchasers with
the Consolidated Group's combined consolidated audited balance sheets dated as
of December 31, 1998, December 31, 1999 and December 31, 2000 and the related
statements of income, retained earnings and cash flows for the 12 months ended
on such dates (which in the case of the 2000 financial statements, are in draft
form) (collectively, the "AUDITED FINANCIAL STATEMENTS") and the unaudited
combined, consolidated balance sheet of the Consolidated Group as of February
28, 2001 and the related statements of income and cash flows for the 2 months
ended on such date (the "UNAUDITED FINANCIAL STATEMENT" and collectively with
the Audited Financial Statements, the "FINANCIAL STATEMENTS"). The Audited
Financial Statements fairly present in all material respects the combined,
consolidated financial condition of the Consolidated Group and the results of
its operations and cash flows for the respective periods specified thereby and
the Unaudited Financial Statement fairly presents in all material respects the
assets and liabilities of the Consolidated Group as of the date thereof. The
Financial Statements have been prepared in accordance with GAAP, consistently
applied through the periods involved except as set forth in the notes thereto.
Except as disclosed in the Unaudited Financial Statement, since January 1, 2001
there have been no developments or changes affecting the business, assets,
liabilities, condition (financial or otherwise) of the Consolidated 

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Group which in the aggregate have had, or could reasonably be expected to have,
a Material Adverse Effect.

8.4  ACTIONS PENDING. Except as set forth in SCHEDULE 8.4, there are no
actions, suits, investigations or proceedings pending, or to the knowledge of
the Company threatened, against any member of the Consolidated Group or in
connection with or affecting any of its Properties or rights, by or before any
court, arbitrator or administrative body or other Governmental Authority.

8.5  TITLE TO PROPERTIES.

(i)    Each member of the Consolidated Group has, or will have
immediately following the Closing, good and marketable title to all of its
assets, subject to no Lien of any kind except Permitted Liens.

(ii)   Each member of the Consolidated Group enjoys peaceful and
undisturbed possession under all leases necessary in any material respect
for the conduct of its business as now conducted and all such leases are
valid and subsisting and are in full force and effect immediately following
the Closing;

(iii)  Each member of the Consolidated Group owns, has or enjoys the
right to use (under agreements or licenses which are in full force and
effect) all Intellectual Property necessary for it to conduct its business
as currently conducted, without any known conflict with the rights of
others. None of its products infringes in any material respect upon any
Intellectual Property owned by any other Person; and

(iv)   To the knowledge of the Company, there is no violation by any
Person of any member of the Consolidated Group with respect to any
Intellectual Property owned or used by such member.

8.6  AFFILIATES AND INVESTMENTS IN OTHERS. The Consolidated Group has no
Investments in any Person other than Investments permitted under SECTION 6.5.1.

8.7  TAX RETURNS AND PAYMENTS. Except as set forth on SCHEDULE 8.7, each
member of the Consolidated Group has filed all Federal, State, local and foreign
income tax returns, franchise tax returns, real and personal property tax
returns and other tax returns required by law to be filed by or on its behalf,
or with respect to its properties or assets, and all Taxes, assessments and
other governmental charges imposed upon it or any of its Properties, income or
franchises which are due and payable have been paid, other than those presently
payable without penalty or interest, those presently being actively contested in
good faith and for which such reserves or other appropriate provisions, if any,
as may be required by GAAP have been made and those, the non-payment or non-
filing of which, in the aggregate, do not, and could not reasonably be expected
to, have a Material Adverse Effect. Except as set forth on SCHEDULE 8.7, the
charges, accruals and reserves on the books of the Consolidated Group in respect
of any Taxes for all fiscal periods are adequate and the Company knows of no
unpaid assessment for additional Taxes for any period or any basis for any such
assessment that in the aggregate could reasonably be expected to have a Material
Adverse Effect. No charges or Taxes will be imposed by any Governmental
Authority on any member of the Consolidated Group on the execution or delivery
of the Transaction Documents and the issue and sale of the Securities.

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8.8  CONFLICTING AGREEMENTS AND OTHER MATTERS.

(i)    No member of the Consolidated Group is in violation of any term
of its organizational documents, or in violation or breach of any term of
any agreement (including its certificate of formation and operating
agreement), instrument, order, judgment, decree, statute, law, rule or
regulation to which it is a party or to which it or any of its Property is
subject other than defaults or violations, which in the aggregate, do not
have and could not reasonably be expected to have, a Material Adverse
Effect.

(ii)   The execution and delivery of the Bank Loan Documents and the
Transaction Documents, and the consummation of the transactions
contemplated thereby do not and will not conflict with the provisions of,
or constitute a default under, or result in any violation of, or result in
the creation of any Lien upon any of the Properties of any member of the
Consolidated Group (other than Liens created pursuant to the terms of the
Bank Loan Documents), pursuant to its organizational documents, any award
of any arbitrator or any agreement, instrument, order, judgment, decree,
statute, law, rule or regulation to which it is subject.

(iii)  Other than the Bank Loan Documents, the Transaction Documents
and as described in SCHEDULE 8.8, no member of the Consolidated Group is a
party to, or otherwise subject to any provision contained in, any
instrument evidencing Debt, any agreement relating thereto or any other
contract or agreement (including its charter and bylaws) which limits the
amount of, or otherwise imposes restrictions on the incurring of, Debt by
any member of the Consolidated Group.

8.9  OFFERING OF SECURITIES. Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Securities for sale to, or
solicited any offers to buy any of the Securities from, or otherwise approached
or negotiated with respect thereto with, any Person other than the Purchasers,
each of which has been offered the Securities at a private sale for investment.
Neither the Company nor any agent acting on its behalf has taken or will take
any action which would subject the issuance or sale of the Securities to the
provisions of Section 5 of the Securities Act or to the registration provisions
of any securities or Blue Sky law of any applicable jurisdiction. As of the
Closing Date, the Securities will not be of the same class as securities of the
Company listed on a national securities exchange registered under Section 6 of
the Exchange Act or quoted in a U.S. automated inter-dealer quotation system,
within the meaning of Rule 144A.

8.10 REGULATION U, ETC. The Company does not own or have any present
intention of acquiring any "margin stock" as defined in Regulation U (12 CFR
Part 221) of the Board of Governors of the Federal Reserve System ("MARGIN
STOCK"). None of the proceeds of the sale of the Securities will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
Notes to violate Regulation T, Regulation U, Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or hereafter in effect.

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8.11 ERISA.

(i)    The Company and each ERISA Affiliate has operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and are not
expected to result in a Material Adverse Effect. Neither the Company nor
any ERISA Affiliate has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company
or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in
either case pursuant to Title I or IV of ERISA or to such penalty or excise
tax provisions or to section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens that in the aggregate could not reasonably be expected
to have a Material Adverse Effect.

(ii)   The present value of the aggregate benefit liabilities under
each of the Plans that is subject to Title IV of ERISA (other than
Multiemployer Plans), determined as of the end of such Plan's most recently
ended plan year on the basis of the actuarial assumptions specified for
funding purposes in such Plan's most recent actuarial valuation report, did
not exceed the aggregate current value of the assets of such Plan allocable
to such benefit liabilities. The term "benefit liabilities" has the meaning
specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.

(iii)  The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that in the aggregate could reasonably be expected to
have a Material Adverse Effect.

(iv)   The expected postretirement benefit obligation (determined as
of the last day of the Company's most recently ended Fiscal Year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Consolidated Group could not
reasonably be expected to have a Material Adverse Effect.

(v)    The execution and delivery of the Transaction Documents, the
issuance and sale of the Securities and the consummation of the
transactions contemplated by the Transaction Documents will not involve a
transaction which is subject to the prohibitions of section 406 of ERISA or
in connection with which a Tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation in the preceding sentence
is made in reliance upon and subject to the accuracy of the Purchasers'
representations in subsection (ii) of SECTION 9 as to the source of the
funds to be used to pay the purchase price of the Securities.

8.12 GOVERNMENTAL AND OTHER CONSENTS. Except as set forth in SCHEDULE 8.12,
neither the nature of any member of the Consolidated Group nor any of their
businesses or Properties, nor any relationship between any member of the
Consolidated Group and any other Person, nor any circumstance in connection
with, the Bank Loan Documents or any Transaction Document or the offering,
issuance, sale or delivery of the Securities is such as to require any

-31-

authorization, consent, approval, exemption or any action by or notice to or
filing with any Governmental Authority or any other Person, other than where the
failure to obtain such authorization, consent, approval, exemption or take
action, give notice, or file would not have a Material Adverse Effect.

8.13 ENVIRONMENTAL MATTERS.  Except as set forth in SCHEDULE 8.13:

(i)    No member of the Consolidated Group has received any notice of
any claim, and no proceeding has been instituted raising any claim, against
it or any of its real properties or other assets now or formerly owned,
leased or operated by it alleging any damage to the environment or
violation of any Environmental Laws, except those that, in the aggregate,
do not, and could not reasonably be expected to, result in a Material
Adverse Effect.

(ii)   There are no facts which would give rise to any claim, public
or private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to the assets now or
formerly owned, leased or operated by any member of the Consolidated Group
or its use, except those that, in the aggregate do not, and could not
reasonably be expected to, result in a Material Adverse Effect.

(iii)  No member of the Consolidated Group has stored any Hazardous
Materials on any real properties now or formerly owned, leased or operated
by it or disposed of or released any Hazardous Materials in violation of
any Environmental Laws, except such that, in the aggregate do not and could
not reasonably be expected to result in a Material Adverse Effect.

(iv)   All buildings on all real properties now owned, leased or
operated by each member of the Consolidated Group are in compliance with
applicable Environmental Laws, except where failures to comply in the
aggregate do not, and could not reasonably be expected to, result in a
Material Adverse Effect.

(v)    Each member of the Consolidated Group has, or will have as of
the Closing, obtained all permits, licenses and other authorizations and
has made all filings, registrations and other submittals which are required
under all Environmental Laws (except to the extent such failures to have
any such permits, licenses or authorizations or to have made any such
filings, registrations or submittals in the aggregate do not, and could not
reasonably be expected to, result in a Material Adverse Effect) and each
member of the Consolidated Group is in compliance with all Environmental
Laws and with the terms and conditions of all such permits, licenses,
authorizations, filings, registrations and submittals or in compliance with
all applicable orders, decrees, judgments and injunctions, issued, entered,
promulgated or approved under any Environmental Law (except to the extent
failures in the aggregate do not, and could not reasonably be expected to,
result in a Material Adverse Effect).

8.14 LABOR RELATIONS. There is not now pending, or to the knowledge of the
Company, threatened, any strike, work stoppage, work slow down, or material
grievance or other material dispute between any member of the Consolidated Group
and any bargaining unit or significant number of its employees. To the knowledge
of the Company, there is no existing or imminent effort to organize the
employees of any member of the Consolidated Group into a

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bargaining unit. To the knowledge of the Company, there is no existing or
imminent labor disturbance by the employees of any member of the Consolidated
Group principal suppliers, contractors or customers that in the aggregate have
had, or could reasonably be expected to have, a Material Adverse Effect.

8.15 FINANCIAL CONDITION. After giving effect to the transactions
contemplated hereby and by the Bank Loan Documents, each member of the
Consolidated Group will individually and the Consolidate Group on a consolidated
basis be Solvent.

8.16 DISCLOSURE

(i)    The Bank Loan Documents, Transaction Documents, the Financial
Statements, and the certificates furnished to the Purchasers pursuant to
SECTION 3.1 do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which
they were made, not misleading.

(ii)   There is no material fact known to the Company, with respect to
the Consolidated Group, which could reasonably be expected to have a
Material Adverse Effect and which has not been described in this Agreement
or otherwise disclosed in writing to the Purchasers by the Company.

8.17 STATUS UNDER CERTAIN FEDERAL STATUTES. The Company is not subject to
regulation under the Investment Company Act of 1940, as amended, or the Public
Utility Holding Company Act of 1935, as amended. Neither the sale of the
Securities hereunder nor the use of the proceeds thereof will violate 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.

8.18 BANK LOAN AGREEMENT; EXISTING DEBT. As of the date of this Agreement
the Bank Loan Agreement has been executed and delivered and is in full forces
and effect in the form of EXHIBIT F. As of the Closing, no member of the
Consolidated Group will be in default and no waiver of any such default will be
in effect, in the payment of any principal or interest on any Senior
Indebtedness or any Existing Debt and no event or condition will exist as of the
Closing with respect to any such Debt that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such Debt
to become due and payable before its regularly scheduled dates of payment.

8.19 COMPLIANCE WITH LAWS, ETC. Each member of the Consolidated Group is in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority (including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and any
Environmental Laws), and each member of the Consolidated Group has, or will have
as of the Closing Date, in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
its properties or to the conduct of its businesses to the extent necessary to
reasonably ensure that non-compliance with such laws, ordinances or governmental
rules or regulations or failures to have in effect such licenses, permits,
franchises and other governmental authorizations do not, and could not
reasonably be expected to, in the aggregate, have a Material Adverse Effect.

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8.20 BROKERS. Other than as described in SCHEDULE 8.20, no broker, finder
or other Person performing a similar function has represented the Company or has
acted on behalf of the Company in connection with the transactions contemplated
hereby. The Company will indemnify and hold each Purchaser harmless from any
fees or commissions owed to any Person listed on SCHEDULE 8.20.

9.   REPRESENTATIONS OF THE PURCHASERS.  Each Purchaser represents that:

(i)    It is an Institutional Investor and is purchasing its
Securities for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds,
in each case for investment and not with a view to the distribution thereof
or with any present intention of distributing or selling any of its
Securities, provided that the disposition of such Purchaser's property
shall at all times be within its control, subject to compliance with
applicable law. The Company acknowledges that a Purchaser's sale of all or
a portion of its Securities to one or more Qualified Institutional Buyers
in compliance with Rule 144A would not be a breach of this representation;

(ii)   With respect to each source of funds to be used by it to pay
the purchase price of its Securities (respectively, the "SOURCE"), at least
one of the following statements is accurate as of the Closing Date:

(a)  the Source is an "insurance company general account" within
the meaning of DOL Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and there is no "employee benefit plan" (within
the meaning of section 3(3) of ERISA or section 4975(e)(1) of the Code
and treating as a single plan all plans maintained by the same
employer or employee organization) with respect to which the amount of
the general account reserves and liabilities for all contracts held by
or on behalf of such plan exceed 10% of the total reserves and
liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set forth in the NAIC Annual Statement
filed with the state of domicile of the Purchaser and, as a result,
the purchase is within the terms of such exemption;

(b)  the Source is either (i) an insurance company pooled
separate account and the purchase is exempt in accordance with PTE 90-
1 (issued January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of PTE 91-38 (issued July 21, 1991) and,
except as such Purchaser has disclosed to the Company in writing
pursuant to this CLAUSE (B), no employee benefit plan or group of
plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund and, as a result, the
purchase is within the terms of one of such exemptions; or

(c)  the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets
that are included in such investment fund, when combined with the
assets of all other employee benefit 

-34-

plans established or maintained by the same employer or by an
affiliate (within the meaning of section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled
by the QPAM (applying the definition of "control" in section V(e) of
the QPAM Exemption) owns a 5% or more interest in the Company and (i)
the identity of such QPAM and (ii) if applicable, the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
clause (c); or

(d)  the Source is a "governmental plan" as defined in Title I,
section 3(32) of ERISA; or

(e)  the Source is one or more plans or a separate account or
trust fund comprised of one or more plans each of which has been
identified to the Company in writing pursuant to this clause (e); or

(f)  the Source does not include "plan assets" as defined in
ERISA.

As used in this SECTION 9, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.

10.  DEFINITIONS. For the purposes of this Agreement, the following terms
shall have the respective meanings specified with respect thereto:

"AFFILIATE" means and includes, at any time, with respect to any Person
each other Person (other than one of its Subsidiaries):

(a)  that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control
with, such Person;

(b)  that beneficially owns or holds ten percent (10%) or more of
any class of the Voting Stock of such Person;

(c)  ten percent (10%) or more of the Capital Stock (or in the
case of a Person that is not a corporation, ten percent (10%) or more of
the Equity Interest) of which is beneficially owned or held by such Person;
or

(d)  that is an officer or director of such Person;

at such time; provided, however, that none of the Purchasers nor any of their
Affiliates shall be deemed to be an "AFFILIATE," of the Company and no Person
holding any one or more of the Notes or Warrants shall be deemed to be an
"AFFILIATE" of the Company solely by virtue of the ownership of such securities.

As used in this definition "CONTROL"  means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

-35-

"AGREEMENT" means this Securities Purchase Agreement as it may from time to
time be amended in accordance with SECTION 12.2.

"APPROVED AUDITOR" means Deloitte & Touche, Arthur Andersen LLP, Ernst &
Young LLP, KPMG Peat Marwick, Grant Thornton LLP or PricewaterhouseCoopers or
such other firm of certified public accountants of national reputation
reasonably acceptable to the Required Holders.

"BANK DEBT" means all liabilities, obligations and indebtedness of the
Consolidated Group and its successors and assigns under the Bank Loan Documents.

"BANK LOAN AGREEMENT" means the Amended and Restated Loan and Security
Agreement dated April 12, 2001 by and among the Company, the other Borrowers (as
defined therein) and Congress Financial Corporation (New England) as amended,
modified and in effect from time to time as permitted by the terms of this
Agreement.

"BANK LOAN DOCUMENTS" means the Bank Loan Agreement and any document,
instrument or agreement executed in connection therewith as amended, modified
and in effect from time to time as permitted by the terms of this Agreement.

"BENEFICIALLY OWNS" has the meaning given in Rule 13d-3 of the SEC under
the Securities Act.

"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which the Federal Reserve is required or authorized to be closed in the
Commonwealth of Massachusetts.

"CALLED PRINCIPAL" means with respect to any Note, the principal amount of
such Note which is to be prepaid pursuant to SECTION 4.1 or is required to be
prepaid pursuant to SECTION 4.4 or is declared to be immediately due and payable
pursuant to SECTION 7.2.

"CAPITAL EXPENDITURES" means, for any period, the sum for the Consolidated
Group (determined on a consolidated basis without duplication in accordance with
GAAP) of the aggregate amount of expenditures (including the aggregate amount of
Capitalized Lease Obligations incurred during such period) made to acquire or
construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period computed in
accordance with GAAP; provided that such term shall not include any such
expenditures in connection with any replacement or repair of Property affected
by a Casualty Event.

"CAPITAL STOCK" means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.

"CAPITALIZED LEASE" means any lease which is required to be capitalized on
the balance sheet of the lessee in accordance with GAAP, including Statement
Nos. 13 and 98 of the Financial Accounting Standards Board, or for which the
amount of the asset and liabilities thereunder as if so capitalized should be
disclosed in a note to such balance sheet.

"CAPITALIZED LEASE OBLIGATION" means the amount of the liability reflecting
the aggregate discounted amount of future payments under all Capitalized Leases
calculated in 

-36-

accordance with GAAP, including Statement Nos. 13 and 98 of the Financial
Accounting Standards Board.

"CASUALTY EVENT" means, with respect to any Property of any Person, any
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.

"CHANGE OF CONTROL" means (i) the acquisition by any individual other than
Alan S. McKim, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of 50% or
more (on a fully diluted basis) of either (A) the then outstanding shares of
Common Stock, taking into account as outstanding for this purpose such shares
issuable upon the exercise of options or warrants, the conversion of convertible
shares or debt, and the exercise of any similar right to acquire shares or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors; or (ii)
individuals who, as of the Closing Date, constitute the Board of Directors of
the Company (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided that any individual becoming a director
subsequent to the Closing  Date whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; or (iii) consummation of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Common Stock and Voting Securities of the Company
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50%, on a fully diluted basis, of the then outstanding
shares of common stock or interests and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation or other entity resulting from
such Business Combination in substantially the same proportions as their
ownership, immediately prior to such Business Combination.

"CHANGE OF CONTROL NOTICE" has the meaning specified in SECTION 4.4.

"CLOSING" and "CLOSING DATE" have the meanings specified in SECTION 2.2.

"CODE" means the Internal Revenue Code of 1986, as amended from time to
time and the rules and regulations promulgated thereunder as from time to time
in effect.

"COMPANY" has the meaning specified in the preamble to this Agreement.

"CONFIDENTIAL INFORMATION" has the meaning specified in SECTION 12.6.

"CONSOLIDATED GROUP" means, the Company and each of its Subsidiaries.

"COVERED TAXES" has the meaning specified in SECTION 4.8.

"DEBT" means, for any Person, without duplication: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, advance,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or 

-37-

agreement, contingent or otherwise, to repurchase such Property from such
Person); (b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses and deferred taxes
incurred and paid, in the ordinary course of business; (c) Capitalized Lease
Obligations of such Person; (d) obligations of such Person in respect of letters
of credit or similar instruments issued or accepted by banks and other financial
institutions for the account of such Person; (e) Debt of others secured by a
Lien on the Property of such Person, whether or not the respective indebtedness
so secured has been assumed by such Person; (f) net liabilities in respect of
Interest Rate Protection Products; and (g) Debt of others Guaranteed by such
Person. The Debt of any Person shall include the Debt of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor.

"DEFAULT" means any occurrence or condition which with the giving of notice
or the passage of time, or both, and remaining uncured after the expiration of
any applicable grace period would be an Event of Default.

"DEFAULT RATE" has the meaning specified in subsection (iii) of SECTION
1.3.

"DISCOUNTED VALUE" means, with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments from their
respective scheduled due dates, in accordance with accepted financial practice
and at a discount factor (applied on a quarterly basis) equal to the Discount
Rate with respect to such Called Principal.

"DISCOUNT RATE" means, with respect to the Called Principal of any Note
2.5%, plus the yield to maturity of the Called Principal implied by (a) (i) the
yield reported as of 10:00 A.M. (New York City time) on the date which is two
Business Days prior to the Settlement Date with respect to such Called
Principal, on the display designated as "PX-1" of the Bloomberg Financial
Markets Screen (or such other display as may replace PX-1 of the Bloomberg
Financial Markets Screen) for actively traded U.S. Treasury securities having a
maturity equal to the Remaining Life of such Called Principal as of such
Settlement Date, or (ii) if such yields shall not be reported as of such time or
the yields reported as of such time shall not be ascertainable, the Treasury
Constant Maturity Series Yields reported for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to the
Remaining Life of such Called Principal as of such Settlement Date.  Such
implied yield shall be determined, if necessary, by (x) converting U.S. Treasury
securities quotations to bond-equivalent yields in accordance with accepted
financial practice and (y) interpolating linearly between (1) the actively
traded U.S. Treasury security with the duration closest to and greater than the
Remaining Life and (2) the actively traded U.S. Treasury security with the
duration closest to and less than the Remaining Life.

"DISPOSITION" means any sale, assignment, transfer or other disposition of
any property (whether now owned or hereafter acquired) by the Company or any
Subsidiary to any Person other than the Company or a Wholly-Owned Subsidiary
excluding (a) the granting of Liens pursuant to the Bank Loan Documents and (b)
any sale, assignment, transfer or other disposition of (i) any property sold or
disposed of in the ordinary course of business and on 

-38-

ordinary business terms, (ii) any property no longer used or useful in the
business of the Company or any Subsidiary.

"DOL" means the United States Department of Labor and any successor agency.

"EBITDA" means, for any period, Net Income (or deficit) of the Consolidated
Group (determined on a consolidated basis without duplication in accordance with
GAAP) for such period  plus the sum of provision for such period for taxes,
Interest Expense, depreciation, amortization and any other non-cash income or
charges accrued for such period used in determining Net Income.

"ELECTION NOTICE" has the meaning specified in SECTION 4.4.

"ENVIRONMENTAL LAWS" means any and all Federal, state and local statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

"EQUITY INTEREST" means as to any Person, any and all shares, interests,
participations, rights or other equivalents (however designated) of any Capital
Stock or other ownership of any profit interest, and any and all warrants,
rights, options, obligations or other equity securities of or in such Person,
and rights to acquire any of the foregoing, including, without limitation,
limited liability company, partnership and joint venture (whether general or
limited) interests and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership or joint venture, but excluding
Funded Debt other than Debt that is convertible into, or exchangeable for, any
of the foregoing Equity Interests.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder,
as from time to time, in effect.

"ERISA AFFILIATE", for Plan purposes, means, with respect to any Person,
any trade or business, whether or not incorporated, which, is treated as a
single employer together with such Person under section 414 of the Code.

"EVENT OF DEFAULT" has the meaning specified in SECTION 7.1.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time and the rules and regulations promulgated thereunder, as from time
to time in effect.

"EXISTING DEBT" has the meaning specified in SECTION 6.1.

"EXISTING SENIOR NOTES" means the 12.5% Senior Notes of the Company due May
15, 2001 in the aggregate principal amount of $50,000,000, issued under the
Indenture dated as of August 4, 1994 between the Company, certain Subsidiaries
of the Company and Shawmut Bank, N.A., as Trustee.

"EXPENSES" has the meaning specified in SECTION 12.1.

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"FISCAL QUARTER" means the Company's fiscal quarters for financial
accounting purposes.

"FISCAL YEAR" means the Company's fiscal year for financial accounting
purposes.

"FIXED CHARGE COVERAGE RATIO" means, as at any date of measurement thereof,
the ratio of (a) (i) EBITDA for the period of four consecutive Fiscal Quarters
ending on, or most recently ended prior to, such date minus (ii) the aggregate
amount of all Capital Expenditures paid in cash during such period and not
financed with the proceeds of loans incurred under the Bank Loan Agreement or
other Debt for borrowed money minus (iii) the aggregate amount paid, or required
to be paid (without duplication), in cash in respect of income, franchise, real
estate and other like Taxes for such period (to the extent such Taxes have not
been deducted in the calculation of EBITDA) to (b) the sum for the Consolidated
Group (determined on a consolidated basis without duplication in accordance with
GAAP), of (i) all Interest Expense for such period plus (ii) all regularly
scheduled payments of principal in respect of Debt (including the term Bank Debt
and the principal component of any payments in respect of Capitalized Lease
Obligations) paid during such period.

"FUNDED DEBT" means as to any Person all Debt for money borrowed.

"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.

"GOVERNMENTAL AUTHORITY" means (a) the governments of (i) the United States
of America and its states and political subdivisions, and (ii) any other
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of any member of
the Consolidated Group, and (b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any such
government or jurisdiction.

"GUARANTY", as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of such Person with respect to any Debt of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by such Person,
or in respect of which such Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation in effect guaranteed by such
Person through any agreement (contingent or otherwise) to purchase, repurchase
or otherwise acquire such obligation or any security therefor, or to advance to
or provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the working capital, equity capital, net worth, solvency or any
balance sheet or other financial condition of the obligor of such obligation, or
to make payment for any securities, products, materials or supplies or for any
transportation or services without regard to the non-delivery or nonfurnishing
thereof, or that any agreements relating thereto will be complied with, or that
the holders of such obligation will be protected against loss in respect
thereof.  The amount of any Guaranty shall be deemed to be equal to the lower of
(a) the amount of the obligation guaranteed and (b) the maximum amount for which
such Person may be contingently liable pursuant to the terms of the instrument
evidencing such Guaranty, unless such guaranteed obligation and the amount for
which such Person may be liable are not stated or determinable, in which case
the amount of such Guaranty shall be the maximum reasonably anticipated
liability for which such Person is contingently liable in respect thereof as
determined 

-40-

by the related Company in good faith (but in any event not less than the amount
which is, or would otherwise be required, in accordance with GAAP, to be
reflected in such Person's balance sheet or the notes thereto) as the amount of
such obligation. A Person shall have "GUARANTEED" an obligation if such Person
has entered into a Guaranty of such obligation.

"HAZARDOUS MATERIALS", at any time, shall mean any substance: (a) the
presence of which at such time requires notification, investigation, monitoring
or remediation under any Environmental Law; (b) which at such time is defined as
a "hazardous waste", "hazardous material", "hazardous substance", "toxic
substance", "pollutant" or "contaminant" under any Environmental Law, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) and any applicable local statutes
and the regulations promulgated thereunder; or (c) without limitation, which
contains gasoline, diesel fuel or other petroleum products, asbestos or
polychlorinated biphenyls.

"HOLDER" means any Person at the time shown as the holder of a Note on the
registers referred to in SECTION 12.14.

"HOME OFFICE" means, with respect to any Holder, the office of such Holder
specified as its Home Office on ANNEX 1, or such other office of such Holder as
such Holder may from time to time specify to the Company.

"INSTITUTIONAL INVESTOR" means any bank, savings institution, trust
company, insurance company, investment company, pension or profit sharing trust
or other financial institution or institutional buyer within the meaning of
Section 402(b)(8) of the Massachusetts Uniform Securities Act; and an
"Accredited Investor" within the meaning of Rule 501(a)(1) of the Securities
Act, in each case, regardless of legal form.

"INTEREST EXPENSE" means, for any period, the sum, without duplication, for
the Consolidated Group (determined on a consolidated basis without duplication
in accordance with GAAP), of the following: (a) all interest in respect of Debt
accrued or paid during such period (whether or not actually paid during such
period), but excluding capitalized debt acquisition costs (including fees and
expenses related to this Agreement or the Bank Loan Agreement) and the imputed
costs of the Warrants plus (b) the net amounts payable (or minus the net amounts
receivable) under Interest Rate Protection Products accrued during such period
(whether or not actually paid or received during such period) including, without
limitation, fees, but excluding reimbursement of legal fees and other similar
transaction costs and excluding payments required by reason of the early
termination of Interest Rate Protection Products in effect on the date hereof
plus (c) all fees, including letter of credit fees and expenses, incurred
hereunder during such period after the Closing Date.

"INTEREST PAYMENT DATE" has the meaning specified in subsection (ii) of
SECTION 1.3.

"INTEREST RATE PROTECTION PRODUCT" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.

"INTELLECTUAL PROPERTY" means all patents, copyrights, trademarks, trade
names, service marks or other intellectual or industrial property rights.

-41-

"INVESTMENT" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership, limited liability company or other ownership interests
or other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance, loan or
other extension of credit to, any other Person (including the purchase of
Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person, but excluding
any such advance, loan or extension of credit having a term not exceeding 180
days representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business); or (c) the entering into of any
Guarantee of, or other contingent obligation with respect to, Debt or other
liability of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person.  Notwithstanding the foregoing,
Capital Expenditures shall not be deemed "INVESTMENTS" for purposes hereof.

"KNOWLEDGE" means, with respect to any Person, the actual knowledge of any
Senior Officer of such Person.

"LIEN" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute, court decision or contract, and including,
without limitation, any mortgage, pledge, security interest, lease, encumbrance,
lien, purchase option, call or right, or charge of any kind (including any
agreement to give or permit any of the foregoing), any conditional sale or other
title retention agreement, any Capitalized Lease, and the filing of, or
agreement to give or permit the filing on its behalf, of any financing statement
under the Uniform Commercial Code or personal property security legislation of
any jurisdiction.

"MAKE WHOLE AMOUNT" means:

(i)    with respect to a prepayment of Notes upon a Change of Control
pursuant to SECTION 4.4, an amount equal to 1% of the Called Principal of
each such Note; or

(ii)   with respect to any other prepayment:

(a)  If the Settlement Date is on or before April 30, 2004, with
respect to the Called Principal of any Note, an amount equal to the
excess, if any, of (x) the Discounted Value over (y) the sum of (i)
such Called Principal plus (ii) interest accrued and unpaid thereon,
as of and due on the Settlement Date with respect to such Called
Principal but in no event less than zero; or

(b)  If the Settlement Date is after April 30, 2004 but on or
before April 30, 2005, an amount equal to 8% of the Called Principal
of each Note; or

(c)  If the Settlement Date is after April 30, 2005 but before
prior April 30, 2006, an amount equal to 5.34% of the Called Principal
of each Note; or

(d)  If the Settlement Date is after April 30, 2006 but prior to
April 30, 2007, the amount equal to 2.66% of the Called Principal of
any Note; or

-42-

(e)  If the Settlement Date is on or after April 30, 2007, zero.

"MATERIAL ADVERSE EFFECT" means:

(a)  any material adverse effect on the Company's business,
assets, liabilities, financial condition or results of operations;

(b)  any material adverse effect on the Consolidated Group's
business, assets, liabilities, financial condition or results of
operations on, where appropriate, a consolidated basis in accordance
with GAAP;

(c)  any adverse effect, WHETHER OR NOT MATERIAL, on the binding
nature, validity or enforceability of any Transaction Document or the
obligations thereunder of any member of the Consolidated Group a party
thereto; or

(d)  any material adverse effect on the ability of any member of
the Consolidated Group to perform its obligations under any
Transaction Document.

"MATURITY DATE" has the meaning specified in SECTION 4.3.

"MULTIEMPLOYER PLAN" means any plan which is a "multiemployer plan" as such
term is defined in section 4001(a)(3) of ERISA.

"NET INCOME" means, for any period, gross revenues of the Consolidated
Group less all operating and non-operating expenses (including current and
deferred Taxes on income, Interest Expense, amortization, depreciation and
current additions to reserves), but not including in gross revenues any gains
(net of expenses and Taxes applicable thereto) in excess of losses resulting
from Dispositions or Casualty Events, any earnings or losses attributable to any
other Person, any gains arising from transactions of a non-recurring and
material nature, any gains arising from the discontinuation of operations, any
gains resulting from the write-up of assets, any earnings of any other Person
acquired by the Consolidated Group through purchase, merger or combination or
otherwise, earned prior to acquisition, all determined in accordance with GAAP.

"NORTHEAST CASUALTY" means Northeast Casualty Risk Retention Group, Inc., a
Vermont corporation.

"NOTES" has the meaning specified in SECTION 1.1.

"OFFICERS' CERTIFICATE" means, with respect to any Person, a certificate
signed in the name of such Person by any two of its Senior Officers.

"OTHER TAXES" has the meaning specified in SECTION 4.8 ABOVE.

"OUTSTANDING PREFERRED STOCK" means the 112,000 outstanding shares of the
Company's Series B Convertible Preferred Stock, on which dividends are payable
at an annual rate of $4.00 per share on a quarterly basis.

"PBGC" means the Pension Benefit Guaranty Corporation or any other
Governmental Authority succeeding to any of its functions.

-43-

"PERMITTED INVESTMENTS" means:

(i)    direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;

(ii)   investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from Standard and Poor's Ratings
Service or from Moody's Investors Service, Inc.;

(iii)  investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of
not less than $250,000,000;

(iv)   fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (i) above and entered
into with a financial institution satisfying the criteria described in
clause (iii) above;

(v)   advances, loans and extensions of credit to any director,
officer or employee of the Company or any Subsidiary Guarantor, if the
aggregate outstanding amount of all such advances, loans and extensions of
credit (excluding travel advances in the ordinary course of business) does
not at any time exceed $200,000; and

(vi)   investments in money market mutual funds that are rated AAA by
Standard & Poor's Rating Service; and

(vii)  other Investments not to exceed $500,000 at any one time
outstanding; provided that no Investment under this clause (vii) shall consist
of an Equity Interest in the Company.

"PERMITTED LIENS" means any Liens described in SECTION 6.2.

"PERSON" means and includes an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust and any other form of
business organization (whether or not a legal entity), or any Governmental
Authorities.

"PLAN" means an "employee pension benefit plan" (as defined in Section 3 of
ERISA) which is or within the preceding five years has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate, or for which the Consolidated Group or any ERISA Affiliate
may have any liability.

"PRIORITY DEBT" means, without duplication, any Bank Debt, any Capitalized
Lease Obligations and any Debt secured by a Lien permitted under SECTION 6.2.2
or SECTION 6.2.8.

-44-

"PROPERTY" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.

"PTE" has the meaning specified in subsection (ii) of SECTION 9.

"PURCHASER" and "PURCHASERS" have the meaning specified in the preamble to
this Agreement.

"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued
by the DOL.

"QUALIFIED INSTITUTIONAL BUYER" means a qualified institutional buyer, as
defined in Rule 144A.

"REFINANCING DEBT" means any Debt of the Company issued in exchange for, or
the net proceeds of which are used to refinance, renew, replace, defease or
refund the Bank Debt provided that (a) no violation of SECTION 6.14 shall have
occurred in connection with or as a result of the incurrence of such Refinancing
Debt and (b) after giving effect to the incurrence of such Refinancing Debt on a
pro forma basis, the financial covenants set forth in SECTION 6.10 would be
satisfied.

"REFINANCING DEBT DOCUMENT" has the meaning specified in SECTION 6.14.

"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in SECTION 3.11.

"REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (i) such Called Principal into (ii) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.

"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal
of any Note, all scheduled cash payments of such Called Principal and interest
that would be due after the Settlement Date with respect to such Called
Principal, if no payment of Called Principal were made prior to its scheduled
due date, provided, that if such Settlement Date is not a date on which interest
payments are scheduled to be made, then the amount of the next succeeding
scheduled interest payment will be reduced by the amount of interest accrued to
such Settlement Date and required to be paid on such Settlement Date.

"REQUIRED HOLDERS" means the Holder or Holders of more than 50% of the
aggregate principal amount of the Notes at the time outstanding.

"RESTRICTED JUNIOR PAYMENTS" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of, or other
Equity Interest in, any member of the Consolidated Group now or hereafter
outstanding, except a dividend payable solely in shares of stock or other Equity
Interests of such member, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any shares of any class of stock of, or other Equity Interest in, any member of
the Consolidated Group now or hereafter outstanding, (iii) any payment made to
retire, or to obtain 

-45-

the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of, or other Equity Interest in, any member of the
Consolidated Group now or hereafter outstanding, (iv) any payment or prepayment
of principal of, premium, if any, or interest on, or redemption purchase,
retirement, defeasance (including economic or legal defeasance), sinking fund or
similar payment with respect to, any Subordinated Debt, and (v) any payment made
to any Affiliates of any member of the Consolidated Group in respect of
management, consulting or other similar services provided to any member of the
Consolidated Group.

"RULE 144A" means Rule 144A promulgated under the Securities Act and
including any successor rule thereto, as such rule may be amended from time to
time.

"SEC" means the United States Securities and Exchange Commission, or any
Governmental Authority succeeding to the functions of such Commission in the
administration of the Securities Act and/or the Exchange Act.

"SECURITIES" has the meaning specified in SECTION 1.1.

"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations promulgated thereunder, as from time to time
in effect.

"SENIOR INDEBTEDNESS" has the meaning given therefor in the Subordination
Agreement.

"SENIOR OFFICER" means, with respect to the Company, the chairman of the
board of directors, the president, chief executive officer, chief financial
officer, treasurer, or principal accounting officer of the Company.

"SETTLEMENT DATE" means, with respect to any Note, the date on which such
Note is to be prepaid pursuant to SECTION 4.1 or SECTION 4.4, or is declared to
be immediately due and payable pursuant to SECTION 7.2.

"SPECIAL COUNSEL" means the law firm of Sullivan & Worcester LLP or such
other firm of legal counsel as the Purchasers may from time to time designate as
their Special Counsel for the purposes of this Agreement or any matters related
hereto.

"SOLVENT" and "SOLVENCY"  means with respect to any Person (i) the fair
value of the property of such Person exceeds its total liabilities (including,
without limitation, contingent liabilities), (ii) the present fair saleable
value of the assets of such Person is not less than the amount that will be
required to pay its probable liability on its debts as they become absolute and
matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature and (iv) such Person is not engaged, and is not about to
engage, in business or a transaction for which its property would constitute an
unreasonably small capital.

"SUBORDINATED DEBT" means any Debt of the Company or any Subsidiary
incurred after the Closing Date that by its terms (or by the terms of the
instrument under which it is outstanding and to which appropriate reference is
made in the instrument evidencing such Subordinated Debt) is made subordinate
and junior in right of payment to the Company's or such Subsidiary payment
obligations under the Transaction Documents on terms and conditions acceptable
to the Required Holders.

-46-

"SUBORDINATED INDEBTEDNESS" mean (i) the Debt of the Company or any
Subsidiary represented by the Notes and the Subsidiary Guaranties and (ii) any
Debt of the Company or any Subsidiary incurred after the Closing Date with the
consent of Congress Financial Corporation (New England) and otherwise permitted
under this Agreement that by its terms (or by the terms of the instrument under
which it is outstanding and to which appropriate reference is made in the
instrument evidencing such Subordinated Indebtedness) is made subordinate and
junior in right of payment to the Company's or such Subsidiary payment
obligations under the Bank Loan Documents on terms and conditions acceptable to
Congress Financial Corporation (New England).

"SUBORDINATION AGREEMENT" means the Subordination Agreement dated as of
April 12, 2001 among the Company, the Subsidiary Guarantors, the Purchasers and
Congress Financial Corporation (New England), as it may be amended from time to
time in accordance with the terms thereof.

"SUBSIDIARY" means as to any Person, any other Person in which the first
mentioned Person directly or indirectly through one or more of its other
Subsidiaries collectively owns sufficient voting interests to enable it to
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is directly or indirectly through one or more of its other
Subsidiaries, owned by the first mentioned Person (unless such partnership can
and does ordinarily take major business actions without the prior approval of
such Person.  Unless the context otherwise clearly requires, any reference to a
"SUBSIDIARY" is a reference to a Subsidiary of the Company.

"SUBSIDIARY GUARANTY" and "SUBSIDIARY GUARANTIES" have the meanings
specified in SECTION 3.10.

"SUBSIDIARY GUARANTOR" means any Subsidiary which is a party to a
Subsidiary Guarantee which is then in full force and effect.

"TANGIBLE CAPITAL BASE" means, at any time an amount (determined on a
consolidated basis without duplication in accordance with GAAP) equal to (a) the
sum of (i) the book net worth of the Consolidated Group, plus (ii) the
outstanding principal amount of Subordinated Indebtedness plus (iii)  to the
extent deducted in determining book net worth obligations with respect to
letters of credit which are the functional equivalent of commercial surety or
fidelity bonds and not issued in connection with the borrowing of money, or are
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment of such
letter of credit, minus (b) the total book value of all assets of the
Consolidated Group which would be treated as intangible assets under GAAP,
including without limitation, such items as goodwill and Intellectual Property
and rights (including rights under licenses) with respect to the foregoing.

"TAX" and "TAXES" means any and all present or future taxes, assessments,
stamps, duties, fees, levies, imposts, deductions, withholdings or other
governmental charges of any nature whatsoever and any liabilities with respect
thereto, including any surcharge, penalties, additions to tax, fines or interest
thereon, now or hereafter imposed, levied, collected, withheld 

-47-

or assessed by any government or taxing authority of any country or political
subdivision of any country, or any international taxing authority.

"TOTAL LIABILITIES" means, as at any time of determination thereof, (a) the
aggregate amount of all Debt, liabilities and other obligation of the
Consolidated Group at such time minus (b) the aggregate principal amount of the
Notes outstanding at such time, and minus (c) to the extent included in clause
(a), obligations with respect to letters of credit which are the functional
equivalent of commercial surety or fidelity bonds and not issued in connection
with the borrowing of money, or are entered into in the ordinary course of
business of such Person to the extent such letters of credit are not drawn upon
or, if and to the extent drawn upon, such drawing is reimbursed no later than
the third Business Day following receipt by such Person of a demand for
reimbursement following payment of such letter of credit.

"TOTAL LIABILITIES TO TANGIBLE CAPITAL BASE RATIO" means, as at any time,
the ratio of (a) Total Liabilities at such time, to (b) the Tangible Capital
Base at such time.

"TRADE PAYABLES" means amounts payable to suppliers of goods and services
in the ordinary course of a Person's business.

"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the Warrants, the
Warrant Agreement, the Registration Rights Agreement, and any Subsidiary
Guaranties.

"TRANSFEREE" means any direct or indirect transferee of all or any part of
the Notes.

"VOTING STOCK" means any securities of any class of a Person whose holders
are entitled under ordinary circumstances to vote for the election of directors
of such Person (or Persons performing similar functions) (irrespective of
whether at the time securities of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).

"WARRANT" has the meaning specified in SECTION 1.1.

"WARRANT AGREEMENT" has the meaning specified in SECTION 3.11.

"WARRANT SHARES" has the meaning specified in the Warrant Agreement.

"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary, one hundred percent (100%)
of all of the Equity Interests (except directors' qualifying shares) and Voting
Stock (except directors' qualifying shares) of which are owned by any one or
more of the Company and the Company's other Wholly-Owned Subsidiaries at such
time.

11.  [INTENTIONALLY OMITTED]

12.  MISCELLANEOUS.

12.1 EXPENSES. Whether or not the transactions provided for hereby shall be
consummated, the Company agrees to pay on demand and upon receipt of an invoice
therefor, and save each Purchaser and its Transferees harmless against liability
for the payment of, all out-of-pocket expenses arising in connection with such
transactions and in connection with any subsequent modification of, or consent
under, the Transaction Documents, whether or not such transactions are
consummated or modification shall be effected or consent granted 

-48-

("EXPENSES"), including (i) the reasonable fees and expenses of Special Counsel
and its agents and of any other special or local counsel or other special
advisers engaged by the Purchasers in connection with the transactions
contemplated by this Agreement, (ii) the costs of obtaining the private
placement numbers from Standard & Poor's Ratings Group for the Securities and
Common Units and (iii) the costs and expenses, including reasonable attorneys'
fees and the fees of any other special or financial advisers, incurred in
evaluating, monitoring or enforcing any rights under the Transaction Documents
or in responding to any subpoena or other legal process issued in connection
with the Transaction Documents or the transactions provided for hereby or
thereby or by reason of a Purchaser or any Transferee having acquired any of its
Securities (other than those issued solely as a result of (a) such Purchaser or
Transferee being engaged in business in a regulated industry or (b) such
Purchaser's or Transferee's actions or omissions in connection with a transfer
of a Security), including without limitation costs and expenses incurred in
connection with any bankruptcy or insolvency of any member of the Consolidated
Group or in connection with any workout or restructuring of any of the
transactions contemplated by the Transaction Documents. The obligations of the
Company under this SECTION 12.1, SECTION 4.8 and SECTION 5.10.2 shall survive
the transfer of any of its Securities or any interest therein by a Purchaser or
any Transferee and the payment of any Note.

12.2 CONSENT TO AMENDMENTS.

(i)    No Transaction Document may be amended, and the Company may not
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, without the written consent of the Company
and the Required Holders, except that:

(a)  no decrease in the interest rate of, or Make Whole Amount
payable on, the Notes or change to the mandatory repayment of the
Notes as provided in SECTION 4.3;

(b)  no amendment or waiver of the provisions of SECTION 7.2 or
SECTION 7.3, or amendment or waiver of any defined term to the extent
used therein; and

(c)  no amendment or waiver of the definition of "REQUIRED
HOLDERS" or other amendment of the percentage of Notes required to be
held by Holders consenting to any action under this Agreement;

may be made or granted without the written consent of all Holders affected
thereby.

(ii)   Any Holder may specify that any such written consent executed
by it shall be effective only with respect to a portion of the Securities
held by it (in which case it shall specify, by dollar amount, the aggregate
principal amount of Securities with respect to which such consent shall be
effective) and in the event of any such specifications, such Holder shall
be deemed to have executed such written consent only with respect to the
portion of Securities so specified.

(iii)  Each Holder at the time or thereafter shall be bound by any
amendment or waiver authorized by the Required Holders in accordance with
this SECTION 12.2 whether or not its Securities are marked to reflect such
amendment or waiver. No such amendment or waiver will extend to or affect
any obligation, covenant, agreement, 

-49-

Default or Event of Default not expressly amended or waived or impair any
right consequent thereon.

(iv)   No course of dealing between any member of the Consolidated
Group and any Holder nor any delay in exercising any rights under any
Transaction Document shall operate as a waiver of any rights of any Holder.

(v)    Any amendment or waiver made pursuant to this SECTION 12.2 by a
Holder that has transferred or has agreed to transfer its Securities to any
member of the Consolidated Group or any Affiliate and has provided or has
agreed to provide such amendment or waiver as a condition to such transfer
shall be void and of no force and effect except solely as to such Holder,
and any amendments effected or waivers granted that would not have been or
would not be so effected or granted but for such amendment or waiver (and
the amendments or waivers of all other Holders that were acquired under the
same or similar conditions) shall be void and of no force and effect,
retroactive to the date such amendment or waiver initially took or takes
effect, except solely as to such Holder.

12.3 PERSONS DEEMED OWNERS; PARTICIPATIONS. The Company may treat the
Person at the time shown on the register referenced in SECTION 12.14 in whose
name any Security, is issued as the owner and holder of such Security for the
purpose of receiving payment on or in respect of such Security and for all other
purposes whatsoever. Subject to the preceding sentence, a Holder may from time
to time grant participations in all or any part of its Securities to any Person
on such terms and conditions as may be determined by such Holder in its sole and
absolute discretion, subject to its compliance with applicable law.

12.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained in any Transaction Document or made in
any other writing by or on behalf of the Company in connection herewith shall
survive the execution and delivery of such Transaction Document or other
writing, the transfer by a Purchaser of any Securities or portion thereof or
interest therein and the payment of any Securities and may be relied upon by any
Transferee, regardless of any investigation made at any time by or on behalf of
the Purchasers or any Transferee. All representations and warranties contained
in any certificate or other instrument delivered by or on behalf of the Company
pursuant to any Transaction Document shall be deemed representations and
warranties of the Company under this Agreement and not of the individuals
executing such certificates or other instruments on behalf of the Company.
Subject to the preceding sentence, the Transaction Documents embody the entire
agreement and understanding between the Purchasers and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof
and thereof.

12.5 SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of such party
(including, without limitation, any Transferee) whether so expressed or not;
provided the Company may not delegate the performance of any of its obligations
hereunder.

12.6 CONFIDENTIAL INFORMATION. For the purposes of this Section,
"CONFIDENTIAL INFORMATION" means information delivered to a Purchaser by or on
behalf of the Company in connection with the transactions contemplated by or
otherwise pursuant to this Agreement,

-50-

whether in the past, present or future, that is proprietary in nature and that
was clearly marked or labeled or otherwise adequately identified when received
by the Purchaser as being confidential information of the Company, provided that
such term does not include information that (a) was publicly known or otherwise
known to the Purchaser prior to the time of such disclosure or (b) subsequently
becomes publicly known through no act or omission by the Purchaser. Each
Purchaser will maintain the confidentiality of such Confidential Information in
accordance with the procedures adopted by it in good faith to protect
confidential information of third parties delivered to it. Notwithstanding the
foregoing, a Purchaser may deliver copies of any Confidential Information to (i)
such Purchaser's and its Affiliates' directors, officers, employees, and to its
agents and professional consultants, (ii) any other Purchaser, (iii) any Person
to whom such Purchaser offers to sell any of its Securities or any part thereof
or to whom such Purchaser sells or offers to sell a participation in all or any
part of its Securities, provided said Persons agree to be bound by the terms
hereof regarding Confidential Information, (iv) any federal or state regulatory
authority having jurisdiction over such Purchaser and which requires such
disclosure, (v) any Person from which a Purchaser offers to purchase any
security of any member of the Consolidated Group, (vi) the National Association
of Insurance Commissioners or any rating agency which generally requires access
to information about a Purchaser's investment portfolio or any similar
organization, (vii) Standard & Poor's Ratings Group (in connection with
obtaining a private placement numbers) or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (a) in compliance with
any law, rule, regulation or order applicable to such Purchaser, (b) in response
to any subpoena or other legal process, provided, however, that each Holder
agrees to use its reasonable best efforts to inform the Company of the service
upon it of such subpoena or legal process, and to reasonably cooperate with the
Company should the Company wish (at the Company' expense) to seek a protective
order or similar relief relating to such disclosure; or (c) at any time after
the occurrence of Event of Default to the extent that such Purchaser reasonably
determines disclosure is necessary in the enforcement of or for the protection
of its rights and remedies under the Transaction Documents. Each Holder, by its
acceptance of its Securities, will be deemed to have agreed to be bound by and
to be entitled to the benefits of this SECTION 12.6 as though it were a party to
this Agreement.

12.7 NOTICES.

(i)    All notices and other written communications provided for
hereunder shall be given in writing and delivered in person or sent by
recognized overnight delivery service (with charges prepaid) or by
facsimile transmission, if the original of such facsimile transmission is
sent on the same day by a recognized overnight delivery service (with
charges prepaid); and

(a)  if to a Purchaser or its nominee, addressed to such Person
at the address or fax number specified for such communications to such
Purchaser in ANNEX 1, or at such other address or fax number as such
Person shall have specified to the Company in writing,

(b)  if to any other Holder, addressed to such other Holder at
such address or fax number as is specified for such Holder in the Note
register referenced in SECTION 12.14, and

(c)  if to the Company, or any other member of the Consolidated
Group at the address or fax number specified in ANNEX 2 or at such
other 

-51-

address or fax number as the Company shall have specified to each
Holder in writing given in accordance with this SECTION 12.7.

(ii)   Any communication addressed and delivered as herein provided
shall be deemed to be received when actually delivered to the address of
the addressee (whether or not delivery is accepted) or received by the
telecopy machine of the recipient. Any communication not so addressed and
delivered shall be ineffective.

(iii)  Notwithstanding the foregoing provisions of this SECTION 12.7,
service of process in any suit, action or proceeding arising out of or relating
to this Agreement or any document, agreement or transaction contemplated hereby,
or any action or proceeding to execute or otherwise enforce any judgment in
respect of any breach hereunder or under any document or agreement contemplated
hereby, shall be delivered in the manner provided in SECTION 12.12.

12.8  DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

12.9  SOLICITATION OF HOLDERS. The Company will provide each Holder with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such Holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent requested under any
Transaction Document. The Company will deliver executed or true and correct
copies of each such amendment, waiver or consent effected to each Holder
promptly following the date on which it is executed and delivered by, or
receives the consent or approval of, the Required Holders. Neither the Company
nor any Person acting on its behalf will directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee, expense (other than such Holder's Expenses) or otherwise, to any Holder for
or in connection with any consent by such Holder in its capacity as a Holder to
any waiver or amendment of any of the terms of the Transaction Documents unless
such remuneration is concurrently paid, on the same terms, ratably to all
Holders whether or not such Holder consented to the waiver or amendment.

12.10 REPRODUCTION OF DOCUMENTS. Any Transaction Document and all related
documents, including (a) consents, waivers and modifications which may
subsequently be executed, (b) documents received by the Purchasers on the
purchase of the Securities (except the Notes) and (c) financial statements,
certificates and other information previously or subsequently furnished to the
Purchasers, may be reproduced by the Purchasers by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and the Purchasers may destroy any original document so reproduced. The
Company agrees and stipulates that any such reproduction shall, to the extent
permitted by applicable law, be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence and whether or not the reproduction was made by a Purchaser in the
regular course of business, and to the extent not prohibited by applicable law,
that any enlargement, facsimile or further reproduction of the reproduction
shall likewise be admissible in evidence.

12.11 GOVERNING LAW. THIS AGREEMENT IS TO BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT GIVING EFFECT TO ANY LAWS OR RULES
RELATING TO CONFLICTS OF LAWS THAT 

-52-

WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
COMMONWEALTH OF MASSACHUSETTS).

12.12 CONSENT TO JURISDICTION AND SERVICE. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY CONSENTS AND
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS AND OF ANY FEDERAL COURT LOCATED IN SAID JURISDICTION IN
CONNECTION WITH ANY ACTIONS OR PROCEEDINGS BROUGHT AGAINST IT BY ANY HOLDER
ARISING OUT OF OR RELATING TO ANY OF THE TRANSACTION DOCUMENTS AND HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY WAIVES AND
AGREES NOT TO ASSERT IN ANY SUCH ACTION OR PROCEEDING, IN EACH CASE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT
TO IT OR ITS PROPERTY, (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, OR (D) SUCH TRANSACTION DOCUMENT MAY NOT BE ENFORCED IN OR
BY ANY SUCH COURT. IN ANY SUCH ACTION OR PROCEEDING, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE COMPANY HEREBY ABSOLUTELY AND IRREVOCABLY
WAIVES TRIAL BY JURY AND PERSONAL IN HAND SERVICE OF ANY SUMMONS, COMPLAINT,
DECLARATION OR OTHER PROCESS AND HEREBY ABSOLUTELY AND IRREVOCABLY AGREES THAT
THE SERVICE MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO IT AT ITS ADDRESS SET FORTH IN OR FURNISHED PURSUANT TO
THE PROVISIONS OF THIS AGREEMENT, OR BY ANY OTHER MANNER PROVIDED BY LAW.
ANYTHING HEREINBEFORE TO THE CONTRARY NOTWITHSTANDING, ANY HOLDER MAY SUE THE
COMPANY IN ANY OTHER APPROPRIATE JURISDICTION AND ANY PARTY MAY SUE ANY OTHER
PARTY ON A JUDGMENT RENDERED BY ANY COURT PURSUANT TO THE PROVISIONS OF THE
FIRST SENTENCE OF THIS SECTION 12.12 IN THE COURTS OF ANY COUNTRY, STATE OF THE
UNITED STATES OR PLACE WHERE SUCH OTHER PARTY OR ANY OF ITS PROPERTY OR ASSETS
MAY BE FOUND OR IN ANY OTHER APPROPRIATE JURISDICTION.

12.13 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.

12.14 REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.

12.14.1   REGISTRATION. The Notes are to be issued and are transferable in
whole or in part as registered securities without coupons in denominations of at
least $1,000,000, except as may be necessary to reflect any principal amount
less than $1,000,000, and may be exchanged for one or more Notes of any
authorized denomination and like class and aggregate outstanding principal
amount. The Company shall keep at its principal executive office registers in
which the Company shall record the registrations of the Notes and the Warrants
and the names and addresses of the Holders from time to time and all transfers
thereof. The Company shall provide any Holder who is a Purchaser or an
Institutional Investor 

-53-

or who otherwise holds not less than 10% of the aggregate principal amount of
the Notes then outstanding, promptly upon request, a complete and correct copy
of the names and addresses of the then Holders.

12.14.2    TRANSFER AND EXCHANGE. Upon surrender of a Note to the Company
for registration of transfer or exchange endorsed or accompanied by a written
instrument of transfer duly executed by the registered Holder or its attorney
duly authorized in writing and accompanied by the address for notices, the
Company shall at its expense (except as provided below), execute and deliver one
or more replacement Notes of like tenor and class and of a like aggregate
amount, registered in the name of such Transferee or Transferees. Each new Note
will bear interest from the date on which interest was last paid on the
surrendered Note or the date of issue of the surrendered Note if no interest has
yet been paid thereon. The Company may require payment of a sum sufficient to
cover any stamp tax or governmental charge imposed in respect of any such
transfer. If a transfer of a Note is not made pursuant to an effective
registration statement under the Securities Act, the Company may require the
transferor to deliver, prior to such transfer, an opinion of counsel, which may
be counsel to such transferor, reasonably satisfactory to the Company, that such
Note may be sold without registration under the Securities Act.

12.14.3   REPLACEMENT. Upon receipt of written notice from a Holder of the
loss, theft, destruction or mutilation of a Note and, in the case of any such
loss, theft or destruction, upon receipt of an indemnification agreement of such
Holder (and, in the case of a Holder which is not a Qualified Institutional
Buyer, with such security as may be reasonably requested by the Company)
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, at its expense, of like tenor and class, in lieu of the lost, stolen,
destroyed or mutilated Note, and each new Note will bear interest from the date
on which interest was last paid on such lost, stolen, destroyed or mutilated
Note or if no interest has yet been paid thereon, the date of issue of such
lost, stolen, destroyed or mutilated Note.

12.15 COMPLIANCE BY SUBSIDIARIES. The Company as the equity holder of its
Subsidiaries, shall cause such meetings to be held, votes to be cast,
resolutions to be passed, by-laws to be made and confirmed, documents to be
executed and all other things and acts to be done to ensure that, at all times,
the provisions of this Agreement relating to such Subsidiaries, respectively,
are complied with.

12.16 SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction because of
the conflict of such provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative, illegal or unenforceable to the extent that such
other provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative,
illegal or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.

-54-

12.17 TERMINATION. This Agreement and the rights of the Holders and the
obligations of the Company hereunder shall not terminate until each of the
Notes, including all principal, interest, including interest on overdue interest
and Make Whole Amount has been indefeasibly paid in full and all Expenses and
all other amounts owed to any Purchaser or any Holder pursuant to the terms of
any Transaction Document (other than the Warrants, Warrant Agreement, or the
Registration Rights Agreement) has been indefeasibly paid in full.

12.18 CONSTRUCTION. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.

[Signatures Follow on Next Page]

-55-

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered by one of its duly authorized officers.

COMPANY:                      CLEAN HARBORS, INC.

By:  /s/ Stephen H. Moynihan
--------------------------------
Name:  Stephen H. Moynihan
Title:  Senior Vice President

Signature Page to Securities Purchase Agreement

-56-

PURCHASERS:                   JOHN HANCOCK LIFE INSURANCE
COMPANY

By:  /s/ Steven J. Blewitt
--------------------------------
Name: Steven J. Blewitt
Title: Managing Director

JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY

By:  /s/ Steven J. Blewitt
--------------------------------
Name: Steven J. Blewitt
Title: Authorized Signatory

SIGNATURE 4 LIMITED
By:  John Hancock Life Insurance Company,
as Portfolio Advisor

By:  /s/ Steven J. Blewitt
--------------------------------
Name: Steven J. Blewitt
Title: Managing Director

SIGNATURE 5 L.P.
By:  John Hancock Life Insurance Company,
as Portfolio Advisor

By:  /s/ Steven J. Blewitt
--------------------------------
Name: Steven J. Blewitt
Title: Managing Director

Signature Page to Securities Purchase Agreement

-57-

SPECIAL VALUE BOND FUND, LLC

By:  SVIM/MSM, LLC
as Manager

By:  TENNENBAUM & CO., LLC
as Managing Member of the Manager

By:   /s/ Michael E. Tennenbaum
--------------------------------
Name:  Michael E. Tennenbaum
Title:  Member

Signature Page to Securities Purchase Agreement

-58-

ARROW INVESTMENT PARTNERS
By:  Grandview Capital Management, LLC,
Investment Manager

By:   /s/ Robert E. Sydow
-------------------------------
Name:  Robert E. Sydow
Title:  President

BILL AND MELINDA GATES FOUNDATION
By:  Grandview Capital Management, LLC,
Investment Manager

By:   /s/ Robert E. Sydow
-------------------------------
Name:  Robert E. Sydow
Title:  President

Signature Page to Securities Purchase Agreement

-59-

EXHIBITS, ANNEXES AND DISCLOSURE SCHEDULES

EXHIBITS
--------

EXHIBIT A       Form of Note

EXHIBIT B       Coverage of Opinion of Counsel to the Company

EXHIBIT C       Form of Subsidiary Guaranty

EXHIBIT D       Form of Registration Rights Agreement

EXHIBIT E       Form of Warrant Agreement

EXHIBIT F       Form of Bank Loan Agreement

ANNEXES
-------

ANNEX 1         Purchasers Schedule

ANNEX 2         Wiring Instructions, Company Address for Notices

DISCLOSURE SCHEDULES
--------------------

Schedule 6.1  Existing Debt and Liens
Schedule 8.1  Company and Subsidiary Information
Schedule 8.2  Outstanding Rights
Schedule 8.4  Litigation
Schedule 8.7  Tax Matters
Schedule 8.8  Restrictive Agreements
Schedule 8.12  Consents
Schedule 8.13  Environmental Matters
Schedule 8.20  Brokers

Table of Contents
-----------------

Page
----

1.   AUTHORIZATION; RANKING...........................................     1

1.1   AUTHORIZATION OF ISSUE OF THE NOTES AND WARRANTS...........     1
1.2   RANKING....................................................     1
1.3   INTEREST ON THE NOTES......................................     1

2.   PURCHASE AND SALE OF THE SECURITIES; CLOSING.....................     2

2.1   PURCHASE AND SALE OF THE SECURITIES........................     2
2.2   CLOSING....................................................     3
2.3   CERTAIN AGREEMENTS OF THE COMPANY AND THE HOLDERS..........     3

3.   CONDITIONS OF CLOSING............................................     3

3.1   ARTICLES OF ORGANIZATION AND PROCEEDINGS...................     3
3.2   OPINION OF COMPANY COUNSEL.................................     4
3.3   OPINION OF PURCHASERS' SPECIAL COUNSEL.....................     5
3.4   REPRESENTATIONS AND WARRANTIES AND COMPLIANCE..............     5
3.5   PURCHASE PERMITTED BY APPLICABLE LAWS......................     5
3.6   PRIVATE PLACEMENT NUMBERS..................................     5
3.7   SALE OF ALL SECURITIES.....................................     5
3.8   CONSENT OF OTHER PERSONS...................................     5
3.9   PAYMENT OF SPECIAL COUNSEL FEES............................     5
3.10  GUARANTIES.................................................     5
3.11  OTHER TRANSACTION DOCUMENTS................................     6
3.12  BANK LOAN DOCUMENTS........................................     6
3.13  EXISTING SENIOR NOTES......................................     6
3.14  2000 FINANCIAL STATEMENTS..................................     6
3.15  CLOSING FEE................................................     6   

4.   PREPAYMENT AND REPAYMENT.........................................     6

4.1   OPTIONAL PREPAYMENT OF NOTES AT ANY TIME...................     6
4.2   NOTICE OF OPTIONAL PREPAYMENT..............................     6
4.3   SCHEDULED REPAYMENT OF NOTES...............................     7
4.4   PREPAYMENT OF NOTES UPON A CHANGE OF CONTROL...............     7
4.5   PAYMENTS PRO RATA; APPLICATION OF PAYMENTS.................     7
4.6   RETIREMENT OF NOTES........................................     8
4.7   MANNER OF PAYMENT..........................................     8
4.8   TAXES......................................................     9
4.9   MAKE WHOLE AMOUNT..........................................    10

5.   AFFIRMATIVE COVENANTS............................................    11

5.1   FINANCIAL AND OTHER REPORTING BY THE COMPANY...............    11
5.2   INFORMATION REQUIRED BY RULE 144A..........................    13
5.3   INSPECTION OF PROPERTY.....................................    14

i

5.4   EXISTENCE, ETC.............................................    14
5.5   PAYMENT OF TAXES AND CLAIMS................................    14
5.6   COMPLIANCE WITH LAWS, ETC..................................    14
5.7   MAINTENANCE OF PROPERTIES AND LEASES.......................    14
5.8   INSURANCE..................................................    15
5.9   USE OF PROCEEDS............................................    15
5.10  ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION...............    15
5.11  MAINTENANCE OF BOOKS AND RECORDS...........................    16
5.12  SUBSIDIARY GUARANTIES......................................    16
5.13  BOARD VISITATION RIGHTS....................................    16

6.   NEGATIVE COVENANTS...............................................    17

6.1   INDEBTEDNESS...............................................    17
6.2   LIENS......................................................    17
6.3   CONTINGENT LIABILITIES.....................................    18
6.4   FUNDAMENTAL CHANGES; ASSET SALES...........................    19
6.5   INVESTMENTS; INTEREST RATE PROTECTION PRODUCTS.............    20
6.6   RESTRICTED JUNIOR PAYMENTS.................................    20
6.7   TRANSACTIONS WITH AFFILIATES...............................    20
6.8   RESTRICTIVE AGREEMENTS.....................................    21
6.9   SALE-LEASEBACK TRANSACTIONS; BILL-AND-HOLD SALES, ETC......    21
6.10  CERTAIN FINANCIAL COVENANTS................................    21
6.11  LINES OF BUSINESS..........................................    22
6.12  OTHER INDEBTEDNESS.........................................    22
6.13  MODIFICATIONS OF CERTAIN DOCUMENTS.........................    22
6.14  AMENDMENTS TO SENIOR INDEBTEDNESS DOCUMENTS................    23
6.15  COMPLIANCE WITH ERISA......................................    23

7.   EVENTS OF DEFAULT................................................    24

7.1   EVENTS OF DEFAULT..........................................    24
7.2   ACCELERATION ON EVENT OF DEFAULT...........................    26
7.3   RESCISSION OF ACCELERATION.................................    26
7.4   NOTICE OF ACCELERATION OR RESCISSION.......................    27
7.5   OTHER REMEDIES, NO WAIVERS OR ELECTION OF REMEDIES.........    27

8.   REPRESENTATIONS AND WARRANTIES................................... 27

8.1   ORGANIZATION, ETC.......................................... 27
8.2   STOCK OWNERSHIP............................................ 28
8.3   FINANCIAL STATEMENTS....................................... 28
8.4   ACTIONS PENDING............................................ 29
8.5   TITLE TO PROPERTIES........................................ 29
8.6   AFFILIATES AND INVESTMENTS IN OTHERS....................... 29
8.7   TAX RETURNS AND PAYMENTS................................... 29
8.8   CONFLICTING AGREEMENTS AND OTHER MATTERS................... 30
8.9   OFFERING OF SECURITIES..................................... 30
8.10  REGULATION U, ETC.......................................... 30
8.11  ERISA...................................................... 31

ii

8.12  GOVERNMENTAL AND OTHER CONSENTS............................ 31
8.13  ENVIRONMENTAL MATTERS...................................... 32
8.14  LABOR RELATIONS............................................ 32
8.15  FINANCIAL CONDITION........................................ 33
8.16  DISCLOSURE................................................. 33
8.17  STATUS UNDER CERTAIN FEDERAL STATUTES...................... 33
8.18  BANK LOAN AGREEMENT; EXISTING DEBT......................... 33
8.19  COMPLIANCE WITH LAWS, ETC.................................. 33
8.20  BROKERS.................................................... 34

9.   REPRESENTATIONS OF THE PURCHASERS................................ 34

10.  DEFINITIONS...................................................... 35

11.  [INTENTIONALLY OMITTED].......................................... 48

12.  MISCELLANEOUS.................................................... 48
12.1  EXPENSES................................................... 48
12.2  CONSENT TO AMENDMENTS...................................... 49
12.3  PERSONS DEEMED OWNERS; PARTICIPATIONS...................... 50
12.4  SURVIVAL OF REPRESENTATIONS AND WARRANTIES; 
ENTIRE AGREEMENT.......................................... 50
12.5  SUCCESSORS AND ASSIGNS..................................... 50
12.6  CONFIDENTIAL INFORMATION................................... 50
12.7  NOTICES.................................................... 51
12.8  DESCRIPTIVE HEADINGS....................................... 52
12.9  SOLICITATION OF HOLDERS.................................... 52
12.10 REPRODUCTION OF DOCUMENTS.................................. 52
12.11 GOVERNING LAW.............................................. 52
12.12 CONSENT TO JURISDICTION AND SERVICE........................ 52
12.13 COUNTERPARTS............................................... 53
12.14 REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT OF NOTES.. 53
12.15 COMPLIANCE BY SUBSIDIARIES................................. 54
12.16 SEVERABILITY............................................... 54
12.17 TERMINATION................................................ 54
12.18 CONSTRUCTION............................................... 54

iii

EXHIBIT 4.20

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT, dated as of April 12, 2001 by and among CLEAN
HARBORS, INC., a Massachusetts corporation ("Clean Harbors"), THE SUBSIDIARIES
-------------                    
OF CLEAN HARBORS LISTED ON THE SIGNATURE PAGES HERETO (collectively with Clean
Harbors, the "Credit Parties"), CONGRESS FINANCIAL CORPORATION (NEW ENGLAND), a
--------------                                                   
Massachusetts corporation, as the Senior Creditor under the Credit Agreement
described below (together with the equivalent party with respect to any
Refinanced Senior Indebtedness (as defined below), herein called the "Senior
------
Creditor"), and JOHN HANCOCK LIFE INSURANCE COMPANY, JOHN HANCOCK VARIABLE LIFE
--------                                                                       
INSURANCE COMPANY, SIGNATURE 4 LIMITED, SIGNATURE 5 L.P., SPECIAL VALUE BOND
FUND, LLC, ARROW INVESTMENT PARTNERS and BILL AND MELINDA GATES FOUNDATION
(collectively the "Subordinated Creditors" and each a "Subordinated Creditor").
----------------------              ---------------------   

W I T N E S S E T H:

In order to induce the Senior Creditor to enter into such Existing Credit
Agreement and to make the Revolving Credit Loans and Term Loans contemplated
thereby, the Credit Parties and the Subordinated Creditors hereby agree with the
Senior Creditor that so long as any part of the Senior Indebtedness as described
in Section 1.2 below is outstanding and so long as any Lender shall have any
obligation to make any loan, advance any credit, issue or honor any of Letter
Credit issued under the Credit Agreement, each of the Subordinated Creditors and
the Credit Parties will comply with such of the following provisions as are
applicable to it:

1.  Certain Definitions.
------------------- 

1.1  Reference to Credit Agreement.  Reference is hereby made to the Amended
-----------------------------                                          
and Restated Loan and Security Agreement dated as of April 12, 2001 by and among
the Credit Parties, as borrowers and guarantors, and the Senior Creditor, as the
Lender, as amended, modified, restated or supplemented from time to time without
violation of Section 8 hereof (the "Existing Credit Agreement" and together with
-------------------------                   
any Refinanced Credit Agreement (as defined below), the "Credit Agreement").
Capitalized terms defined in the Existing Credit Agreement and not otherwise
defined herein are used herein with the meanings so defined.

1.2  Senior Indebtedness.  The term "Senior Indebtedness" shall mean all
-------------------             -------------------                
"Existing Senior Indebtedness" and all "Refinanced Senior Indebtedness".  The
term "Existing Senior Indebtedness" shall mean indebtedness, obligations and
----------------------------                                          
liabilities of the Credit Parties to the Senior Creditor its successors and
assigns, now existing or hereafter arising, direct or indirect, absolute or
contingent, secured or unsecured, arising out of or in connection with any of
the Financing Agreements, any and all interest payable pursuant to the Existing
Credit Agreement and/or under any promissory notes which may be issued by any
Credit Party to any Lender pursuant to the Existing Credit Agreement at the
interest rates provided therein (including interest which accrues after the
commencement of any proceeding in respect of any Reorganization (as hereinafter
defined)), all premium and termination fees if any payable in accordance with
the terms of the Financing Agreements and all other fees and expenses and 

other amounts due from time to time under the Financing Agreements. The term
"Refinanced Senior Indebtedness" shall mean indebtedness, obligations and
-------------------------------                                          
liabilities of the Credit Parties to any lender or lenders, their successors and
assigns, hereafter incurred to refinance the Existing Senior Indebtedness in an
original principal amount not to exceed the then outstanding principal amount,
together with accrued interest and all other amounts then due and owing under
the Existing Senior Indebtedness, direct or indirect, absolute or contingent,
secured or unsecured, arising out of or in connection with any of the Financing
Agreements relating to such refinancing, provided the terms of the Refinanced
Senior Indebtedness and the Financing Agreements related thereto do not, violate
Section 8 hereof (the "Refinanced Financing Agreements", with the agreement
-------------------------------                     
equivalent to the Existing Credit Agreement herein called, the "Refinanced
----------
Credit Agreement"), any and all interest payable pursuant to the Refinanced
----------------                                                           
Financing Agreements and/or under any promissory notes which may be issued by
any Credit Party to any lender pursuant to the Refinanced Financing Agreements
at the interest rates provided therein (including interest which accrues after
the commencement of any proceeding in respect of any Reorganization (hereafter
defined)), all premium and termination fees if any payable in accordance with
the terms of the Refinanced Financing Agreements and all other fees and expenses
and other amounts due from time to time under the Refinanced Financing
Agreements.  The term "Senior Indebtedness" shall include all amounts payable
under the Financing Agreements or any Refinanced Financing Agreements in
accordance with their terms, irrespective of whether any Credit Party may be
excused from payment of any interest, fees or other amounts payable thereunder
as a result of any Reorganization.  All Senior Indebtedness shall be entitled to
the benefit of this Agreement without notice thereof being given to any
Subordinated Creditor.

1.3  Subordinated Indebtedness.  The term "Subordinated Indebtedness" shall
-------------------------             -------------------------       
mean:

(a)  All indebtedness, liabilities and obligations of the Credit Parties
to the Subordinated Creditors, now existing or hereafter incurred, however made
or incurred, direct or indirect, absolute or contingent, secured or unsecured
and however evidenced, under the Securities Purchase Agreement, dated as of
April 12, 2001, among Clean Harbors and the Subordinated Creditors (as amended
from time to time, the "Securities Purchase Agreement"), the 16% Senior
-----------------------------
Subordinated Notes due 2008 issued by Clean Harbors and the Subsidiary
Guaranties in favor of the Subordinated Creditors executed by certain
subsidiaries of Clean Harbors (collectively, the "Subordinated Debt Documents").
---------------------------

(b)  All obligations (contingent or otherwise) under all agreements and
instruments heretofore or hereafter securing the obligations of the Credit
Parties in respect of the Subordinated Debt Documents, including any guaranty
thereof by any Affiliate of any Credit Party.

2.  Terms of Subordination.
---------------------- 

2.1 Transfer.  Any Person to which any of the Subordinated Indebtedness is
--------                                                              
transferred, sold or who otherwise acquires an interest therein shall become a
party hereto, shall be deemed a "Subordinated Creditor" for all purposes hereof
and shall be bound by all of the terms hereof automatically upon acceptance of
such Subordinated Indebtedness or interest 

2

therein without further action on the part of such Person, the Subordinated
Creditors, the Credit Parties or the Senior Creditor.

2.2  Payment Subordinated.  Anything in the Subordinated Debt Documents
--------------------                                              
notwithstanding, the payment of the Subordinated Indebtedness is and shall be
expressly subordinate and junior in right of payment and, as provided in Section
6 hereof, exercise of remedies, to the prior payment in full of the Senior
Indebtedness to the extent and in the manner provided herein, and the
Subordinated Indebtedness is hereby subordinated as a claim against the Credit
Parties or any of the assets of the Credit Parties to the prior payment in full
of the Senior Indebtedness, whether such claim be (i) in the event of any
distribution of the assets of the Credit Parties upon any voluntary or
involuntary dissolution, winding-up, total or partial liquidation or
reorganization, or bankruptcy, insolvency, receivership or other statutory or
common law proceedings or arrangements involving the Credit Parties or the
readjustment of their liabilities or any assignment for the benefit of creditors
or any marshalling of their assets or liabilities (collectively called a

"Reorganization"), or (ii) other than in connection with a Reorganization,
---------------                                                           
except to the extent such payment is permitted by Section 2.6 hereof.  In
furtherance of the foregoing, the Credit Parties agree that they will not make,
and each of the Subordinated Creditors and each other holder of all or any
portion of the Subordinated Indebtedness agrees that it will not accept or
receive, any payment of Subordinated Indebtedness, including, without
limitation, any payment received through the exercise of any right of setoff,
counterclaim or crossclaim, until all of the Senior Indebtedness has been paid
in full or provision made for the full payment thereof in cash, except to the
extent such payment is permitted by Section 2.6 hereof.

2.3  Distributions in Reorganization.
------------------------------- 

(a)  In the event of any Reorganization relative to the Credit Parties
or their properties, then all of the Senior Indebtedness shall first be paid in
full in cash before any payment is made in respect of the Subordinated
Indebtedness, and in any such proceedings any payment or distribution of any
kind or character, whether in cash, property or securities (other than Junior
Securities, hereafter defined), which may be payable or deliverable in respect
of the Subordinated Indebtedness shall be paid or delivered directly to the
Senior Creditor for application in payment of the Senior Indebtedness, unless
and until all such Senior Indebtedness shall have been paid or satisfied in full
in cash, and each holder of Subordinated Indebtedness does hereby authorize the
Senior Creditor to accept and receipt for any payment or distribution and to
apply such payment or distribution to the payment of the then unpaid Senior
Indebtedness, and to do any and all things and to execute all instruments
necessary to effectuate the foregoing. In the event that, upon any such
Reorganization, any payment or distribution of assets of the Credit Parties of
any kind or character, whether in cash, property or securities (other than
Junior Securities), shall be received by any holder of Subordinated Indebtedness
before all Senior Indebtedness is paid in full in cash, such payment or
distribution shall be immediately paid over to the Senior Creditor for
application to the payment of all Senior Indebtedness remaining unpaid until all
such Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness. Notwithstanding any provisions of this Section 2.3, in the event
that a plan is proposed in the course of a Reorganization (a "Bankruptcy Plan")
(x) if the Senior Creditor consents thereto in writing, each holder of
Subordinated Indebtedness shall be entitled to retain any cash, securities or
other

3

property payable to it in accordance with the terms of such Bankruptcy Plan and
(y) in any event, each holder of Subordinated Indebtedness shall be entitled to
receive and retain any Junior Securities distributed to it in accordance with
the terms of such Bankruptcy Plan. "Junior Securities" means any payment or
distribution of capital stock or other securities of any Credit Party or other
Person provided for by a Bankruptcy Plan, which stock or securities are
subordinated in right of payment to all then outstanding Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the Subordinated
Indebtedness is subordinated to Senior Indebtedness as provided in this
Agreement.

(b)  Each Subordinated Creditor hereby appoints, which appointment is
irrevocable and coupled with an interest, the Senior Creditor as such
Subordinated Creditor's true and lawful attorney, with full power of
substitution, in the name of such Subordinated Creditor, the Senior Creditor, or
otherwise, for the sole use and benefit of the Senior Creditor, to the extent
permitted by law, to prove and vote all claims relating to the Subordinated
Indebtedness if such Subordinated Creditor fails to file a proof of claim or
vote its claim within 20 days following written demand therefor by the Senior
Creditor.

(c)  At any meeting of creditors of the Credit Parties or in the event
of any case or proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of the Credit Parties or
the proceeds thereof, whether such case or proceeding be for the liquidation,
dissolution or winding up of the Credit Parties or their business, a
receivership, insolvency or bankruptcy case or proceeding, an assignment for the
benefit of creditors or a proceeding by or against the Credit Parties for relief
under the federal Bankruptcy Code or any other bankruptcy, reorganization or
insolvency law or any other law relating to the relief of debtors, readjustment
of indebtedness, Reorganization, arrangement, composition or extension or
marshalling of assets or otherwise, the Senior Creditor is hereby irrevocably
authorized to receive or collect any cash or other assets of the Credit Parties
distributed, divided or applied by way of dividend or payment, or any securities
issued on account of any Subordinated Indebtedness, and apply such cash to or to
hold such other assets or securities as collateral for the Senior Indebtedness,
and to apply to the Senior Indebtedness any cash proceeds of any realization
upon such other assets or securities that the Senior Creditor, in its
discretion, elects to effect, until all of the Senior Indebtedness shall have
been paid in full in cash, rendering to the Subordinated Creditors any surplus
to which the Subordinated Creditors are then entitled.

2.4  Effect of Provisions.  The provisions hereof are solely for the purpose
--------------------                                                   
of defining the relative rights of the holders of Senior Indebtedness on the one
hand, and the holders of Subordinated Indebtedness on the other hand, and none
of such provisions shall impair, as between the Credit Parties and any holder of
the Subordinated Indebtedness, the obligations of the Credit Parties, which are
unconditional and absolute, to pay to such holder all Subordinated Indebtedness
in accordance with the terms thereof nor, except as provided in Section 6 below,
shall any such provisions prevent any holder of Subordinated Indebtedness from
exercising all remedies otherwise permitted by applicable law or under the terms
of such Subordinated Indebtedness upon a default thereunder, subject to the
rights, if any, of holders of Senior Indebtedness under the provisions of this
Agreement.

2.5  Subrogation, etc.  Subject to the payment in full of all Senior
----------------                                               
Indebtedness, the holders of the Subordinated Indebtedness shall be subrogated
to the rights of the holders of 

4

Senior Indebtedness to receive payments or distributions of assets of the Credit
Parties made on the Senior Indebtedness until the Subordinated Indebtedness
shall be paid in full in cash and, for the purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the holders of the Subordinated Indebtedness
would be entitled except for the provisions of this Agreement, and no payment
over pursuant to the provisions of this Agreement to the holders of Senior
Indebtedness, by the holders of the Subordinated Indebtedness, shall, as between
the Credit Parties, the creditors of the Credit Parties (other than the holders
of Senior Indebtedness) and the holders of the Subordinated Indebtedness, be
deemed to be a payment by the Credit Parties to or on account of Senior
Indebtedness; it being understood that the provisions of this Agreement are and
are intended solely for the purpose of defining the relative rights of the
holders of the Subordinated Indebtedness on the one hand, and the holders of
Senior Indebtedness on the other hand.

2.6  Permitted Payments.
------------------ 

(a)  Notwithstanding anything to the contrary set forth herein, (i)
so long as (x) no Payment Default exists, and so long as (y) the Subordinated
Creditors have not received a Blockage Notice with respect to any other Event of
Default, the Credit Parties may, from time to time, pay or cause to be paid to
the Subordinated Creditors and the Subordinated Creditors may accept and retain
scheduled payments of principal and of interest on the Subordinated Indebtedness
in the amounts and on the dates required to be paid by the Credit Parties under
the Subordinated Debt Documents, as originally executed and delivered or as
amended from time to time without violation of Section 6, and (ii) so long as
(x) no Payment Default exists, (y) the Subordinated Creditors have not received
a Blockage Notice with respect to any other Event of Default and (z) no Default
or Event of Default shall result from the making of any such payment and such
payment is made to the extent and only to the extent permitted under Schedule A
to this Agreement, the Credit Parties may make prepayments of principal and
interest in respect of the Subordinated Indebtedness. In addition to payments
permitted under the first sentence of this Section 2.6(a), if the then holders
of the Senior Indebtedness shall not have accelerated the payment of the Senior
Indebtedness within 180 days after receipt by the Subordinated Creditors of a
Blockage Notice, then after the expiration of such 180-day period (or if during
said 180-day period such Event of Default is cured by the Credit Parties or is
waived by the then holders of the Senior Indebtedness, then after the time of
such cure or waiver), and if no Payment Default exists, the Credit Parties may
from time to time pay or cause to be paid to the Subordinated Creditors and the
Subordinated Creditors may accept and retain payments of interest on the
Subordinated Indebtedness (not in excess of the scheduled payments of interest
required to be made by the Credit Parties under the Subordinated Debt Documents,
as originally executed and delivered or as amended from time to time without
violation of Section 6 hereof, including any interest payments which were not
paid as a result of such Blockage Notice or the prior existence of a Payment
Default), provided, that if thereafter any Payment Default occurs or any other
--------
Blockage Notice is sent, then the first sentence of this Section 2.6(a) shall
again apply. If the Subordinated Creditors or any other holder of the
Subordinated Indebtedness receives payment from the Credit Parties pursuant to
the first sentence of this Section 2.6(a), such payment shall be deemed to
constitute a representation of the Credit Parties to the Senior Creditor and to
the Subordinated Creditors that no Event of Default exists, that such payment is
permitted to be paid by the Credit Parties under this Agreement, and the
Subordinated Creditors shall be entitled to keep and retain such payment.
Notwithstanding anything which may be to the contrary herein, 

5

the Senior Creditor shall not be entitled to block payments pursuant to a
Blockage Notice delivered hereunder for more than 180 days during any 360 day
period or send more than three (3) Blockage Notices during the term of this
Agreement.

(b)  For purposes hereof, the terms:

(i)  "Payment Default" shall mean any failure by the Credit Parties to
---------------                                             
pay any principal of or premium, if any, or interest on any Senior Indebtedness
or any fee owing to the Senior Creditor or any Lender under the Credit Agreement
when the same becomes due and payable, whether at maturity or at date fixed for
the payment of any installment or prepayment thereof or by declaration or
acceleration or otherwise (but after giving effect to the period of grace, if
any, applicable thereto). No Payment Default shall be deemed to have been cured
unless the full amount of the overdue payment to which such Payment Default
relates shall have been paid in full prior to any acceleration of the Senior
Indebtedness or unless waived by the then holders of the Senior Indebtedness.

(ii) "Blockage Notice" shall mean a written notice from the Senior
---------------                                            
Creditor to the Subordinated Creditors of the existence of an Event of Default.

3.  Agreement to Hold In Trust.  If the Subordinated Creditors or any
--------------------------                                  
other holders of Subordinated Indebtedness shall receive any payments on account
of the Subordinated Indebtedness in violation of this Agreement, they shall hold
such payments in trust for the benefit of the holder or holders of the Senior
Indebtedness and pay them over to the Senior Creditor for application in payment
of the Senior Indebtedness.

4.  Requirement of Notices.
---------------------- 

4.1 By the Senior Creditor.  The Senior Creditor agrees to notify the
----------------------                                           
Subordinated Creditors of any Payment Default, of any acceleration of the Senior
Indebtedness or of any change in the Senior Creditor.

4.2 By the Subordinated Creditors.  The Subordinated Creditors agree to
-----------------------------                                      
notify the Senior Creditor prior to any acceleration of the Subordinated
Indebtedness or upon the happening of any of the following:

(a)  The failure of the Credit Parties to make any payment on the
Subordinated Indebtedness as and when due; or

(b)  The transfer of any Subordinated Indebtedness, specifying the
name and address of the transferee.

4.3 Effect of Failure to Give Notice.  Notwithstanding the foregoing, the
--------------------------------                                     
failure of any party to give any notice required under this Section 4 shall not
affect the subordination of the Subordinated Indebtedness.

5.  Legend.  The Credit Parties and the Subordinated Creditors, for
------
themselves and their successors and assigns, covenant to cause each instrument
representing or evidencing any

6

of the Subordinated Indebtedness to have affixed upon it a legend which reads
substantially as follows:

"This instrument is subject to a Subordination Agreement dated as of April
12, 2001 among the payee hereof, the maker hereof, and Congress Financial
Corporation (New England), which, among other things, subordinates the
makers' obligations to the payee to the makers' obligations to the holders
of Senior Indebtedness as defined in said Agreement."

6.  Limit on Right of Action, No Amendments.  The Subordinated Creditors,
for themselves and their successors and assigns, agree for the benefit of the
holders of the Senior Indebtedness that so long as any part of the Senior
Indebtedness remains outstanding or any holder of the Senior Indebtedness shall
have any obligation to make any loans, extend any credit, or issue or honor any
Letter of Credit Accommodation issued under the Credit Agreement, the
Subordinated Creditors will not take any action to accelerate or demand the
payment of the Subordinated Indebtedness or to foreclose or otherwise realize on
any security or guaranty given by the Credit Parties or any of their Affiliates
to secure or guarantee the Subordinated Indebtedness (except and only to the
extent required to toll the running of any applicable statute of limitations)
prior to the earliest of (i) a Reorganization or (ii) the acceleration of the
Senior Indebtedness by the holders thereof; provided that notwithstanding the
--------
foregoing, the Subordinated Creditors shall be entitled to accelerate the
Subordinated Indebtedness as a result of any default by the Credit Parties in
their obligations under the Subordinated Debt Documents one hundred eighty (180)
days after the Subordinated Creditors give the Senior Creditor written notice of
their intent to accelerate (the "Standstill Period") and may thereafter take
action to collect or enforce the Subordinated Indebtedness, provided any
proceeds received or recoverable by the Subordinated Creditors in connection
therewith shall be held in trust as provided in Section 3 of this Agreement and
paid over to Senior Creditor as provided under the other provisions of this
Agreement; provided, however, that the Subordinated Creditors shall not take and
shall suspend any action taken to collect and enforce the Subordinated
Indebtedness (but may continue the acceleration thereof) effective upon receipt
of notice from the Senior Creditor of the acceleration of the Senior
Indebtedness and for so long as the Senior Creditor is actively taking actions
to collect and enforce the Senior Indebtedness in such manner as the Senior
Creditor shall determine, in its discretion, except that Subordinated Creditors
may bring suit and obtain judgments and judgment liens with respect to the
Subordinated Indebtedness but not take any action to execute on any such liens
unless required to protect such judgment lien's priority as against other
judgment creditors (other than with respect to the security interests and liens
of the Senior Creditor). The foregoing provisions of this Section 6 are solely
for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand and the holders of the Subordinated Indebtedness on
the other hand and shall not limit or otherwise affect any rights which the
holders of the Subordinated Indebtedness may have against the Credit Parties
under the terms of the Subordinated Debt Documents.

The Subordinated Creditors shall not amend or permit amendment of the terms
of any instrument or agreement evidencing any Subordinated Indebtedness in any
manner that would amend the payment terms of the Subordinated Debt Documents
(other than extensions or deferrals of scheduled dates of payment or waivers of
defaults), any financial covenant or other negative covenant set forth in the
Securities Purchase Agreement or the rate and manner of 

7

payment of interest, premiums or fees due under the Subordinated Debt Documents,
except to the extent such amendment is no more onerous to the Credit Parties
(provided, the Subordinated Creditors and the Credit Parties may amend the terms
of any financial covenant in the Subordinated Debt Documents or any defined term
used therein or to provide for new financial covenants if the same conform to
any such term or covenants in any Credit Agreement or in any Refinance Credit
Agreement regardless of whether or not more onerous) or except as otherwise
permitted under the Credit Agreement.

7.  No Security to the Subordinated Creditors.  The Credit Parties shall not
-----------------------------------------                               
grant and the Subordinated Creditors shall not accept any security of any nature
in property real or personal of the Credit Parties to secure the Subordinated
Indebtedness.  Any security interest granted in violation of the terms of this
Agreement shall be null and void and of no force and effect against the holders
of the Senior Indebtedness.  In foreclosing or realizing on the security
interests granted in favor of the holders of the Senior Indebtedness in the
Collateral, so long as the Senior Creditor acts in a commercially reasonable
manner, the Senior Creditor may proceed in any manner which the Senior Creditor,
in its sole discretion, shall choose, even though a higher price might have been
realized if the Senior Creditor had proceeded to foreclose or realize on its
security interests in another manner.

8.  Right to Amend, etc.  The holders of the Senior Indebtedness shall have
--------------------                                                   
the right, in their sole discretion (and without in any way diminishing or
altering their rights hereunder or the subordination provisions contained
herein), to modify, amend, waive or release any of the terms of the Credit
Agreement, the Financing Agreements or the Senior Indebtedness or of any other
document relative thereto and to exercise or refrain from exercising any powers
or rights which it may have thereunder; provided that in no event shall the
--------                           
Financing Agreements or the Refinanced Financing Agreements contain any
provision that would (i) directly prohibit the Credit Parties from making
payments in respect of the Subordinated Indebtedness in any manner which is not
already specifically prohibited by this Agreement or directly prohibit the
amendment of any instrument or agreement evidencing Subordinated Indebtedness
except as provided in Section 6 hereof, (ii) extend the maturity of any Senior
Indebtedness to a date that is beyond the maturity date of the Subordinated
Indebtedness without the consent of the holders of a majority of the
Subordinated Indebtedness,  (iii) cause the maximum principal amount of the
Senior Indebtedness to exceed $65,000,000 at any time, or (iv) amend the
definition of Collateral set forth in the Existing Credit Agreement except as
may be necessary to conform to amendments to the Uniform Commercial Code.

9.  Further Assurances.  The Credit Parties and the Subordinated Creditors for
------------------                                                        
themselves and their respective successors and assigns, agree to execute and
deliver to the Senior Creditor, at the expense of the Credit Parties, such
further documents and instruments and to take such further action as the Senior
Creditor may at any time or times reasonably request in order to carry out the
provisions and intent of this Agreement.

10.  Notices.  All notices and other communications hereunder shall be in
-------                                                             
writing and shall be personally delivered or mailed by first class mail, postage
prepaid, as follows:

(a) If to the Subordinated Creditors:

8

to such party at its address set forth on Annex 1 attached

9

(b)  If to the Credit Parties:

Clean Harbors, Inc.
1501 Washington Street
Braintree, Massachusetts  02185
Attention:  Chief Financial Officer
Fax no. (781) 848-1632

with a copy to:

Davis, Malm & D'Agostine, P.C.
One Boston Place
Boston, MA  02108
Attention: C. Michael Malm
Fax no. (617) 305-3103

(c)  If to the Senior Creditor:

Congress Financial Corporation (New England)
One Post Office Square, Suite 3600
Boston, MA  02109
Attention:  Marc Swartz, Senior Vice President
Fax No. (617) 338-1497

with a copy to:

Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA  02111
Attention:  Jeffery L. Keffer
Fax No. (617) 856-8201

or to such other address or addresses as the party to whom such notice is
directed may have designated in writing to the other parties hereto.  A notice
shall be deemed to have been given upon the earlier to occur of (i) three (3)
days after the date on which it is deposited in the U.S. mails or (ii) receipt
by the party to whom such notice is directed.

11.  Successors: Continuing Effect. etc.  This Agreement is being entered into
-----------------------------------                                      
for the benefit of, and shall be binding upon, the holders of the Senior
Indebtedness and the holders of the Subordinated Indebtedness and their
respective successors and assigns.  This Agreement shall be a continuing
agreement and shall be irrevocable and shall remain in full force and effect so
long as there is both Senior Indebtedness (including, if applicable, any portion
of the Senior Creditors commitment or obligation to make loans, extend credit or
issue or honor Letter of Credit Accommodations issued under the Credit
Agreement) and Subordinated Indebtedness outstanding.

10

12.  Credit Agreement.  Notwithstanding any other provision of this
----------------                                              
Subordination Agreement, the rights of the holders of the Senior Indebtedness
are subject to the provisions of the Credit Agreement.  Unless the context shall
so otherwise clearly indicate, the terms "holder of Senior Indebtedness" and
"holders of Senior Indebtedness," as used herein shall be deemed to include the
Senior Creditor and any successor or assign thereof acting pursuant to the
Credit Agreement.

13.  Miscellaneous.  In case any provision in this Agreement shall be invalid,
-------------                                                            
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.  This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument. This
Agreement shall be governed by the laws of The Commonwealth of Massachusetts.

SIGNATURES APPEAR ON THE NEXT PAGE

11

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.

CLEAN HARBORS, INC.

/s/ Stephen H. Moynihan 
By: __________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS ENVIRONMENTAL SERVICES, INC.

/s/ Stephen H. Moynihan
By: __________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS OF BRAINTREE, INC.

/s/ Stephen H. Moynihan
By:__________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS OF NATICK, INC.

/s/ Stephen H. Moynihan
By:__________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS SERVICES, INC.

/s/ Stephen H. Moynihan
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

MURPHY'S WASTE OIL SERVICE, INC.

/s/ Stephen H. Moynihan                            
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

12

CLEAN HARBORS KINGSTON FACILITY CORPORATION

/s/ Stephen H. Moynihan
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS OF CONNECTICUT, INC.

/s/ Stephen H. Moynihan
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

MR. FRANK, INC.

/s/ Stephen H. Moynihan
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

SPRING GROVE RESOURCE RECOVERY, INC.

/s/ Stephen H. Moynihan
By: __________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

HARBOR MANAGEMENT CONSULTANTS, INC.

/s/ Stephen H. Moynihan
By:___________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

CLEAN HARBORS OF BALTIMORE, INC.

/s/ Stephen H. Moynihan
By:  __________________________
Name:Stephen H. Moynihan
Title:Senior Vice President

13

JOHN HANCOCK LIFE INSURANCE COMPANY

Steven J. Blewitt
By: __________________________
Name:Steven J. Blewitt
Title:Managing Director

JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY

/s/ Steven J. Blewitt
By: __________________________
Name:Steven J. Blewitt
Title:Authorized Signatory

SIGNATURE 4 LIMITED

By: John Hancock Life Insurance Company,
as Portfolio Advisor

/s/ Steven J. Blewitt
By: __________________________
Name:Steven J. Blewitt
Title:Managing Director

SIGNATURE 5, L.P.

By: John Hancock Life Insurance Company,
as Portfolio Advisor

/s/ Steven J. Blewitt
By: __________________________
Name:Steven J. Blewitt
Title:Managing Director

SPECIAL VALUE BOND FUND, LLC

By: SVIM/MSM, LLC
as Manager

By: TENNENBAUM & CO., LLC
as Managing Member of the Manager

/s/ Michael E. Tennenbaum
By: _______________________________
Name:  Michael E. Tennenbaum
Title:  Member

14

ARROW INVESTMENT PARTNERS

By:  Grandview Capital Management, LLC,
Investment Manager

/s/ Robert E. Sydow
By:  _______________________________
Name:  Robert E. Sydow
Title:  President

BILL AND MELINDA GATES FOUNDATION

By:  Grandview Capital Management, LLC,
Investment Manager

/s/ Robert E. Sydow
By:  _______________________________
Name:  Robert E. Sydow
Title:  President

CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND)

/s/ Edward Shifman
By:____________________________
Name:Edward Shifman
Title:Senior Vice President

12

SCHEDULE A

PERMITTED PREPAYMENTS

Subject to the conditions set forth in Section 2.6(a)(ii) of this Agreement,
the Credit Parties may make prepayments of principal and accrued interest on the
Senior Subordinated Notes; provided, that, (i) the Credit Parties shall give
--------  ----                                   
Senior Creditor not more than sixty (60) days nor less than thirty (30) days
prior notice of any such prepayment, (ii) on each of the sixty (60) consecutive
days prior to the making of any such prepayment and on the date thereof after
giving effect thereto, the Credit Parties shall maintain Excess Availability (as
defined under the Existing Credit Agreement) of not less than $2,500,000, (iii)
prior to making any such prepayment the Credit Parties shall  have repaid at
least $9,000,000 of principal on the Term Loan B (as defined in the Existing
Loan Agreement) and (iv) the Credit Parties shall make such prepayment only from
the following sources: (a) fifty percent (50%) of Excess Cash Flow (as defined
below) or (b) 100% of the net proceeds from the issuance of equity securities by
Parent.  For purposes hereof, Excess Cash Flow shall mean EBITDA (as defined in
the Existing Loan Agreement) of the Credit Parties for the prior twelve
consecutive month period less (1) all capital expenditures made by the Credit
Parties during such period that are paid in cash and not financed with
indebtedness other than the Loans (as defined in the Existing Loan Agreement),
(2) the amount of income, real estate, franchise and like taxes paid or withheld
by the Credit Parties during such period, (3) payments and prepayments on
indebtedness for borrowed money by the Credit Parties during such period and (4)
interest expense paid in cash by the Borrowers during such period.

EXHIBIT 21

CLEAN HARBORS, INC. AND SUBSIDIARIES

SUBSIDIARIES

Principal Place of
State of Incorporation         Business
----------------------    ------------------

Clean Harbors Environmental Services,            MA           1501 Washington Street
Inc.                                                         Braintree, MA 02185-0327

Clean Harbors of Natick, Inc.                    MA           1501 Washington Street
Braintree, MA 02185-0327

Clean Harbors of Braintree, Inc.                 MA           1501 Washington Street
Braintree, MA 02185-0327

Clean Harbors Services, Inc.                     MA           1501 Washington Street
Braintree, MA 02185-0327

Clean Harbors of Baltimore, Inc.                 PA           1501 Washington Street
Braintree, MA 02185-0327

Clean Harbors of Connecticut, Inc.               CT           1501 Washington Street
Braintree, MA 02185-0327

Clean Harbors Kingston Facility                  MA           1501 Washington Street
Corporation                                                  Braintree, MA 02185-0327

Harbor Management Consultants, Inc.              MA           1501 Washington Street
Braintree, MA 02185-0327

Murphy's Waste Oil Service, Inc.                 MA           1501 Washington Street
Braintree, MA 02185-0327

Mr. Frank, Inc.                                  IL           1501 Washington Street
Braintree, MA 02185-0327

Northeast Casualty Risk Retention                VT           1501 Washington Street
Group, Inc.                                                  Braintree, MA 02185-0327

Spring Grove Resource Recovery, Inc.             DE           1501 Washington Street
Braintree, MA 02185-0327

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statements
of Clean Harbors, Inc. on Form
S-8 (Files No. 33-22638, No. 33-51452, No. 33-60187 and No. 333-46159) of our
report dated February 6, 2001 on our audits of the consolidated financial
statements and the financial statement schedule of Clean Harbors, Inc., which
report is included in Item 8 of this Form 10-K.

PricewaterhouseCoopers LLP

Boston, Massachusetts
April 13, 2001

Exhibit 24

POWER OF ATTORNEY

Know all men by these presents, that the individuals whose signatures
appear below constitute and appoint Alan S. McKim and Roger A. Koenecke,
and each of them acting alone, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, to sign the
Clean Harbors, Inc. Form 10-K Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 2000, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said substitute or substitutes
may lawfully do or cause to be done by virtue hereof.

Signature                              Title                Date
--------------------------            --------         --------------

/s/ Christy W. Bell                   Director         April 12, 2001      
---------------------------------
Christy W. Bell                                                        

/s/ John F. Kaslow                    Director         April 12, 2001      
---------------------------------                                     
John F. Kaslow                                                         

/s/ Daniel J. McCarthy                Director         April 12, 2001      
---------------------------------                                      
Daniel J. McCarthy     

/s/ John T. Preston

Director         April 12, 2001      
---------------------------------                                      
John T. Preston    

/s/ Thomas J. Shields                 Director         April 12, 2001      
---------------------------------                                      
Thomas J. Shields                                                      

/s/ Lorne R. Waxlax                   Director         April 12, 2001      
---------------------------------                                      
Lorne R. Waxlax                                                        

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