EXHIBIT B.2
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PURCHASE AGREEMENT
Dated as of May 16, 2000
Among
WILMAR INDUSTRIES, INC., as Company,
each of the Guarantors named herein
and
FLEET CORPORATE FINANCE, INC.
and
ALLIED CAPITAL CORPORATION, as Purchasers
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Purchase of
15% Senior Subordinated Notes
due 2008
and
Warrants to Purchase Shares of Common Stock
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PURCHASE AGREEMENT
TABLE OF CONTENTS/a/
Page
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SECTION 1. Definitions............................................................................. 1
1.1. Definitions............................................................................. 1
1.2. Terms of General Application............................................................ 21
SECTION 2. Authorization, Purchase and Sale of Notes and Warrants.................................. 22
SECTION 3. Closing................................................................................. 23
SECTION 4. Financial Information; Inspection....................................................... 24
4.1. Financial Data and Other Reporting Requirements......................................... 24
4.2. Inspection.............................................................................. 26
4.3. Taxes................................................................................... 27
SECTION 5. Representations and Warranties.......................................................... 29
5.1. Organization and Qualification.......................................................... 29
5.2. Organizational Authority................................................................ 29
5.3. Valid Obligations....................................................................... 30
5.4. Consents or Approvals................................................................... 30
5.5. Title to Properties; Absence of Liens................................................... 30
5.6. Financial Statements.................................................................... 31
5.7. Changes................................................................................. 31
5.8. Defaults................................................................................ 32
5.9. Taxes................................................................................... 32
5.10. Litigation.............................................................................. 32
5.11. Subsidiaries............................................................................ 32
5.12. Investment Company Act.................................................................. 32
5.13. Compliance with ERISA................................................................... 32
5.14. Environmental Matters................................................................... 32
5.15. Disclosure.............................................................................. 32
5.16. Solvency................................................................................ 33
5.17. Compliance with Statutes, Etc........................................................... 33
5.18. Capitalization.......................................................................... 34
5.19. Labor Relations......................................................................... 34
5.20. Certain Transactions.................................................................... 34
5.21. Restrictions on the Company and Its Subsidiaries........................................ 35
__________________________________
/a/ The Table of Contents shall not be deemed to be a part of the Purchase
Agreement.
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5.22. Leases...................................................................................35
5.23. Franchises, Patents, Copyrights, Etc.....................................................36
5.24. Year 2000 Compliance.....................................................................36
5.25. Material Contracts.......................................................................36
5.26. Recapitalization.........................................................................36
SECTION 6. Affirmative Covenants....................................................................36
6.1. Payment of Principal, Premium and Interest...............................................36
6.2. Conduct of Business......................................................................37
6.3. Maintenance and Insurance................................................................37
6.4. Taxes....................................................................................38
6.5. Maintenance of Books and Records.........................................................38
6.6. Use of Proceeds..........................................................................38
6.7. Pension Plans............................................................................38
6.8. Fiscal Year..............................................................................38
6.9. Additional Guarantors....................................................................38
6.10. Further Assurances.......................................................................39
SECTION 7. Negative and Financial Covenants.........................................................39
7.1. Liens....................................................................................39
7.2. Debt.....................................................................................41
7.3. Merger; Consolidation; Sale or Lease of Assets; Acquisitions.............................42
7.4. Contingent Liabilities...................................................................44
7.5. Sale and Leaseback.......................................................................45
7.6. Funded Debt Ratio........................................................................45
7.7. Fixed Charge Coverage Ratio..............................................................45
7.8. Interest Coverage Ratio..................................................................46
7.9. Restricted Payments......................................................................46
7.10. Investments..............................................................................47
7.11. ERISA....................................................................................47
7.12. Transactions with Affiliates.............................................................47
7.13. Partnerships; New Subsidiaries...........................................................48
7.14. Issuance of Stock........................................................................48
7.15. Future Debt Offerings....................................................................48
7.16. No Amendments to Certain Documents.......................................................48
7.17. Waiver of Stay, Extension or Usury Laws..................................................48
SECTION 8. Events of Default; Remedies..............................................................49
8.1. Events of Default........................................................................49
8.2. Acceleration of Maturity; Rescission and Annulment.......................................50
8.3. Collection of Debt.......................................................................52
SECTION 9. Redemption of Securities.................................................................53
9.1. Mandatory Redemption.....................................................................53
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9.2. Optional Redemption......................................................................53
9.3. Notice of Redemption.....................................................................53
9.4. Change in Control........................................................................54
9.5. Notes Redeemed in Part...................................................................55
SECTION 10. Representations and Covenants of the Purchasers..........................................55
SECTION 11. Guarantees; Execution and Delivery.......................................................59
11.1. Guarantees...............................................................................59
11.2. Execution and Delivery...................................................................61
11.3. Termination..............................................................................62
SECTION 12. Subordination of Notes and Guarantees....................................................62
12.1. Notes Subordinate to Senior Debt.........................................................62
12.2. Payment Over of Proceeds upon Dissolution, Etc...........................................62
12.3. No Payment When Senior Debt in Default...................................................64
12.4. Payment Permitted if No Default..........................................................65
12.5. Subrogation to Rights of Holders of Senior Debt..........................................66
12.6. Acceleration of Payment of Notes and Exercise of Remedies................................66
12.7. Provisions Solely to Define Relative Rights..............................................67
12.8. No Waiver of Subordination Provisions....................................................67
12.9. Reliance on Judicial Order or Certificate of Liquidating Agent...........................68
12.10. No Modification..........................................................................69
12.11. Waivers; Reliance by the Agent and Holders of Senior Debt................................69
12.12. Notice to Agent..........................................................................69
12.13. Rights of Holders upon Proceedings.......................................................69
SECTION 13. Conditions Precedent.....................................................................70
13.1. Purchasers' Conditions to Closing........................................................70
13.2. Conditions Precedent to Obligations of the Company.......................................72
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SECTION 14. Transfer and Exchange of Notes...........................................................73
SECTION 15. Indemnification..........................................................................74
SECTION 16. Amendments...............................................................................76
SECTION 17. Survival.................................................................................76
SECTION 18. Notices..................................................................................77
SECTION 19. Successors...............................................................................78
SECTION 20. Applicable Law...........................................................................79
SECTION 21. Waiver of Jury Trial.....................................................................79
SECTION 22. Counterparts.............................................................................80
EXHIBITS
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EXHIBIT A-1 - Form of Note
EXHIBIT A-2 - Form of Guarantee
EXHIBIT A-3 - Form of Warrant
EXHIBIT B - Form of Financial Report
EXHIBIT C - Form of Opinion of Company Counsel
EXHIBIT D - U.S. Tax Certificate
EXHIBIT 4.1 - Compliance Certificate
SCHEDULES
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PURCHASE AGREEMENT
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May 16, 2000
FLEET CORPORATE FINANCE, INC.
ALLIED CAPITAL CORPORATION
c/o Fleet Corporate Finance, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned, Wilmar Industries, Inc. (the "Company"), a New Jersey
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corporation, and each of the Guarantors listed on the signature pages hereto
(the "Guarantors"), agrees with each purchaser listed above (individually a
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"Purchaser" and collectively the "Purchasers") as follows:
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SECTION 1. Definitions.
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1.1. Definitions. Except as otherwise specified, the following terms
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used shall have the respective meanings set forth below whenever used in this
Agreement:
"Acceptance Notice" shall have the meaning specified in Section 14
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hereof.
"Accounts and Accounts Receivable" means, individually and
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collectively, all rights to payment for goods sold or leased or for services
rendered, all sums of money or other proceeds due or becoming due thereon
(including, without limitation, all accounts receivable, notes, bills, drafts,
acceptances, instruments, documents, chattel paper and all other debts,
obligations and liabilities in whatever form owing to any Person for goods sold
by it or for services rendered by it), all guarantees and security therefor, and
all right, title and interest of such Person in the goods or services giving
rise thereto and the rights pertaining to such goods, including rights of
reclamation and stoppage in transit, and all related insurance, whether any of
the foregoing be now existing or hereafter arising, now or hereafter received by
or owing or belonging to such Person.
"Ace" means Ace Maintenance Mart USA, Inc., a California corporation
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which is a wholly-owned Subsidiary of the Company.
"Acquisition" has the meaning specified in Section 2 hereof.
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"Affiliate" means, with reference to any Person, (i) any other Person
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controlling, controlled by or under direct or indirect common control with that
Person, (ii) any other Person directly or indirectly holding 5% or more of the
capital stock on a fully diluted basis assuming conversion into capital stock of
all other equity interests (including options, war-
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rants, convertible securities and similar rights) of that Person, and (iii) any
other Person that possesses, directly or indirectly, power to direct or cause
the direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise) of that
Person.
"Agent" means Fleet National Bank, as agent, and its successors and
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assigns as Administrative Agent under the Bank Loan Agreement.
"AHYDO Amount" has the meaning specified in Section 9.1 hereof.
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"Allied" means Allied Capital Corporation, a Maryland corporation.
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"Asset Sale" shall have the meaning specified in Section 7.3(g)
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hereof.
"Bank Loan Agreement" means the Loan Agreement dated as of May 16,
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2000 among the Company, the Lenders and the Agent, as in effect on the date
hereof and as amended, modified, supplemented, extended, renewed, amended and
restated, replaced, refinanced or refunded (and together with any successor
thereto or replacement therefor).
"Bank Loan Documents" means the Bank Loan Agreement with exhibits
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attached thereto, the guarantees thereof, agreements securing the Obligations
thereunder and other agreements referred to therein and the Bank Notes and as
such agreements may be amended, modified, supplemented, extended, renewed,
amended and restated, replaced, refinanced, or refunded (and together with any
successor thereto or replacement therefor).
"Bank Notes" means, collectively, the notes evidencing the loans under
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the Bank Loan Documents.
"Board of Directors" means either (i) the board of directors of the
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Company, the Guarantors or any of their Subsidiaries, as the case may be, or
(ii) any duly authorized committee of such board of directors.
"Board Resolution" means a copy of a resolution certified by the
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Secretary or an Assistant Secretary of the Company, the Guarantors or any of
their Subsidiaries to have been duly adopted by the Board of Directors of the
Company, the Guarantors or such Subsidiary, as the case may be, and to be in
full force and effect on the date of such certification.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
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Friday which is not a day on which banking institutions in The City of New York,
New York or Boston, Massachusetts are authorized or obligated by law or
executive order to close.
"Capital Expenditures" means, to the extent capitalized in accordance
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with GAAP, any expenditure for fixed assets (both tangible and intangible)
including assets being
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constructed (whether or not completed), leasehold improvements, capital leases
under GAAP, installment purchases of machinery and equipment, acquisitions of
real estate and other similar expenditures including (i) in the case of a
purchase, the entire purchase price, whether or not paid during the fiscal
period in question, (ii) in the case of a capital lease, the capitalized amount
thereof (determined in accordance with GAAP) and (iii) without duplication,
expenditures in or from any construction-in-progress account of the Company or
any of its Subsidiaries.
"Capital Stock" of any Person means any and all shares, interests,
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participations, rights or other equivalents (however designated) of corporate
stock of such Person.
"Capitalized Leases" means all leases that, in accordance with GAAP,
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are required to be accountable for, or recorded as capitalized leases on, the
lessor's balance sheet.
"Cash Equivalents" means, collectively, (i) notes, bonds or other
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obligations of the United States of America or any agency thereof that as to
principal and interest constitute direct obligations of or are guaranteed by the
United States of America, (ii) certificates of deposit or other deposit
instruments or accounts of banks or trust companies organized under the laws of
the United States or any state thereof that have capital and surplus of at least
$100,000,000, (iii) commercial paper that is rated not less than prime-one or ▇-
▇ or their equivalents by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
▇▇▇▇▇▇▇▇, respectively, or their successors, (iv) any repurchase agreement
secured by any one or more of the foregoing, (v) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital and surplus of
at least $100,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subclauses (i) through (iv), and (vi)
time deposits maturing no more than 30 days from the date of creation thereof
with commercial or savings banks and savings and loan associations each having
membership in the FDIC or the deposits of which are insured by the FDIC and in
amounts not exceeding the maximum amounts of insurance thereunder to the extent
constituting Investments.
"CERCLA" means the Comprehensive Environmental Response, Compensation
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and Liability Act of 1980, as the same may from time to time be supplemented or
amended and remain in effect.
"Change in Control" means any of the following events: prior to an
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Initial Public Offering, any change in equity ownership of the Company which
would result in (i) the Investor Group owning, both beneficially and of record,
less than 51% of the issued and outstanding Common Stock of the Company or (ii)
Parthenon owning, both beneficially and of record, less than (x) 20% of the
issued and outstanding Common Stock of the Company and (y) 20% of the Senior
Preferred Stock; or after an Initial Public Offering, any change in equity
ownership of the Company which would result in (i) Parthenon and the Investor
Group own-
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ing, both beneficially and of record, less than 33% of the Common Stock of the
Company, or (ii) any other "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) other than Parthenon, the Investor Group
and the Company's management shareholders, owning beneficially, directly or
indirectly, more than 33% of the Common Stock of the Company.
"Change in Control Notice" has the meaning specified in Section 9.3
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hereof.
"Change in Control Payment Date" has the meaning specified in Section
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9.3 hereof.
"Closing Date" has the meaning specified in Section 3 hereof.
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"Code" means the Internal Revenue Code of 1986 and the rules and
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regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
"Collateral" has the meaning set forth in the Bank Loan Agreement.
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"Commission" means the United States Securities and Exchange
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Commission.
"Commitment Fees" means the fees payable to the Lenders and the Agent
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under the Bank Loan Documents.
"Common Stock" has the meaning specified in Section 2 hereof.
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"Company" has the meaning set forth in the first paragraph to this
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Agreement.
"Competitor" means any Person engaged in the business of wholesale
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distribution of maintenance, repair, plumbing and/or electrical supplies and
institutional or multi-family property building operating supplies.
"Consolidated and Consolidating" shall have the respective meanings
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ascribed to such terms under GAAP.
"Consolidated Net Working Capital" means, as of any date, with respect
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to the Company and its Subsidiaries on a Consolidated basis, an amount equal to
(i) current assets, excluding cash and Cash Equivalents, minus (ii) current
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liabilities other than current maturities of long term debt, all as determined
in accordance with GAAP. Consolidated Net Working Capital as of any date may be
a positive or negative number. Consolidated Net Working Capital increases when
it becomes more positive or less negative and decreases when it becomes less
positive or more negative.
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"Consolidated Non-Cash Charges" means, as of any date, with respect to
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the Company and its Subsidiaries on a Consolidated basis, the non-cash component
of any item of expense other than (i) to the extent requiring an accrual or
reserve for future cash expenses, and (ii) write-offs of accounts receivable or
inventory.
"Controlled Group" means all trades or businesses (whether or not
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incorporated) under common control that, together with the Company, are treated
as a single employer under Section 414(b) or 414(c) of the Code or Section 400l
of ERISA.
"Debt" means, as applied to any Person, (i) all obligations for
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borrowed money or other extensions of credit whether secured or unsecured,
absolute or contingent, including, without limitation, unmatured reimbursement
obligations with respect to letters of credit or guarantees issued for the
account of or on behalf of such Person, and all obligations representing the
deferred purchase price of property, other than accounts payable arising in the
ordinary course of business, (ii) all obligations evidenced by bonds, notes,
debentures or other similar instruments, (iii) all obligations secured by any
Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby shall have been assumed, (iv) that portion of all
obligations arising under capital leases that is required to be capitalized on
the Consolidated balance sheet of such Person, (v) all obligations in respect of
any mandatorily redeemable preferred Capital Stock of such Person (other than
the Senior Preferred Stock), and (vi) all Guarantees by such Person in respect
of Debt of the type described in clauses (i) through (v) of this definition of
any other Person.
"Default" means any Event of Default or any event that would
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constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"Default Rate" has the meaning specified in Section 8.3 hereof.
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"Domestic Subsidiaries" means, at any time, each of the direct and
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indirect Subsidiaries of the Company that is incorporated or organized under the
laws of the United States of America, any state thereof or the District of
Columbia.
"Dormant Subsidiaries" means, collectively, (i) Supply Depot, (ii)
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Management Supply and (iii) One Source.
"EBITDA" means, in relation to the Company and its Subsidiaries on a
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Consolidated basis for any period, an amount equal to the net income (or net
loss), determined in accordance with GAAP, of the Company and its Subsidiaries
after deduction of all expenses, taxes and other proper charges (with Inventory
being determined on a "first-in, first-out" basis) for such period, but without
giving effect to any GAAP extraordinary gains or losses, plus, without
duplication, the following to the extent deducted in computing such net income
(or net loss) for such period: (i) Interest Charges for such period, (ii) taxes
on income for such period, (iii) depreciation for such period, (iv) amortization
for such period, (v) all other Con-
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solidated Non-Cash Charges for such period, (vi) transaction expenses incurred
in connection with (a) the acquisition of ▇.▇. ▇▇▇▇▇▇▇, Inc. and Trayco of S.C.,
Inc. and any related financing in an aggregate amount not to exceed $5,621,423,
including severance expenses of up to $2,416,500, (b) the Recapitalization and
(c) the transactions contemplated by the Transaction Documents, and in each case
under this clause (vi) paid within 9 months after the date hereof, (vii)
reasonable and customary transaction expenses paid by the Company or any of its
Subsidiaries during such period in connection with Permitted Acquisitions, which
such expenses have been reasonably approved by the Purchasers, and (viii) the
portion of the Parthenon Management Fee paid in such period, minus, without
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duplication, to the extent included in net income (or net loss) for such period,
all non-cash gains during such period.
"Eligible Holder" means, with respect to the assignment of any right,
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title, interest or obligations of a holder of any Notes or Warrants hereunder, a
Person that is not at the time of such assignment (a) a Competitor of the
Company and (b) any Person that is entitled, directly or indirectly, whether
through ownership of stock, contracts or otherwise, to elect a majority of the
board of directors of, or otherwise directly or indirectly controlled or is
controlled by or is under direct or indirect common control with, any Person
described in clause (a) above. For purposes of this definition, "control" when
used with respect to any Person means the power to direct management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controls" and
"controlled" have meanings correlative to the foregoing.
"Environmental Indemnity Agreement" means the Environmental Compliance
---------------------------------
and Indemnity Agreement, dated as of the date hereof and executed and delivered
by the Company and certain of its Subsidiaries to the Agent, for the ratable
benefit of the Lenders and the Agent, as amended, modified or otherwise
supplemented from time to time.
"Environmental Laws" means any and all applicable foreign, federal,
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state, local and provincial environmental, worker health or safety statutes,
laws, regulations, ordinances, policies and or common law (whether now existing
or hereafter enacted or promulgated), of all federal, state, local, provincial
or other governmental authorities, agencies, commissions, boards, bureaus or
departments which may now or hereafter have jurisdiction over the Company, any
of its Subsidiaries or any landlord under any real estate Lease under which the
Company or any of its Subsidiaries is a tenant, and all applicable judicial and
administrative and regulatory decrees, judgments and orders, including common
law rulings and determinations, relating to injury to, or the protection of
worker health or the environment, including, without limitation, all
requirements pertaining to reporting, licensing, permitting, investigation,
remediation and removal of emissions, discharges, releases or threatened
releases of Hazardous Materials, chemical substances, pollutants or contaminants
whether solid, liquid or gaseous in nature, into the environment or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of such Hazardous Materials, chemical substances,
pollutants or contaminants.
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"Equipment" means all machinery, apparatus, equipment, fittings,
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furniture, fixtures, motor vehicles and other tangible personal Property (other
than Inventory) of every kind and description used in the Company's or any
Guarantor's operations or owned by the Company or any Guarantor or in which the
Company or any Guarantor has an interest, whether now owned or hereafter
acquired by the Company or any Guarantor and wherever located, and all parts,
accessories and special tools and all increases and accessions thereto and
substitutions and replacements therefor.
"Equity Securities" means, as to any Person, any shares of any class
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of capital stock or other equity interests of such Person, voting or non-voting,
or any options, warrants or similar rights with respect to any such shares or
other equity interests.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
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the rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
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from time to time, and the rules and regulations of the Commission thereunder.
"Excluded Foreign Subsidiaries" means, collectively, (i) ▇▇▇▇▇▇▇ Ltd.,
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and (ii) each of the other Foreign Subsidiaries of the Company which constitutes
a "controlled foreign corporation" under Section 957 of the Code, excluding,
however, any Foreign Subsidiary (a) which is an unlimited liability company
under the laws of its jurisdiction and is treated as a partnership for U.S. tax
purposes or (b) as to which the Company or other applicable U.S. parent
corporation has made an election under Section 1504(d) of the Code to treat such
Foreign Subsidiary as a domestic corporation.
"FDIC" has the meaning specified in the definition of "Qualified
----
Investments."
"Fee Mortgages" has the meaning assigned to it in the Bank Loan
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Agreement.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
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EBITDA for such period, minus the aggregate amount of Capital Expenditures
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during such period, minus cash taxes on income paid during such period, to (ii)
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Total Fixed Charges for such period.
"Fleet" means Fleet Corporate Finance, Inc., a Massachusetts
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corporation.
"Foreign Subsidiary" means, at any time, each of the direct or
------------------
indirect Subsidiaries of the Company that is not a Domestic Subsidiary at such
time.
"Fully Diluted Common Stock" means, as of any date, the number of
--------------------------
shares of Common Stock that would be outstanding assuming all securities of the
Company convertible into or exchangeable for Common Stock were converted into
shares of Common Stock pursu-
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ant to their respective terms and all outstanding options, warrants or other
rights to acquire Common Stock were exercised excluding, for all purposes, all
securities issued or issuable pursuant to the Wilmar Industries 2000 Stock
Option Plan, as in effect on the date hereof, and the securities issuable or
issued pursuant to such Plan.
"Fully Satisfied" means, with respect to the Obligations under this
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Agreement, the Notes and the Guarantees, as of any date, that, on or before such
date, (a) the principal of, premium, if any, and interest accrued to such date
on all outstanding Notes shall have been indefeasibly paid in full in cash and
(b) all fees, expenses and other amounts then due and payable under this
Agreement, the Notes and the Guarantees shall have been indefeasibly paid in
full in cash.
"Funded Debt Ratio" means, as at the end of any fiscal quarter of the
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Company and its Subsidiaries, the ratio of (i) Total Funded Debt as at the end
of such fiscal quarter, to (ii) EBITDA for the four consecutive fiscal quarters
of the Company and its Subsidiaries ending on the last day of such fiscal
quarter.
"GAAP" means generally accepted accounting principles in the United
----
States of America, consistently applied.
"Green Employment Agreement" means the employment agreement between
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▇▇▇▇▇▇▇ ▇▇▇▇▇ and the Company as in effect on the date hereof.
"Guarantee" has the meaning specified in Section 2 hereof.
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"Guarantors" means, collectively, (i) ▇.▇. ▇▇▇▇▇▇▇, (ii) Trayco, (iii)
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Wilmar Financial, (iv) Wilmar Holdings, (v) Ace, (vi) Supply Depot, (vii)
Management Supply, (viii) One Source, and (ix) each of the other Subsidiaries of
the Company which from time to time become guarantors of the Obligations
hereunder.
"Hazardous Materials" means any substance (i) the presence of which
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requires or may hereafter require notification, investigation or remediation
under any Environmental Law; (ii) which is or becomes defined as a "hazardous
waste" or "hazardous material" or "hazardous substance" or "controlled
industrial waste" or "pollutant" or "contaminant" under any present or future
Environmental Law or amendments thereto including, without limitation, CERCLA,
the Canadian Environmental Protection Act (Canada) and any applicable local or
provincial statutes and the regulations promulgated thereunder; (iii) which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is or becomes regulated by any governmental
authority, agency, department, commission, board or instrumentality of any
foreign country, the United States, any state of the United States, or any
political subdivision thereof to the extent any of the foregoing has or had
jurisdiction over the Company or any of its Subsidiaries or any landlord under
any real property lease under which the Company or any of its Subsidiaries is a
tenant; or (iv) which
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could be a detriment or pose a danger to the environment or to the health or
safety of any person, including, without limitation, which contains gasoline,
diesel fuel, oil or other petroleum products, asbestos, asbestos containing
materials ("ACM"), polychlorinated biphenyls ("PCB's"), radon gas, urea
formaldehyde, flammable materials or radioactive material.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
----------------
interest rate future or option contracts and other similar agreements that
relate to actual indebtedness of the Company permitted to be incurred under this
Agreement.
"Independent Financial Expert" shall mean any nationally recognized
----------------------------
investment banking firm reasonably acceptable to Parthenon and the applicable
Purchaser to whom Parthenon has delivered an Acceptance Notice pursuant to
Section 14 hereof (i) that does not (and whose directors, officers, employees
and Affiliates do not) have a direct or indirect material financial interest in
the Company or Parthenon, (ii) that has not been, and, at the time it is called
upon to serve as an Independent Financial Expert under this Agreement or the
Warrant Agreement, is not (and none of whose directors, officers, employees or
Affiliates is) a promoter, director or officer of the Company or Parthenon,
(iii) that has not been retained by the Company or Parthenon for any purpose,
other than to perform an equity valuation, within the preceding twelve months
and (iv) that, in the reasonable judgment of the Board of Directors of the
Company, is otherwise qualified to serve as an independent financial advisor.
The fees and expenses of the Independent Financial Expert shall be paid by the
purchaser of the Offered Notes pursuant to Section 14 hereof.
"Initial Financial Statement" has the meaning specified in Section 5.6
---------------------------
hereof.
"Initial Public Offering" means a public offering and sale of any
-----------------------
class of Common Stock of the Company pursuant to the initial registration
thereof under the Securities Act (other than a registration statement on Form S-
4 or S-8 or a successor form).
"Insolvent or Insolvency" means the occurrence of one or more of the
-----------------------
following events with respect to a Person: dissolution (except to the extent
permitted by Section 7.3); termination of existence (except to the extent
permitted by Section 7.3); insolvency within the meaning of the United States
Bankruptcy Code or other foreign or domestic applicable statutes; such Person's
admission in writing to an inability to pay its debts as they come due;
appointment of a receiver of any part of the property of such Person, or an
assignment for the benefit of creditors by such Person, or the entry of an order
for relief or the filing of a petition in bankruptcy or the commencement of any
proceedings under any bankruptcy or insolvency laws, or any laws relating to the
relief of debtors, readjustment of indebtedness or reorganization of debtors, or
the offering of a plan to creditors for composition or extension, except for an
involuntary proceeding commenced against such Person which is dismissed,
discharged or fully bonded within 60 days after the commencement thereof without
the entry or an order for relief or the appointment of a trustee.
-10-
"Interest Charges" means, for any period, without duplication, all
----------------
interest paid or required to be paid in cash on any particular Debt (including
outstanding Letters of Credit) for which such calculations are being made all as
determined in accordance with GAAP. Computations of Interest Charges on a pro
---
forma basis for Debt having a variable interest rate shall be calculated at the
-----
rate in effect on the date of any determination. For purposes of the foregoing,
interest expense shall give effect to any net payments made or received by the
Company and its Subsidiaries with respect to any hedging agreements permitted
pursuant to Section 6.1(g) of the Bank Loan Agreement in effect during the
applicable period (or any portion thereof).
"Interest Coverage Ratio" means, for any period, the ratio of (i)
-----------------------
EBITDA for such period, to (ii) Interest Charges paid or required to be paid by
the Company or its Subsidiaries during such period.
"Interest Rate Protection Agreement(s)" has the meaning specified in
-------------------------------------
the Bank Loan Agreement.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"Inventory" shall mean goods, merchandise and other personal property,
---------
now owned or hereafter acquired by a Person, which are held for sale or lease or
are furnished or to be furnished under a contract of service or are raw
materials, work in process or materials used or consumed or to be used or
consumed in such Person's business.
"Investment" means, as applied to any Person, (i) the purchase or
----------
acquisition of any share of capital stock, partnership interest, limited
liability company membership interest, evidence of indebtedness or other equity
security of any other Person, (ii) any loan, advance or extension of credit to,
or contribution to the capital of, any other Person, (iii) any commodities
futures contracts held other than in connection with bona fide hedging
transactions, (iv) any other investment in any other Person, and (v) the making
of any commitment or acquisition of any option to make an Investment.
Investments which are capital contributions or purchases of Equity
Securities which have, or may be converted into, a right to participate in the
profits of the issuer thereof shall be valued at the amount actually contributed
or paid to purchase such Equity Securities as of the date of such contribution
or payment. Investments which are loans, advances, extensions of credit or
Guarantees shall be valued at the principal amount of such loan, advance or
extension of credit outstanding as of the date of determination or, as
applicable, the principal amount of the loan or advance outstanding as of the
date of determination guaranteed by such Guarantee.
-11-
"Investment Documents" means, collectively, the Shareholders Agreement
--------------------
and the employment agreements each dated as of the date hereof, between the
Company and each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
respectively, in each case as amended, modified or otherwise supplemented from
time to time.
"Investment Transactions" means, collectively, (i) the investment by
-----------------------
the Investor Group of at least $130,000,000 in WM Acquisition, and (ii) the
rollover into WM Acquisition by certain of the Company's management shareholders
of approximately $3,000,000, in the aggregate, of their investments in the
Company immediately prior to consummation of the Recapitalization.
"Investor Group" means, collectively, (i) Parthenon, (ii) Chase
--------------
Manhattan Bank, as Trustee for First Plaza Group Trust (a pension trust managed
by General Motors Investment Management Corporation), (iii) JMH Partners Corp.,
a Delaware corporation, (iv) Sterling Investment Partners, L.P., a Delaware
limited partnership, (v) BancBoston Capital Inc., a Massachusetts corporation,
(vi) ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company QP, L.P., a Delaware limited partnership, (vii)
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Company, L.P., a Delaware limited partnership, (viii) Fleet,
(ix) Allied, (x) CB Capital Investors, LLC, a Delaware limited liability
company, (xi) any successors of any of the foregoing, and (xii) any assigns of
any of the foregoing which result from a transfer of the Equity Securities of
the Company held by any of the foregoing permitted by the terms of the
Shareholders Agreement as in effect on the Closing Date.
"Involuntary Disposition" means any loss of, damage to or destruction
-----------------------
of, or any condemnation or other taking for public use of, any property of the
Company or any of its Subsidiaries.
"▇.▇. ▇▇▇▇▇▇▇" means ▇.▇. ▇▇▇▇▇▇▇, Inc., a Delaware corporation which
------------
is a wholly-owned Subsidiary of the Company.
"Junior Payment" has the meaning specified in Section 12.2(2) hereof.
--------------
"Leases or Lease" means any agreement granting a Person the right to
---------------
occupy space in a structure or real estate for any period of time or any capital
lease, operating lease or other lease of or agreement to use personal property
including, but not limited to, machinery, equipment, furniture and fixtures,
whether evidenced by written or oral lease, contract, sales agreement or other
agreement no matter how characterized.
"Lenders" means the Persons named as "Banks" in the Bank Loan
-------
Agreement and as defined therein and their respective successors and assigns in
such capacity.
"Letters of Credit" has the meaning assigned to it in the Bank Loan
-----------------
Agreement.
"Lien" has the meaning specified in Section 7.1 hereof.
----
-12-
"Loans" means, collectively, the revolving loans, swingline loans and
-----
term loans under the Bank Loan Agreement.
"Management Supply" means Management Supply Company, a Michigan
-----------------
corporation which is a wholly-owned Subsidiary of the Company.
"Margin Stock" has the meaning specified in Regulation U.
------------
"Material Adverse Effect" has the meaning specified in Section 2
-----------------------
hereof.
"Material Contracts" means, collectively, each contract, agreement or
------------------
license which is material to the operations or business of the Company and its
Subsidiaries, taken as a whole.
"Maturity" when used with respect to any Note means the date on which
--------
the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, put or otherwise.
"Merger" means the merger of WM Acquisition with and into the Company
------
pursuant to the Recapitalization Agreement.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
-------
"Net Proceeds" with respect to the sale, transfer or other disposition
------------
by the Company or any of its Subsidiaries of any asset or group of assets (other
than Inventory in the ordinary course of business, but including, without
limitation, any sale of Equity Securities), means the amount of cash (freely
convertible into U.S. dollars) received by the Company, its Subsidiaries or
their agents, from such sale or other disposition (including, without
limitation, any tax refund or tax benefit resulting from a loss on such sale or
other disposition as and when such tax benefit is realized), after (i) provision
for all income or other taxes of the Company or any of its Subsidiaries paid or
payable as a result of such sale or other disposition, (ii) payment of all third
party brokerage commissions and other out-of-pocket fees and expenses to third
parties related to such sale or other disposition, (iii) deduction of
appropriate amounts to be provided by the Company or any of its Subsidiaries as
a reserve, in accordance with GAAP, against any liabilities associated with such
sale, transfer or other disposition and retained by the Company or any of its
Subsidiaries after such sale or other disposition, and (iv) payment of the
outstanding principal amount of, and premium or penalty, if any, and interest
on, any Debt that is secured by a lien or other encumbrance on the assets in
question and that is required to be repaid as a result of such sale, transfer or
other disposition.
"Net Proceeds Offer" has the meaning specified in Section 7.3(f)
------------------
hereof.
-13-
"Net Proceeds Offer Amount" has the meaning specified in Section
-------------------------
7.3(f) hereof.
"Notes" has the meaning specified in Section 2 hereof.
-----
"Obligation" means any principal, interest, penalties, fees,
----------
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Debt. For purposes of Section 12,
Obligations has the meaning specified in Section 12.1 hereof.
"Officers' Certificate" means a certificate signed by an officer of
---------------------
the Company.
"One Source" means One Source Supply, Inc., a Florida corporation
----------
which is a wholly-owned Subsidiary of the Company.
"Opening Balance Sheet" means the Consolidated balance sheet of the
---------------------
Company and its Subsidiaries dated as of March 31, 2000 (but after giving effect
to the transactions contemplated by the Transaction Documents).
"Original Notes" has the meaning specified in Section 2 hereof.
--------------
"Parthenon" means, collectively, (i) Parthenon Investors, L.P., a
---------
Delaware limited partnership, (ii) Parthenon Capital, Inc., a Delaware
corporation, (iii) PCIP Investors, a Delaware general partnership, (iv) any
Subsidiary of any of the foregoing Persons which becomes a successor or assign
of any of the foregoing Persons and (v) any other Affiliate of any of the
foregoing Persons which becomes a successor or assign of any of the foregoing
Persons and to which the Required Purchasers have consented, which consent will
not be unreasonably withheld or delayed.
"Parthenon Management Agreement" means the Management Agreement, dated
------------------------------
as of May 16, 2000, between Parthenon and the Company, as from time to time
amended, modified or otherwise supplemented.
"Parthenon Management Fee" means the fee required to be paid to
------------------------
Parthenon pursuant to Section 1 of the Parthenon Management Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"PCB" has the meaning specified in the definition of "Hazardous
---
Material."
"Permitted Acquisition" means an acquisition of all of the capital
---------------------
stock or all or substantially all of the property of another Person, whether or
not involving a merger or
-14-
consolidation with such other Person by the Company (so long as the Company is
the surviving entity) or any Subsidiary of the Company, provided that (i) any
--------
Person acquired is in substantially the same field of business as the Company or
any Subsidiary of the Company (or any reasonable extensions or expansions
thereof) and any property acquired (or the property of the Person acquired) in
such acquisition is used or useful in the same business as the Company or its
Subsidiaries were engaged in on the Closing Date (or any reasonable extensions
or expansions thereof), (ii) no Debt is assumed or incurred in connection with
the acquisition other than Debt permitted under Section 7.2, (iii) the
acquisition is "friendly" or non-hostile in nature, (iv) the Company shall have
delivered to the Purchasers a pro forma compliance certificate demonstrating
compliance with Sections 7.6 through 7.8, inclusive, (after giving effect to
such acquisition on a pro forma basis), and certifying that no Default or Event
of Default exists or would exist after giving effect to such acquisition, (v)
the representations and warranties made by the Company and its Subsidiaries in
the Subordinated Transaction Documents shall be true and correct in all material
respects at and as if made as of the date of such acquisition (after giving
effect thereto) except to the extent such representations and warranties
expressly relate to an earlier date, (vi) if such transaction involves the
purchase of an interest in a partnership between the Company (or a Subsidiary of
the Company) as a general partner and entities unaffiliated with the Company or
such Subsidiary as the other partners, such transaction shall be effected by
having such equity interest acquired by a holding company directly or indirectly
wholly-owned by the Company or a Subsidiary newly formed for the sole purpose of
effecting such transaction and (vii) the aggregate Qualifying Consideration for
each such acquisition occurring after the Closing Date shall not exceed
$50,000,000 in the aggregate for all such acquisitions occurring after the
Closing Date. For purposes of the foregoing clause (vii), "Qualifying
Consideration" shall mean, with respect to any acquisition, all cash and non-
cash consideration actually paid or required to be paid by the Company or any of
its Subsidiaries, including the principal amount of any assumed Debt and
deferred amounts in the nature of holdbacks (to the extent not distributed to
the Company or any of its Subsidiaries), other than consideration consisting of
(a) the value attributable to any Equity Securities of the Company issued to the
seller of the Capital Stock or property acquired in such acquisition and (b) the
proceeds of any issuance by the Company of Equity Securities.
"Permitted Debt" has the meaning specified in Section 7.2 hereof.
--------------
"Permitted Lien" has the meaning specified in Section 7.1 hereof.
--------------
"Person" or "person" means an individual, a company, a corporation, a
------- ------
limited liability company, a joint stock company, an unincorporated trade or
business enterprise, a trust, an estate or a government (national, regional or
local), or an agency, instrumentality or official thereof.
"PIK Notes" has the meaning specified in Section 2 hereof.
---------
-15-
"Plan" means, at any time, an employee pension or other benefit plan
----
that is subject to Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established or maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
"Pro Forma Financial Statements" has the meaning specified in Section
------------------------------
5.6 hereof.
"Proceeding" shall mean any voluntary or involuntary insolvency,
----------
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a person or
entity.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Proxy Statement" means the proxy statement of the Company filed with
---------------
the Commission on April 19, 2000 relating to the Merger.
"Purchasers" has the meaning specified in the first paragraph hereof.
----------
"Qualified Investments" means, as applied to the Company and its
---------------------
Subsidiaries, investments in (i) cash; (ii) notes, bonds or other obligations of
the United States of America or any agency thereof that as to principal and
interest constitute direct obligations of or are guaranteed by the United States
of America; (iii) certificates of deposit or other deposit instruments or
accounts of banks or trust companies organized under the laws of the United
States or any state thereof that have capital and surplus of at least
$100,000,000; (iv) commercial paper that is rated not less than prime-one or A-1
or their equivalents by ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
▇▇▇▇▇▇▇▇, respectively, or their successors; (v) any repurchase agreement
secured by any one or more of the foregoing; (vi) Investments, classified in
accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to Investments of the
character described in the foregoing subclauses (ii) through (v); (vii) time
deposits maturing no more than 30 days from the date of creation thereof with
commercial or savings banks and savings and loan associations each having
membership in the Federal Deposit Insurance Corporation, or any successor
thereto ("FDIC") or the deposits of which are insured by the FDIC and in amounts
----
not exceeding the maximum
-16-
amounts of insurance thereunder to the extent constituting Investments; (viii)
accounts receivable created, acquired or made by the Company and its
Subsidiaries in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; (ix) Investments consisting of capital
stock, obligations, securities or other property received by the Company and its
Subsidiaries in settlement of accounts receivable (created in the ordinary
course of business) from bankrupt obligors or in connection with a work-out or
reorganization; (x) Investments existing as of the Closing Date and set forth in
Schedule 1.1 hereto; (xi) advances or loans to directors, officers or employees
------------
of the Company and its Subsidiaries, made in the ordinary course of business and
consistent with past practices, that do not exceed $600,000 in the aggregate at
any one time outstanding, provided that no such advances to any single director,
--------
officer or employee shall exceed $60,000 in the aggregate; (xii) loans to
directors, officers and employees in an aggregate amount not to exceed
$1,200,000 at any one time to finance the purchase of Equity Securities of the
Company; (xiii) Investments in (A) any Guarantors and (B) any Excluded Foreign
Subsidiary so long as such Investments in all such Excluded Foreign Subsidiaries
(1) do not exceed $2,400,000 in the aggregate in any fiscal year and (2) do not
exceed $7,200,000 in the aggregate from and after the Closing Date (it being
agreed that to the extent any such Investment is in the form of a loan, advance
or other extension of credit to an Excluded Foreign Subsidiary, to the extent
that such loan, advance or other extension of credit has been repaid, the amount
of such loan, advance or other extension of credit so repaid shall be added to
the amount of Investments permitted to be made in Excluded Foreign Subsidiaries
under this clause (xiii)(B); (xiv) transactions permitted under Section 7.12 and
otherwise permitted by this definition of "Qualified Investments"; (xv)
Permitted Acquisitions; and (xvi) Investments in addition to those permitted in
this definition, provided that (A) the aggregate amount of such Investments
--------
after the Closing Date shall not exceed $6,000,000 at any one time outstanding,
(B) the Company may not guarantee any Debt of the Persons in which it invests,
and (C) both before and after giving effect to such Investments, no Default or
Event of Default exists or would result therefrom.
"Qualifying Consideration" has the meaning specified in the definition
------------------------
of "Permitted Acquisition."
"Real Property" or "Real Properties" has the meaning specified in the
------------- ---------------
Bank Loan Agreement.
"Recapitalization" means the recapitalization of the Company in
----------------
connection with which each of the following will be consummated: (i) the
Investment Transactions, (ii) the Merger, including the conversion or
cancellation of shares contemplated in Section 2.1 of the Recapitalization
Agreement, (iii) the Bank Loan Agreement, (iv) this Agreement, (v) the Warrant
Agreement and (vi) the Shareholders Agreement, all as more fully described in
the Recapitalization Agreement and other Recapitalization Documents and the Bank
Loan Documents.
-17-
"Recapitalization Agreement" means the Agreement and Plan of Merger
--------------------------
and Recapitalization dated December 22, 1999 between the Company and WM
Acquisition as amended on March 27, 2000.
"Recapitalization Documents" means, collectively, (i) the
--------------------------
Recapitalization Agreement and each of the exhibits and schedules thereto, (ii)
the Proxy Statement, (iii) the Investment Documents, and (iv) each of any other
agreements, contracts and instruments executed and delivered in connection with
the foregoing or relating thereto, as the same may be amended or modified.
"Reportable Event" has the meaning specified in Section 4.1(i) hereof.
----------------
"Required Purchasers" has the meaning specified in Section 16 hereof.
-------------------
"Restricted Payment" means (i) any cash or property dividend,
------------------
distribution or payment, direct or indirect, by the Company or any of its
Subsidiaries to any Person who now holds, or who in the future holds, an equity
interest in the Company or any of its Subsidiaries, in their capacity as such,
whether evidenced by a security or not, other than dividends payable solely in
Equity Securities of the Company or any of its Subsidiaries and any such
dividends, distributions or other payments described in this clause (i) to the
Company or any of its Subsidiaries, provided that if any such dividend,
--------
distribution or payment is made to an Excluded Foreign Subsidiary, such Excluded
Foreign Subsidiary shall, as soon as practicable, dividend, distribute or pay
such amounts to its equity holders, with the intention that all such dividends,
distributions and payments ultimately are made to the Company or a Guarantor,
(ii) any payment (other than payment of Equity Securities of the Company or any
of its Subsidiaries) on account of the purchase, redemption, retirement or other
acquisition for value of any capital stock or other equity security of the
Company or its Subsidiaries (including the Company's Senior Preferred Stock),
and (iii) any management or similar fees paid or payable by the Company or any
of its Subsidiaries to any Person or any Affiliate of such Person who now holds,
or in the future holds, directly or indirectly, an equity interest in the
Company or any of its Subsidiaries.
"Retention Bonus Senior Note" means a note issued by the Company to
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ pursuant to the Green Employment Agreement in respect of the
Retention Bonus (as defined in the Green Employment Agreement) other than a
Retention Bonus Subordinated Note.
"Retention Bonus Subordinated Note" means a note issued by the Company
---------------------------------
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ pursuant to the Green Employment Agreement in respect of the
Retention Bonus (as defined in the Green Employment Agreement) in connection
with his voluntary resignation from the Company other than a resignation for
Good Reason (as defined in the Green Employment Agreement).
-18-
"rules and regulations" means the published rules and regulations of
---------------------
the Commission promulgated under any of the Securities Act or the Exchange Act,
as in effect at any relevant time.
"Securities" has the meaning specified in Section 2 hereof.
----------
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission thereunder.
"Senior Debt" means all present and future obligations of the Company
-----------
and the Guarantors under or in connection with the Retention Bonus Senior Note
and the Bank Loan Documents, including, without limitation, all obligations to
pay principal, interest (including post-petition interest, whether or not
allowed in any bankruptcy of the Company or any Guarantor), fees and expenses
incurred under the Bank Loan Documents and all other amounts payable under the
Bank Loan Documents; provided, that in no event shall the aggregate principal
--------
amount of Senior Debt exceed (x) $3,000,000 in the case of the Retention Bonus
Senior Note and (y) the amount set forth in Section 7.2(a) or (b) in the case of
the Bank Loan Documents. Senior Debt shall also include all amendments,
modifications and refinancings of the foregoing, provided such amendments,
modifications or refinancings do not (i) change the maturity of such Senior Debt
beyond one year of its stated maturity on the Closing Date, (ii) increase the
interest rate payable on any tranche of such Senior Debt in excess of 300 basis
points above the maximum interest rate applicable thereto on the Closing Date,
(iii) shorten the weighted average maturity of such Senior Debt by more than 25%
of its weighted average maturity on the Closing Date or (iv) make any
representations, covenants or defaults contained in the Bank Loan Documents more
restrictive, or create new representations, covenants or defaults (it being
understood that waivers of existing covenants or defaults shall not be deemed to
create new covenants or defaults and the giving or making of a representation as
set forth in the Bank Loan Documents as in effect on the date hereof, at a time
not required by the Bank Loan Documents as in effect on the date hereof, shall
not be deemed to create a new representation) that are not in the Bank Loan
Documents as of the date hereof; provided that this clause (iv) shall not be
--------
applicable to any representations, covenants or defaults that are (x) solely
applicable to the Collateral or the security interest of the Agent or Banks
therein or (y) offered to be added to this Agreement by the Company and such
addition is consented to by the Agent (provided that with respect to dollar
amounts or ratios referred to in such representations, covenants or defaults
contained or to be contained in Bank Loan Documents, when such representations,
covenants or defaults are added herein such dollar amounts or ratios, as
applicable, shall be increased by 20%) and, if requested by the Purchasers, are
so added to this Agreement.
"Senior Preferred Stock" means the Senior Preferred Stock, $0.01 par
----------------------
value per share, of the Company.
-19-
"▇▇▇▇▇▇▇ Dispositions" means the disposition by the Borrower of the
--------------------
two fee owned properties acquired by the Borrower in connection with its
acquisition of ▇▇▇▇▇▇▇ Ltd. and ▇.▇. ▇▇▇▇▇▇▇, together with the improvements and
fixtures thereon.
"▇▇▇▇▇▇▇ Ltd." means ▇▇▇▇▇▇▇ Ltd., a company organized under the laws
-----------
▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ which is a wholly-owned Subsidiary of ▇.▇. ▇▇▇▇▇▇▇ and,
indirectly, a wholly-owned Subsidiary of the Company.
"Shareholders Agreement" has the meaning specified in Section 2
----------------------
hereof.
"Solvency Certificate" means, collectively, (i) the solvency
--------------------
certificate dated as of the date hereof and executed and delivered by the chief
financial officer of the Company to the Purchasers and (ii) the solvency
certificate dated as of the date hereof and executed and delivered by the chief
financial officer of the Company, on behalf of itself and its Subsidiaries on a
Consolidated basis, to the Purchasers.
"Special Payment Conditions" means, collectively, the following
--------------------------
conditions: (i) all sums which shall have become due and payable by the Company
to the holders of Notes under this Agreement on or prior to such date shall have
been paid in full on or prior to such date; and (ii) no event or condition which
constitutes a Default or an Event of Default shall be continuing on or as of
such date or shall occur by reason of the making of the payment on such date.
"Stated Maturity", when used with respect to the principal of any Note
---------------
or installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note (disregarding any mandatory
redemption payments required by the terms of this Agreement) or such installment
of interest is due and payable.
"Subordinated Transaction Documents" has the meaning specified in
----------------------------------
Section 2 hereof.
"Subsidiary" means any corporation, association, joint stock company,
----------
business trust or other similar organization of which 50% or more of the
ordinary voting power for the election of a majority of the members of the board
of directors or other governing body of such entity is held or controlled by a
Person or a Subsidiary of such Person; or any other such organization the
management of which is directly or indirectly controlled by a Person or a
Subsidiary of such Person through the exercise of voting power or otherwise; or
any joint venture, whether incorporated or not, in which a Person has a 50% or
more ownership interest.
"Supply Depot" means Supply Depot, Inc., a Texas corporation which is
------------
a wholly-owned subsidiary of the Company.
-20-
"Total Fixed Charges" means, for any period, without duplication, (i)
-------------------
Interest Charges paid or required to be paid in cash by the Company and its
Subsidiaries in such period, plus (ii) the aggregate amount of scheduled
principal payments required to be made by the Company and its Subsidiaries
during such period with respect to any Debt for borrowed money or capital lease
obligations, plus (iii) any fees, including Letter of Credit fees and Commitment
Fees, required to be paid in connection with any Debt for borrowed money or
capital lease obligations, plus (iv) all Restricted Payments made in cash
pursuant to Section 7.9 during such period, if any, plus (v) cash payments of
original issue discount on the Notes (including, without limitation, the AHYDO
Amount).
"Total Funded Debt" means, as at any date of determination, on a
-----------------
Consolidated basis for the Company and its Subsidiaries, the sum of, without
duplication, (i) the aggregate amount of the Loans outstanding on such date,
plus (ii) the Stated Amount of Letters of Credit outstanding on such date, plus
(iii) the aggregate principal amount of the Notes outstanding on such date, plus
(iv) all principal obligations arising under capital leases in effect on such
date required to capitalized in accordance with GAAP, plus (v) all other
Guarantees and Debt for borrowed money of the Company and its Subsidiaries
outstanding on such date.
"Total Interest Coverage Ratio" means, for any period, the ratio of
-----------------------------
(i) EBITDA for such period to (ii) the sum of (x) Interest Charges and (y) all
amortization of original issue discount and other non-cash payments or accruals
of interest and other financing fees on all Debt (including outstanding Letters
of Credit) that would be included in interest expense in accordance with GAAP
for the Company and its Subsidiaries for such period.
"Transaction Documents" has the meaning specified in Section 2 hereof.
---------------------
"Trayco" means Trayco of S.C., Inc., a Delaware corporation which is a
------
wholly-owned Subsidiary of the Company.
"Voting Stock" means capital stock issued by a corporation, or
------------
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even if the right so
to vote has been suspended by the happening of such a contingency.
"Warrant Agreement" has the meaning specified in Section 2 hereof.
-----------------
"Warrants" has the meaning specified in Section 2 hereof.
--------
"Wholly Owned Subsidiary" of a Person means any Subsidiary of such
-----------------------
Person all the outstanding capital stock of which (other than directors'
qualifying shares) is at the time owned by such Person, such Person and one or
more of its Wholly Owned Subsidiaries, or one or more Wholly Owned Subsidiaries
of such Person.
-21-
"Wilmar Financial" means Wilmar Financial, Inc., a Delaware
----------------
corporation which is a wholly-owned Subsidiary of the Company.
"Wilmar Holdings, Inc." means Wilmar Holdings, Inc., a Delaware
--------------------
corporation which is a wholly-owned Subsidiary of the Company.
"WM Acquisition" means WM Acquisition, Inc., a New Jersey corporation
--------------
of which the Investor Group, immediately prior to the effectiveness of the
Recapitalization Transactions, owns 100% of the issued and outstanding capital
stock.
1.2. Terms of General Application. For all purposes of this
Agreement and the other Subordinated Transaction Documents, except as otherwise
expressly provided herein or therein or unless the context otherwise requires:
(i) references to any Person defined in this Agreement refer to
such Person and its successor in title and assigns or (as the case may be)
his or her successors, assigns, heirs, executors, administrators and other
legal representatives;
(ii) references to any agreement, instrument or document defined in
this Agreement refer to such document as originally executed, or if
subsequently varied, extended, renewed, modified, amended, restated or
supplemented from time to time, as so varied, extended, renewed, modified,
amended, restated or supplemented and in effect at the relevant time of
reference thereto;
(iii) words importing the singular only shall include the plural
and vice versa, and the words importing the masculine gender shall include
---- -----
the feminine gender and vice versa, and all references to dollars, $, U.S.
---- -----
dollars or U.S. Dollars shall be to the lawful currency of the United
States of America;
(iv) accounting terms not otherwise defined in this Agreement or any
of the other Subordinated Transaction Documents have the meanings assigned
to them in accordance with GAAP;
(v) all financial statements and other financial information
provided by the Company and each other Subsidiary of the Company to the
Purchasers shall be provided with reference to U.S. dollars;
(vi) all of the obligations of the Company, any of its Subsidiaries
and the Guarantors under this Agreement shall be the joint and several
obligations of the Company and the Guarantors;
(vii) this Agreement and the other Subordinated Transaction
Documents are the result of negotiation among, and have been reviewed by
counsel to, among others,
-22-
the Company and the Guarantors, Parthenon and the Purchasers and are the
product of discussions and negotiations among all parties. Accordingly,
this Agreement and the other Subordinated Transaction Documents are not
intended to be construed against the Purchasers merely on account of the
Purchasers' involvement in the preparation of such documents; and
(viii) for purposes of all calculations of the Interest Coverage
Ratio in Section 7.2 hereof or made under the financial covenants set forth
in Sections 7.6, 7.7 and 7.8 (including but not limited to, the calculation
of compliance with such covenants on a pro forma basis), (a) following
--- -----
consummation of any sale, lease or other disposition of assets or
properties (i) income statement items (whether positive or negative) and
capital expenditures attributable to the property disposed of shall be
excluded to the extent relating to any period occurring prior to the date
of the transaction for which such calculation is determined and (ii) Debt
which is retired in connection with such transaction shall be excluded and
deemed to have been retired as of the first day of the applicable period
and (b) following consummation of any Permitted Acquisition (i) income
statement items (whether positive or negative) attributable to the Person
or property acquired shall, to the extent not otherwise included in such
income statement items for the Company or any of its Subsidiaries on a
Consolidated basis in accordance with GAAP or in accordance with any
defined terms set forth in Section 1.1 hereof, be included to the extent
relating to any period applicable in such calculations, (ii) (A) Debt of
the Person or property acquired shall be deemed to have been incurred as of
the first day of the applicable period and, (B) if such Debt has a floating
or formula rate, shall have an implied rate of interest for the applicable
period for purposes of this definition determined by utilizing the rate
which is or would be in effect with respect to such Debt as at the relevant
date of determination and (iii) pro forma adjustments may be included to
--- -----
the extent that such adjustments are made in the good faith judgment of the
management of the Company and are reasonably acceptable to the Required
Purchasers.
SECTION 2. Authorization, Purchase and Sale of Notes and Warrants.
------------------------------------------------------
The Company will authorize and create an issue of its 15% Senior Subordinated
Notes due 2008 (the "Original Notes"), such Original Notes limited to
--------------
$40,000,000 in aggregate principal amount plus the aggregate principal amount of
any additional notes issued in accordance with the terms of the Original Notes
in lieu of a portion of cash interest payments (the "PIK Notes" and, together
---------
with the Original Notes, the "Notes"), each such Note to be substantially in the
-----
form of Exhibit A-1 hereto. The Notes will be unconditionally guaranteed on a
senior subordinated basis by each of the Guarantors pursuant to the terms of
this Agreement, such guarantee to be substantially in the form of Exhibit A-2
hereto (each, a "Guarantee"). In consideration for the purchase of the Notes,
---------
the Company will authorize the issue of its warrants (the "Warrants"), to be
--------
substantially in the form of Exhibit A-3 hereto, for the purchase of 47,712
shares of Common Stock of the Company, no par value (the "Common Stock"),
------------
constituting
-23-
approximately 4% of the Fully Diluted Common Stock as of the date hereof after
giving effect to the Acquisition, at a price of $0.001 per share. The Notes will
be denominated in U.S. dollars. The Notes, the Guarantees, the Warrants and the
Common Stock to be received upon exercise of the Warrants are hereinafter
referred to collectively as the "Securities."
----------
The Warrants are being issued pursuant to a Warrant Agreement to be
dated as of May 16, 2000 (as amended, restated or otherwise modified from time
to time, the "Warrant Agreement") among the Company and the Purchasers. The
-----------------
holders of Warrants will be entitled to the benefits of the Shareholders
Agreement dated as of May 16, 2000 (as amended, restated or otherwise modified
from time to time, the "Shareholders Agreement"), among the Company, certain
----------------------
shareholders of the Company and the Purchasers.
The Notes and Warrants will be issued and sold to the Purchasers
without registration under the Securities Act in reliance upon an exemption from
the registration requirements of the Securities Act.
The Company shall, on the Closing Date (as defined in Section 3),
enter into the Bank Loan Agreement. In addition, on the Closing Date, pursuant
to the provisions of an Agreement and Plan of Merger and Recapitalization (the
"Acquisition Agreement") entered into by and among the Company and WM
----------------------
Acquisition, Inc. ("Newco"), Newco has agreed to merge with and into the Company
-----
(such transaction hereinafter called the "Acquisition").
-----------
The Securities, the Warrant Agreement, the Shareholders Agreement and
this Agreement are collectively referred to herein as the "Subordinated
------------
Transaction Documents" and, together with all other agreements to be executed in
---------------------
connection with the Recapitalization (excluding the Bank Loan Documents), are
referred to herein as the "Transaction Documents."
---------------------
For purposes of this Agreement, "Material Adverse Effect" means a
-----------------------
material adverse effect on the business, condition (financial or otherwise),
assets, operations or prospects of the Company and its Subsidiaries, taken as a
whole.
Subject to the terms and conditions herein set forth, the Company
agrees to sell to each Purchaser, and each Purchaser agrees to purchase from the
Company, Notes and Warrants, in the amount and for the purchase price set forth
below the name of each Purchaser on the signature pages hereof. The parties
hereto agree that the aggregate purchase price shall be allocated $37,750,000 to
the Notes and $2,250,000 to the Warrants for purposes of Sections 1272 through
1275 of the Code.
SECTION 3. Closing. The date for the purchase of the Securities
-------
(other than the Common Stock) by the Purchasers as provided herein is May 16,
2000 or such other date as may be agreed to by the Purchasers and the Company
(the "Closing Date"). The closing shall occur at the offices of Paul, Weiss,
------------
Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, New York, New York or at such other place as shall
agreed upon among the parties hereto.
-24-
On the Closing Date the Company will deliver to each Purchaser one or
more Notes registered in the name of such Purchaser (or its nominee), evidencing
the aggregate principal amount of Notes to be purchased by such Purchaser and in
the denomination or denominations specified by such Purchaser, and the Company
will deliver to each Purchaser the Warrants to be purchased by such Purchaser
registered in the name of such Purchaser (or its nominee), against payment of
the purchase price thereof by transfer of immediately available funds on the
Closing Date, to an account of the Company which shall be specified in writing
by the Company not later than 9:00 a.m. of the Closing Date.
SECTION 4. Financial Information; Inspection. The Company will,
---------------------------------
until the later of the date on which (a) the Notes are Fully Satisfied and (b)
an Initial Public Offering closes, perform all of its obligations under this
Section 4.
4.1. Financial Data and Other Reporting Requirements. The Company
-----------------------------------------------
shall furnish to the holders of Notes:
(a) as soon as available, but in any event within 90 days after the
end of (x) the period commencing on the Closing Date and ending on December
31, 2000, and (y) each fiscal year of the Company and its Subsidiaries
thereafter, a Consolidated balance sheet as of the end of, and a related
Consolidated statement of income, changes in stockholders' equity and cash
flow for, such period or year, as applicable, prepared in accordance with
GAAP and audited and certified by a "Big Five" accounting firm or other
independent public accounting firm reasonably satisfactory to the Required
Purchasers; and, concurrently with such financial statements, a copy of
said certified public accountants' management letter and a written
statement by such accountants that, in the making of the audit necessary
for their letter and opinion upon such financial statements they have
obtained no knowledge of any Default or Event of Default under any of
Sections 7.6 through 7.8, inclusive, or, if in the opinion of such
accountants any such Default or Event of Default exists, they shall
disclose in such written statement the nature and status thereof;
(b) as soon as available, but in any event within 45 days after the
end of each of the first three fiscal quarters of the Company and its
Subsidiaries, a Consolidated balance sheet as of the end of, and a related
Consolidated statement of income, changes in stockholders' equity and cash
flow for, the portion of the fiscal year then ended and for the fiscal
quarter then ended, prepared in accordance with GAAP (without footnotes)
and comparing results to budgeted amounts for such fiscal quarter and to
results for the same period during the previous year and certified by the
chief financial officer of the Company, but subject, however, to normal
year-end audit adjustments that shall not in the aggregate be materially
adverse and a management summary discussing results of operations for the
quarter and detailed calculations evi-
-25-
dencing compliance with the financial covenants set forth in any of
Sections 7.6 through 7.8, inclusive;
(c) as soon as available, but in any event within 30 days after the
end of each fiscal month of the Company and its Subsidiaries, a
Consolidated balance sheet as of the end of, and a related Consolidated
statement of income, changes in stockholders' equity and cash flow for, the
portion of the fiscal year then ended and for the fiscal month then ended,
prepared in accordance with GAAP (without footnotes) and comparing results
to budgeted amounts for such fiscal month and certified by the chief
financial officer of the Company, but subject, however, to normal year-end
audit adjustments that shall not in the aggregate be materially adverse;
(d) on or before the 30th day after the first day of each fiscal year
of the Company and its Subsidiaries, (i) an annual operating budget
presented on a quarterly basis for such fiscal year, and (ii) Consolidated
pro forma projections of the Company and its Subsidiaries for such
--- -----
succeeding fiscal year in form reasonably acceptable to the Required
Purchasers (it being recognized by the Purchasers that projections as to
future results are not to be viewed as facts and that the actual results
for the period or periods covered by the projections may differ from the
projected results);
(e) concurrently with the delivery of each financial statement
pursuant to subsections (a) and (b) of this Section 4.l, a report in
substantially the form of Exhibit B hereto signed on behalf of the Company
---------
and its Subsidiaries by the chief financial officer of the Company, and
including, without limitation, computations in reasonable detail evidencing
compliance with the covenants contained in Sections 7.6 through 7.8,
inclusive;
(f) as soon as practical and, in any event, within 90 days after the
Closing Date, the Opening Balance Sheet, which shall be prepared by the
chief financial officer of the Company and reviewed by Deloitte and Touche,
LLP, which review shall not result in any material changes to the Opening
Balance Sheet;
(g) upon the Required Purchasers' request from time to time, copies
of any reports submitted to any member of the Company and its Subsidiaries
by independent public accountants in connection with any interim review of
the accounts of Company or its Subsidiaries made by such accountants;
(h) promptly after the same are available, copies of all financial
statements, proxy material, and reports as the Company or its Subsidiaries
shall send to its stockholders or that the Company or its Subsidiaries may
file with the Securities and Exchange Commission;
-26-
(i) if and when the Company or its Subsidiaries gives or is required
to give notice to the PBGC of any "Reportable Event" (as defined in Section
4043 of ERISA) with respect to any Plan that might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that any member
of the Controlled Group or the plan administrator of any Plan has given or
is required to give notice of any such Reportable Event, a copy of the
notice of such Reportable Event given or required to be given to the PBGC
or, if such notice is not given to the PBGC, a description of the content
of the notice that would be required to be given;
(j) (I) immediately upon becoming aware of the existence of any
condition or event (i) that constitutes a Default or Event of Default,
written notice thereof specifying the nature and duration thereof and the
action being or proposed to be taken with respect thereto or (ii) affecting
the Company or its Subsidiaries which could reasonably be expected to have
a Material Adverse Effect, written notice thereof specifying the nature
thereof and the action being or proposed to be taken with respect thereto;
and (II) immediately upon receipt thereof, copies of any written notice of
any cancellation, termination or material change in any insurance
maintained by the Company or its Subsidiaries;
(k) promptly upon becoming aware of any litigation or of any
investigative proceedings by any Person, including, without limitation, any
governmental agency or authority commenced or threatened in writing against
the Company or its Subsidiaries of which it has notice, or of a material
change in any such existing litigation or proceedings, the outcome of which
could reasonably be expected to have a Materially Adverse Effect, written
notice thereof and the action being or proposed to be taken with respect
thereto;
(l) except to the extent otherwise provided in the Environmental
Indemnity Agreement, promptly upon becoming aware of any investigative
proceedings by a governmental agency or authority commenced or threatened
in writing against the Company or its Subsidiaries regarding any potential
violation of Environmental Laws or any spill, release, discharge or
disposal of any Hazardous Material, written notice thereof, copies of all
correspondence, reports and other materials furnished to or prepared by the
Company or any of its Subsidiaries (or its representatives) in connection
therewith and the action being or proposed to be taken with respect
thereto; and
(m) from time to time, with reasonable promptness, such other
financial data and other information or documents (financial or non-
financial) about the Company or any of its Subsidiaries as the Required
Purchasers may reasonably request.
4.2. Inspection. (a) Any holder of Notes and, prior to the closing
----------
of an Initial Public Offering, any holder of Warrants exercisable for at least
20,000 shares of Common Stock (appropriately adjusted for any stock splits or
stock dividends after the Closing Date),
-27-
or any representative thereof, upon five Business Days' notice, may visit and
inspect the properties of the Company and each of its Subsidiaries during
business hours, examine and copy their books of record and accounts (including,
but not limited to, access to board minutes and other materials distributed at
meetings of the Board of Directors), and discuss their affairs, finances and
accounts with their officers and independent public accountants; provided that,
--------
so long as no Event of Default has occurred and is continuing, such holders and
representatives are entitled to inspection rights pursuant to this Section
4.2(a) no more than two times each fiscal year in the aggregate; and provided,
--------
further, that with respect to discussions with employees and independent public
-------
accountants, so long as no Event of Default has occurred and is continuing, the
Company shall be given prior notice and opportunity to participate in such
discussions. In addition, the Company shall promptly mail a copy of all board
minutes of the Company to each of the Purchasers; provided, however, that the
-------- -------
Company shall not be required to deliver that portion of any board minutes of
the Company relating to a discussion by the Board of Directors of the Company in
connection with the Subordinated Transaction Documents.
(b) All materials and information provided to the Purchasers or their
Affiliates, representatives, agents, employees and officers by or on behalf of
the Company or its Subsidiaries or by another Purchaser in connection with this
Agreement or any other Transaction Document shall be kept confidential by the
Person receiving such information and shall not be disclosed to any other
Person, without the prior written consent of the Company or such Subsidiary,
which consent shall not be unreasonably withheld, and no Purchaser nor any of
its Affiliates, representatives, agents, employees or officers shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Subordinated Transaction Documents or in connection with
other business now or hereafter existing with the Company or its Subsidiaries,
except that the same may be disclosed without such consent (i) to any Affiliate
of the Purchasers who purchases or holds Notes or Warrants or otherwise performs
services for the Purchasers in connection herewith (other than Fleet National
Bank in its capacity as senior lender to the Company under the Bank Loan
Agreement), (ii) as required by applicable law, (iii) as requested by the
Commission or any self-regulatory organization, (iv) to any attorneys,
accountants or consultants to the holders of the Notes or Warrants or (v) to any
prospective purchaser which is, or upon acquisition of any Note would be, a
holder reasonably acceptable to the Company, in connection with a bona fide
attempt to sell any Notes; provided that, prior to the dissemination of
--------
information to a prospective purchaser, such purchaser shall agree in advance to
treat such information as confidential as set forth herein, and further provided
------- --------
that, with respect to clauses (ii) and (iii) above, the Purchasers, to the
extent practicable, will use reasonable efforts to give notice to the Company
before releasing such information, provided that no Purchaser shall have
liability whatsoever for the failure to give such notice.
4.3. Taxes. (a) Any and all payments by or on behalf of the Company
-----
hereunder and under any other Transaction Document shall be made, free and clear
of and
-28-
without deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) income taxes imposed on the net income of a Purchaser (including
---------
any so-called branch profit taxes) and (ii) franchise taxes imposed on the net
income of a Purchaser, in each case by the jurisdiction under the laws of which
such Purchaser is organized or qualified to do business or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called "Taxes"). If the Company must deduct any Taxes from or in respect of any
-----
sum payable hereunder or under any other Transaction Document to a Purchaser,
(i) the sum payable shall be increased by the amount (an "additional amount")
-----------------
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.3) such Purchaser
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and (iii) the
Company shall pay the full amount deducted to the relevant governmental
authority in accordance with applicable law.
(b) Each Purchaser (or any direct or indirect transferee of a
Purchaser) that is not a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States (or any jurisdiction thereof), or any estate or trust
that is subject to federal income taxation regardless of the source of its
income (a "Non-U.S. Holder") shall deliver to the Company two copies of either
---------------
U.S. Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-
U.S. Holder claiming exemption from U.S. federal withholding tax under Section
871(h) or 881(c) of the Code with respect to payments of "portfolio interest" a
statement substantially in the form of Exhibit D and a Form W-8, or any
subsequent versions thereof or successors thereto properly completed and duly
executed by such Non-U.S. Holder claiming complete exemption from U.S. federal
withholding tax on all payments by the Company hereunder and under any other
Transaction Document. Such forms shall be delivered by each Non-U.S. Holder on
or before the date it becomes a party to this Agreement. In addition, each Non-
U.S. Holder shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Holder. Each Non-
U.S. Holder shall promptly notify the Company at any time it determines that it
is no longer in a position to provide any previously delivered certificate to
the Company (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
Section 4.3(b), a Non-U.S. Holder shall not be required to deliver any form
pursuant to this Section 4.3(b) that such Non-U.S. Holder is not legally able to
deliver.
(c) For any period with respect to which a Purchaser (or transferee)
has failed to provide the Company with the appropriate form described in
subsection (b) above (other than if such failure is due to a change in law
occurring subsequent to the date on which a form originally was required to be
provided, or if such form otherwise is not required under subsection (b) above),
such person shall not be entitled to any additional amounts under Section 4.3(a)
with respect to Taxes imposed by the United States by reason of such failure.
-29-
(d) If a Purchaser (or transferee) shall become aware that it is
entitled to claim a refund from a governmental authority in respect of Taxes
with respect to which the Company has paid additional amounts pursuant to
Section 4.3(a), it promptly shall notify the Company of the availability of such
refund claim and shall make a timely claim to such taxation authority for such
refund at the Company's expense. If a Purchaser (or transferee) receives a
refund (including pursuant to a claim for refund made pursuant to the preceding
sentence) in respect of any Taxes with respect to which the Company has paid
additional amounts pursuant to Section 4.3(a), it shall within 30 days from the
date of such receipt pay over the amount of such refund to the Company, net of
all reasonable out-of-pocket expenses of such Purchaser (or transferee) and
without interest (other than interest paid by the relevant taxation authority
with respect to such refund); provided that the Company, upon the request of
--------
such Purchaser (or transferee), agrees to repay the amount paid over to the
Company (plus penalties, interest or other reasonable charges) to such Purchaser
(or transferee) in the event such Purchaser (or transferee) is required to repay
such refund to such taxation authority.
SECTION 5. Representations and Warranties. In order to induce the
------------------------------
Purchasers to purchase the Notes, the Company and each of the Guarantors
represents and warrants as follows:
5.1. Organization and Qualification. As of the Closing Date, the
------------------------------
Company, each of its Subsidiaries and their respective jurisdictions of
incorporation are listed on Schedule 5.1 hereto. The Company and each of its
------------
Subsidiaries (a) is a Person duly organized, validly existing and in good
standing (or the jurisdictional equivalent thereof) under the laws of the
jurisdiction of its organization, (b) has all requisite corporate or other power
to own its property and conduct its business as now conducted and as presently
contemplated, and (c) is duly qualified and in good standing (or the
jurisdictional equivalent thereof) as a foreign corporation and is duly
authorized to do business in each jurisdiction where the nature of its
properties or business requires such qualification, except where the failure to
be so qualified could not reasonably be expected to have a Material Adverse
Effect.
5.2. Organizational Authority. The execution, delivery and
------------------------
performance of each of the Subordinated Transaction Documents and the
Transaction Documents (other than the Proxy Statement) to which the Company or
any of its Subsidiaries is a party and the transactions contemplated hereby and
thereby (including, without limitation, the Recapitalization Transactions) are
within the corporate or other power and authority of the Company or such
Subsidiary and have been authorized by all necessary corporate or other
proceedings, and do not and will not (a) require any consent or approval of any
creditors, trustees for creditors or shareholders of the Company or such
Subsidiary (other than any such consent that has been obtained prior to the
Closing Date and delivered to the Purchasers or that will be obtained after the
Closing Date but prior to the effective date of the relevant document requiring
such consent), (b) contravene any provision of the charter documents or by-laws
of the Company or such Subsidiary, (c) contravene any law, rule or regulation
applicable to the Company or such
-30-
Subsidiary, (d) contravene any provision of, or constitute an event of default
or event that, but for the requirement that time elapse or notice be given, or
both, would constitute an event of default under, any other material agreement,
instrument, order or undertaking binding on the Company or such Subsidiary, or
(e) result in or require the imposition of any Lien (other than Permitted Liens)
on any of the properties, assets or rights of the Company or such Subsidiary,
except in case of clauses (c) and (d) with respect to the Transaction Documents
(other than the Subordinated Transaction Documents) only, any contraventions and
defaults that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
5.3. Valid Obligations. Each of the Subordinated Transaction
-----------------
Documents to which the Company or any of its Subsidiaries is or is to become a
party and all of their respective terms and provisions are the legal, valid and
binding obligations of the Company or such Subsidiary enforceable in accordance
with their respective terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally, and except as the remedy of specific performance or of
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
5.4. Consents or Approvals. The execution, delivery and
---------------------
performance of each of the Subordinated Transaction Documents to which the
Company or any of its Subsidiaries is or is to become a party and the
transactions contemplated herein and therein do not require any approval or
consent of, or filing or registration with, any governmental or other agency or
authority, or any other party, except as have been made or obtained and are in
full force and effect.
5.5. Title to Properties; Absence of Liens. Each of the Company
-------------------------------------
and its Subsidiaries has good and marketable title to all of the properties,
assets and rights of every name and nature now purported to be owned or leased
by it which are material to the business of the Company or such Subsidiary,
including, without limitation, such properties, assets and rights as are
reflected in the Initial Financial Statement (except such properties, assets or
rights as have been disposed of in the ordinary course of business or otherwise
permitted hereunder since the date thereof), free from all Liens except
Permitted Liens, and, except as so disclosed, free from all defects of title
that could reasonably be expected to materially adversely affect any of such
properties, assets or rights. To the knowledge of the Company, all such
properties and assets purported to be owned by it and all of the interest of the
Company and its Subsidiaries in properties which are leaseholds are free and
clear of all material title defects or material objections, liens, claims,
charges, security interests and other Liens (except Permitted Liens) of any
nature whatsoever, and are not, in the case of real property, subject to any
material rights of way, building, use or other restrictions, easements,
exceptions, variances, reservations or limitations of any nature whatsoever
except, with respect to all such properties and assets, (i) provisions of
building and zoning laws, provided that such provisions would not materially
--------
interfere with the Company's or any of its Subsidiaries' use of such
-31-
properties, (ii) liens for current taxes not yet due, and (iii) as otherwise
disclosed on Schedule 5.5 hereto. The rights, properties and other assets
------------
presently owned, leased or licensed by each of the Company and its Subsidiaries
include all material rights, properties and other assets necessary to permit the
Company and its Subsidiaries to conduct its businesses in all material respects
in the same manner as its businesses have been conducted prior to the date
hereof.
5.6. Financial Statements. The Company has furnished to the
--------------------
Purchasers the Consolidated balance sheet of the Company and its Subsidiaries as
of December 25, 1998 and the related Consolidated statements of income, changes
in stockholders' equity and cash flow of the Company and its Subsidiaries for
the fiscal years then ended, and related footnotes, audited by Deloitte and
Touche, LLP, together with the opinion of Deloitte and Touche, LLP thereon. The
Company has also furnished to the Purchasers (i) a Consolidated balance sheet as
of December 31, 1999, audited by Deloitte and Touche, LLP, together with the
opinion of Deloitte and Touche, LLP thereon, (ii) a Consolidated statement of
operations and cash flows for the fiscal year ended December 31, 1999, audited
by Deloitte and Touche, LLP, together with the opinion of Deloitte and Touche,
LLP thereon (the financial statements referred to in clauses (i) and (ii) shall
be referred to as the "Initial Financial Statement"), and (iii) a pro forma
--------------------------- --- -----
unaudited balance sheet as of December 31, 1999, prepared on a basis consistent
with the Initial Financial Statement. The Company has also furnished to the
Purchasers the Opening Balance Sheet (together with the unaudited pro forma
--- -----
financial statements referred to in clause (iii) above, the "Pro Forma Financial
-------------------
Statements"). The Company has also furnished to the Purchasers the unaudited
----------
pro forma Consolidated projected balance sheets of the Company and its
--- -----
Subsidiaries for the next 5 fiscal years, and its related unaudited Consolidated
projected statements of income, changes in stockholders' equity and cash flow
for the next five fiscal years, as if the loans under the Bank Loan Agreement
had been made and the Recapitalization had occurred as of the Closing Date. The
Company has also furnished to the Purchasers management reports for the Company
and its Subsidiaries prepared for the fiscal year ended December 25, 1998 and
the fiscal year ended December 31, 1999. The Initial Financial Statement was
prepared in accordance with GAAP and presents fairly in all material respects
the financial position of the Company and its Subsidiaries as of such dates and
the results of the operations of the Company and its Subsidiaries for such
periods on the basis disclosed in the footnotes thereto. There are no
liabilities, contingent or otherwise, not disclosed in any of such financial
statements that involve a material amount. The Pro Forma Financial Statements
were prepared in good faith by the Company based upon reasonable assumptions and
on a basis consistent with the Initial Financial Statement. The Purchasers
acknowledge that the Pro Forma Financial Statements are projections as to future
results and are not to be viewed as facts and that actual results may differ
from the projected results.
5.7. Changes. Since the date of the Initial Financial Statement,
-------
there have been no changes in the assets, liabilities, financial condition,
business or prospects of the Company and its Subsidiaries taken as a whole, the
effect of which has, individually or in the aggregate, been materially adverse
to the Company and its Subsidiaries taken as a whole.
-32-
5.8. Defaults. As of the date of this Agreement, no Default or
--------
Event of Default exists.
5.9. Taxes. Each of the Company and its Subsidiaries has filed
-----
or has caused to be filed all federal, state and other tax returns required to
be filed, and all taxes, assessments and other governmental charges due from the
Company or such Subsidiary in excess of $100,000 individually and in the
aggregate have been fully paid or other than any taxes, assessments or
governmental charges being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been established therefor.
Neither the Company nor any of its Subsidiaries has executed any waiver of
limitations in respect of tax liabilities. Each of the Company and its
Subsidiaries has established on its books reserves adequate for the payment of
all federal, state and other tax liabilities.
5.10. Litigation. Except as set forth on Schedule 5.10 hereto,
---------- -------------
there is no litigation, arbitration, claim, proceeding or investigation pending
or threatened in writing against the Company or any of its Subsidiaries that, if
adversely determined, could reasonably be expected to result in a forfeiture of
all or any substantial part of the property of the Company or any of its
Subsidiaries taken as a whole, or could otherwise reasonably be expected to have
a Material Adverse Effect.
5.11. Subsidiaries. As of the date of this Agreement, neither the
------------
Company nor any of its Subsidiaries has any Subsidiaries except as set forth on
Schedule 5.1 hereto.
------------
5.12. Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is required to be registered as an investment company within the
meaning of the Investment Company Act of l940, as amended.
5.13. Compliance with ERISA. Each of the Company and its
---------------------
Subsidiaries and each member of the Controlled Group have fulfilled their
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all material respects with the
applicable provisions of ERISA and the Code, and have not incurred any liability
to the PBGC or a Plan under Title IV of ERISA other than for premiums,
contributions or benefits, as applicable, payable in the ordinary course of
business other than such liabilities which are not paid when due; and no
"prohibited transaction" or "reportable event" (as such terms are defined in
ERISA) has occurred with respect to any Plan.
5.14. Environmental Matters. See the representations and
---------------------
warranties set forth in the Environmental Indemnity Agreement, which are
incorporated herein by this reference.
5.15. Disclosure. As of the Closing Date, the representations and
----------
warranties made by the Company and its Subsidiaries in this Agreement, any other
Subordinated Transaction Document, in the Proxy Statement or in any other
agreement, instrument, document,
-33-
certificate, statement or letter furnished to the Purchasers by or on behalf of
the Company or any of its Subsidiaries, and the factual information heretofore
or contemporaneously furnished by or on behalf of the Company or any of its
Subsidiaries to the Purchasers, in connection with any of the transactions
contemplated by any of the Subordinated Transaction Documents taken as a whole
and as supplemented from time to time prior to the Closing Date do not contain
any untrue statement of material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
light of the circumstances in which they were or are made. The representations
and warranties made by the Company and its Subsidiaries in this Agreement, in
any other Subordinated Transaction Document, in the Proxy Statement or in any
other agreement, instrument, document, certificate, statement or letter
furnished to the Purchasers by or on behalf of the Company or any of its
Subsidiaries, and the factual information furnished by or on behalf of the
Company or any of its Subsidiaries to the Purchasers after the Closing Date, in
connection with any of the transactions contemplated by any of the Subordinated
Transaction Documents taken as a whole, 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 therein not materially misleading in light of the
circumstances in which they were or are made. Neither the Company nor any of its
Subsidiaries is aware of any fact which it has not disclosed in writing to the
Purchasers that has had, or could reasonably be expected to have, a Material
Adverse Effect. It is recognized by the Purchasers that projections, pro forma
financial statements, financial models, and business plans, to the extent they
project future results, are not to be viewed as facts and that the actual
results during the period or periods covered by any documents containing such
projections may differ from the project results.
5.16. Solvency. Both before and after giving effect to the
--------
Recapitalization, and all Debt incurred by the Company and its Subsidiaries on
the Closing Date, neither the Company nor the Company and its Subsidiaries on a
Consolidated basis (i) is Insolvent, or will be rendered Insolvent by the Debt
incurred in connection therewith, (ii) will be left with unreasonably small
capital with which to engage in its business, (iii) will have incurred Debt
beyond its ability to pay such Debt as it matures, and (iv) will fail to have
assets (both tangible and intangible) having a present fair salable value equal
to or in excess of the amount required to pay the probable liability on its then
existing debts as they become absolute and matured, in each case after giving
effect to all rights of indemnification and contribution of such Person(s) to or
from any Affiliate of such Person(s).
5.17. Compliance with Statutes, Etc.. Each of the Company and its
------------------------------
Subsidiaries is in compliance with all applicable laws, statutes, rules,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, other than any non-compliance which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
-34-
5.18. Capitalization. On and as of the Closing Date (and after
--------------
giving effect to the Recapitalization), the authorized capital stock of the
Company consists of (x) 2,500,000 shares of Common Stock, of which 1,145,099
shares are issued and outstanding and are held by the Persons and in the amounts
set forth in Schedule 5.18(a) hereto, and (y) 27,000,000 shares of Senior
----------------
Preferred Stock, of which 13,315,774 shares are issued and outstanding and are
held by the Persons and in the amounts set forth in Schedule 5.18(a) hereto. On
----------------
and as of the Closing Date, the authorized capital stock of each of the
Company's Subsidiaries, and the number of issued and outstanding shares thereof,
is as set forth in Schedule 5.18(b) hereto. All such outstanding shares of the
----------------
Company and each of the Company's Subsidiaries have been duly and validly issued
and are fully paid and non-assessable. Neither the Company nor any of its
Subsidiaries has outstanding any other securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock, in each case except as set
forth in Schedule 5.18(b) hereto with respect to the Company's Subsidiaries. As
----------------
of the Closing Date, the Company does not have outstanding any other securities
convertible into or exchangeable for its Capital Stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its Capital Stock, in
each case except as set forth in Schedule 5.18(b) hereto.
----------------
5.19. Labor Relations. Neither the Company nor any of its
---------------
Subsidiaries is engaged in any unfair labor practice. Except as disclosed on
Schedule 5.19 hereto, (i) there is no unfair labor practice complaint pending or
-------------
threatened in writing against the Company or any of its Subsidiaries before the
National Labor Relations Board which if adversely determined could reasonably be
expected to have a Material Adverse Effect, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement which if
adversely determined could reasonably be expected to have a Material Adverse
Effect is so pending against the Company or any of its Subsidiaries or, to the
knowledge of the Company or any of its Subsidiaries, threatened against it in
writing, (ii) there is no labor dispute, slowdown or stoppage pending against
the Company or any of its Subsidiaries or, to the knowledge of the Company or
any of its Subsidiaries, threatened in writing against the Company or any of its
Subsidiaries which if adversely determined could reasonably be expected to have
a Material Adverse Effect, and (iii) to the knowledge of the Company or any of
its Subsidiaries, no union representation question exists with respect to the
employees of the Company or any of its Subsidiaries and no union organizing
activities are taking place which could reasonably be expected to have a
Material Adverse Effect.
5.20. Certain Transactions. As of the date of this Agreement, except
--------------------
as set forth on Schedule 5.20 hereto or as expressly permitted hereunder, none
-------------
of the officers, partners or directors of the Company or any of its Subsidiaries
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than in connection with services as
-35-
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, partner, director or, to the knowledge of the Company or any of its
Subsidiaries, any Person which is an Affiliate of any officer, partner,
director, or natural person in the immediate family of an officer, partner or
director of the Company or any of its Subsidiaries or other Person in which such
officer, partner, director has a substantial direct or indirect beneficial
interest or is an officer, director, trustee or partner.
5.21. Restrictions on the Company and Its Subsidiaries. Neither the
------------------------------------------------
Company nor any of its Subsidiaries is a party to or bound by any contract,
agreement or instrument, or subject to any charter or other corporate
restriction, materially and adversely affecting the business, property, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
5.22. Leases. As of the date hereof, Schedule 5.22 hereto contains a
------ -------------
complete list of all leases, occupancy agreements for real property and all
amendments thereto, including without limitation, assignments and subleases
pursuant to which the Company and its Subsidiaries leases real property, and
written license agreements granted by the Company or its Subsidiaries pursuant
to which a third party would have the right to enter upon the leased premises
(herein individually referred to, together with any other Lease entered into
from time to time, as a "Real Property Lease" and collectively referred to as
-------------------
the "Real Property Leases"). The copies of the Real Property Leases heretofore
--------------------
delivered by the Company to the Agent are true, correct and complete copies
thereof and each of such Real Property Leases currently in effect is in full
force and effect in accordance with the terms thereof. Neither the tenant nor,
to the knowledge of the Company or its Subsidiaries, the landlord, under any
Real Property Lease under which the Company is the tenant is in default under
the applicable Real Property Lease or has given or received any notice of
cancellation or termination of such Real Property Lease (other than pursuant to
the expiration thereof) or condemnation of the leased premises, except to the
extent such defaults or events described in such notices, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), assets, operations or
prospects of the Company or its Subsidiaries taken as a whole. Each of the Real
Property Leases under which the Company or any of its Subsidiaries is the tenant
currently in effect is in possession of its respective premises and is open for
business in accordance with the Company's or such Subsidiary's ordinary course
practices, and no such tenant has assigned any of its interest in any of the
Real Property Leases under which the Company is the tenant, as collateral or
otherwise or sublet all or any portion of the premises covered by any Lease or
granted any written license with respect thereto, except as may be otherwise
disclosed on Schedule 5.22 hereto or as is expressly permitted hereunder. To
-------------
the knowledge of the Company, all work to be performed by the landlord under the
Real Property Leases currently in effect has been completed and there are no
claims pending or threatened against any landlord for failure to have per-
-36-
formed or completed any such work, except to the extent any failure of such work
to be performed, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), assets, operations or prospects of the Company or its
Subsidiaries taken as a whole.
5.23. Franchises, Patents, Copyrights, Etc. Except as otherwise set
------------------------------------
forth on Schedule 5.23 hereto, each of the Company and its Subsidiaries
-------------
possesses, owns or has the right to use all franchises, patents, copyrights,
trademarks, tradenames, service marks, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of its business as
substantially now conducted without known conflict with any rights of others
other than such conflicts which could not reasonably be expected to have a
Material Adverse Effect and, in each case, free of any Lien that is not a
Permitted Lien.
5.24. Year 2000 Compliance. The Company reasonably believes that all
--------------------
reprogramming required to permit the proper functioning, in and following the
year 2000, of the Company and its Subsidiaries' computer and management
information systems and the testing of all such systems and equipment, as so
reprogrammed, has been completed. The computer and management information
systems of the Company and its Subsidiaries are and, with ordinary course
upgrading and maintenance, can reasonably be expected to continue for the term
of this Agreement to be sufficient to permit the Company and its Subsidiaries to
conduct their respective businesses as conducted prior to January 1, 2000
without any material adverse effect on the Company and its Subsidiaries taken as
a whole.
5.25. Material Contracts. As of the Closing Date, Schedule 5.25
------------------ -------------
hereto sets forth each of the contracts, agreements and licenses which is a
Material Contract.
5.26. Recapitalization. Neither the Company nor, to the Company's
----------------
knowledge, any other party thereto is in default in the performance or
compliance with any material provisions of the Recapitalization Documents. The
Recapitalization Documents comply with, and on or prior to the Closing Date, the
Recapitalization has been consummated in accordance with, all applicable laws.
All requisite approvals by governmental authorities having jurisdiction over the
Company, any of its Subsidiaries and any other Person referenced therein, with
respect to the transactions contemplated by the Recapitalization Documents, have
been obtained on or before the Closing Date, and no such approvals impose or
will impose any conditions to the consummation of the transactions contemplated
by the Recapitalization Documents or to the conduct by the Company or any of it
Subsidiaries of its business thereafter.
SECTION 6. Affirmative Covenants. To induce the Purchasers to
---------------------
enter into this Agreement and purchase the Notes, the Company and each Guarantor
covenants and agrees as follows:
6.1. Payment of Principal, Premium and Interest. The Company will
------------------------------------------
duly and punctually pay the principal of (and premium if any) and interest on
the Notes in accor-
-37-
dance with the terms of the Notes and this Agreement. The Company must redeem
Notes on June 30, 2005 in accordance with Section 9.1 hereof and the terms of
the Notes. After May 16, 2005, the Company may not issue additional PIK Notes
and must pay all interest on the Notes in cash at the rate of 15% per annum,
payable quarterly in arrears.
6.2. Conduct of Business. The Company shall and shall cause each of
-------------------
its Subsidiaries to:
(a) duly observe and comply in all respects with all applicable
laws and requirements of any governmental authorities relative to its
corporate existence, rights and franchises, to the conduct of its business
and to its property and assets (including without limitation all
Environmental Laws and ERISA) other than any non-compliance which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect, and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the
proper conduct of its business;
(b) maintain its corporate existence (except as otherwise permitted
by Section 7.3) and remain qualified to conduct its business in all
jurisdictions in which the nature of its properties or business requires
such qualification, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect; and
(c) remain engaged in substantially the same fields of business as
those in which it is now engaged (and reasonable extensions or expansions
thereof), except that the Company or any of its Subsidiaries may cease to
conduct any business activity which its Board of Directors (or any
committee thereof) reasonably determines is no longer desirable in the
conduct of its business, provided that promptly after such cessation, the
--------
Company shall provide the Purchasers with written notice thereof.
6.3. Maintenance and Insurance. The Company shall, and shall cause
-------------------------
each of its Subsidiaries to, maintain its properties in good repair, working
order and condition (normal wear and tear excepted) as required for the conduct
of its business and from time to time the Company will make or cause to be made,
and cause each of its Subsidiaries to make or cause to be made, all necessary
and proper repairs, renewals, replacements, additions and improvements thereto
so that the business of the Company and its Subsidiaries may be properly and
advantageously conducted at all times in the manner and custom of companies in
the same or similar businesses and shall maintain or cause to be maintained (or
to be replaced as needed) all Leases as may be required for the conduct of the
Company's and each of its Subsidiaries' business. The Company shall and shall
cause each of its Subsidiaries to at all times maintain liability and casualty
insurance with financially sound and reputable insurers in such amounts as the
officers of the Company and such Subsidiary in the exercise of their reason-
-38-
able judgment deem to be adequate in the manner and custom of companies in the
same or similar businesses.
6.4. Taxes. The Company shall, and shall cause each of its
-----
Subsidiaries to, pay or cause to be paid all taxes, assessments or governmental
charges on or against it or its properties on or prior to the time when they
become due; provided that this covenant shall not apply to any tax, assessment
--------
or charge that is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established and are being
maintained in accordance with GAAP.
6.5. Maintenance of Books and Records. The Company shall, and shall
--------------------------------
cause each of its Subsidiaries to, keep adequate books and records of account,
in which true and complete entries will be made reflecting its business and
financial transactions in accordance with GAAP and applicable law.
6.6. Use of Proceeds. The proceeds of the Notes will be used by the
---------------
Company solely to provide funding for the Recapitalization and to pay the costs
and expenses incurred in connection therewith. No portion of any Notes shall be
used for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U or X of the Board of Governors of
the Federal Reserve System.
6.7. Pension Plans. With respect to any Plan, the benefits under
-------------
which are guaranteed, in whole or in part, by the PBGC or any governmental
authority succeeding to any or all of the functions of the PBGC, the Company
will, and will cause each of its Subsidiaries to, (i) fund each Plan as required
by the provisions of Section 412 of the Code; (ii) cause each Plan to pay all
benefits when due; and (iii) furnish the Purchasers (a) promptly with a copy of
any notice of each Plan's termination sent to the PBGC and (b) no later than the
date of submission to the Department of Labor or to the Internal Revenue
Service, as the case may be, a copy of any request for waiver from the funding
standards or extension of the amortization periods required by Section 412 of
the Code.
6.8. Fiscal Year. Each of the Company and its Subsidiaries shall
-----------
have a fiscal year ending on the last Friday in December of each year and shall
notify the Purchasers of any change in such fiscal year (whereupon the
Purchasers shall have the right to modify the timing of the financial covenants
hereunder accordingly in order to correspond to any such change in fiscal year).
6.9. Additional Guarantors. The Company will cause any newly
---------------------
organized or acquired Subsidiary of the Company (other than an Excluded Foreign
Subsidiary) as promptly as practicably and in any event with 30 days after the
organization or acquisition of such Subsidiary to become a party to this
Agreement as a Guarantor and to execute and deliver a Guarantee to each holder
of Notes.
-39-
6.10. Further Assurances. At any time and from time to time the
------------------
Company shall, and shall cause each of its Subsidiaries to, execute and deliver
such further instruments and take such further action as may reasonably be
requested by the Purchasers to effect the purposes of the Subordinated
Transaction Documents. Without limitation of the foregoing, upon receipt of an
affidavit of any holder as to the loss, theft, destruction or mutilation of any
Note, and, in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Note, the Company will issue, in lieu thereof, a
replacement Note in the same principal amount thereof and otherwise of like
tenor.
SECTION 7. Negative and Financial Covenants. To induce the Purchasers
--------------------------------
to enter into this Agreement and purchase the Notes, each of the Guarantors and
the Company warrants, covenants and agrees as follows:
7.1. Liens. The Company shall not, nor shall permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance, including the lien or
retained security title of a conditional vendor upon or with respect to any of
its property or assets ("Liens"), or assign or otherwise convey any right to
-----
receive income, including the sale or discount of Accounts Receivable with or
without recourse, except the following ("Permitted Liens"):
---------------
(a) Liens in favor of the Agent or the Lenders under the Bank Loan
Documents with respect to the Senior Debt;
(b) Liens existing on the date of this Agreement and disclosed in
Schedule 7.1 hereto securing Debt described therein, and Liens securing
------------
refinancings, extensions and renewals of any such Debt secured by such
Liens, provided that the principal amount of Debt so secured and the fees
--------
thereon is not increased or the maturity date thereof is not shortened
(except for reasonable and customary fees);
(c) Liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required to be paid in accordance with the provisions of Section 6.4;
(d) Landlords' and lessors' liens in respect of rent not in
default, or liens in respect of pledges or deposits under workmen's
compensation, unemployment insurance, social security laws, or similar
legislation (other than ERISA) or in connection with appeal and similar
bonds incidental to litigation; mechanics', laborers', carriers',
warehousemans', materialmen's and similar liens, if the obligations secured
by such liens are not then delinquent, or are either unfiled or no other
action has been taken to enforce the same; liens securing the performance
of surety bonds, appeal bonds, performance bond, bids, tenders, leases and
contracts (other than for the payment of money); and statutory obligations
incidental to the conduct of its business and that do not in the aggregate
materially impair the use thereof in the operation of its business;
-40-
(e) Judgment liens that shall not have been in existence for a period
longer than 30 days after the creation thereof or, if a stay of execution
shall have been obtained, for a period longer than 30 days after the
expiration of such stay;
(f) easements, rights of way, licenses, covenants, restrictions
(including zoning restrictions), minor defects or irregularities in title
and other similar charges or Liens relating to real property and not
interfering in a material way with the ordinary conduct of its business;
(g) Liens securing the purchase price of inventory and capital assets
(including rights of lessors under capital leases) and encumbrances created
by conditional sale or other title retention agreements, in each case to
the extent the Debt to which such Lien applies is permitted hereunder,
provided, however, that (A) each such Lien is given solely to secure the
-------- -------
purchase price of, or the lease obligations relating to, such property,
does not extend to any other property and is given at the time or within 30
days of the acquisition of the property, and (B) the Debt secured thereby
does not exceed the lesser of the cost of such property or its fair market
value at the time such security interest attaches, and in any event, such
Debt does not exceed $6,000,000 in the aggregate outstanding at any time;
(h) Liens securing Debt permitted by Section 7.2(k), so long as such
Liens are of the kind permitted by this Section 7.1 and cover only the real
or personal property acquired in such Permitted Acquisitions and not any
other property;
(i) leases or subleases granted to others not interfering with the
business of the Company or any of its Subsidiaries, provided that such
--------
leases are permitted under the Bank Loan Agreement;
(j) any interest of title of a lessor under, and Liens arising from
precautionary Uniform Commercial Code financing statements (or equivalent
filings, registrations or agreements in foreign jurisdictions) relating to
equipment leases permitted by this Agreement;
(k) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(l) Liens of a collection bank arising under Section 4-210 of the
Uniform Commercial Code on items in the course of collection;
(m) any exception included in a title insurance policy approved by the
Agent or the Lien of any Lease approved by the Agent; and
-41-
(n) discounts of Accounts Receivable payable to the Company or any
of its Subsidiaries not in excess of $30,000 in the aggregate in any fiscal
year of the Company.
7.2. Debt. Other than Permitted Debt (as defined below), the
----
Company will not, and will not cause or permit any of its Subsidiaries or any of
the Guarantors to, create, incur, assume or suffer to exist, any Debt; provided,
--------
however, that if no Default or Event of Default shall have occurred and be
-------
continuing at the time of or as a consequence of the incurrence of any such
Debt, the Company, its Subsidiaries and the Guarantors may incur Debt on and
after January 1, 2003, in each case, if on the date of incurrence of such Debt,
after giving pro forma effect to the incurrence thereof and the receipt and
application of the proceeds therefrom, the Total Interest Coverage Ratio for the
four most recent consecutive fiscal quarters for which financial statements
pursuant to Section 5.1(a) or (b) were most recently delivered to the Purchasers
would be greater than 2.75 to 1.0.
Notwithstanding the foregoing, the Company, its Subsidiaries and the
Guarantors may incur "Permitted Debt", as set forth in (a) through (m) below:
(a) the incurrence by the Company or any Guarantor of Debt under
the Bank Loan Documents; provided that the aggregate principal amount of
--------
Debt of the Company and the Guarantors outstanding under the Bank Loan
Documents after giving effect to such incurrence (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company thereunder) does not exceed $160,000,000, as
reduced by the scheduled amortization in accordance with the Bank Loan
Documents in effect as of the Closing Date;
(b) additional Debt in an aggregate principal amount not to exceed
$25,000,000, which Debt is incurred under the Bank Loan Documents (in
excess of the amount specified in (a) above);
(c) Debt existing on the date of this Agreement as set forth on
Schedule 7.2 hereto and renewals, refinancings and extensions thereof which
------------
do not have the effect of increasing the principal amount or amortization
thereof (other than to extend the same);
(d) the incurrence by the Company and the Guarantors of Debt
represented by the Notes (including any additional Notes issued in
accordance with the terms of the Notes in lieu of a portion of cash
interest payments) and the Guarantees and the guarantees under the Bank
Loan Documents and guarantees issued by the Company in the ordinary course
of business;
(e) Debt (including Capitalized Leases) secured by Liens permitted
by Sections 7.1(c) and (g);
-42-
(f) Debt of any Guarantor to the Company or to another Guarantor or
intercompany indebtedness expressly permitted hereunder;
(g) Contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary
course of business;
(h) Debt in respect of interest rate swap, cap, or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option contractors or similar agreements designed to
hedge against fluctuations in currency and interest rates incurred in the
ordinary course of business and consistent with prudent business practice;
(i) Debt in respect of the Retention Bonus Senior Note or the
Retention Bonus Subordinated Note incurred in the ordinary course of
business, provided that the aggregate principal amount of debt permitted by
--------
this clause (i) shall not exceed $3,000,000 at any one time outstanding;
(j) Guarantees by the Company or its Subsidiaries with respect to any
Debt of the Company or its Subsidiaries permitted by this Section 7.2 and
Section 7.4;
(k) Debt of any Subsidiary of the Company that existed at the time
such Person became a Subsidiary of the Company or Debt assumed by the
Company or any of its Subsidiaries in connection with any Permitted
Acquisition; provided that, in each case, such Debt (a) was not incurred in
--------
contemplation of such Permitted Acquisition or the transaction by which
such Person became a Subsidiary of the Company and (b) the aggregate
principal amount of such Debt outstanding at any time shall not exceed
$1,200,000 (including any extensions, renewals, refinancing or replacement
of such Debt, in any such case, without any increase in the principal
amount thereof);
(l) Debt issued to holders of Capital Stock that is required to be
repurchased by the Company pursuant to the Shareholders Agreement; provided
--------
that (i) such Debt is expressly subordinated to the Notes on terms
reasonably satisfactory to the Required Purchasers, (ii) no cash interest
or principal is payable until after the Notes are Fully Satisfied and (iii)
the maturity date of such Debt is at least May 16, 2009; and
(m) other unsecured Debt of the Company and its Subsidiaries (taken
as a whole) with an aggregate principal amount not to exceed $7,000,000 at
any time outstanding; provided, however, that both before and after the
-------- -------
incurrence thereof, no Default or Event of Default shall be continuing.
7.3. Merger; Consolidation; Sale or Lease of Assets; Acquisitions.
------------------------------------------------------------
The Company shall not, nor shall permit any of its Subsidiaries to, sell, lease
or otherwise dispose
-43-
of assets or properties (valued at the lower of cost or fair market value),
other than (a) sales of inventory in the ordinary course of business, (b)
Involuntary Dispositions resulting in Net Proceeds to the Company or the
Guarantors having an aggregate value (or in an aggregate amount, as applicable)
of less than $1,200,000 in any fiscal year of the Company, (c) sales, leases or
other dispositions of assets or properties not in the ordinary course of
business in an aggregate amount not to exceed $5,000,000 in any fiscal year of
the Company, (d) sales, leases and other dispositions of obsolete equipment or
other assets no longer used or useful in the business of the Company or any of
its Subsidiaries, (e) sales, leases or other disposition to the Company or any
of its Subsidiaries or any sale or disposition of assets or properties to an
Excluded Foreign Subsidiary having an aggregate value equal to or less than
$3,600,000 in any fiscal year of the Company, provided that the consideration
--------
received from such Excluded Foreign Subsidiary in respect of such sale or
disposition is equal to or greater than the lower of the cost of such asset or
property or the fair market value of such asset or property, (f) the ▇▇▇▇▇▇▇
Dispositions and (g) the sale of any asset by the Guarantors, the Company or any
of their Subsidiaries (other than an asset included in the preceding clauses
(a), (b), (c), (d), (e) or (f)) (an "Asset Sale") so long as (i) the purchase
----------
price paid to the Company or such Subsidiary or Guarantor for such asset shall
be no less than the fair market value of such asset at the time of such sale,
(ii) 80% of the purchase price for such asset shall be paid to the Company or
such Subsidiary or Guarantor solely in cash and (iii) the aggregate purchase
price paid to the Company and all of its Subsidiaries for such asset and all
other assets sold by the Company and its Subsidiaries (other than an asset
included in Section 7.3(a), (b), (c), (d), (e) or (f)) in any fiscal year
pursuant to this Section 7.3 shall not exceed $5,000,000; provided that in the
--------
case of sales of assets pursuant to this Section 7.3(g), the Company shall (iv)
apply the entire Net Proceeds from such sale within 190 days of receipt thereof
either: (x) to prepay any Senior Debt and, in the case of any Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (y) to make an investment in properties
and assets that replace the properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of the
Company and its Subsidiaries as existing on the Closing Date or in businesses
reasonably related or ancillary thereto, or (z) a combination of prepayment and
investment permitted by the foregoing clauses (iv)(x) and (iv)(y). On the 191st
day after receipt of proceeds of an Asset Sale, to the extent that Net Proceeds
relating to such Asset Sale in excess of those applied as set forth in clause
(iv)(x), (iv)(y) and (iii)(z) above exist (the "Net Proceeds Offer Trigger
--------------------------
Date"), such aggregate amount of excess Net Proceeds (a "Net Proceeds Offer
---- ------------------
Amount") shall be applied by the Company or such Subsidiary to make an offer to
------
purchase (the "Net Proceeds Offer") on a date not less than 30 nor more than 60
------------------
days following the applicable Net Proceeds Offer Trigger Date, from all Holders
on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
--- ----
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
-------- -------
the Company or any Subsidiary of the Company, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any
-44-
such non-cash consideration), then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Proceeds thereof shall
be applied in accordance with this Section 7.3(g). In addition, the Company
shall not, nor shall permit any of its Subsidiaries to, liquidate, merge or
consolidate into or with any other Person or enter into or undertake any plan or
agreement of liquidation, merger or consolidation with any other Person,
provided that if no Default or Event of Default has occurred and is continuing
--------
or would result from such transaction, (A) any wholly-owned Subsidiary of the
Company may merge or consolidate into or with (x) the Company if the Company is
the surviving company, or (y) any other wholly-owned Subsidiary of the Company
if the surviving person is a Guarantor, (B) the Company or any Subsidiary of the
Company may merge with any Person in connection with a Permitted Acquisition,
provided that the Person that is the surviving Person of such merger is or
--------
becomes a Guarantor and if such transaction involves the Company, the Company
shall be the surviving corporation, and (C) any Subsidiary of the Company may,
upon 15 days' prior written notice to the Purchasers, dissolve, liquidate or
wind up its affairs, provided that all assets and properties of any such
--------
Subsidiary shall, prior to (or as a result of) such dissolution, liquidation or
winding up, be transferred to the Company or a Guarantor into a Guarantor or as
otherwise permitted by this Agreement, provided that such dissolution,
--------
liquidation or winding up, as applicable, could not reasonably be expected to
have a Material Adverse Effect. The Company will not, nor will it permit any of
its Subsidiaries to, without the prior written consent of the Required
Purchasers, acquire all or substantially all of the assets (or a division) or
capital stock (or other equity) of any Person, except in connection with a
Permitted Acquisition.
7.4. Contingent Liabilities. The Company shall not, nor shall permit
----------------------
any of its Subsidiaries to, create, incur, assume or remain liable with respect
to any Guarantees other than the following:
(a) Guarantees in favor of the Purchasers, the holders of the Notes,
or the Agent and the Lenders under the Bank Loan Documents;
(b) Guarantees existing on the date of this Agreement and disclosed
on Schedule 7.4 hereto (including any renewals, refinancings and extensions
------------
thereof which do not have the effect of increasing the principal amount
thereof, or fees thereon (except for reasonable and customary fees);
(c) Guarantees resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business;
(d) Guarantees with respect to surety, performance and return-of-
money and other similar obligations incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money) not
exceeding in the aggregate at any time $600,000;
-45-
(e) Guarantees in respect of interest rate protection arrangements
required under the Bank Loan Agreement; and
(f) Guarantees of Debt permitted under Section 7.2.
7.5. Sale and Leaseback. The Company shall not, nor shall permit any
------------------
of its Subsidiaries to, enter into any arrangement, directly or indirectly,
whereby it shall sell or transfer any property owned by it in order to lease
such property or lease other property that the Company or any of its
Subsidiaries intends to use for substantially the same purpose as the property
being sold or transferred.
7.6. Funded Debt Ratio. The Company shall not at any time permit the
-----------------
Funded Debt Ratio of the Company and its Subsidiaries as at the last day of any
fiscal quarter in any fiscal period identified below to be greater than the
ratio specified below opposite such fiscal period:
Maximum
Four Consecutive Quarters Ending On Ratio
----------------------------------- -----
September 29, 2000 6.00 to 1
December 29, 2000 and March 30, 2001 5.75 to 1
June 29, 2001 and September 28, 2001 5.50 to 1
December 28, 2001 and March 29, 2002 5.25 to 1
June 28, 2002 and September 27, 2002 4.75 to 1
December 27, 2002, March 28, 2003,
June 27, 2003 and September 26, 2003 4.25 to 1
December 26, 2003, March 26, 2004,
June 25, 2004 and September 24, 2004 4.00 to 1
Any fiscal quarter ending on or after
December 31, 2004 3.50 to 1
7.7. Fixed Charge Coverage Ratio. The Company shall not permit the
---------------------------
Fixed Charge Coverage Ratio of the Company and its Subsidiaries for any four
fiscal quarter period commencing with the four fiscal quarters ending on June
30, 2001 and for the periods commencing on July 1, 2000 and ending on each of
September 29, 2000, December 29, 2000 and March 30, 2001, respectively, to be
less than 1.0 to 1.
-46-
7.8. Interest Coverage Ratio. The Company shall not permit the
-----------------------
Interest Coverage Ratio of the Company and its Subsidiaries for any fiscal
period identified below to be less than the ratio specified below opposite such
fiscal period:
Minimum
Period Ratio
------ -----
For the fiscal quarter ending on
September 29, 2000 1.25 to 1
For the two consecutive fiscal quarters ending on
December 29, 2000 1.35 to 1
For the three consecutive fiscal quarters ending
on March 30, 2001 1.35 to 1
For the four consecutive fiscal quarters ending
June 29, 2001 and September 28, 2001 1.35 to 1
For the four consecutive fiscal quarters ending
on or after December 28, 2001 through September
27, 2002 1.75 to 1
For the four consecutive fiscal quarters ending
on or after December 27, 2002 through September
24, 2004 2.00 to 1
For the four consecutive fiscal quarters ending
on or after December 31, 2004 through September
30, 2005 2.25 to 1
For any four consecutive fiscal quarters ending
on or after December 30, 2005 2.50 to 1
7.9. Restricted Payments. The Company shall not, nor shall it permit
-------------------
any of its Subsidiaries to, pay, make or declare any Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, (i) the Company and the Guarantors may make payments to Parthenon
under the Parthenon Management Agreement, provided that (x) the aggregate amount
--------
of all such payments in any year may not exceed $250,000, and (y) at the time
any such payment is proposed to be made, and after giving effect thereto, the
Special Payment Conditions have been met, (ii) the Company and the Guarantors
may consummate any of the transactions described on Schedule 7.9 hereto, and
------------
(iii) the Company and the Guarantors may consummate the repurchase, redemption
or other acquisi-
-47-
tion or retirement for value of any Equity Securities of the Company held by
officers, directors or employees of the Company or its Subsidiaries in an
aggregate cash amount not to exceed (x) $900,000 in any fiscal year of the
Company, and (y) $1,500,000 in the aggregate during the term of this Agreement.
Neither the Company nor any of its Subsidiaries will enter into any agreement,
contract or arrangement (other than the Transaction Documents) restricting the
ability of any Subsidiary of the Company to pay or make dividends or
distributions in cash or kind, to make loans, advances or other payments of any
nature or to make transfers or distributions of all or any part of its assets to
the Company or any of its Subsidiaries, other than to the extent set forth in
documents evidencing Liens permitted by Section 7.1(h) and customary anti-
assignment provisions in the Bank Loan Documents, Leases and other contracts,
agreements and licenses (other than Material Contracts) entered into by the
Company or any of its Subsidiaries.
7.10. Investments. The Company shall not, nor shall permit any of its
-----------
Subsidiaries to, make or maintain any Investments other than Qualified
Investments.
7.11. ERISA. Neither the Company nor any of its Subsidiaries shall
-----
permit any Plan maintained by it to (i) engage in any "prohibited transaction"
(as defined in Section 4975 of the Code, (ii) incur any "accumulated funding
deficiency" (as defined in Section 302 of ERISA) whether or not waived, or (iii)
terminate any Plan in a manner that could result in the imposition of a lien or
encumbrance on the assets of the Company or any of its Subsidiaries pursuant to
Section 4068 of ERISA, but only to the extent any of the foregoing could
reasonably be expected to result in a liability to the Company or any of its
Subsidiaries in excess of $1,200,000.
7.12. Transactions with Affiliates. The Company and the Guarantors
----------------------------
will not, and will not permit any of their Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any officer, director, employee or Affiliate
thereof on terms that are less favorable to the Company or such Subsidiary, as
the case may be, than those which might be obtained at the time of such
transaction from Persons who are not such Affiliates thereof (an "Affiliate
---------
Transaction"); provided, however, that the purchase, sale or lease to, or
----------- -------- -------
exchange of any property with, any such Affiliates shall not be deemed to be
prohibited by this Section 7.12 if: (i) with respect to any Affiliate
Transaction involving an aggregate fair market value in excess of $5,000,000 the
Company delivers to the holders of the Notes a written opinion of an independent
nationally recognized investment banking firm (or, in the case of a real estate
transaction, an independent nationally recognized real estate consulting firm)
stating that the transaction is fair to the Company from a financial point of
view; (ii) with respect to any Affiliate Transaction involving an aggregate fair
market value in excess of $2,500,000 the Company delivers to the holders of the
Notes a Board Resolution certifying that such Affiliate Transaction complies
with this Section 7.12 and is in the best interests of the Company or such
Subsidiary; (iii) with respect to any Affiliate Transaction
-48-
involving an aggregate fair market value in excess of $1,000,000 the Company
delivers to the holders of the Notes an Officers' Certificate stating that such
Affiliate Transaction complies with this Section 7.12 and is in the best
interests of the Company or such Subsidiary; (iv) such agreements or
transactions are contemplated, required or allowed by any Transaction Documents
as in effect on the date of this Agreement, provided that such agreements or
transactions are not otherwise prohibited by this Agreement or any of the Bank
Loan Documents; (v) such transactions are permitted by Sections 7.9 and 7.10
hereof; (vi) such agreements and transactions are among the Company and its
Subsidiaries (provided such agreements and transactions are not otherwise in
violation of any of the terms of this Agreement); and (vii) as disclosed on
Schedule 7.12 hereto.
-------------
7.13. Partnerships; New Subsidiaries. None of the Company, the
------------------------------
Guarantors or any of their Subsidiaries will become a general partner in any
general or limited partnership or joint venture (other than as expressly
permitted pursuant to Section 7.10).
7.14. Issuance of Stock. The Company will not permit any of its
-----------------
Subsidiaries to issue any additional Equity Securities except director's
qualifying Equity Securities and except the issuance of Equity Securities of a
Subsidiary of the Company to the Company or any Guarantor. In addition, the
Company may not issue any preferred stock which pays dividends in excess of 14%.
7.15. Future Debt Offerings. In the event that the Company or any of
---------------------
its Subsidiaries issues any debt securities (excluding any debt securities
permitted under clauses (b) through (m) of the definition of Permitted Debt)
having an aggregate principal amount in excess of $60,000,000 after the date
hereof in a private placement or public offering, the Company shall promptly use
the proceeds thereof to effect an optional redemption of the Notes pursuant to
Section 9.2 hereof out of the net proceeds of such issue and either (x) obtain
the consent of the Agent to such prepayment or (y) raise sufficient additional
proceeds to repay the Senior Debt under the Bank Loan Documents and made such
payment on such Senior Debt.
7.16. No Amendments to Certain Documents. The Company shall not, nor
----------------------------------
shall permit any of its Subsidiaries to, at any time cause or permit charter or
other incorporation documents or by-laws of the Company or any of its
Subsidiaries to be modified, amended or supplemented in any respect , except for
such supplement, modification or amendment which could not reasonably be
expected to have a Material Adverse Effect, without (in each case) the prior
written agreement, consent or approval of the Agent (if the Bank Loan Documents
are in effect) and the Required Purchasers.
7.17. Waiver of Stay, Extension or Usury Laws. The Company covenants
---------------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law that would prohibit
or forgive the Company from paying all or any
-49-
portion of the principal of or interest on the Notes (including any additional
Notes issued in accordance with the terms of the Notes in lieu of a portion of
cash interest payments) as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this Agreement.
SECTION 8. Events of Default; Remedies.
---------------------------
8.1. Events of Default. "Event of Default," whenever used herein,
----------------- ----------------
means any one of the following events (whatever the reason for such Event of
Default and whether such occurrence shall be voluntary or involuntary or come
about or be effected by operation of law or otherwise):
(a) default in the payment of any interest on any Note when it
becomes due and payable, and continuance of such default for a period of 5
Business Days, whether or not such payment is prohibited by Section 12; or
(b) default in the payment of the principal of (or premium, if any,
on) any Note at its Maturity, whether or not such payment is prohibited by
Section 12; or
(c) (i) a default of a covenant set forth in Section 7, (ii) a
default of a covenant set forth in Section 4.1, which default continues for
a period of 15 days, or (iii) a default in the performance of any covenant
in this Agreement (other than a covenant default in the performance of
which is elsewhere in this Section 8.1 specifically dealt with), which
default continues for a period of 30 days after the date upon which an
executive officer of the Company or any of its Subsidiaries becomes aware
thereof; or
(d) a default or defaults with respect to the payment of principal or
interest shall have occurred, and continuance of such default or defaults
for a period of 10 Business Days, in respect of any Debt (other than the
Notes) of the Company or any of its Subsidiaries under the Bank Loan
Agreement or under the terms of any other agreements, instruments or other
documents evidencing such Debt (or pursuant to which the same was issued);
or
(e) a default or defaults shall have occurred in respect of any Debt
(other than the Notes) of the Company or any of its Subsidiaries under the
Bank Loan Agreement or under the terms of any other agreements, instruments
or other documents evidencing such Debt (or pursuant to which the same was
issued) which has individually an outstanding principal amount in excess of
$6,000,000, and such default or defaults shall result in the maturity of
such Debt under the Bank Loan Agreement or such other agreement, instrument
or document being accelerated, whether by declaration or otherwise, on a
date prior to the date on which it would otherwise have become due and
payable or the Company or such Subsidiary shall then fail to pay principal
when due at the stated maturity (after giving effect to any applicable
grace periods and
-50-
extensions thereof) of any such Debt under the Bank Loan Agreement or such
other agreement, instrument or document; or
(f) final judgments or orders shall have been rendered against the
Company or any of its Subsidiaries which require the payment in money,
either individually or in an aggregate amount, that is in excess of
$6,000,000 (net of the proceeds from any insurance policy or indemnity
related thereto and any legal fees and expenses not reimbursed under said
insurance policies or indemnity) and there shall have been a period of 45
days during which (i) such amounts remained unpaid, unstayed, undischarged
or unwaived or (ii) such amounts were not covered by an insurance policy
from an insurer of recognized national standing or by a letter of credit or
bond issued by an institution of recognized national standing; or
(g) except as otherwise permitted hereunder, any of the Guarantees
shall cease for any reason to be in full force and effect, except for
Guarantees that were released or otherwise cease to be in full force and
effect in accordance with the terms hereof; or
(h) any representation or warranty made by the Company or any of the
Guarantors under this Agreement, the Notes, the Warrants, the Warrant
Agreement, the Shareholders Agreement shall prove to have been incorrect in
any material respect when made; or
(i) the Company or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Company or any of its Subsidiaries seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for
any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it) that is being
diligently contested by it in good faith, either such proceeding shall
remain undismissed or unstayed for a period of 75 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or the Company or any of its Subsidiaries shall take
any corporate action to authorize any of the actions set forth above in
this subsection (i).
8.2. Acceleration of Maturity; Rescission and Annulment. If an Event
--------------------------------------------------
of Default (other than an Event of Default specified in Section 8.1(i) occurs
and is continuing, then and in every such case the holders of not less than 51%
in aggregate principal amount of
-51-
the Notes outstanding may, subject to the provisions of Section 12, declare the
principal of, together with accrued interest on, all the Notes to be due and
payable immediately (to the extent not already so due and payable) and upon any
such declaration such principal of, together with interest accrued thereon,
notwithstanding anything in this Agreement to the contrary, shall become
immediately due and payable. If an Event of Default specified in Section 8.1(i)
occurs and is continuing, then the principal of, together with interest accrued
on, all the Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of any holder of the Notes.
Anything herein contained to the contrary notwithstanding, in the event of any
acceleration pursuant to this Section 8.2, the Company shall be obligated to pay
any premium which would have had to have been paid if the Notes had been
redeemed as required by the terms of this Agreement and the Notes in an amount
equal to the premium that would have been due if the Notes were so redeemed on
the date of such acceleration.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the holders of the Notes as hereinafter in this Section 8 provided, the holders
of at least a majority in principal amount of the Notes outstanding, by written
notice to the Company, may rescind and annul such declaration and its
consequences if
(a) there shall have been paid
(1) all overdue interest on all Notes,
(2) the principal of (and premium, if any, on) any Notes which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate stipulated by Section 8.3 and
(3) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate stipulated by Section 8.3;
and
(b) all Events of Default, other than the nonpayment of principal of
Notes (which have become due solely by such declaration of acceleration),
have been cured or waived as provided in Section 8.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the preceding provisions of this Section 8.2, in the
event of a declaration of acceleration in respect of the Notes because an Event
of Default specified in Section 8.1(e) has occurred and is continuing, such
declaration of acceleration shall be automatically annulled and rescinded if the
Debt under the Bank Loan Agreement that is the subject of such Event of Default
has been discharged or the other Debt that is the subject of such
-52-
Event of Default constitutes Senior Debt and has been discharged, or the holders
of such Debt under the Bank Loan Agreement or such other Debt (whether or not,
in the case of any such other Debt, the same constitutes Senior Debt) have
rescinded their declaration of acceleration in respect of such Debt under the
Bank Loan Agreement or such other Debt and written notice of such discharge or
rescission, as the case may be (and a copy of the advice or other instrument
whereby such discharge or rescission was accomplished), shall have been given to
the holders of the Notes by the Company within 15 days after such declaration of
acceleration in respect of the Notes, and no other Event of Default has occurred
during such 15-day period which has not been cured or waived during such period;
provided that, in all such cases, the holders of Notes have not commenced legal
--------
action against the Company or acted in reliance upon such acceleration prior to
the time such declaration of acceleration is annulled or rescinded.
Upon a determination by the Company that the Bank Loan Agreement is no
longer in effect or that no Debt of the Company or any Subsidiary is outstanding
under the Bank Loan Agreement, the Company shall promptly give to the holders of
the Notes written notice thereof, which notice shall be countersigned by the
Agent. Unless and until the holders of the Notes shall have received such
written notice with respect to the Bank Loan Agreement, the holders of the Notes
shall be entitled, and shall be required, in all respects to assume that the
Bank Loan Agreement is in effect.
8.3. Collection of Debt. The Company covenants that if:
------------------
(a) default is made in the payment of any interest on any Note when
such interest becomes due and payable and such default continues for a
period of 5 Business Days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Note at the Maturity thereof,
the Company will, subject to the provisions of Section 12, upon demand of the
holders of the Notes, pay to them in cash, the whole amount then due and payable
on such Notes for principal (and premium, if any) and interest, with interest
upon the overdue principal, if any (and premium, if any) and, to the extent that
payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate of the then applicable interest rate on
the Notes plus 2.00% per annum (the "Default Rate"); and, in addition thereto,
------------
such further amount as shall be sufficient to cover the reasonable costs and
expenses of collection. Subject to applicable law, any interest that shall
accrue on overdue interest on the Notes as provided in the preceding sentence
that shall not have been paid in full on or before the next Interest Payment
Date to occur after the Interest Payment Date on which the overdue interest
became due and payable shall itself be deemed to be overdue interest on this
Note to which the preceding sentence shall apply. Prior to May 16, 2005, the
additional 2.00% of interest included in the Default Rate may be paid by the
Company, at its option (which option must be exercised un-
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less the Company delivers to the Purchasers the written consent of the Agent to
the payment thereof in cash), by its issuing to each such holder of record
additional Notes in an aggregate principal amount equal to the amount of such
additional interest due to such holder on the applicable Interest Payment Date
in lieu of cash.
SECTION 9. Redemption of Securities.
------------------------
9.1. Mandatory Redemption. Subject to Section 12, on June 30, 2005,
--------------------
the Company shall redeem a principal amount of Notes outstanding on such date
equal to the AHYDO Amount on a pro rata basis at a redemption price of 100% of
the principal amount of the Notes so redeemed. The "AHYDO Amount" equals the
------------
amount such that the Notes will not be "applicable high yield discount
obligations" within the meaning of Section 163(i)(1) of the Code. The
Purchasers, the Company and Guarantors estimate such amount to be approximately
$11,631,604.34. On and after May 16, 2005, the Company, in accordance with the
terms of the Notes and this Agreement, may not issue additional PIK Notes and
shall pay all interest on the Notes in cash at the rate of 15% per annum,
payable quarterly in arrears.
9.2. Optional Redemption. The Notes may be redeemed at the option of
-------------------
the Company at any time as a whole, or from time to time in part, at the
redemption prices (expressed as percentages of principal amount redeemed) set
forth below, plus accrued and unpaid interest (if any) to the date of
redemption, if redeemed during periods set forth below:
Redemption
Period Price
------ -----
May 17, 2000 through May 16, 2001 104.000%
May 17, 2001 through May 16, 2002 103.000%
May 17, 2002 through May 16, 2003 102.000%
May 17, 2003 and thereafter 100.000%
9.3. Notice of Redemption. (a) The Company shall give the holder of
--------------------
each Note irrevocable written notice of any redemption pursuant to Section 9.1
or 9.2 not less than 30 days nor more than 60 days prior to the date specified
for such redemption, specifying such date and the principal amount of the Notes
held by such holder to be redeemed on such date and stating which section of
this Agreement the redemption is to be made pursuant to. Concurrently with such
notice, the Company must send to the Note holders a letter from the Agent
consenting to such redemption or a letter stating that no such consent is
necessary and if such letter is not received and has not been given, the
redemption notice shall not be effective and no such redemption shall be made.
Notice of redemption having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with accrued and unpaid interest (if
any) thereon to the redemption date with respect thereto, shall become due and
payable on such redemption date.
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(b) Deposit of Funds and Termination of Rights. In connection with
------------------------------------------
any redemption under this Section 9.3, upon one day's notice to the holder of
Notes affected thereby, the Company may deposit for the benefit of the holders
of any or all of the Notes the funds necessary to redeem such Notes in
accordance with Section 9.1 or 9.2 with a bank or trust company in the Borough
of Manhattan, the City of New York, having a capital and surplus of at least
$100,000,000; provided that the Company shall have complied with the requirement
--------
of delivering a letter from the Agent at the time required under Section 9.3(a).
Any moneys so deposited by the Company and unclaimed at the end of two years
from the date designated for the redemption of such Note shall revert to the
general funds of the Company or as otherwise required by law. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Company such unclaimed amounts and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof and any holder of Notes shall
look only to the Company for the payment of the redemption price. Any interest
accrued on funds deposited pursuant to this Section 9.3(b) shall be paid from
time to time to the Company for its own account. The notices required under
this Section 9.3, having been given as aforesaid, upon the payment of, or
deposit of, funds, as applicable, pursuant to this Section 9.3(b) in respect of
the Notes to be redeemed, notwithstanding that any such Notes themselves shall
not have been surrendered for cancellation, from and after the date scheduled
for the redemption of the Notes (i) the Notes shall no longer be deemed
outstanding, (ii) the rights to receive interest thereon shall cease to accrue
and (iii) all rights of the holders of the Notes shall cease and terminate,
excepting only the right to receive the redemption price therefor; provided,
however, that if the Company shall default in the payment of the redemption
price therefor, the Notes shall thereafter be deemed to be outstanding and the
holders thereof shall have all of the rights of a holder of Notes until such
time as such default shall no longer be continuing or shall have been waived by
holders of 51% of the aggregate principal of all outstanding Notes.
9.4. Change in Control. Subject to Section 12 hereof, in the event of
-----------------
a Change in Control , holders of Notes shall have the right, at their option, to
require the Company to purchase all or any portion of the Notes on the date (the
"Change in Control Payment Date") which is thirty Business Days after the date
------------------------------
the Change in Control Notice (as defined below) is required to be mailed (or
such later date as is required by applicable law) at 101% of the principal
amount thereof, plus accrued and unpaid interest (if any) to the Change in
Control Payment Date.
The Company shall send all holders of the Notes, within ten days after
the occurrence of any Change in Control, a notice of the occurrence of such
Change in Control (the "Change in Control Notice").
------------------------
Each Change in Control Notice shall state:
(1) the Change in Control Payment Date;
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(2) the date by which the right to have Notes purchased must be
exercised;
(3) that such right is conditioned on receipt of notice from the
holders;
(4) a description of the procedure which the holders of Notes must
follow to exercise the right to have Notes purchased;
(5) that the purchase is being made pursuant to this Section 9.4;
(6) that any Note not tendered will continue to accrue interest if
interest is then accruing; and
(7) that, unless the Company defaults in making payment therefor, any
Note accepted for purchase shall cease to accrue interest after the Change
in Control Payment Date.
No failure of the Company to give the foregoing notice shall limit any
holder's right to exercise a right to have Notes purchased.
In the event that holders of 75% or more of the outstanding principal
amount of the Notes require the Company to purchase their Notes pursuant to this
Section 9.4, the remaining outstanding Notes will be redeemable, in whole but
not in part, at the option of the Company upon not less than 30 nor more than 60
days prior notice to each holder of remaining outstanding Notes, at a redemption
price equal to 101% of the principal amount thereof plus accrued interest to the
date of purchase.
9.5. Notes Redeemed in Part. Any Note which is to be redeemed only in
----------------------
part pursuant to Sections 9.1, 9.2 or 9.4 shall be surrendered at the office of
the Company and the Company shall execute, and deliver to the holder of such
Note without service charge, a new Note or Notes, of any authorized denomination
as requested by such holder in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so surrendered.
SECTION 10. Representations and Covenants of the Purchasers.
-----------------------------------------------
(a) Each Purchaser (as to itself only) understands and acknowledges
to the Company that:
(i) the offering and sale of the Securities is intended to be exempt
from registration under the Securities Act by virtue of the provisions of
Section 4(2) of the Securities Act; and
-56-
(ii) there is no existing public or other market for the Securities
and there can be no assurance that any Purchaser will be able to sell or
dispose of the Securities.
(b) Each Purchaser (as to itself only) represents and warrants to
the Company that:
(i) the Securities to be acquired by it pursuant to this Agreement
are being acquired for its own account, not as a nominee or agent for any
other Person and without any interest therein in violation of the
Securities Act, without prejudice, however, to each Purchaser's right at
all times to sell or otherwise dispose of all or any part of such
Securities under an effective registration statement under the Securities
Act or under an exemption from such registration available under the
Securities Act (including, without limitation, Rule 144A promulgated
thereunder);
(ii) such Purchaser is an "Accredited Investor" as such term is
defined in Regulation D under the Securities Act and has such knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Securities, and
such Purchaser is capable of bearing the economic risks of such investment
and is able to bear a complete loss of its investment in the Securities;
(iii) such Purchaser has been provided, to its satisfaction, the
opportunity to ask questions concerning the terms and conditions of the
offering and sale of the Securities, has had all such questions answered to
its satisfaction and has been supplied all additional information deemed
necessary by it to verify the accuracy of the information furnished to it;
(iv) such Purchaser is duly organized and validly existing under
the laws of the jurisdiction of its organization;
(v) such Purchaser has the power and authority to own and operate
its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is currently proposed to be,
engaged; and
(vi) each of the Transaction Documents to which such Purchaser is a
party has been or will be duly executed and delivered by such Purchaser,
and constitutes or will constitute the legal, valid and binding obligation
of such Purchaser enforceable against it in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
(c) Each Purchaser (as to itself only) further represents that the
execution, delivery, and performance of the Transaction Documents to which such
Purchaser is a party
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and the consummation of the transactions contemplated thereby are (i) within
such Purchaser's powers (corporate or otherwise) and authority and have been
duly authorized by all requisite action (corporate or otherwise), (ii) do not
violate its charter, by-laws or any law, judgment, order, decree or regulation
to which it is subject or any material contract, instrument or agreement binding
on such Purchaser and (iii) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any governmental
authority or any other Person, other than those that have been obtained or made
on or prior to the Closing Date.
(d) Each Purchaser acknowledges that the Securities have not been
registered under the Securities Act and understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or such sale is permitted pursuant to an available exemption from such
registration requirement.
Each Purchaser agrees to the imprinting, so long as required by law
or, with respect to the legend regarding subordination, as requested by the
Agent, of a legend on certificates and/or Notes, as applicable, representing the
Securities issued pursuant to the Transaction Documents to read substantially as
follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER
THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇, (▇) ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE OR TRANSFER AGENT A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM
-58-
OF WHICH LETTER CAN BE OBTAINED FROM THE COMPANY), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF AVAILABLE) OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR OTHER EXEMPTION FROM REGISTRATION AND (3) AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN CONNECTION WITH
ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR OR SUCH TRANSFER IS MADE IN
ACCORDANCE WITH CLAUSES (D) OR (E) ABOVE, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS, AND SUCH OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
FOR PURPOSES OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT.THE HOLDER OF THIS NOTE MAY REQUEST THE INFORMATION
DESCRIBED IN UNITED STATES TREASURY REGULATION SECTION 1.1275-
3(b)(1)(i) FROM THE CHIEF FINANCIAL OFFICER, WILMAR INDUSTRIES,
INC., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
THIS NOTE IS SUBJECT TO THE TERMS OF A PURCHASE AGREEMENT
(INCLUDING THE SUBORDINATION TERMS CONTAINED IN SECTION 12
THEREOF), DATED AS OF MAY 16, 2000 BY AND BETWEEN WILMAR
INDUSTRIES, INC., THE GUARANTORS LISTED THEREIN AND THE
PURCHASERS LISTED THEREIN (AS AMENDED OR OTHERWISE MODIFIED, THE
"PURCHASE AGREEMENT") TO WHICH REFERENCE IS MADE FOR THE TERMS
AND PROVISIONS GOVERNING THIS NOTE.
-59-
SECTION 11. Guarantees; Execution and Delivery.
----------------------------------
11.1. Guarantees. Each Guarantor jointly and severally guarantees to
----------
each holder of a Note the due and punctual payment of the principal of (and
premium, if any) and interest on such Note, interest on the overdue principal
(and premium, if any) and fees and expenses and all other amounts due in
connection with such Note, when and as the same shall become due and payable,
whether at the Stated Maturity, by declaration of acceleration or otherwise in
accordance with the terms of such Note and of this Agreement. In the case of
the failure of the Company punctually to make any such payment of principal (or
premium, if any) or interest, the Guarantors hereby jointly and severally agree
to cause any such payment to be made punctually when and as the same shall
become due and payable, whether at the Stated Maturity or by declaration of
acceleration, or are required to be redeemed pursuant to Section 9 or otherwise,
and as if such payment were made by the Company.
The Guarantees of each Guarantor are, to the extent and in the manner
set forth in Section 12, subordinate and junior in right of payment to the prior
payment in full in cash of all Senior Debt of such Guarantor. The obligations
of each Guarantor are limited to the maximum amount which, after giving effect
to all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee, will result in the obligations of such Guarantor under its Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law.
Each Guarantor hereby agrees that to the extent that a Guarantor shall
have paid more than its proportionate share (as determined by the net worth of
such Guarantor as compared to the net worth of such Guarantor and all other
Guarantors in the aggregate, the value of such net worth to be determined as the
greater of such Guarantor's net worth on the date hereof or the date on which a
payment is required pursuant to this paragraph or pursuant to the Guarantee) of
any payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 12. The provisions of
this Section 11 shall in no respect limit the obligations and liabilities of any
Guarantor to any holder of the Notes, and each Guarantor shall remain liable to
any holder of the Notes for the full amount guaranteed by such Guarantor
hereunder.
Except for notice and other formalities specifically required
hereunder or under the Notes, each Guarantor waives (to the extent permitted by
applicable law) notice of acceptance of the Guarantees, of any action taken or
omitted in reliance thereon or of any default in the payment of any such sums or
in the performance of any covenants and agreements of the Company and the
Guarantors contained in this Agreement or in any Notes and any presentment,
demand, protest or notice of any kind. Each Guarantor hereby agrees that the
execution
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and delivery of each Guarantee executed and delivered by such Guarantor shall be
conclusive evidence against such Guarantor that such Guarantee is absolute.
Each Guarantor hereby agrees that its obligations under the Guarantees
constitute a present and continuing guarantee of payment and not of
collectibility, and shall be absolute, and to the extent permitted by applicable
law, such obligations shall not be subject to any counterclaim, setoff,
deduction or defense based upon claim any Guarantor may have against the
Company, any holder of Notes or any other Person, and shall remain in full force
and effect without regard to, and shall not be released, discharged or in any
way affected or impaired by any thing, event, happening, matter, circumstance or
condition whatsoever (whether or not such Guarantor shall have any knowledge or
notice thereof or consent thereto), including, without limitation: (a) any
amendment or modification of or supplement to any provision of this Agreement or
any of the Notes, or any assignment or transfer thereof in accordance with the
terms hereof and of the Notes, including, without limitation, any renewal or
extension of the terms of payment of any of the Notes or the granting of time in
respect of any payment thereof, or any furnishing or acceptance of security or
any release of any security so furnished or accepted for any of the Notes; (b)
any waiver, consent, extension, granting of time, forbearance, indulgence or
other action or inaction under or in respect of the Guarantees, this Agreement
or any of the Notes, or any exercise or nonexercise of any right, remedy or
power in respect hereof or thereof; (c) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceedings with respect to the Company, or any other Person or the properties
or creditors of any of them; (d) the occurrence of any Event of Default under,
or any invalidity or any unenforceability of, or any misrepresentation,
irregularity or other defect in, this Agreement or any of the Notes or any other
agreement; (e) or any transfer of any assets to or from the Company, including,
without limitation, any transfer or purported transfer to the Company from any
Person, any invalidity, illegality of, or inability to enforce, any such
transfer or purported transfer, any consolidation or merger of the Company with
or into any other corporation or entity, or any change whatsoever in the
objects, capital structure, constitution or business of the Company; (f) any
failure on the part of the Company or any Person to perform or comply with any
term of the Notes, this Agreement or any other agreement; (g) any suit or other
action brought by any stockholders or creditors of, or by, the Company or any
other Person for any reason whatsoever, including, without limitation, any suit
or action in any way attacking or involving any issue, manner or thing in
respect of any of the Guarantees, the Notes, this Agreement or any other
agreement; (h) any lack or limitation of status or of power, incapacity or
disability of the Company or of any director or agent of any of them; or (i) any
other thing, event, happening, matter, circumstance or condition whatsoever, not
in any way limited to the foregoing,
The Guarantors hereby agree that if they shall make any payment in
respect of any Note, they shall, to the extent permitted by applicable law, be
subrogated to the rights of the holder of such Note in respect of which such
payment was made (but shall not for any purpose be deemed a holder of any Note);
provided, however, that such rights of subrogation
-------- -------
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and all indebtedness and claims arising therefrom shall be, and each Guarantor
agrees that it is, and shall at all times be, in all respects subordinate and
junior to the prior payment in full, in cash, of all indebtedness evidenced by
the Notes in respect of which payment was not made. Each Guarantor agrees that
the foregoing right of subrogation shall not be effective until, and that it
shall not be entitled to receive any payment, under any condition, in respect of
any such subrogated claim unless and until, all Notes and all other amounts
which may become due, or are stated in such Guarantor's Guarantees to become
due, shall have been Fully Satisfied.
Each Guarantor waives any right it may have to (a) require the holder
of any Note to proceed against the Company or against any other party; (b)
exercise any right or remedy arising by reason of any performance by it of any
Guarantee, whether by subrogation or otherwise, against the Company or any other
Guarantor; or (c) to require the Company to pursue any remedy within its power.
Each Guarantor agrees that the Guarantees shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of the Company or any Guarantor is rescinded or must be otherwise restored by
any holder of a Note, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise.
Without limiting the generality of the Guarantees, if an Event of
Default shall have occurred and be continuing and the holders of Notes (or
permitted assignees thereof) are prevented by applicable law from exercising
their remedies (or any of them) under Section 8 of this Agreement, the holders
of Notes (or permitted assignees thereof) shall be entitled to receive hereunder
from each Guarantor, upon demand therefor, the sums which would have otherwise
been due had such remedies been exercised.
Each Guarantor shall pay each holder of Notes such further amounts as
shall be sufficient to cover the reasonable cost and expense of collecting any
sums under the Guarantees, or of otherwise enforcing the Guarantees, including,
in any case, reasonable compensation to its attorneys for all reasonable
services rendered in that connection.
11.2. Execution and Delivery. To further evidence and confirm its
----------------------
Guarantees provided in Section 11.1, the Guarantors hereby agree to execute the
Guarantees, substantially in the form set forth in Exhibit A-2 hereto, to be
endorsed on each Note from time to time issued by the Company. Each such
Guarantee shall be executed on behalf of each Guarantor by its Chairman of the
Board, Deputy Chairman of the Board, President or one of its Vice Presidents or
its Treasurer.
Guarantees bearing the manual or facsimile signatures of Persons who
were at any time the proper officers of a Guarantor shall bind such Guarantor,
notwithstanding that such Persons or any of them have ceased to hold such
offices prior to the authentication and
-62-
delivery of the Notes upon which such Guarantees are endorsed or did not hold
such offices at the date of such Notes.
11.3. Termination. The Guarantees made hereunder shall terminate
-----------
when all Notes are Fully Satisfied. This Agreement shall become effective as to
any Guarantor when a counterpart hereof executed on behalf of such Guarantor
shall have been delivered to the Purchasers and thereafter shall be binding upon
such Guarantor and the Purchasers and their respective successors and assigns,
and shall inure to the benefit of such Guarantor and the Purchasers, and their
respective successors and permitted assigns. This Agreement shall be construed
as a separate agreement with respect to each Guarantor and may be amended,
modified, supplemented, waived or released with respect to any Guarantor without
the approval of any other Guarantor and without affecting the obligations of any
other Guarantor. The Purchasers and any holder of the Notes agrees upon request
of the Company that it will, release any Guarantor from its obligations
hereunder in the event that all the capital stock of such Guarantor shall be
sold, transferred or otherwise disposed of to a person that is not an Affiliate
of the Company in a transaction permitted by Section 7.3 hereof.
SECTION 12. Subordination of Notes and Guarantees.
-------------------------------------
12.1. Notes and Guarantees Subordinate to Senior Debt. The Company
-----------------------------------------------
and each Guarantor for itself and their respective successors and assigns,
covenants and agrees, and each holder of a Note, by his acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Section 12 notwithstanding anything contained in this
Agreement to the contrary, the Debt represented by the Notes and the Guarantees
and the payment of the principal of and premium, if any, and interest on each
and all of the Notes, and any payment on account of the purchase, redemption or
other acquisition of the Notes, and the payment on or in respect of the
Guarantees are hereby expressly made subordinate and subject in right of payment
to the prior payment in full in cash of all Senior Debt of the Company and each
Guarantor. In addition, all rights to receive payments under Section 13 of the
Warrant Agreement (including any put or call right) are subordinate and subject
in right of payment to the prior payment in full in cash of all Senior Debt of
the Company and each Guarantor. As used in this Section 12, the term
"Obligation" or "Obligations" means obligations of the Company and the
Guarantors under or with respect to the Notes, the Guarantees, this Agreement,
the Warrants and the Warrant Agreement, respectively. Any payments required to
be paid over to the holders of the Senior Debt under this Section 12 will first
be paid to the Agent until all of the Obligations under (and as the defined in)
the Bank Loan Documents have been Fully Satisfied (as defined in the Bank Loan
Documents).
12.2. Payment Over of Proceeds upon Dissolution, Etc. In the event
----------------------------------------------
of (a) any insolvency or bankruptcy case or proceeding, or any receivership,
total liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company, any of the Guarantors or to their
creditors, as such, or to their assets, or (b) any liq-
-63-
uidation, dissolution or other winding up of the Company or any of the
Guarantors, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company or any of the
Guarantors, or (d) any other event described in Section 8.1(i) occurs with
respect to the Company or any of the Guarantors, then and in any such event:
(1) the holders of Senior Debt of the Company or such Guarantor shall
be entitled to receive payment in full in cash of all amounts due or to
become due on or in respect of all Senior Debt of the Company or such
Guarantor before the holders of the Obligations of the Company or such
Guarantor are entitled to receive any direct or indirect payment on account
of principal of (or premium, if any) or interest on, or any other amount
payable by the Company or such Guarantor under or in connection with, such
Obligations on acceleration or otherwise or on account of the purchase or
redemption or other acquisition of Obligations; and
(2) any payment or distribution of assets of the Company or any
Guarantor of any kind or character, whether in cash, property or
securities, by set-off or otherwise, to which the holders of the
Obligations would be entitled but for the provisions of this Section 12.2,
including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other Debt of the Company or
any Guarantor being subordinated to the payment of their Obligations
(except, so long as the effect of this parenthetical clause is not to cause
any Obligations to be treated in any case or proceeding or similar event
described in Subsection (a), (b) or (c) of this Section 12.2 as part of the
same class of claims as the Senior Debt of the Company or such Guarantor or
any class of claims on a parity with or senior to the Senior Debt of the
Company or such Guarantor, for any such payment or distribution of equity
securities or debt securities which (a) are subordinate, to at least the
same extent as the Obligations, to the payment of all Senior Debt of the
Company or such Guarantor then outstanding, (b) are unsecured, and (c) have
an average life to stated maturity and a final maturity that is no shorter
than the average life to stated maturity or the final maturity, as the case
may be, of the Notes, (any such payment or distribution being hereinafter
called a "Junior Payment")) shall be paid by the liquidating trustee or
--------------
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Debt of the Company or such Guarantor or
their representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Debt of the Company or such Guarantor may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the
principal of, and premium, if any, and interest on, and other amounts due
under or in connection with, the Senior Debt of the Company or such
Guarantor held or represented by each, to the extent necessary to make
payment in full in cash of all Senior Debt of the Com-
-64-
pany or such Guarantor remaining unpaid, after giving effect to any
concurrent payment in cash to the holders of such Senior Debt; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 12.2, the holder of any Obligations shall have received any
such payment or distribution of assets of the Company or Guarantor of any
kind or character, whether in cash, property or securities, other than any
such Junior Payment, before all Senior Debt of the Company or such
Guarantor is paid in full in cash, then and in such event such payment or
distribution shall be segregated and held in trust for the benefit of, and
forthwith paid over to, the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company or such Guarantor for application to
the payment of all Senior Debt remaining unpaid, to the extent necessary to
pay all Senior Debt of the Company or such Guarantor in full in cash after
giving effect to any concurrent payment in cash to or for the holders of
Senior Debt of the Company or such Guarantor.
The consolidation of the Company or any Guarantor with, or the merger
of the Company or any Guarantor into, another corporation or the liquidation or
dissolution of the Company or any Guarantor following the conveyance, transfer
or lease of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Section 7.3 and in compliance
with the Bank Loan Agreement shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company or such Guarantor for the
purposes of this Section 12.2 if the corporation formed by such consolidation or
into which the Company or such Guarantor is merged or the Person which acquires
by conveyance, transfer or lease such properties and assets substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions set forth in said
Section 7.3 and in compliance with the Bank Loan Agreement.
12.3. No Payment When Senior Debt in Default. (a) (i) In the event
--------------------------------------
of and during the continuation of any event of default in respect of the payment
of principal of (or premium, if any) or interest on, or any other amount due
under or in connection with, any Senior Debt of the Company or any Guarantor
beyond any applicable grace period with respect thereto, or (ii) in the event
that any other event of default with respect to any Senior Debt of the Company
or any Guarantor shall have occurred and be continuing and shall have resulted
in such Senior Debt becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, whether pursuant to the
terms thereof, on acceleration or otherwise, or (b) in the event that any event
of default (other than an event of default described in clause (a)) with respect
to any Senior Debt of the Company or any Guarantor shall have occurred and be
continuing which event of default permits the holders of such Senior Debt to
immediately declare such Senior Debt due and payable prior to the date on which
it would otherwise have become due and payable, then no direct or indirect
-65-
payment (other than any Junior Payment) shall be made by the Company or such
Guarantor on account of the principal of (or premium, if any) or interest on, or
any other amount due under or in connection with, the Obligations or on account
of the purchase or redemption or other acquisition of Obligations (x) in case of
any event of default described in subclause (i) of clause (a) or any event of
default resulting in any acceleration described in subclause (ii) of clause (a),
unless and until such event of default described in subclause (i) of clause (a)
shall have been cured (with such cure accepted in writing by the Agent) or
waived in writing or such acceleration described in subclause (ii) of clause (a)
shall have been rescinded in writing or, in either case, the holders of such
Senior Debt of the Company, the Guarantors or their agents (or a trustee on
behalf of such holders) have waived the benefits of this Section 12.3 in
writing, or (y) in case of any event of default specified in clause (b), from
the date the Company or such Guarantor receives written notice of such event of
default from the Agent or any other representative of a holder of Senior Debt
and a notice from the Agent or any other representative of a holder of Senior
Debt which states that it has elected to exercise its payment blockage right
under this Section 12.3 until the earlier of (1) 180 days after such date, and
(2) the date, if any, on which the Senior Debt of the Company or such Guarantor
to which such event of default relates is discharged or such event of default is
waived in writing by the holders of such Senior Debt or otherwise cured (with
such cure accepted in writing by the Agent) (in each case under clauses (a) and
(b) above, a "Payment Blockage Period"); provided, however, that (1) in no event
-------- -------
shall any such blockage of payment on the Notes or Guarantees on account of any
event of default described in clause (b) continue for more than 180 days in the
aggregate in any 360 day consecutive period and (2) further written notice
relating to the same event of default specified in clause (b) above with respect
to any Senior Debt shall not be effective for purposes of this clause (y) unless
such event of default has been cured or waived for a period of not less than 60
consecutive days. In any event, notwithstanding the foregoing, there shall be a
period of at least 180 days during each 360 day period when no Payment Blockage
Period under clause (b) above is in effect.
In the event that, notwithstanding the foregoing, the Company or the
Guarantor, as the case may be, shall make any payment to the holder of any
Obligation or any such holder shall otherwise receive any payment or collection
prohibited by the foregoing provisions of this Section 12.3, then and in such
event the holder of the Obligations who receives the payment or collection shall
hold it in trust for the holders of the Senior Debt and such payment or
collection shall be paid over and delivered forthwith to the Agent.
The provisions of this Section 12.3 shall not apply to any payment
with respect to which Section 12.2 would be applicable.
12.4. Payment Permitted if No Default. Nothing contained in this
-------------------------------
Section 12 or elsewhere in this Agreement or in any of the Obligations shall
prevent the Company or any of the Guarantors, at any time except during the
pendency of any insolvency or bankruptcy case or proceeding, or any
receivership, total liquidation, reorganization or other similar case
-66-
or proceeding in connection therewith, or any liquidation, dissolution or other
winding up of the Company or any of the Guarantors, assignment for the benefit
of creditors or other marshaling of assets and liabilities of the Company or any
of the Guarantors referred to in Section 12.2 or under the conditions described
in Section 12.3(a) or during any Payment Blockage Period under Section 12.3(b),
from making payments at any time of principal of (and premium, if any) or
interest on the Obligations or any other amount payable by the Company or such
Guarantor under or in connection with the Obligations.
The failure to make a payment on account of Obligations by reason of
any provision of this Section 12 shall not prevent the occurrence of an Event of
Default under Section 8.
12.5. Subrogation to Rights of Holders of Senior Debt. Subject to
-----------------------------------------------
the payment in full in cash of all Senior Debt of the Company and the Guarantors
and termination of the Bank Loan Documents, the holders of the Obligations of
the Company and the Guarantors shall be subrogated (equally and ratably with the
holders of all Debt of the Company and the Guarantors which by its express terms
is subordinated to Senior Debt of the Company or the Guarantors to the same
extent as Obligations of the Company or the Guarantors are subordinated and
which is entitled to like rights of subrogation) to the rights of the holders of
such Senior Debt to receive payments and distributions of cash, property and
securities applicable to the Senior Debt of the Company and the Guarantors until
the principal of (and premium, if any) and interest on the Obligations shall be
paid in full in cash. For purposes of such subrogation, no payments or
distributions to the holders of Senior Debt of the Company and the Guarantors of
any cash, property or securities to which the holders of such Obligations would
be entitled except for the provisions of this Section 12, and no payments
pursuant to the provisions of this Section 12 over to the holders of Senior Debt
by holders of such Obligations, shall, as among the Company and the Guarantors,
their creditors other than holders of Senior Debt of the Company and the
Guarantors and the holders of such Obligations, be deemed to be a payment or
distribution by the Company and the Guarantors to or on account of the Senior
Debt.
12.6. Acceleration of Payment of Notes and Exercise of Remedies.
---------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement, until the
Senior Debt shall have been paid in full in cash and the Bank Loan Documents
have been terminated, in the event that during the continuance of an Event of
Default described in Section 8, all or any portion of the unpaid principal
amount of the Notes shall (or would be permitted to) have been declared due and
payable pursuant to the provisions of Section 8.2, such declaration shall not be
effective, and the Purchasers shall not otherwise take any enforcement action or
exercise remedies, until the earlier of (i) the date on which an Event of
Default under Section 8.1(i) with respect to the Company has occurred, (ii) the
date on which the maturity of any Senior Debt under the Bank Loan Documents is
accelerated, (iii) the date on which any suit, action or proceeding is brought
to (A) enforce payment of or to collect the whole or any part of the
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Senior Debt, (B) judicially enforce any of the rights and remedies available to
the holders of Senior Debt with respect to the Senior Debt or any collateral
securing the Senior Debt or (C) to realize upon any of the collateral securing
the Senior Debt, or (iv) 15 Business Days after the date that written notice of
such declaration has been given to the holders of Senior Debt at Fleet National
Bank, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Director, facsimile number (▇▇▇) ▇▇▇-▇▇▇▇ (or such other address as
the holders of Senior Debt shall have notified Fleet of in accordance with
Section 18) and with a copy to Goulston & Storrs, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, facsimile number (617) 574-
6595 unless, in the case of clause (iv) only, a Payment Blockage Period is then
in effect in which case it shall then be at the end of such Payment Blockage
Period.
12.7. Provisions Solely to Define Relative Rights. The provisions of
-------------------------------------------
this Section 12 are and are intended solely for the purpose of defining the
relative rights of the holders of the Obligations of the Company and the
Guarantors on the one hand and the holders of Senior Debt of the Company and the
Guarantors on the other hand. Nothing contained in this Section 12 or elsewhere
in this Agreement or in the Obligations is intended to or shall (a) impair, as
among the Company, the Guarantors, their creditors other than holders of Senior
Debt of the Company and the Guarantors and the holders of the Obligations of the
Company and the Guarantors, the obligations of the Company and the Guarantors,
which are absolute, to pay to the holders of such Obligations the principal of
(and premium, if any) and interest on, and any other amount payable by the
Company and the Guarantors under or in connection with, the Obligations as and
when the same shall become due and payable in accordance with their terms; or
(b) affect the relative rights against the Company and the Guarantors of the
holders of the Obligations and creditors of the Company or such Guarantor other
than the holders of Senior Debt; or (c) prevent the holder of any Obligation
from exercising all remedies otherwise permitted by applicable law upon default
under this Agreement, subject to the limits set forth under this Section 12.
12.8. No Waiver of Subordination Provisions. No right of any present
-------------------------------------
or future holder of any Senior Debt of the Company or the Guarantors to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or the
Guarantors or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company or the Guarantors with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt of the Company or the Guarantors may, at any time and
from time to time, without the consent of or notice to the holders of the
Obligations, without incurring responsibility to the holders of the Obligations
and without impairing or releasing or otherwise affecting the subordination
provided in this Section 12 or the obligations hereunder of the
-68-
holders of the Obligations of the Company or the Guarantors to the holders of
Senior Debt of the Company or the Guarantors, do any one or more of the
following: (a) amend the terms of the Senior Debt of the Company or the
Guarantors (provided that the Required Purchasers must consent to (i) any change
--------
in the maturity of such Senior Debt beyond one year of its stated maturity on
the Closing Date, (ii) any increase in the interest rate payable on any tranche
of such Senior Debt in excess of 300 basis points above the maximum interest
rate applicable thereto on the Closing Date, (iii) any change that shortens the
weighted average maturity of such Senior Debt by more than 25% of its weighted
average maturity as of the Closing Date or (iv) any change that makes any
representations, covenants or defaults contained in the Bank Loan Documents more
restrictive, or creates new representations, covenants or defaults (it being
understood that waivers of existing covenants or defaults shall not be deemed to
create a new covenant or default and the giving or making of a representation as
set forth in the Bank Loan Documents as in effect on the date hereof, at a time
not required by the Bank Loan Documents as in effect on the date hereof, shall
not be deemed to create a new representation) that are not in the Bank Loan
Documents as of the date hereof; provided that this clause (iv) shall not be
--------
applicable to any representations, covenants or defaults that are (y) solely
applicable to the Collateral or the security interest of the Agent or Banks
therein or (y) offered to be added to this Agreement by the Company and
consented to by the Agent (provided that with respect to dollar amounts or
ratios referred to in such representations, covenants or defaults contained or
to be contained in Bank Loan Documents, when such representations, covenants or
defaults are added herein such dollar amounts or ratios shall be increased by
20%) and, if requested by the Purchasers, are so added to this Agreement; (b)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Senior Debt of the Company or the Guarantors; (c) release
in whole or in part any Person liable in any manner for the collection of Senior
Debt; and (d) exercise or refrain from exercising any rights against the Company
or the Guarantors or any other Person. The Company hereby covenants and agrees
that it will offer to add to this Agreement any changes to or new
representations, covenants or defaults referred to in clause (a)(iv) of the
preceding sentence.
12.9. Reliance on Judicial Order or Certificate of Liquidating Agent.
--------------------------------------------------------------
Upon any payment or distribution of assets of the Company or the Guarantors
referred to in this Section 12, the holders of the Obligations shall be entitled
to rely upon any order or decree entered by any court of competent jurisdiction
in which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the holders of any Obligations, for
the purpose of ascertaining the Persons entitled to participate in such payment
or distribution subject to the terms of this Section 12, the holders of Senior
Debt of the Company or the Guarantors and other Debt of the Company or the
Guarantors, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section 12.
-69-
12.10. No Modification. The provisions of the second paragraph of
---------------
subsection 11.1 and this Section 12 and the defined terms used in the second
paragraph of subsection 11.1 and this Section 12 are for the benefit of Agent
and the holders from time to time of the Senior Debt and, as long as any Senior
Debt or any commitment with respect thereto remain outstanding, such provisions
and defined terms may not be modified, rescinded or canceled in whole or in
part; provided, that the provisions of the second paragraph of subsection 11.1
and this Section 12 and the defined terms used in the second paragraph of
subsection 11.1 and this Section 12 may be modified, amended or supplemented by
the parties to this Agreement upon obtaining the prior written consent of the
Purchasers. In connection with any amendment to this Agreement, the Company
must first obtain a letter from the Agent consenting to such amendment or
stating that such amendment is not prohibited by the Bank Loan Agreement and no
amendment to this Agreement shall be effective until the Purchasers are
delivered a copy of such letter.
12.11. Waivers; Reliance by the Agent and Holders of Senior Debt. To
---------------------------------------------------------
the extent permitted by applicable law, the holders of the Obligations, the
Company and the Guarantors hereby waive (a) notice of acceptance hereof by the
Agent and the holders of the Senior Debt and (b) all diligence in the collection
or protection of or realization upon the Senior Debt. Each holder of the
Obligations, by acceptance of the Obligations, acknowledges and agrees that the
subordination provisions in the second paragraph of subsection 11.1 and this
Section 12 are and are intended to be, an inducement and a consideration to the
Agent and each holder of any Senior Debt, whether such Senior Debt was created
or acquired before or after the issuance of the Obligations, to acquire and
continue to hold such Senior Debt. Each of the holders of the Obligations, the
Company and Guarantors hereby acknowledge and agree that the Agent and each
holder of any Senior Debt are third party beneficiaries of the second paragraph
of subsection 11.1 and this Section 12.
12.12. Notice to Agent. The Purchasers agree to promptly send to the
---------------
Agent a copy of any notice of default or acceleration which is sent to the
Company under this Agreement but the failure to send such copy shall not
otherwise affect the validity or effectiveness of such notice of default or
acceleration.
12.13. Rights of Holders upon Proceedings. At any meeting of
----------------------------------
creditors or in the event of any Proceeding involving the Company, the holders
of Notes shall retain the right to vote, file a proof of claim and otherwise act
with respect to the Notes (including the right to vote to accept or reject any
plan of partial or complete liquidation, reorganization, arrangement,
composition, or extension); provided that the holders of Notes shall not
-------- -----
initiate or prosecute any claim or action in such Proceeding challenging the
enforceability of the Senior Debt, this Agreement, or any liens and security
interests securing the Senior Debt. In the event the holders of Notes fail to
execute, verify, deliver and file any proofs of claim in respect of the Notes in
connection with any such Proceeding
-70-
prior to 15 days before the expiration of the time to file any such proof or
fail to vote any such claim in any such Proceeding prior to 5 days before the
expiration of the time to vote any such claim, the holders of Notes hereby
irrevocably authorize, empower and appoint the Agent as their agent and
attorney-in-fact to execute, verify, deliver and file such proofs of claim and
vote such claim in any such Proceeding; provided that the Agent shall have no
obligation to exercise any such authority with respect to the holders' claims.
In the event that the Agent votes any claim in accordance with the authority
granted hereby, the holders of the Notes shall not be entitled to change or
withdraw such vote.
SECTION 13. Conditions Precedent.
--------------------
13.1. Purchasers' Conditions to Closing. The obligation of each
---------------------------------
Purchaser to purchase and pay for the Notes and Warrants to be purchased
hereunder is subject to the satisfaction, on or before the Closing Date of the
following conditions:
(i) The Purchasers shall have received all of the following, duly
executed and delivered:
(a) The Notes and Warrants to be purchased by the Purchasers.
(b) "Omnibus Certificate or Certificates" of the Secretary of
the Company and each of the Guarantors dated the Closing Date,
certifying the incumbency and authority of the officers of the Company
and each of the Guarantors who executed the Transaction Documents and
the truth, correctness and completeness of the following exhibits
attached thereto: (a) a copy of resolutions duly adopted by the Board
of Directors of the Company and each of the Guarantors and in full
force and effect at the time this Agreement is entered into,
authorizing the execution of this Agreement and the other Transaction
Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (b)
a copy of the certificate of incorporation (or equivalent
documentation) of the Company and each of the Guarantors and all
amendments thereto, certified as of a recent date by an appropriate
official of the Company's and each Guarantor's jurisdiction of
organization, and (c) a copy of the by-laws of the Company and each of
the Guarantors.
(c) Certificates, dated as of a recent date, as to the valid
existence, good standing and qualification to do business of the
Company and each of the Guarantors in its jurisdiction of
organization, issued by the appropriate authorities of such
jurisdiction.
(d) A "Compliance Certificate" executed by the Chairman of the
Board or President and the Chief Financial Officer of the Company,
dated the Closing Date in which such officers certify that the
conditions set forth in sub-
-71-
sections (a), (b) and (c) of Section 13.1(iii) and in Section
13.1(iv), 13.1(v), 13.1(viii) and 13.1(ix) have been satisfied.
(e) The opinion of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
special counsel to the Company, dated the Closing Date and
substantially in the form set forth as Exhibit C hereto, subject only
to such qualifications, limitations or exceptions as are contained in
such Exhibit C or as may be reasonably acceptable to special counsel
to the Purchasers.
(f) A complete and correct copy of any Recapitalization
Documents (including all schedules and exhibits thereto) requested by
Purchasers and the Green Employment Agreement.
(g) A certificate dated the Closing Date of the President or
Chief Financial Officer of the Company certifying to the Purchasers
that the proceeds of the Notes were used as provided for in Section
6.6 hereof.
(ii) The payment by the Company, by wire transfer of immediately
available funds, of the reasonable fees and expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, special counsel to Fleet, related to this transaction shall have
been made.
(iii) (a) All representations and warranties made by the Company and
each of the Guarantors in any Transaction Document shall be true and
correct on and as of the Closing Date (except for such representations and
warranties which expressly relate to an earlier date and to the extent that
the facts upon which such representations are based have been changed by
the transactions herein contemplated and such changes are set forth to the
reasonable satisfaction of the Purchasers) as if such representations and
warranties had been made as of the Closing Date.
(b) No Default under this Agreement or the other Transaction
Documents shall exist at the Closing Date.
(c) The Company and each of the Guarantors shall have performed and
complied in all material respects with all material agreements and
conditions required in the Transaction Documents to be performed or
complied with by the Company on or prior to the Closing Date.
(iv) The offer by the Company and the Guarantors of, and the
purchase of and payment for, the Notes and Warrants on the terms and
conditions herein provided (including the use of the proceeds of the sale
of such Notes and Warrants by the Company) 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).
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(v) Simultaneously with or prior to the sale to the Purchasers of
the Notes and Warrants at the Closing, the Bank Loan Documents and all
related documents shall have been executed and delivered by all respective
parties thereto and shall be in full force and effect. The Purchasers
shall have received true and correct copies of each such agreement and none
of such agreements shall have been amended prior to the Closing Date.
(vi) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to
the Purchasers, and the Purchasers shall have received all such counterpart
originals or certified or other copies of such agreements, schedules,
exhibits, certificates, financial information, filings or documents as they
or their counsel may reasonably request.
(vii) The Company shall have received a minimum of $133 million in
cash proceeds from the Bank Loan Agreement, and an additional $130 million
in equity, each on terms satisfactory to the Purchasers.
(viii) The Company shall have delivered to the Purchasers a compliance
certificate evidencing to the reasonable satisfaction of the Purchasers
that the pro forma EBITDA of the Company (with such EBITDA being determined
----------
on a basis consistent with the Initial Financial Statement) for the 12
month period ended December 31, 1999 (excluding the one-time transaction
costs relating to the consummation of the Recapitalization Transactions and
the Bank Loan Documents) is at least equal to $33,800,000. EBITDA for these
purposes shall be equal to the Consolidated operating income of the Company
and its Subsidiaries, on a Consolidated basis, plus depreciation and
amortization, and certain pro forma adjustments in accordance with Reg. S-X
----------
under the Securities Act of 1934.
(ix) The Company shall have delivered to the Purchasers a compliance
certificate evidencing to the reasonable satisfaction of the Purchasers
that the pro forma ratio of (i) Total Funded Debt as of the Closing Date to
---------
(ii) pro forma EBITDA of the Company and its Subsidiaries, as calculated
----------
pursuant to the preceding clause (viii) for the four consecutive fiscal
quarters ended on December 31, 1999, does not exceed 5.20 to 1.0.
(x) The Company shall have reimbursed the Purchasers for all of its
reasonable out-of-pocket expenses in connection with the Transaction
Documents and the financing of the Acquisition.
13.2. Conditions Precedent to Obligations of the Company. The
--------------------------------------------------
obligation of the Company to issue and sell the Securities is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
-73-
(i) The representations and warranties made by the Purchasers
herein shall be true and correct on and as of the Closing Date with the
same effect as though such representations and warranties had been made on
and as of the Closing Date.
(ii) The issuance or sale of the Securities by the Company shall not
be enjoined under the laws of any jurisdiction to which the Company is
subject (temporarily or permanently) at the Closing Date.
(iii) Notes having an aggregate principal amount equal to at least
$40,000,000 shall concurrently have been purchased by the Purchasers
hereunder, 47,712 Warrants shall have been issued and the Purchasers shall
have accepted delivery of such Securities.
SECTION 14. Transfer and Exchange of Notes. The Company will keep at
------------------------------
its principal office a register the ("Note Register") in which it will provide
for the registration and registration of transfer of Notes, at its own expense
(excluding transfer taxes). If any Note is surrendered at said office or at the
place of payment named in the Note for registration of transfer or exchange
(accompanied in the case of registration of transfer by a written instrument of
transfer in form reasonably satisfactory to the Company duly executed by or on
behalf of the holder of such Note), the Company, at its expense, will deliver in
exchange one or more new Notes in any denominations (multiples of $1,000), as
requested by the holder of such Note, for the aggregate unpaid principal amount;
provided, however, that any such transfer of an amount less than $5,000,000 must
-------- -------
be approved by the Company. Subject to this Section 14, Notes may only be
transferred to Eligible Holders, unless a transfer to a person other than an
Eligible Holder is approved by the Company. Any Note or Notes issued in a
transfer or exchange shall carry the same rights to interest (unpaid and to
accrue) carried by the Note or Notes so transferred or exchanged so that there
will not be any loss or gain of interest on the Note or Notes surrendered. Any
transfer tax relating to such transaction shall be paid by the holder of such
Note requesting the exchange.
If at any time any Purchaser proposes to transfer any Notes pursuant
to this Section 14, such Purchaser will give notice (the "Transfer Notice") to
---------------
Parthenon and the Company specifying (x) the Notes proposed to be transferred
(the "Offered Notes") and (y) the price (the "Offered Price") upon which such
------------- -------------
Purchaser proposes to transfer such Notes.
The Transfer Notice will constitute an irrevocable offer (for the time
periods set forth below) to transfer all of the Offered Notes to Parthenon or
its assignee at the Offered Price (the "Offer to Sell"), except that if the
-------------
Offered Price designated by the Purchasers is to be wholly or partly for
consideration other than cash, then the Offer to Sell will constitute an offer
to transfer the Offered Notes to Parthenon or its assignee for a cash purchase
price equal to the amount of cash (if any) specified in the Transfer Notice,
plus the fair market value of such non-cash consideration. If the applicable
Purchaser and Parthenon cannot agree on such
-74-
cash value within ten Business days after Parthenon's receipt of the Transfer
Notice, the valuation shall be made by an Independent Financial Expert at the
date of the Transfer Notice.
Parthenon will have fifteen (15) Business Days after the later of (a)
its receipt of the Transfer Notice and (b) the date on which the fair market
value of any non-cash consideration which is part of the Offered Price is
determined (the "Parthenon Exercise Period") during which to notify such
-------------------------
Purchaser in writing of its election to purchase or to have its assignees
purchase all of the Offered Notes (an "Acceptance Notice") at the Offered Price.
-----------------
Upon the delivery of the Acceptance Notice, Parthenon and such
Purchaser shall be firmly bound to consummate the purchase and sale of the
applicable Offered Notes in accordance with the Transfer Notice and the
Acceptance Notice. Subject to the provisions hereof, within 45 days after the
end of the Parthenon Exercise Period, Parthenon shall purchase and such
Purchaser shall sell the applicable Offered Notes at a mutually agreeable time
and place (the "Offered Notes Closing").
---------------------
At the Offered Notes Closing, such Purchaser shall deliver to
Parthenon or its assignee certificates representing the Offered Notes to be
purchased by Parthenon or its assignee and Parthenon or its assignee shall
deliver to such Purchaser the applicable purchase price for such Offered Notes
by wire transfer of immediately available funds (or by such other means as
requested by such Purchaser) to an account(s) designated by such Purchaser.
If Parthenon or its assignee does not elect to purchase all of the
Offered Notes in accordance with this Section, then such Purchaser may transfer
all of the Offered Notes, at a price which is not less than the Offered Price
specified in the Transfer Notice to any Eligible Holder but only to the extent
that such transfer occurs within 90 (ninety) days after expiration of the
Parthenon Exercise Period; provided, however, that any such transfer of an
-------- -------
amount less than $5,000,000 must be approved by the Company. The Purchasers
will give prompt written notice of any such transfer to the Company and
Parthenon specifying the identity of the purchaser. Any Notes not transferred
within such 90-day period will again be subject to the provisions of this
Section 14.
The Company and any agent of the Company shall treat the Person in
whose name any Note is registered in the Note Register as the owner of such Note
for the purpose of receiving payment of the principal and premium (if any) and
interest on such Note and for all other purposes whatsoever, whether or not such
Note be overdue.
SECTION 15. Indemnification. In consideration of the execution and
---------------
delivery of this Agreement by each of the Purchasers, each of the Company and
the Guarantors shall, on demand, indemnify, exonerate and hold each of the
Purchasers and each of their respective officers, directors, general and limited
partners (and officers and directors thereof), employees and agents and, if such
Purchaser or holder is a portfolio or investment fund, its investment advisers
and/or agents (herein called the "Indemnitees") free and harmless from
-----------
-75-
and against any and all actual losses, liabilities, damages and expenses
incurred as a result of actions, causes of action, suits or claims brought by
third parties in connection with this Agreement, including, without limitation,
reasonable counsel fees and disbursements (herein called the "Indemnified
-----------
Liabilities", which term shall not include, however, any actions, causes of
-----------
action or suits (or any losses, liabilities, damages or expenses in connection
therewith) brought by the Company or the Guarantors against any Indemnitee
arising out of this Agreement), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to
(a) any transaction financed or to be financed by the sale of the
Notes and Warrants on the date hereof to the Purchasers in whole or in part
directly or indirectly with proceeds from the sale of any of the Notes and
Warrants, to the Purchasers or
(b) the execution, delivery, performance or enforcement of, or the
protection or preservation of any rights or remedies of any Purchaser
under, this Agreement or any Note or Guarantee contemplated hereby by any
of the Indemnitees,
except for (i) any such Indemnified Liabilities arising on account of any
Indemnitee's bad ▇▇▇▇▇ ▇▇▇▇▇ negligence or willful misconduct and (ii) for any
amount paid in settlement of claims without their consent (which consent shall
not be unreasonably withheld), provided, however, that if an Indemnitee is
-------- -------
reimbursed hereunder for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Indemnified
Liabilities in question resulted primarily from the willful misconduct, bad
faith or gross negligence of such Indemnitee, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company and the
Guarantors hereby agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
Each Indemnitee will, promptly after the receipt of notice of the
commencement of any action or other proceeding against such Indemnitee in
respect of which indemnity may be sought from the Company or the Guarantors
under this Section 15, notify the Company in writing of the commencement
thereof. The omission of any indemnified party so to notify the Company of any
such action shall not relieve the Company from any liability which it may have
to such indemnified party other than pursuant to this Section 15 unless, and
only to the extent that, such omission results in the Company's forfeiture of
substantive rights or defenses. In case any such action or other proceeding
shall be brought against any Indemnitee and it shall notify the Company of the
commencement thereof, the Company or any Guarantor shall be entitled to
participate therein and, to the extent that they may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnitee; provided,
--------
however, that any Indemnitee may, at its own expense, retain separate counsel to
-------
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which both the Company or a Guarantor and an Indemnitee is, or is
reasonably likely to become, a party, such in-
-76-
demnitee shall have the right to employ separate counsel at the Company's or the
Guarantor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such indemnified party, (a) there
are or may be legal defenses available to such indemnified party or to other
indemnified parties that are different from or additional to those available to
the Company or a Guarantor or (b) any conflict or potential conflict exists
between the Company or a Guarantor and such Indemnitee that would make such
separate representation advisable; provided, however, that in no event shall the
-------- -------
Company and the Guarantors be required to pay fees and expenses under this
Section 15 for more than one firm of attorneys in any jurisdiction in any one
legal action or group of related legal actions. None of the Company or the
Guarantors shall, without the consent of the Indemnitee (which consent shall not
be unreasonably withheld), consent to the entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect to such claim or litigation or which requires action other
than the payment of money by the Company or a Guarantor.
SECTION 16. Amendments. The Notes and this Agreement may be amended
----------
with the consent of the holders of a majority of the aggregate principal amount
of the Notes then outstanding (the "Required Purchasers") and any past default
or compliance with any provisions thereof may also be waived with the consent of
the holders of a majority of the aggregate principal amount of the Notes then
outstanding; provided, however, the consent of all affected holders of the Notes
-------- -------
shall be required with respect to any changes to (i) this Section 16, (ii) the
amount or timing of prepayments or payment of principal, (iii) the rate or time
of payment or method of computation of interest or Section 9.1 hereof, and (iv)
the date on which principal, interest, or fees are due or (v) or any definitions
related to any of the foregoing.
SECTION 17. Survival. The respective representations, warranties,
--------
agreements or covenants of the Company and the Guarantors and the Purchasers set
forth in this Agreement shall remain in full force and effect until the Notes
are Fully Satisfied; provided that the covenants set forth in Sections 6.2, 6.3,
-------- ----
6.4, 6.5 and 6.8 and the financial and inspection rights set forth in Section 4
shall remain in full force and effect until the later of (i) the date on which
the Notes are Fully Satisfied, and (ii) the date on which an Initial Public
Offering closes, regardless of (i) any investigation made by or on behalf of the
Company and the Guarantors, any of their respective officers or directors, the
Purchasers, any director, officer, employee or agent of the Purchasers or any
controlling person of the Purchasers, or (ii) delivery of and payment for the
Notes and Warrants. Notwithstanding the foregoing, the covenants of Section 15
shall survive the termination of this Agreement, the Initial Public Offering and
the payment or satisfaction of payment of amounts owing with respect to the
Notes under the Transaction Documents.
-77-
SECTION 18. Notices. Notice given pursuant to any of the provisions
-------
of this Agreement or the other Subordinated Transaction Documents shall be in
writing and shall be mailed or delivered (a) to the Company at:
Wilmar Industries, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Parthenon Investors, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) to Fleet at:
FleetBoston ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: 212-269-5420
(c) to Allied at:
Allied Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) to Parthenon at:
Parthenon Capital, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or (e) to the Agent at:
Fleet National Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Goulston & Storrs
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices hereunder to any party shall be addressed to such party at the
address specified above or such other address as such party may specify by
written notice to the other parties hereto and shall be deemed to have been
given at (a) when delivered to such party if delivered by hand, (b) the third
Business Day following the day on which the same is sent by certified or
registered mail, postage prepaid, (c) when sent by electronic facsimile
transmission, or (d) the Business Day following the day on which the same has
been delivered prepaid to a reputable national overnight air courier service.
SECTION 19. Successors. This Agreement shall inure to the benefit of and
----------
shall be binding upon each of the Purchasers, the Company, the Guarantors,
Parthenon and their successors and legal representatives, and other than as set
forth in this Section 19 nothing
-79-
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person except that the indemnities of the Company and the Guarantors contained
in Section 15 of this Agreement shall also be for the benefit of the control
persons, directors, officers, employees and agents of the Purchasers and of any
control person of the Purchasers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act.
SECTION 20. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
SECTION 21. WAIVER OF JURY TRIAL. THE PURCHASERS, THE COMPANY AND THE
--------------------
GUARANTORS HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER SUBORDINATED TRANSACTION DOCUMENT OR
THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF; AND
THE COMPANY AND THE GUARANTORS HEREBY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM OR CROSS-
CLAIM IN CONNECTION WITH ANY SUCH LITIGATION, IRRESPECTIVE OF THE NATURE OF SUCH
SET-OFF, COUNTERCLAIM OR CROSS-CLAIM EXCEPT TO THE EXTENT THAT THE FAILURE SO TO
ASSERT ANY SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM WOULD PERMANENTLY PRECLUDE
THE PROSECUTION OF OR RECOVERY UPON SAME. NOTWITHSTANDING ANYTHING CONTAINED IN
THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY THE COMPANY OR THE
GUARANTORS AGAINST THE PURCHASERS FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER
THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING
OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER
THE OTHER TRANSACTION DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH; THE COMPANY AND THE GUARANTORS HEREBY WAIVE, RELEASE AND
AGREE NOT TO ▇▇▇ UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. THE PURCHASERS, THE
COMPANY AND THE GUARANTORS AGREE THAT THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE
-80-
THAT THE PURCHASERS, THE COMPANY AND THE GUARANTORS WOULD NOT PURCHASE THE
SECURITIES IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
SECTION 22. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-S1-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Guarantors a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the Purchasers, the Company and the Guarantors
in accordance with its terms.
Very truly yours,
Company
WILMAR INDUSTRIES, INC.
By:____________________________________
Name:
Title:
Guarantors
▇.▇. ▇▇▇▇▇▇▇, INC.
TRAYCO OF S.C., INC.
WILMAR FINANCIAL, INC.
WILMAR HOLDINGS, INC.
ACE MAINTENANCE MART USA, INC.
SUPPLY DEPOT, INC.
MANAGEMENT SUPPLY COMPANY
ONE SOURCE SUPPLY, INC.
By:____________________________________
Name:
Title:
-S2-
PARTHENON INVESTORS, L.P.
By:_________________________________
Name:
Title:
-S3-
Confirmed and accepted as of
the date first above written:
Purchasers
FLEET CORPORATE FINANCE, INC.
By:_____________________________
Name:
Title:
ALLIED CAPITAL CORPORATION
By:_____________________________
Name:
Title:
EXHIBIT A-1
Form of Note
------------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE ACT)
OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR
ANY OF ITS SUBSIDIARIES, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇, (▇) ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE OR TRANSFER AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE COMPANY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN CONNECTION
WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE
OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR SUCH TRANSFER IS MADE IN ACCORDANCE WITH CLAUSES (D) OR (E) ABOVE,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS, AND SUCH OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. AS USED HEREIN, THE
-2-
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING
GIVEN TO THEM BY REGULATION S UNDER THE ACT.
FOR PURPOSES OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS
NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT. THE HOLDER OF THIS NOTE MAY
REQUEST THE INFORMATION DESCRIBED IN UNITED STATES TREASURY REGULATION SECTION
1.1275-3(b)(1)(i) FROM THE CHIEF FINANCIAL OFFICER, WILMAR INDUSTRIES, INC., ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
THIS NOTE IS SUBJECT TO THE TERMS OF A PURCHASE AGREEMENT (INCLUDING
THE SUBORDINATION TERMS CONTAINED IN SECTION 12 THEREOF), DATED AS OF MAY 16,
2000 BY AND BETWEEN WILMAR INDUSTRIES, INC., THE GUARANTORS LISTED THEREIN AND
THE PURCHASERS LISTED THEREIN (AS AMENDED OR OTHERWISE MODIFIED, THE "PURCHASE
AGREEMENT") TO WHICH REFERENCE IS MADE FOR THE TERMS AND PROVISIONS GOVERNING
THIS NOTE.
-3-
WILMAR INDUSTRIES, INC.
Senior Subordinated Note
Due [ ], 2008
New York, New York
[ ], 2000
No. $
WILMAR INDUSTRIES, INC., a New Jersey corporation (herein called the
"Company," which term includes any successor corporation under the Purchase
-------
Agreement hereinafter referred to), for value received, hereby promises to pay
to [Purchaser], or registered assigns, the principal sum of [ ] Million
Dollars (or so much thereof as shall not have been redeemed) and to pay interest
(computed on the basis of a 360 day year of twelve 30-day months) in cash
(subject to the succeeding sentence and Section 12 of the Purchase Agreement) on
the unpaid principal amount hereof from the date hereof at the rate of 15% per
annum, payable quarterly in arrears on each April 10, July 10, October 10 and
January 10 or, if such day is not a Business Day on the next succeeding Business
Day to occur after such date (each an "Interest Payment Date"), commencing July
---------------------
10, 2000, to the registered holder of this Note on the fifteenth day preceding
each Interest Payment Date, until the principal hereof shall have become due and
payable. Notwithstanding the foregoing, with respect to any installment of
interest on this Note due on an Interest Payment Date that occurs on or prior to
May 16, 2005, in lieu of paying all of such installment of interest in cash, the
Company may, at its option, pay up to one-third of such installment by issuing
to each such holder of record additional Notes in an aggregate principal amount
equal to the amount of interest due to such holder on the applicable Interest
Payment Date and not paid in cash. Such additional Notes will be payable and
subordinated on the same terms and conditions as the original Notes. After May
16, 2005, the Company, in accordance with the terms hereof and the Purchase
Agreement, may not issue additional PIK Notes and shall pay all interest on the
Notes in cash at the rate of 15% per annum, payable quarterly in arrears in
accordance with the terms hereof.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand to the extent that payment
of such interest shall be legally enforceable, at the rate of the then
applicable interest rate on the Notes plus 2.00% per annum (the "Default Rate");
and, in addition thereto, such further amount as shall be suffi-
-4-
cient to cover the reasonable costs and expenses of collection on overdue
installments of interest (without regard to any applicable grace period to the
extent lawful).
Unless otherwise stated herein, payments of principal and interest on
this Note are to be made pursuant to the terms of the Purchase Agreement (as
defined below), in lawful money of the United States of America.
This Note is one of a duly authorized issue of Notes of the Company
designated as its Senior Subordinated Notes Due May 16, 2008 (herein called the
"Notes"), limited in aggregate principal amount to $40,000,000 plus the
-----
aggregate principal amount of any additional Notes issued in accordance with the
terms hereof in lieu of a portion of cash interest payments issued under the
Purchase Agreement dated as of May 16, 2000 among the Company, the Guarantors
and the purchasers thereunder (as amended, modified or otherwise supplemented
from time to time, the "Purchase Agreement"). This Note is guaranteed on a
------------------
senior subordinated basis by the Guarantors.
The indebtedness evidenced by the Notes and the Guarantee endorsed
hereon is, to the extent and in the manner provided in the Purchase Agreement,
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt of the Company and all Senior Debt of each Guarantor and this Note
and the Guarantee endorsed hereon is issued subject to such provisions. Each
holder of this Note, by accepting the same, agrees to and shall be bound by such
provisions.
Except as provided below, the Notes are not redeemable.
On June 30, 2005, the Company shall redeem a principal amount of Notes
outstanding on such date equal to the AHYDO Amount (as defined in the Purchase
Agreement) on a pro rata basis at a redemption price of 100% of the principal
amount of the Notes so redeemed.
The Notes may be redeemed at the option of the Company at any time as
a whole, or from time to time in part, at the redemption prices (expressed as
percentages of principal amount redeemed), set forth below plus accrued and
unpaid interest (if any) to the date of redemption, if redeemed during the
periods set forth below:
Redemption
Period Price
------ -----
May 17, 2000 through May 16, 2001 104.000%
May 17, 2001 through May 16, 2002 103.000%
May 17, 2002 through May 16, 2003 102.000%
May 17, 2003 and thereafter 100.000%
-5-
In addition, in the event of a Change in Control, holders of Notes
shall have the right, at their option, to require the Company to purchase all or
any portion of the Notes on the Change of Control Payment Date at 101% of the
principal amount thereof, plus accrued and unpaid interest (if any) to the
Change in Control Payment Date.
Notes (or portions thereof) for whose redemption and payment provision
is made in accordance with the Purchase Agreement shall cease to bear interest
from and after the date fixed for redemption.
In the event of redemption of this Note in part, a new Note or Notes
for the unredeemed portion hereof shall be issued in the name of the registered
holder of this Note as reflected in the Note Register upon the cancellation
hereof.
If an Event of Default shall occur and be continuing, the principal of
all the Notes may be declared, or may become, due and payable in the manner and
with the effect provided in the Purchase Agreement.
No reference herein to the Purchase Agreement and no provision of this
Note shall alter or impair, as among the Company, its creditors other than the
holders of Senior Debt of the Company and the holder of this Note, the
Obligations of the Company, which are absolute, to pay the principal of (and
premium, if any) and interest on this Note and reasonable fees and expenses and
all other amounts due and payable in connection with this Note at the times,
place, and rate, and in the coin or currency, prescribed herein or in the
Purchase Agreement.
Transfer of this Note is registrable on the Note register of the
Company upon presentation at the principal office of the Company, accompanied by
a written instrument of transfer in form satisfactory to the Company duly
executed by, or on behalf of, the holder hereof. This Note may also be exchanged
at such office for one or more Notes in any authorized denominations (multiples
of $1,000), as requested by the holder, of a like aggregate unpaid principal
amount.
Prior to and at the time of due presentment of this Note for
registration of transfer, the Company and any agent of the Company, may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company nor any
agent shall be affected by notice to the contrary.
This Note shall be governed by and construed in accordance with the
law of the State of New York and all rights and remedies shall be governed by
such law without reference to its conflict of law provisions.
-6-
All capitalized terms in this Note which are defined in the Purchase
Agreement and not otherwise defined herein shall have the meanings assigned to
them in the Purchase Agreement.
-7-
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated:
WILMAR INDUSTRIES, INC.
By:__________________________________
Name:
Title:
Attest:
________________________________
Name:
Title:
EXHIBIT A-2
Form of Guarantee
-----------------
In consideration of, and as an inducement for, the Purchasers of the
Notes to enter into the Purchase Agreement dated as of May 16, 2000 (as amended,
modified or otherwise supplemented from time to time, the "Purchase Agreement"),
------------------
the undersigned entities (herein called the "Guarantors") hereby irrevocably,
----------
and jointly and severally, guarantee to the holder of the Note upon which this
Guarantee is endorsed the due and punctual payment of the principal of (and
premium, if any) and interest (including any additional amounts due and payable
in accordance with the terms of such Note), on such Note, interest on overdue
principal (and premium, if any) and, to the extent that payment of such interest
is lawful, interest on any overdue interest on such Note at the rate specified
in such Note and reasonable fees and expenses and all other amounts due and
payable in connection with such Note when and as the same shall become due and
payable, whether at the Stated Maturity or by declaration of acceleration or
otherwise, according to the terms of such Note. In case of the failure of the
Company punctually to make any such payment of principal of (or premium, if any)
or interest on such Note or reasonable fees and expenses or other amounts due
and payable in connection with such Note, the Guarantors hereby jointly and
severally agree to cause any such payment to be made punctually when and as the
same shall become due and payable, whether at the Stated Maturity or by
declaration of acceleration, or are required to be redeemed pursuant to Section
9 of the Purchase Agreement or otherwise, and as if such payment were made by
the Company.
This Guarantee is, to the extent and in the manner set forth in
Section 12 of the Purchase Agreement, subordinate and junior in right of payment
to the prior payment in full of all Senior Debt of each of the Guarantors, and
this Guarantee is issued subject to such provisions of the Purchase Agreement,
and each holder of the Note upon which this Guarantee is endorsed, by accepting
the same, agrees to and shall be bound by such provisions.
This Guarantee shall be governed by and construed in accordance with
the law of the State of New York and all rights and remedies shall be governed
by such law without reference to its conflict of law provisions.
This Guarantee shall be confirmatory of the Guarantee set forth in
Section 11 of the Purchase Agreement, and is subject to the terms and conditions
thereof, all of which are incorporated herein by reference as fully as if set
forth at length at this place. All terms used in this Guarantee which are
defined in the Purchase Agreement shall have the meanings assigned to them in
the Purchase Agreement.
-2-
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be
duly executed.
[GUARANTORS]
By:_______________________________
Name:
Title:
[EXHIBIT A-3]
Form of Warrant
[EXHIBIT B]
Form of Financial Report
[EXHIBIT C]
Form of Opinion of Company Counsel
EXHIBIT D
Form of
U.S. Tax Compliance Certificate
Reference is made to the Purchase Agreement (as amended, modified or
otherwise supplemented from time to time, the "Purchase Agreement"), dated as of
May 16, 2000, among Wilmar Industries, Inc. (the "Company"), the Guarantors and
each of the Purchasers (as each is defined in the Purchase Agreement).
The undersigned hereby certifies to the Company that:
(1) The undersigned is the beneficial owner of the Note registered in
its name;
(2) The undersigned is not a bank (as such term is used in Section
881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code"));
(3) The undersigned is not a "10-percent shareholder" (as such term
is used in Section 881(c)(3)(B) of the Code);
(4) The income from the Note held by the undersigned is not
effectively connected with the conduct of a trade or business within the
United States;
(5) The undersigned is not a controlled foreign corporation related
(within the meaning of Section 864(d)(4) of the Code) to the Company;
(6) The undersigned is a person other than (i) a citizen or resident
of the United States of America, its territories and possessions (including
the Commonwealth of Puerto Rico and all other areas subject to its
jurisdiction) (for purposes of this clause (6), the "United States"), (ii)
a corporation, partnership or other entity created or organized under the
laws of the United States or any political subdivision thereof or therein
or (iii) an estate or trust that is subject to United States federal income
taxation regardless of the source of its income; and
(7) The undersigned is not a natural person.
We have furnished you with a certificate of our non-U.S. person status
on Internal Revenue Service Form W-8 or applicable successor form. By executing
this certificate, the undersigned agrees that (a) if the information provided on
this certificate changes, the undersigned shall so inform the Company in writing
within thirty days of such change and (b) the undersigned shall furnish the
Company a properly completed and currently effective cer-
-2-
tificate in either the calendar year in which payment is to be made by the
Company to the undersigned, or in either of the two calendar years preceding
such payment.
Unless otherwise defined herein, terms defined in the Purchase
Agreement and used herein shall have the meanings given to them in the Purchase
Agreement.
[NAME OF PURCHASER]
By:___________________________________
Name
Title:
[ADDRESS]
Dated:
EXHIBIT 4.1
-----------
COMPLIANCE CERTIFICATE
----------------------
[Letterhead of the Company]
---------------------------
__________________, ____
_______________________________
_______________________________
_______________________________
_______________________________
The undersigned, the chief financial officer of each of Wilmar
Industries, Inc. (the "Company"), gives this certificate to the entities listed
above (as amended, modified or supplemented from time to time, the "Purchasers")
in accordance with the requirements of subsection 4.1 of that certain Purchase
Agreement dated May 16, 2000, among the Company, certain subsidiaries of the
Company and the Purchasers ("Purchase Agreement"). Capitalized terms used in
this Certificate, unless otherwise defined herein, shall have the meanings
ascribed to them in the Purchase Agreement.
1. Based upon my review of the balance sheets and statements of
income and cash flows of the Company for the [fiscal year] [quarterly period]
ending __________________, ____, copies of which are attached hereto, I hereby
certify that:
(i) The Interest Coverage Ratio is ____ to 1.0;
(ii) Fixed Charge Coverage Ratio is ____ to 1.0; and
(iii) Funded Debt to EBITDA Ratio is ____ to 1.0.
2. No Default exists on the date hereof, other
than:__________________________________________________________________ [if
none, so state]; and
-2-
3. No Event of Default exists on the date hereof, other than
___________________________________________________ __________ [if none, so
state].
Very truly yours,
____________________________
Chief Financial Officer
Schedule 1.1
Current Investments
Schedule 5.1
Subsidiaries; Jurisdictions of Organization
Schedule 5.5
Current Liens
Schedule 5.10
Current Litigation
Schedule 5.18(a)
Common and Senior Preferred Stock of Company; Holders
and Amount Issued and Outstanding
Schedule 5.18(b)
Capital Stock of Subsidiaries; Amount Issued and Outstanding; and
Agreements and Rights Relating to Capital Stock of Subsidiaries
and the Company
Schedule 5.19
Current Labor Complaints, Disputes and Proceedings
Schedule 5.20
Certain Transactions
Schedule 5.22
Current Leases and Assignments or Sublicenses thereof
Schedule 5.23
Unpermitted Use of Intellectual Property
Schedule 5.25
Material Contracts
Schedule 7.1
Liens Securing Debt
Schedule 7.4
Guarantees
Schedule 7.9
Permitted Transactions
Schedule 7.12
Permitted Affiliate Transactions
