<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
Amendment No. 3 (Final Amendment)
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
WILMAR INDUSTRIES, INC.
-----------------------
(Name of the Issuer)
Wilmar Industries, Inc.
WM Acquisition, Inc.
Parthenon Investors, L.P.
Parthenon Investment Advisors, L.L.C.
Parthenon Investment Partners, L.L.C.
John C. Rutherford
Ernest K. Jacquet
William Green
Michael J. Grebe
---------------------------------------------
(Name of Persons Filing Statement)
Common Stock, no par value
--------------------------
(Title of Class of Securities)
971426101
---------
(CUSIP Number of Class of Securities)
James M. Dubin, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of Persons Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [x] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
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Calculation of filing fee:
================================================================================
Transaction Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------
$230,041,702 $46,008
================================================================================
* For purposes of calculating the filing fee only. This amount assumes the
purchase of 12,407,826 outstanding shares of Common Stock, no par value, of
Wilmar Industries, Inc. ("Common Stock"), less 164,384 shares held by a
member of Wilmar Industries, Inc.'s management, at $18.25 cash per share
and the product of 1,107,538 shares subject to options, 921,632 of which
are being cashed out, at $18.25 per share less the $11.09 per share
weighted average exercise price of the option shares being cashed out. The
amount of the filing fee, calculated in accordance with Regulation 240.0-11
under the Securities Exchange Act of 1934, equals 1/50 of one percentum of
the value of the securities to be purchased.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $46,008
Form or Registration No.: Schedule 14A
Filing Party: Wilmar Industries, Inc.
Date Filed: February 4, 2000
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THIS
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL AND A CRIMINAL
OFFENSE.
2
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Introduction
------------
This Amendment No. 3 (the "Final Amendment") to the Rule 13e-3
Transaction Statement on Schedule 13E-3 amends and supplements the original Rule
13e-3 Transaction Statement on Schedule 13E-3 (the "STATEMENT") filed on
February 7, 2000, relating to the Agreement and Plan of Merger and
Recapitalization dated as of December 22, 1999 (as amended, the "MERGER
AGREEMENT") between Wilmar Industries, Inc., a New Jersey corporation ("WILMAR,"
the "ISSUER" or the "COMPANY") and WM Acquisition, Inc., a New Jersey
corporation ("MERGERCO"). A copy of the Merger Agreement was attached as
Appendix A to the Definitive Proxy Statement filed by the Company (the "PROXY
STATEMENT"). This Final Amendment is being filed pursuant to Rule 13e-3(d)(3) to
report the results of the transaction which is the subject of the Statement.
3
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The information in the Definitive Proxy Statement relating to the
Merger filed by the Company with the Securities and Exchange Commission (the
"COMMISSION"), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item of this
Statement are qualified in their entirety by the provisions of the Definitive
Proxy Statement.
4
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Item 15. Additional Information.
- ------- ----------------------
Item 7(d) is hereby amended and supplemented as follows:
At the Special Meeting of the shareholders of Wilmar held on May 15, 2000,
the Merger Agreement was approved by the affirmative vote of a majority of the
votes cast by the holders of shares of common stock, no par value of Wilmar (the
"Common Stock") entitled to vote at the Special Meeting. A Certificate of Merger
was filed with respect to the Merger with the Department of Treasury of the
State of New Jersey on May 16, 2000. At the Effective Time of the Merger (May
16, 2000), (a) each outstanding share of Common Stock of the Company was
converted into the right to receive $18.25 in cash (except that any shares held
by MergerCo or held in the Company's treasury were canceled); (b) each
outstanding share of Class C Preferred Stock, par value $.10 per share (the
"CLASS C PREFERRED STOCK"), of the Company was converted into (i) .5486558
shares of Common Stock and (ii) 1.7701344 shares of Cumulative Senior Preferred
Stock, par value $.01 per share (the "SENIOR PREFERRED STOCK"), of the Company;
(c) each outstanding share of common stock, no par value, of MergerCo ("MERGERCO
COMMON STOCK") was converted into one share of Common Stock; and (d) each
outstanding share of preferred stock, par value $0.01 per share (the "MERGERCO
PREFERRED STOCK"), of MergerCo was converted into one share of Senior Preferred
Stock.
A Form 15 has been filed with the Commission in order to deregister the
Common Stock. A press release relating to the foregoing is attached hereto as
Exhibit (a)(5) and is incorporated herein by reference.
Item 10(a) is hereby amended and supplemented as follows:
Upon consummation of the Merger, the Company entered into a Revolving
Credit and Term Loan Agreement among itself, the lenders named therein, Fleet
National Bank, as administrative agent, and FleetBoston Robertson Stephens Inc.,
as arranger, providing for a senior secured credit facility substantially
similar to that described in the Definitive Proxy Statement. Upon consummation
of the Merger, the Company made borrowings of approximately $129 million under
this senior secured credit facility, consisting of a $50 million Term Loan A, a
$50 million Term Loan B and approximately $29 million under its Revolver.
Upon consummation of the Merger, the Company entered into a Subordinated
Note and Warrant Purchase Agreement, among itself, certain subsidiaries of the
Company, Fleet Corporation Finance, Inc. and Allied Capital Corporation, and a
Warrant Agreement, among itself, Fleet Corporation Finance, Inc. and Allied
Capital Corporation, and issued thereunder $40 million of senior subordinated
notes and warrants, substantially similar to those described in the Definitive
Proxy Statement.
5
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Item 16. Exhibits.
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Item 16 is hereby amended and supplemented by the addition of the following
exhibits thereto:
(a)(5) Press Release of Wilmar dated May 16, 2000.
(b)(1) Revolving Credit and Term Loan Agreement among Wilmar, the lenders named
therein, Fleet National Bank, as administrative agent, and FleetBoston
Robertson Stephens Inc. as arranger, dated as of May 16, 2000.
(2) Subordinated Note and Warrant Purchase Agreement, dated as of May 16,
2000, among Wilmar, certain subsidiaries of Wilmar, Fleet Corporation
Finance, Inc. and Allied Capital Corporation.
(3) Warrant Agreement, dated as of May 16, 2000, among Wilmar, Fleet
Corporation Finance, Inc. and Allied Capital Corporation.
6
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After due inquiry and to the best of its knowledge and belief, the
undersigned certify that the information set forth in this Statement is true,
complete and correct.
WILMAR INDUSTRIES, INC.
By: /s/ William Green
---------------------------
Name: William Green
Title: Chairman and Chief Executive Officer
WM ACQUISITION, INC.
By: /s/ Drew Sawyer
---------------------------
Name: Drew Sawyer
Title: Vice President
PARTHENON INVESTORS, L.P.
By: PARTHENON INVESTMENT ADVISORS L.L.C.
its general partner
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
PARTHENON INVESTMENT ADVISORS, L.L.C.
By: PARTHENON INVESTMENT PARTNERS L.L.C.
its Managing Member
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
PARTHENON INVESTMENT PARTNERS, L.L.C.
By: /s/ Ernest K. Jacquet
---------------------------
Name: Ernest K. Jacquet
Title: Managing Member
/s/ John C. Rutherford
------------------------------
John C. Rutherford
/s/ Ernest K. Jacquet
------------------------------
Ernest K. Jacquet
/s/ William Green
------------------------------
William Green
/s/ Michael J. Grebe
------------------------------
Michael J. Grebe
Date: May 24, 2000
7
<PAGE>
Exhibit A.5
New Release Wilmar
For Immediate Release:
================================================================================
CONTACT: Drew Sawyer William Sanford
Ernest K. Jacquet Wilmar Industries, Inc.
Parthenon Capital 303 Harper Drive
200 State Street Moorestown, NJ 08057
Boston, MA 02110 856-533-3115
617-478-7000
INVESTOR GROUP LED BY PARTHENON CAPITAL
AND MANAGEMENT COMPLETE ACQUISITION OF
WILMAR INDUSTRIES
Moorestown, N.J. -- May 16, 2000 -- Wilmar Industries, Inc. (NASDAQ:WLMR),
announced today the completion of its previously announced merger and
recapitalization. In the merger, which was approved by Wilmar's stockholders on
Monday, May 15, 2000, each share of Wilmar common stock was converted into the
right to receive $18.25 in cash. As a result of the transaction, Wilmar is
owned by a group of investors including Parthenon Capital, Chase Capital
Partners, a pension plan advised by General Motors Investment Management
Corporation, Sterling Investment Partners, BancBoston Capital and Svoboda,
Collins L.L.C., as well as by Wilmar's Chairman, William S. Green, and other
members of management. FleetBoston Financial provided senior and subordinated
debt and Allied Capital provided subordinated debt for the transaction.
Wilmar Industries, based in Moorestown, New Jersey, has 27 distribution centers
across the United States and Canada, and provides same-day delivery of MRO
supplies to the multi-family housing industry, as well as government, healthcare
and hospitality segments. The company will continue to be led by Chairman and
Chief Executive Officer William Green and President Michael Grebe. Mr. Green
said, "We look forward to working with our value-added partners to continue to
build Wilmar as a private, independent entity." Wilmar employs 1,350 and had
revenues of approximately $229 million in 1999. William Sanford, Chief
Financial Officer, remarked, "The partners and principals of Parthenon Capital,
together with our other equity investors, have operating and strategy consulting
backgrounds and we are pleased that this expertise will be available to Wilmar
in the future."
Parthenon Capital is a Boston-based $350 million private equity firm which
assists middle-market companies to attain their Full Potential(TM) by assisting
managers to grow revenues and improve profitability. Ernest Jacquet, Managing
Partner, said, "With the completion of the Wilmar transaction, Parthenon Capital
will have partnered with eleven management teams since Parthenon Investors L.P.
began investing in January 1999. We are pleased the consulting model has met
with so much enthusiasm from middle market business owners and management
teams."
Chase Capital Partners (CCP) is a global private equity partnership with
approximately $15 billion under management. CCP has been a leading provider of
private equity capital since its inception in 1984 and is a diversified investor
with significant interests in most major industries. CCP's primary limited
partner is The Chase Manhattan Corporation, one of the largest bank holding
companies in the United States.
Sterling Investment Partners of Westport, Connecticut is a private equity fund
established to provide growth capital for middle-market companies.
- --------------------------------------------------------------------------------
Forward-looking statements in this news release, if any, are made under the safe
harbor provisions of the Private Securities Reform Act of 1995. Certain
important factors that could cause results to differ materially from those
anticipated by the forward-looking statements are discussed from time to time in
reports filed by the Company with the Securities and Exchange Commission.
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<PAGE>
EXHIBIT B.2
================================================================================
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
----------------------
Purchase of
15% Senior Subordinated Notes
due 2008
and
Warrants to Purchase Shares of Common Stock
================================================================================
<PAGE>
PURCHASE AGREEMENT
TABLE OF CONTENTS/a/
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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
</TABLE>
__________________________________
/a/ The Table of Contents shall not be deemed to be a part of the Purchase
Agreement.
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<TABLE>
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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
</TABLE>
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<TABLE>
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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
</TABLE>
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<TABLE>
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<S> <C>
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
</TABLE>
EXHIBITS
- --------
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
- ---------
-iv-
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PURCHASE AGREEMENT
------------------
May 16, 2000
FLEET CORPORATE FINANCE, INC.
ALLIED CAPITAL CORPORATION
c/o Fleet Corporate Finance, Inc.
100 Federal Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
The undersigned, Wilmar Industries, Inc. (the "Company"), a New Jersey
-------
corporation, and each of the Guarantors listed on the signature pages hereto
(the "Guarantors"), agrees with each purchaser listed above (individually a
----------
"Purchaser" and collectively the "Purchasers") as follows:
- ---------- ----------
SECTION 1. Definitions.
-----------
1.1. Definitions. Except as otherwise specified, the following terms
-----------
used shall have the respective meanings set forth below whenever used in this
Agreement:
"Acceptance Notice" shall have the meaning specified in Section 14
-----------------
hereof.
"Accounts and Accounts Receivable" means, individually and
--------------------------------
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
---
which is a wholly-owned Subsidiary of the Company.
"Acquisition" has the meaning specified in Section 2 hereof.
-----------
"Affiliate" means, with reference to any Person, (i) any other Person
---------
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-
<PAGE>
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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
-----
assigns as Administrative Agent under the Bank Loan Agreement.
"AHYDO Amount" has the meaning specified in Section 9.1 hereof.
------------
"Allied" means Allied Capital Corporation, a Maryland corporation.
------
"Asset Sale" shall have the meaning specified in Section 7.3(g)
----------
hereof.
"Bank Loan Agreement" means the Loan Agreement dated as of May 16,
-------------------
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
-------------------
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
----------
the Bank Loan Documents.
"Board of Directors" means either (i) the board of directors of the
------------------
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
----------------
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
------------
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
--------------------
with GAAP, any expenditure for fixed assets (both tangible and intangible)
including assets being
<PAGE>
-3-
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,
-------------
participations, rights or other equivalents (however designated) of corporate
stock of such Person.
"Capitalized Leases" means all leases that, in accordance with GAAP,
------------------
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
----------------
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 A-
1 or their equivalents by Moody's Investors Service, Inc. or Standard & Poor's
Comstock, 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
------
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
-----------------
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-
<PAGE>
-4-
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
------------------------
hereof.
"Change in Control Payment Date" has the meaning specified in Section
------------------------------
9.3 hereof.
"Closing Date" has the meaning specified in Section 3 hereof.
------------
"Code" means the Internal Revenue Code of 1986 and the rules and
----
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.
----------
"Commission" means the United States Securities and Exchange
----------
Commission.
"Commitment Fees" means the fees payable to the Lenders and the Agent
---------------
under the Bank Loan Documents.
"Common Stock" has the meaning specified in Section 2 hereof.
------------
"Company" has the meaning set forth in the first paragraph to this
-------
Agreement.
"Competitor" means any Person engaged in the business of wholesale
----------
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
------------------------------
ascribed to such terms under GAAP.
"Consolidated Net Working Capital" means, as of any date, with respect
--------------------------------
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
-----
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.
<PAGE>
-5-
"Consolidated Non-Cash Charges" means, as of any date, with respect to
-----------------------------
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
----------------
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
----
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
-------
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.
------------
"Domestic Subsidiaries" means, at any time, each of the direct and
---------------------
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)
--------------------
Management Supply and (iii) One Source.
"EBITDA" means, in relation to the Company and its Subsidiaries on a
------
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-
<PAGE>
-6-
solidated Non-Cash Charges for such period, (vi) transaction expenses incurred
in connection with (a) the acquisition of J.A. Sexauer, 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
-----
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,
---------------
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,
------------------
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.
<PAGE>
-7-
"Equipment" means all machinery, apparatus, equipment, fittings,
---------
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
-----------------
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
-----
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
------------
from time to time, and the rules and regulations of the Commission thereunder.
"Excluded Foreign Subsidiaries" means, collectively, (i) Sexauer Ltd.,
-----------------------------
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
-------------
Agreement.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (i)
---------------------------
EBITDA for such period, minus the aggregate amount of Capital Expenditures
-----
during such period, minus cash taxes on income paid during such period, to (ii)
-----
Total Fixed Charges for such period.
"Fleet" means Fleet Corporate Finance, Inc., a Massachusetts
-----
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-
<PAGE>
-8-
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
---------------
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
-----------------
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
--------------------------
William Green and the Company as in effect on the date hereof.
"Guarantee" has the meaning specified in Section 2 hereof.
---------
"Guarantors" means, collectively, (i) J.A. Sexauer, (ii) Trayco, (iii)
----------
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
-------------------
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
<PAGE>
-9-
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.
<PAGE>
-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.
<PAGE>
-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 William S. Green, Michael J. Grebe and William Sanford,
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) Svoboda, Collins & Company QP, L.P., a Delaware limited partnership, (vii)
Svoboda, Collins & 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.
"J.A. Sexauer" means J.A. Sexauer, 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.
----
<PAGE>
-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 Moody's 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.
<PAGE>
-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
<PAGE>
-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.
---------
<PAGE>
-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 Moody's Investors Service, Inc. or Standard & Poor's
Comstock, 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
<PAGE>
-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.
<PAGE>
-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
---------------------------
William Green 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 William Green 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).
<PAGE>
-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.
<PAGE>
-19-
"Sexauer Dispositions" means the disposition by the Borrower of the
--------------------
two fee owned properties acquired by the Borrower in connection with its
acquisition of Sexauer Ltd. and J.A. Sexauer, together with the improvements and
fixtures thereon.
"Sexauer Ltd." means Sexauer Ltd., a company organized under the laws
-----------
of Ontario, Canada which is a wholly-owned Subsidiary of J.A. Sexauer 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.
<PAGE>
-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.
<PAGE>
-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,
<PAGE>
-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
<PAGE>
-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, Wharton & Garrison, New York, New York or at such other place as shall
agreed upon among the parties hereto.
<PAGE>
-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-
<PAGE>
-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;
<PAGE>
-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),
<PAGE>
-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
<PAGE>
-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.
<PAGE>
-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
<PAGE>
-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
<PAGE>
-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.
<PAGE>
-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,
<PAGE>
-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.
<PAGE>
-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
<PAGE>
-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-
<PAGE>
-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-
<PAGE>
-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-
<PAGE>
-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.
<PAGE>
-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;
<PAGE>
-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
<PAGE>
-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);
<PAGE>
-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
<PAGE>
-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 Sexauer
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
<PAGE>
-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;
<PAGE>
-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.
<PAGE>
-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-
<PAGE>
-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
<PAGE>
-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
<PAGE>
-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
<PAGE>
-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
<PAGE>
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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
<PAGE>
-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-
<PAGE>
-53-
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.
<PAGE>
-54-
(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;
<PAGE>
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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
<PAGE>
-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
<PAGE>
-57-
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 144A UNDER THE ACT, (C) INSIDE THE UNITED
STATES 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
<PAGE>
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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., 303 HARPER DRIVE, MOORESTOWN, NEW JERSEY 08057.
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.
<PAGE>
-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
- -------- -------
<PAGE>
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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
<PAGE>
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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-
<PAGE>
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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-
<PAGE>
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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
<PAGE>
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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
<PAGE>
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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
<PAGE>
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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, 100 Federal Street, Boston, Massachusetts 02110, Attn: Timothy G.
Clifford, Director, facsimile number (617) 434-4929 (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, 400 Atlantic Avenue, Boston,
Massachusetts 02110-3333, Attn: Philip A. Herman, 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
<PAGE>
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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.
<PAGE>
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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
<PAGE>
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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-
<PAGE>
-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 Paul, Weiss, Rifkind, Wharton & Garrison,
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 Cahill Gordon &
Reindel, 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).
<PAGE>
-72-
(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:
<PAGE>
-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
<PAGE>
-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
-----------
<PAGE>
-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 faith gross 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-
<PAGE>
-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.
<PAGE>
-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.
303 Harper Drive
Moorestown, NJ 08057
Attention: William Sanford
Facsimile: (856) 439-8846
with a copy to:
Parthenon Investors, L.P.
200 State Street
Boston, MA 02210
Attention: Drew Sawyer
Facsimile: (617) 478-7010
(b) to Fleet at:
FleetBoston Robertson Stephens Inc.
100 Federal Street
Boston, Massachusetts 02110
Attention: Andrew Fay
Facsimile: (617) 434-4970
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: James J. Clark, Esq.
Facsimile: 212-269-5420
(c) to Allied at:
Allied Capital Corporation
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Michael Grisius
Facsimile: (202) 659-2053
<PAGE>
-78-
with a copy to:
Piper Marbury Rudnick & Wolfe, LLP
1200 19th Street, N.W.
Washington, D.C. 20036
Attention: Anthony H. Rickert, Esq.
Facsimile: (202) 223-2085
(d) to Parthenon at:
Parthenon Capital, Inc.
200 State Street
Boston, MA 02109
Attention: Drew Sawyer
Facsimile: (617) 478-7010
or (e) to the Agent at:
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
Attention: Timothy G. Clifford
Facsimile: (617) 434-4929
with a copy to:
Goulston & Storrs
400 Atlantic Avenue
Boston, Massachusetts 02110-3333
Attention: Philip A. Herman
Facsimile: (617) 574-6595
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
<PAGE>
-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 SUE 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
<PAGE>
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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.
<PAGE>
-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
J.A. SEXAUER, 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:
<PAGE>
-S2-
PARTHENON INVESTORS, L.P.
By:_________________________________
Name:
Title:
<PAGE>
-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:
<PAGE>
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 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES 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
<PAGE>
-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., 303
HARPER DRIVE, MOORESTOWN, NEW JERSEY 08057.
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.
<PAGE>
-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-
<PAGE>
-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:
<TABLE>
<CAPTION>
Redemption
Period Price
------ -----
<S> <C>
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%
</TABLE>
<PAGE>
-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.
<PAGE>
-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.
<PAGE>
-7-
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
Dated:
WILMAR INDUSTRIES, INC.
By:__________________________________
Name:
Title:
Attest:
________________________________
Name:
Title:
<PAGE>
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.
<PAGE>
-2-
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be
duly executed.
[GUARANTORS]
By:_______________________________
Name:
Title:
<PAGE>
[EXHIBIT A-3]
Form of Warrant
<PAGE>
[EXHIBIT B]
Form of Financial Report
<PAGE>
[EXHIBIT C]
Form of Opinion of Company Counsel
<PAGE>
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-
<PAGE>
-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:
<PAGE>
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
<PAGE>
-2-
3. No Event of Default exists on the date hereof, other than
___________________________________________________ __________ [if none, so
state].
Very truly yours,
____________________________
Chief Financial Officer
<PAGE>
Schedule 1.1
Current Investments
<PAGE>
Schedule 5.1
Subsidiaries; Jurisdictions of Organization
<PAGE>
Schedule 5.5
Current Liens
<PAGE>
Schedule 5.10
Current Litigation
<PAGE>
Schedule 5.18(a)
Common and Senior Preferred Stock of Company; Holders
and Amount Issued and Outstanding
<PAGE>
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
<PAGE>
Schedule 5.19
Current Labor Complaints, Disputes and Proceedings
<PAGE>
Schedule 5.20
Certain Transactions
<PAGE>
Schedule 5.22
Current Leases and Assignments or Sublicenses thereof
<PAGE>
Schedule 5.23
Unpermitted Use of Intellectual Property
<PAGE>
Schedule 5.25
Material Contracts
<PAGE>
Schedule 7.1
Liens Securing Debt
<PAGE>
Schedule 7.4
Guarantees
<PAGE>
Schedule 7.9
Permitted Transactions
<PAGE>
Schedule 7.12
Permitted Affiliate Transactions
<PAGE>
EXHIBIT B.3
________________________________________________________________________________
WARRANT AGREEMENT
Between
WILMAR INDUSTRIES, INC.
and
FLEET CORPORATE FINANCE, INC.
and
ALLIED CAPITAL CORPORATION
_________________________
Dated as of May 16, 2000
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Warrant Certificates........................................................... 1
SECTION 2. Execution of Warrant Certificates.............................................. 2
SECTION 3. Registration................................................................... 2
SECTION 4. Transfer and Exchange of Warrants.............................................. 3
SECTION 5. Registration of Transfers and Exchanges........................................ 4
SECTION 6. Terms of Warrants; Exercise of Warrants........................................ 6
SECTION 7. Payment of Taxes............................................................... 9
SECTION 8. Mutilated or Missing Warrant Certificates...................................... 10
SECTION 9. Reservation of Warrant Shares.................................................. 10
SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable............. 11
SECTION 11. Fractional Interests........................................................... 21
SECTION 12. Notices to Warrant Holders..................................................... 21
SECTION 13. Notices to the Company and the Holders......................................... 23
SECTION 14. Supplements and Amendments..................................................... 25
SECTION 15. Sale of the Company............................................................ 25
SECTION 16. Return of Warrants upon Certain Events......................................... 27
SECTION 17. Identity of Transfer Agent..................................................... 27
SECTION 18. Shareholders Agreement......................................................... 27
SECTION 19. Successors..................................................................... 27
SECTION 20. Termination.................................................................... 27
SECTION 21. GOVERNING LAW.................................................................. 28
SECTION 22. Benefits of This Agreement..................................................... 28
SECTION 23. Subordination.................................................................. 28
SECTION 24. Counterparts................................................................... 28
SECTION 25. Headings....................................................................... 28
Exhibit A. Form of Warrant Certificate.................................................... A-1
Exhibit B. Certificate.................................................................... B-1
Exhibit C. Transferee Letter.............................................................. C-1
</TABLE>
-i-
<PAGE>
WARRANT AGREEMENT (the "Agreement"), dated as of May 16, 2000, between
Wilmar Industries, Inc., a New Jersey corporation (together with any successors
and assigns, the "Company"), and Fleet Corporate Finance, Inc. and Allied
Capital Corporation (collectively, the "Initial Holders" or the "Purchasers").
WHEREAS, the Company proposes to issue and sell pursuant to a Purchase
Agreement, dated as of May 16, 2000 (as amended, modified or supplemented from
time to time, the "Purchase Agreement"), among the Company and the Purchasers,
$40,000,000 in aggregate principal amount of the Company's Senior Subordinated
Notes due 2008 (the "Notes"), along with Warrants (the "Warrants" and the
certificates evidencing the Warrants being hereinafter referred to as "Warrant
Certificates") for the purchase of an aggregate of 47,712 shares of the
Company's Common Stock, no par value (the "Common Stock" and the shares of
Common Stock issuable upon exercise of the Warrants being referred to herein as
the "Warrant Shares");
WHEREAS, pursuant to the Purchase Agreement, Warrants to purchase
35,784 Warrant Shares are to be issued to Allied Capital Corporation and
Warrants to purchase 11,928 Warrant Shares are to be issued to Fleet Corporate
Finance, Inc. on the date hereof;
WHEREAS, the holders of Warrants and Warrant Shares shall, from time
to time, have certain rights and obligations with respect thereto as set forth
in the Shareholders Agreement, dated as of May 16, 2000, among the Company and
the Initial Holders and the other parties named therein (as amended, modified or
supplemented from time to time, the "Shareholders Agreement");
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, the Company and the Purchasers hereby agree as follows:
SECTION 1. Warrant Certificates. The Warrant Certificates shall be
--------------------
substantially in the form of Exhibit A hereto.
<PAGE>
-2-
SECTION 2. Execution of Warrant Certificates. Warrant Certificates
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board or its
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer or a Vice President and by its Secretary or an Assistant Secretary under
its corporate seal. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer, a Vice President, Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer, Chief Operating Officer, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be countersigned and delivered or disposed of such person
shall have ceased to hold such office. The seal of the Company may be in the
form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the execution
of this Warrant Agreement any such person was not such officer.
SECTION 3. Registration. The Warrants shall be numbered and shall
------------
be registered on the books of the Company maintained at its address listed in
Section 15 hereof(the "Warrant Register") as they are issued.
The Company may deem and treat the registered holders (the "Holders")
of the Warrant Certificates as the absolute owners thereof (notwithstanding any
notation of ownership or
<PAGE>
-3-
other writing thereon made by anyone) for all purposes, and the Company shall
not be affected by any notice to the contrary.
SECTION 4. Transfer and Exchange of Warrants. The Company shall
---------------------------------
from time to time, subject to the limitations of Section 5 and the limitations
set forth in the Shareholders Agreement, register the transfer of any
outstanding Warrants upon the records to be maintained by it for that purpose,
upon surrender thereof duly endorsed or accompanied (if so required by it) by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Company, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Subject to the terms of this Agreement, each Warrant Certificate may be
exchanged for another certificate or certificates entitling the Holder thereof
to purchase a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle each Holder to purchase. Any Holder
desiring to exchange a Warrant Certificate or Certificates shall make such
request in writing delivered to the Company, and shall surrender, duly endorsed
or accompanied (if so required by the Company) by a written instrument or
instruments of transfer in form satisfactory to the Company, the Warrant
Certificate or Certificates to be so exchanged.
Upon registration of transfer, the Company shall execute and deliver
by certified or first class mail a new Warrant Certificate or Certificates to
the persons entitled thereto. The Warrant Certificates may be exchanged at the
option of the Holder thereof, when surrendered at the office of the Company
maintained for such purpose, which initially will be the Company's office
located at the address listed in Section 15 hereof for another Warrant
Certificate, or other Warrant Certificates of different denominations, of like
tenor and representing in the aggregate the right to purchase a like number of
Warrant Shares.
No service charge shall be made for any exchange or registration of
transfer of Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any stamp or other tax or other governmental charge that is
imposed in connection with any such exchange or registration of transfer.
<PAGE>
-4-
SECTION 5. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Warrants. When Warrants are presented
---------------------------------
to the Company with a request:
(i) to register the transfer of the Warrants; and
(ii) to exchange such Warrants for an equal number of Warrants of other
authorized denominations,
the Company shall register the transfer or make the exchange as requested if its
requirements under this Agreement and the Shareholders Agreement are met;
provided, however, that the Warrants presented or surrendered for registration
- -------- -------
of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form reasonably satisfactory to the Company, duly executed by
the Holder thereof or by such Holder's attorney, duly authorized in
writing; and
(y) in the case of Warrants (the "Restricted Warrants") which
constitute Restricted Securities (as such term is defined in Rule 144(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act")), such
Warrants shall be accompanied, in the sole discretion of the Company, by
the following additional information and documents, as applicable:
(A) if such Restricted Warrant is being delivered to the Company by a
Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (in
substantially the form of Exhibit B hereto); or
(B) if such Restricted Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities
Act, a "QIB") in accordance with Rule 144A under the Securities
Act or pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or Regulation S under the
Securities Act or pursuant to an effective registra-
<PAGE>
-5-
tion statement under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto) and, with
respect to transfers pursuant to Rule 144 or Regulation S, an
opinion of counsel reasonably acceptable to the Company to the
effect that such transfer does not require registration under the
Securities Act;
(C) if such Restricted Warrant is being transferred to an
institutional "accredited investor" within the meaning of
subparagraphs (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under
the Securities Act, delivery of a Certificate of Transfer in the
form of Exhibit C hereto and an opinion of counsel and/or other
information reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act; or
(D) if such Restricted Warrant is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (in substantially
the form of Exhibit B hereto) and an opinion of counsel
reasonably acceptable to the Company to the effect that such
transfer does not require registration under the Securities Act.
(b) Legends.
-------
(i) Except as permitted by the following paragraph (ii), each Warrant
Certificate evidencing the Warrants (and all Warrants issued in
exchange therefor or substitution thereof) shall bear a legend
substantially as set forth in Exhibit A.
(ii) Subject to the limitations contained herein, upon any sale or transfer
of a Warrant pursuant to Rule 144 under the Securities Act or an
effective registration statement under the Securities Act the Company
shall permit the Holder thereof to exchange such Restricted Warrant
for a Warrant that does not bear the first
<PAGE>
-6-
paragraph of the legend set forth in Exhibit A and rescind any related
restriction on the transfer of such Warrant (i) in the case of a sale
or transfer pursuant to Rule 144, after delivery by the Holder thereof
of a certificate to that effect (substantially in the form of Exhibit
B hereto) and accompanied by an opinion of counsel, reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration under the Securities Act or (ii) in the case of a
sale or transfer pursuant to an effective registration statement,
after delivery of evidence of such effective registration statement.
(c) Obligations with Respect to Transfers and Exchanges of Warrants.
---------------------------------------------------------------
(i) To permit registrations of transfers and exchanges in accordance with
the terms of this Agreement and the Shareholders Agreement, the
Company shall execute Warrants.
(ii) All Warrants issued upon any registration, transfer or exchange of
Warrants shall be the valid obligations of the Company, entitled to
the same benefits and obligations under this Agreement and the
Shareholders Agreement as the Warrants surrendered upon the
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Company may deem and treat the person in whose name any
Warrant is registered as the absolute owner of such Warrant, and the
Company shall not be affected by notice to the contrary.
SECTION 6. Terms of Warrants; Exercise of Warrants Subject to the
---------------------------------------
terms of this Agreement, each Warrant Holder shall have the right, which may be
exercised commencing on or after the date hereof and until 5:00 p.m., New York
City time, on the earlier of (x) May 16, 2010 and (y) the Qualified IPO
Effective Date (the "Expiration Date"), to receive from the Company the number
of fully paid and nonassessable Warrant Shares which the Holder may at the time
be entitled to receive
<PAGE>
-7-
on exercise of such Warrants and payment of the Exercise Price (as defined
below) then in effect for such Warrant Shares. "Qualified IPO Effective Date"
means the date on which a public offering and sale of the Common Stock of the
Company consisting of an underwritten primary initial public offering (other
than a public offering pursuant to a registration statement on Form S-8)
pursuant to an effective registration statement filed with the Securities and
Exchange Commission in accordance with the Securities Act and resulting in Net
Proceeds (as defined in the Purchase Agreement) to the Company of at least $40
million is commenced. Subject to the next paragraph of this Section, each
Warrant not exercised prior to the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement and
otherwise shall cease as of such time; provided, however, any Warrants not
-------- -------
exercised prior to the Qualified IPO Effective Date shall be deemed to be
automatically exercised as of such date by the Holder(s) thereof pursuant to the
Cashless Exercise option set forth in the next paragraph of this Section and
such exercise shall be deemed effective as of such date, although such Holder
will not receive the Warrant Shares deliverable upon such Cashless Exercise
until the Warrants are surrendered to the Company as provided in the next
paragraph. No adjustments as to dividends will be made upon exercise of the
Warrants.
The initial price per share at which Warrant Shares shall be
purchasable upon exercise of Warrants (the "Exercise Price") shall be $.001,
subject to adjustment as provided herein. A Warrant may be exercised upon
surrender at the office or agency of the Company maintained for such purpose,
which initially will be the office of the Company located at the address
provided in Section 15 hereof, of the certificate or certificates evidencing the
Warrants to be exercised with the form of election to purchase on the reverse
thereof duly filled in and signed, which signature shall be guaranteed by a
participant in a recognized Signature Guarantee Medallion Program, and upon
payment to the Company of the Exercise Price, as adjusted as herein provided,
for the number of Warrant Shares in respect of which such Warrants are then
exercised and an acknowledgment that (i) such exercise is in compliance with all
federal and state securities laws and (ii) the provisions of the Shareholders
Agreement and this Agreement relating to the Warrant Shares shall remain binding
on the holders of Warrant
<PAGE>
-8-
Shares notwithstanding the exercise of such Warrants. Payment of the Exercise
Price may be made, in the sole discretion of the Holder, in the form of any of
the following: (a) cash or a check or bank draft in New York Clearing House
funds, (b) by the surrender of the applicable Warrant and without the payment of
the Exercise Price in cash, for such number of Warrant Shares equal to the
product of (1) the number of Warrant Shares for which such Warrants are
exercisable with payment in cash of the Exercise Price as of the date of
exercise and (2) the Cashless Exercise Ratio or (c) by any combination of (a)
and (b) above. For purposes of this Agreement, the "Cashless Exercise Ratio"
shall equal a fraction, the numerator of which is the excess of the Current
Market Value of the Common Stock on the date of exercise over the Exercise Price
as of the date of exercise and the denominator of which is the Current Market
Value of the Common Stock on the date of exercise. An exercise of a Warrant in
accordance with the immediately preceding sentences through the surrender of
Warrants and not with cash is herein called a "Cashless Exercise." Upon
surrender of a Warrant Certificate representing more than one Warrant in
connection with the Holder's option to elect a Cashless Exercise, the number of
Warrant Shares deliverable upon a Cashless Exercise shall be equal to the number
of Warrants that the Holder specifies is to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise Ratio. All provisions of this
Agreement shall be applicable with respect to an exercise of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby.
Subject to the provisions of Section 5 hereof and the Shareholders
Agreement, upon such surrender of Warrants and payment of the Exercise Price,
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Holder and in such name or names as the
Warrant Holder may designate a certificate or certificates for the number of
full Warrant Shares issuable upon the exercise of such Warrants together with
cash as provided in Section 11; provided, however, that if any consolidation,
-------- -------
merger or lease or sale of assets and subsequent liquidation of the Company is
proposed to be effected by the Company as described in subsection (j) of Section
10 hereof, or a tender offer or an exchange offer for shares of Common Stock of
the Company shall have been made and not terminated, upon such surrender of
War-
<PAGE>
-9-
rants and payment of the Exercise Price as aforesaid, the Company shall, as soon
as possible, but in any event not later than three days, other than a Saturday
or Sunday or a day on which banking institutions in the State of New York are
not open for business ("Business Day") thereafter, issue and cause to be
delivered the full number of Warrant Shares issuable upon the exercise of such
Warrants in the manner described in this sentence together with cash as provided
in Section 11. Such certificate or certificates shall be deemed to have been
issued and any person so named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part and, in the event that a
certificate evidencing Warrants is exercised in respect of fewer than all of the
Warrant Shares issuable on such exercise at any time prior to the date of
expiration of the Warrants, a new certificate evidencing the remaining Warrant
or Warrants will be issued, and the Company will deliver the required new
Warrant Certificate or Certificates pursuant to the provisions of this Section 6
and of Section 2 hereof.
The Company shall keep copies of this Agreement and the Shareholders
Agreement available for inspection by the Holders during normal business hours
at its office.
SECTION 7. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
-------- -------
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered Holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
<PAGE>
-10-
SECTION 8. Mutilated or Missing Warrant Certificates. In case any of
-----------------------------------------
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant Certificate and a bond or indemnity,
if requested, also satisfactory to them. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 9. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
and every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of any of the rights of purchase aforesaid (the
"Transfer Agent") will be authorized and directed at all times to reserve such
number of authorized shares as shall be required for such purpose. The Company
will keep a copy of this Agreement on file with the Transfer Agent and with
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each Holder pursuant
to Section 12 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon payment of the Exercise Price therefor and
issue, be validly authorized and issued, fully paid, nonassessable, free of
preemptive
<PAGE>
-11-
rights and free from all taxes, liens, charges and security interests with
respect to the issuance thereof. The Company will take no action to increase the
par value of the Common Stock to an amount in excess of the Exercise Price, and
the Company will not enter into any agreements inconsistent in any material
respect with the rights of Holders hereunder. The Company will use its
commercially reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Agreement.
SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares
---------------------------------------------------------
Issuable. The Exercise Price and the number of shares of Common Stock issuable
- --------
upon the exercise of each Warrant (the "Exercise Rate") is subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
10.
(a) Adjustment for Change in Capital Stock. If the Company:
--------------------------------------
(1) pays a dividend or makes a distribution on its Common Stock, in
either case payable in shares of its Common Stock or other capital stock of
the Company; or
(2) subdivides, combines or reclassifies its outstanding shares of
Common Stock;
then the Exercise Rate in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which such Holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action and the
Exercise Price in effect immediately prior to such action shall be adjusted to a
price determined by multiplying the Exercise Price in effect immediately prior
to such action by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding before giving effect to such action and the
denominator of which shall be the number of shares of Common Stock and/or such
other capital stock out-
<PAGE>
-12-
standing referred to in the foregoing clause (a)(1) after giving effect to such
action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the board
of directors of the Company shall determine the allocation of the adjusted
Exercise Price between the classes of capital stock. After such allocation, the
exercise privilege and the Exercise Price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section 10.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Certain Issuances of Common Stock. If the Company
------------------------------------------------
issues, sells or distributes to any person shares of its Common Stock or any
rights, options (other than Permitted Options) or warrants entitling any person
to purchase shares of Common Stock, or securities convertible into or
exchangeable for Common Stock, in each case, at a price per share less than the
Current Market Value on the date of such issuance, sale or distribution (the
"Time of Determination"), the Exercise Rate shall be adjusted in accordance with
the formula:
E' = E x O + N
---------
O + N x P
-----
M
and the Exercise Price shall be adjusted in accordance with the following
formula:
EP' = EP x E
--
E'
where:
<PAGE>
-13-
E' = the adjusted Exercise Rate.
E = the Exercise Rate immediately prior to the Time of
Determination for any such issuance, sale or distribution.
EP' = the adjusted Exercise Price.
EP = the Exercise Price immediately prior to the Time of
Determination for any such issuance, sale or distribution.
O = the number of Fully Diluted Shares (as defined below)
outstanding immediately prior to the Time of Determination
for any such issuance, sale or distribution.
N = the number of additional shares of Common Stock issued, sold
or issuable upon exercise of such rights, options or
warrants.
P = the per share price received and receivable by the Company
in the case of any issuance or sale of Common Stock or
rights, options or warrants inclusive of the exercise price
per share of Common Stock payable upon exercise of such
rights, options or warrants.
M = the Current Market Value per share of Common Stock on the
Time of Determination for any such issuance, sale or
distribution.
For purposes of this Section 10 the term "Fully Diluted Shares" shall
mean (i) the shares of Common Stock outstanding as of a specified date, and (ii)
the shares of Common Stock into or for which rights, options, warrants or other
securities outstanding as of such date are exercisable or convertible (other
than the Warrants), assuming in each case, without duplication, the issuance,
conversion and exercise of all Permitted Options, irrespective of whether on
such date such Permitted Options have been issued or, if issued, are exercisable
or convertible. "Permitted Options" means all securities issued or issuable
under the Wilmar Industries 2000 Stock Option Plan; provided that such Permitted
--------
Options may not
<PAGE>
-14-
exceed in the aggregate 5% of the Fully Diluted Shares calculated as of the date
hereof after the issuance of the Warrants.
The adjustments shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
relevant Time of Determination. Notwithstanding the foregoing, the Exercise
Rate and the Exercise Price shall not be subject to adjustment in connection
with (i) the issuance of any shares of Common Stock upon exercise of any such
rights, options or warrants which have previously been the subject of an
adjustment under this Agreement for which the required adjustment has been made,
(ii) any exercise of the Warrants and (iii) the issuance, conversion or exercise
of Permitted Options. If at the end of the period during which any such rights,
options or warrants are exercisable, not all rights, options or warrants shall
have been exercised, the Warrant shall be immediately readjusted to what it
would have been if "N" in each of the above formulas had been the number of
shares actually issued.
(c) Adjustment for Other Distribution. If the Company distributes as
---------------------------------
a dividend to any holder of its Common Stock or any Affiliate of such holder (i)
any evidences of indebtedness of the Company or any of its subsidiaries, (ii)
any assets of the Company or any of its subsidiaries (other than cash dividends
or other cash distributions that do not constitute an Extraordinary Cash
Dividend), or (iii) any rights, options or warrants to acquire any of the
foregoing or to acquire any other securities of the Company, the Exercise Rate
shall be adjusted in accordance with the formula:
E' = E x M
------
M - F
and the Exercise Price shall be decreased (but not increased) in accordance with
the following formula:
EP' = EP x E
-
E'
where:
E' = the adjusted Exercise Rate.
<PAGE>
-15-
E = the current Exercise Rate on the record date referred to in
this paragraph (c) below.
EP' = the adjusted Exercise Price.
EP = the current Exercise Price on the record date referred to in
this paragraph (c) below.
M = the Current Market Value per share of Common Stock on the
record date referred to in this paragraph (c) below.
F = the fair market value (as determined in good faith by the
Company's board of directors) on the record date referred to
in this paragraph (c) below of the indebtedness, assets,
rights, options or warrants distributable in respect of one
share of Common Stock.
The adjustments shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
If any adjustment is made pursuant to clause (iii) above of this subsection (c)
as a result of the issuance of rights, options or warrants and at the end of the
period during which any such rights, options or warrants are exercisable, not
all such rights, options or warrants shall have been exercised, the Warrant
shall be immediately readjusted as if "F" in the above formula was the fair
market value on the record date of the indebtedness or assets actually
distributed upon exercise of such rights, options or warrants divided by the
number of shares of Common Stock outstanding on the record date.
Notwithstanding anything to the contrary contained in this subsection (c), if
"M-F" in the above formula is less than $1.00 (or is a negative number) then in
lieu of the adjustment otherwise required by this subsection (c), the Company
may elect to distribute to the holders of the Warrants, upon exercise thereof,
the evidences of indebtedness, assets, rights, options or warrants which would
have been distributed to such holders had such warrants been exercised
immediately prior to the record date for such distribution.
<PAGE>
-16-
This subsection does not apply to rights, options or warrants referred
to in subsection (b) of this Section 10.
(d) Current Market Value. "Current Market Value" per share of Common
--------------------
Stock or of any other security (herein collectively referred to as a "Security")
at any date shall be:
(1) if the Security is not registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the value of the Security
shall be determined by the Board of Directors' good faith determination of
the fair value of such Security as of the applicable date, factoring in the
non-marketability or otherwise of such security but not any minority
discount with respect thereto; provided that, if any Holder disagrees with
--------
such determination, it may request, upon notice to the Company within five
(5) days of the Board of Directors' determination, the appointment of an
Independent Financial Expert, and within ten (10) days of such request, the
Company and the Holders shall agree on an Independent Financial Expert,
whose determination shall be binding on all parties, or
(2) if the Security is registered under the Exchange Act, the average
of the daily closing bid prices for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date or, if the Security has been registered under the
Exchange Act for less than 15 consecutive Business Days before such date,
then the average of the daily closing bid prices (as defined below) for all
of the Business Days before such date for which daily closing bid prices
are available. If the closing bid price is not determinable for at least
10 Business Days in such period, the Current Market Value of the Security
shall be determined as if the Security was not registered under the
Exchange Act.
The "closing bid price" for any Security on each Business Day means:
(A) if such Security is listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day on the principal exchange
on which such Security is traded, or if no sale takes place on such day, the
<PAGE>
-17-
average of the closing bid and asked prices on such day, (B) if such Security is
not then listed or admitted to trading on any securities exchange, the last
reported sale price on such day, or if there is no such last reported sale price
on such day, the average of the closing bid and the asked prices on such day, as
reported by a reputable quotation source designated by the Company or (C) if
neither clause (A) nor (B) is applicable, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation service,
or a newspaper of general circulation in the Borough of Manhattan, City of New
York, customarily published on each Business Day, designated by the Company. If
there are no such prices on a Business Day, then the market price shall not be
determinable for such Business Day.
"Independent Financial Expert" shall mean any nationally recognized
investment banking firm reasonably acceptable to the Company and the Holders (i)
that does not (and whose directors, officers, employees and Affiliates do not)
have a direct or indirect material financial interest in the Company, (ii) that
has not been, and, at the time it is called upon to serve as an Independent
Financial Expert under this Agreement is not (and none of whose directors,
officers, employees or Affiliates is) a promoter, director or officer of the
Company, (iii) that has not been retained by the Company for any purpose, other
than to perform an equity valuation, within the preceding twelve months, (iv)
that has not been retained by the Company or any of its Affiliates for any
purpose within the preceding twelve months, and (v) that, in the reasonable
judgment of the board of directors of the Company (certified by a board
resolution), is otherwise qualified to serve as an independent financial
advisor. The fees and expenses of the Independent Financial Expert shall be
paid 50% by the Company and 50% by the Holders.
"Affiliate" of any specified person means any other person which
directly or indirectly through one or more intermediaries controls or is
controlled by, or is under common control with, such specified person. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any person, means the possession, directly or indirectly, of the
power to direct or cause
<PAGE>
-18-
the direction of the management and policies of such person, whether through the
ownership of voting securities, by agreement or otherwise.
"Extraordinary Cash Dividend" means any cash dividends with respect to
the Common Stock the aggregate amount of which in any fiscal year exceeds 5.0%
of the net income of the Company and its subsidiaries for the fiscal year
immediately preceding the payment of such dividend.
(e) When De Minimis Adjustment May Be Deferred. No adjustment in the
------------------------------------------
Exercise Rate or Exercise Price need be made unless the adjustment would require
an increase or decrease of at least 1% in the Exercise Rate. Notwithstanding
the foregoing, any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment, provided that no such
adjustment shall be deferred beyond the date on which a Warrant is exercised.
All calculations under this Section 10 shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(f) When No Adjustment Required. If an adjustment is made upon the
---------------------------
establishment of a record date for a distribution subject to subsections (a),
(b) or (c) hereof and such distribution is subsequently canceled, the Exercise
Rate and Exercise Price then in effect shall be readjusted, effective as of the
date when the board of directors determines to cancel such distribution, to that
which would have been in effect if such record date had not been fixed. If an
adjustment would be required under two or more of paragraphs (a), (b) and (c),
such adjustments will be determined without duplication.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(g) Notice of Adjustment. Whenever the Exercise Rate or Exercise
--------------------
Price is adjusted, the Company shall provide the notices required by Section 12
hereof.
<PAGE>
-19-
(h) Minimum Exercise Price. Notwithstanding anything to the contrary
----------------------
contained in this Agreement, if the Exercise Price, as adjusted pursuant to this
Agreement (other than this Section 10(h)), shall be less than the aggregate par
values of the related Warrant Shares, then such Exercise Price, as so adjusted,
for all purposes of this Agreement, shall be an amount equal to the aggregate
par value of such related Warrant Shares.
(i) When Issuance or Payment May Be Deferred. In any case in which
----------------------------------------
this Section 10 shall require that an adjustment in the Exercise Rate or
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to the
Holder of any Warrant exercised after such record date the Warrant Shares and
other capital stock of the Company, if any, issuable upon such exercise over and
above the Warrant Shares and other capital stock of the Company, if any,
issuable upon such exercise on the basis of the Exercise Rate prior to such
adjustment, and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 11; provided, however, that the Company
-------- -------
shall deliver, at its own expense, to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(j) Reorganizations. In case of any capital reorganization, other
---------------
than in the cases referred to in Sections 10(a), (b) or (c) hereof, or the
consolidation or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the continuing
corporation and which does not result in any reclassification of the outstanding
shares of Common Stock into shares of other stock or other securities or
property) (collectively such actions being hereinafter referred to as
"Reorganizations"), or the sale of the property of the Company as an entirety or
substantially as an entirety, there shall thereafter be deliverable upon
exercise of any Warrant (in lieu of the number of shares of Common Stock
theretofore deliverable) the number of shares of stock or other securities or
property, if any, to which a holder of the number of shares of Common Stock that
would otherwise have been deliverable upon the exercise of such
<PAGE>
-20-
Warrant would have been entitled upon such Reorganization or sale as if such
Warrant had been exercised in full (and for all purposes the Warrant shall be
deemed to have been exercised in full) immediately prior as to such
Reorganization.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization shall (i) expressly
assume, by a supplemental warrant agreement or other acknowledgment executed and
delivered to the Holder, the obligation to deliver to each such Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase and (ii) to the extent that
other holders of Common Stock of the Company have received similar rights from
the successor corporation, enter into an agreement providing to the Holders
rights and benefits substantially similar to those enjoyed by the Holders under
the Shareholders Agreement.
The foregoing provisions of this Section 10(j) shall apply to
successive Reorganization transactions.
(k) Form of Warrants. Irrespective of any adjustments in the number
----------------
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(l) Miscellaneous. For purpose of this Section 10 the term "shares
------------- ------
of Common Stock" shall mean shares now or hereafter authorized of any class of
- ---------------
common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount. In the event that
at any time, as a result of an adjustment made pursuant to this Section 10, the
Holders of Warrants shall become entitled to purchase any securities of the
Company other than, or in addition to, shares of Common Stock, thereafter the
number or amount of such other securities so purchasable upon exercise of each
Warrant shall be subject to adjustment from time to time in a manner and on
terms as
<PAGE>
-21-
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in subsections (a) through (k) of this Section 10, inclusive,
and the provisions of Sections 6, 7, 9 and 11 with respect to the Warrant Shares
or the Common Stock shall apply on like terms to any such other securities.
SECTION 11. Fractional Interests. The Company shall not be required
--------------------
to issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 11,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the excess of the value (as
determined by the Board of Directors in good faith) of a Warrant Share over the
Exercise Price on the day immediately preceding the date the Warrant is
presented for exercise, multiplied by such fraction.
SECTION 12. Notices to Warrant Holders. Upon any adjustment pursuant
--------------------------
to Section 10 hereof, the Company shall, at its own expense, within 10 days
after any such adjustment, mail by first class mail, postage prepaid, to each
Holder a notice of such adjustment(s), setting forth in reasonable detail (i)
the number of Warrant Shares purchasable upon the exercise of each Warrant and
the Exercise Price of such Warrant after such adjustment(s), (ii) a brief
statement of the facts requiring such adjustment(s) and (iii) the computation by
which such adjustment(s) was made. Where appropriate, such notice may be given
in advance and included as a part of the notice required under the other
provisions of this Section 12.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of capital stock of the Company or of any other subscription rights
or warrants; or
<PAGE>
-22-
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets; or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of capital stock of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall mail, at its own expense, to each of the registered
holders of the Warrant Certificates at his or its address appearing on the
Warrant Register, at least 20 days (or 10 days in any case specified in clauses
(a) or (b) above) prior to the applicable record date hereinafter specified, or
the date of the event in the case of events for which there is no record date,
by first-class mail, postage prepaid, a written notice stating (i) the date as
of which the holders of record of shares of Common Stock to be entitled to
receive any such rights, options, warrants or distribution are to be determined,
or (ii) the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure by the Company to give such
notice or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
<PAGE>
-23-
The Company shall give to each Holder prompt written notice of any
determination to make a distribution or dividend to the holders of any class of
its Common Stock of any assets (including cash), debt securities, preferred
stock, or any rights or warrants to purchase debt securities, preferred stock,
assets or other securities of the Company, which notice shall state the nature
and amount of such planned dividend or distribution and the record date
therefor, and shall be received by the Holders at least 20 days prior to such
record date therefor.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of directors of the Company or any other matter, or
any rights whatsoever as shareholders of the Company.
In all cases, the text of any notice to Holders provided pursuant to
this Section shall be prepared by the Company.
SECTION 13. Notices to the Company and the Holders. Any notice or
--------------------------------------
demand authorized by this Agreement to be given or made by any Holder to or on
the Company shall be sufficiently given or made when received at the office of
the Company expressly designated by the Company as its office for purposes of
this Agreement, as follows:
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
Attention: William Sanford
Fax Number: (856) 439-8846
<PAGE>
-24-
with a copy to:
Parthenon Investors, L.P.
c/o Parthenon Capital, Inc.
200 State Street
Boston, Massachusetts 02210
Attention: Drew Sawyer
Fax Number: (617) 478-7010
Any notice pursuant to this Agreement to be given by the Company to
the Holders shall be sufficiently given when received by such Holder at the
address appearing below (until the Company is otherwise notified in accordance
with this Section 15 by such Holder).
(a) To Fleet at: FleetBoston Robertson Stephens Inc.
100 Federal Street
Boston, Massachusetts 02110
Attention: Andrew T. Fay
Fax Number: (617) 434-4970
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: James J. Clark, Esq.
Fax Number: 212-269-5420
(b) To Allied Capital Corporation at:
Allied Capital Corporation
1919 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Michael Grisius
Fax Number: (202) 659-2053
<PAGE>
-25-
with a copy to:
Piper Marbury Rudnick & Wolfe, LLP
1200 19th Street, N.W.
Washington, D.C. 20036
Attention: Anthony H. Rickert, Esq.
Facsimile: (202) 223-2085
SECTION 14. Supplements and Amendments. The Company may from time to
--------------------------
time supplement or amend this Agreement without the approval of any holders of
Warrants in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and all other supplements or amendments, except those that have a material
adverse effect on the interests of any holder of Warrants. Any amendment or
supplement to this Agreement that has a material adverse effect on the interests
of holders shall require the written consent of registered holders of a majority
of the then outstanding Warrants. Notwithstanding the foregoing, the consent of
each holder of a Warrant affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (not including
adjustments contemplated hereunder).
SECTION 15. Sale of the Company.
-------------------
(a) If the Board of Directors of the Company and holders of a
majority of the shares of Common Stock (voting as a single class) then
outstanding approve a Sale of the Company (an "Approved Sale"), each holder of
-------------
Warrants and Warrant Shares shall vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as a (i) merger
or consolidation, each holder of Warrant Shares shall waive any dissenters'
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Warrant Shares shall agree
to sell all of his Warrant Shares and rights to acquire Warrant Shares on the
terms and conditions approved by the Board and
<PAGE>
-26-
the holders of a majority of the Common Stock (voting as a single class) then
outstanding. Each holder of Warrants and Warrant Shares shall take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
requested by the Company.
(b) The obligations of the holders of Warrants and Warrant Shares
with respect to the Approved Sale of the Company are subject to the satisfaction
of the following conditions: (i) upon the consummation of the Approved Sale,
each holder of Common Stock participating in such sale shall receive the same
form of consideration and the same amount of consideration per share; (ii) if
any holders of a class of Common Stock are given an option as to the form and
amount of consideration to be received, each holder of such class of Common
Stock shall be given the same option; and (iii) each holder of then currently
exercisable rights to acquire shares of a class of Common Stock under this
Warrant shall be given an opportunity to either (A) exercise such rights prior
to the consummation of the Approved Sale and participate in such sale as holders
of such class of Common Stock or (B) upon the consummation of the Approved Sale,
receive in exchange for such rights consideration equal to the amount determined
by multiplying (1) the same amount of consideration per share of a class of
Common Stock received by holders of such class of Common Stock in connection
with the Approved Sale less the exercise price per share of such class of Common
Stock of such rights to acquire such class of Common Stock by (2) the number of
shares of such class of Common Stock represented by such rights.
For purposes hereof, "Sale of the Company" means any transaction or
series of transactions pursuant to which any person(s) or entity(ies) (including
any Affiliate of Parthenon), other than Parthenon and the Investors (as such
terms are defined in the Shareholders Agreement as in effect on the date
hereof), in the aggregate acquire(s) (i) capital stock of the Company possessing
the voting power (other than voting rights accruing only in the event of a
default or breach) to elect a majority of the Company's board of directors
(whether by merger, consolidation, reorganization, combination, sale or transfer
of the Company's capital stock, shareholder or voting agreement, proxy, power of
attorney or otherwise) or (ii) all or substantially all of the Company's assets
determined on a
<PAGE>
-27-
consolidated basis. Notwithstanding this Section 15(b), any transaction with an
Affiliate of Parthenon must be on terms that are no less favorable to the
Company than those that could reasonably be obtained in a comparable transaction
in arms-length dealings with an unrelated third party.
SECTION 16. Return of Warrants upon Certain Events. In the event
--------------------------------------
that within eighteen months of the date hereof, the Notes are refinanced with a
high yield securities offering for an aggregate amount of $125.0 million or
greater in which FleetBoston Robertson Stephens Inc. serves as the sole lead
manager, Fleet Corporate Finance, Inc. agrees to return Warrants to purchase
11,928 Warrant Shares and Allied Capital Corporation agrees to return Warrants
to purchase 11,928 Warrant Shares, subject to adjustment in accordance with
Section 10.
SECTION 17. Identity of Transfer Agent. Forthwith upon the
--------------------------
appointment of any Transfer Agent for the Common Stock, or any other shares of
the Company's capital stock issuable upon the exercise of the Warrants, the
Company shall promptly mail to each Holder of Warrants a statement setting forth
the name and address of such Transfer Agent.
SECTION 18. Shareholders Agreement. The Holders and the holders of
----------------------
shares of Common Stock issuable upon exercise of the Warrants shall be entitled
to all of certain benefits, and subject to all of the obligations, under the
Shareholders Agreement, in connection with the Common Stock to be issued in
connection with the exercise of the Warrants, to the extent provided therein and
herein.
SECTION 19. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or any holder of Warrants shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 20. Termination. This Agreement shall terminate at 5:00
-----------
p.m. New York City time on May 16, 2010. Notwithstanding the foregoing, this
Agreement will terminate on any earlier date if all Warrants have been exercised
or redeemed pursuant to this Agreement.
<PAGE>
-28-
SECTION 21. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT
-------------
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO THE CONFLICT OF LAW
RULES THEREOF.
SECTION 22. Benefits of This Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company
and the registered Holders of the Warrant Certificates any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company and the registered Holders of the
Warrant Certificates.
SECTION 23. Subordination. All claims of the Holders under this
-------------
Agreement shall be subordinated to the Senior Debt to the same extent which the
Notes are Subordinated to the Senior Debt pursuant to Section 12 of the Purchase
Agreement.
SECTION 24. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 25. Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
WILMAR INDUSTRIES, INC.
By: ____________________________________
Name:
Title:
FLEET CORPORATE FINANCE, INC.
By: ____________________________________
Name:
Title:
ALLIED CAPITAL CORPORATION
By: ____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
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 144A UNDER THE ACT, (C) INSIDE THE
UNITED STATES 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 THREE 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
REQUIRE-
A-1
<PAGE>
MENTS 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.
THIS SECURITY IS ALSO SUBJECT TO THE TERMS OF A SHAREHOLDERS
AGREEMENT, DATED AS OF May 16, 2000 AS AMENDED, SUPPLEMENTED OR MODIFIED AMONG
WILMAR INDUSTRIES, INC. AND THE OTHER PARTIES NAMED THEREIN.
A-2
<PAGE>
EXERCISABLE ON OR AFTER THE ISSUE DATE
AND ON OR BEFORE MAY 16, 2010
No. 1 [ ] Warrants
Warrant Certificate
WILMAR INDUSTRIES, INC.
This Warrant Certificate certifies that [
], or registered assigns, is the registered holder of [ ] Warrants
(the "Warrants") to purchase shares of Common Stock (the "Common Stock") of
Wilmar Industries, Inc., a New Jersey corporation (the "Company"). Each Warrant
entitles the holder upon exercise to receive from the Company on or after the
date hereof and on or before 5:00 p.m. New York City Time on the earlier of May
16, 2010 and the Qualified IPO Effective Date (or earlier, as specified in the
Warrant Agreement), one fully paid and nonassessable share of Common Stock (a
"Warrant Share") at the initial exercise price (the "Exercise Price") of $.001
payable in lawful money of the United States of America upon surrender of this
Warrant Certificate and payment of the Exercise Price or pursuant to the
Cashless Exercise provision in the Warrant Agreement at the Company's office,
subject only to the conditions set forth herein, in the Shareholders Agreement
and in the Warrant Agreement. The Exercise Price and the Exercise Rate are
subject to adjustment upon the occurrence of certain events as set forth in the
Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City Time, on
the earlier of May 16, 2010 or the Qualified IPO Effective Date and to the
extent not exercised by such time such Warrants shall become void.
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York. Capitalized terms used herein
without definition have the meanings specified in the Warrant Agreement between
the Company, Fleet Corporate Finance, Inc., and Allied Capital Corporation, as
purchasers.
A-3
<PAGE>
IN WITNESS WHEREOF, Wilmar Industries, Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
each by a facsimile of his signature.
Dated:
WILMAR INDUSTRIES, INC.
By:_____________________________________
Chief Executive Officer
By:_____________________________________
Secretary
A-4
<PAGE>
[Form of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants entitling the holder on exercise to receive [
] shares of Common Stock of the Company (the "Common Stock"), no par value, and
are issued or to be issued pursuant to a Warrant Agreement dated as of May 16,
2000 (as amended, modified or supplemented, the "Warrant Agreement"), duly
executed and delivered by the Company to the Initial Holders, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company.
Warrants may be exercised at any time commencing on or after the date
hereof and on or before 5:00 p.m., New York City time, on the earlier of May 16,
2010 and the Qualified IPO Effective Date (as defined in the Warrant Agreement)
(the "Expiration Date"). The holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate, with the
form of election to purchase set forth hereon properly completed and executed,
together with payment of the Exercise Price in cash at the office of the Company
or pursuant to the Cashless Exercise provision of the Warrant Agreement. In the
event that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Common Stock issuable upon exercise of
this Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrants set forth on the face hereof may, subject to
certain conditions, be adjusted. No fractions of a share of Common Stock will
be issued upon the exercise of any Warrant, but the Company will pay the cash
value thereof determined as provided in the Warrant Agreement.
A-5
<PAGE>
The holders of the Warrants are entitled to certain rights (which
include, but are not limited to, certain piggyback registration rights) and
subject to certain obligations with respect to the Warrants and the Common Stock
purchasable upon exercise thereof as set forth in the Shareholders Agreement (as
amended, modified or supplemented, the "Shareholders Agreement"), dated as of
May 16, 2000, between the Company and the parties named therein.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement and
the Shareholders Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
Notwithstanding anything contained herein to the contrary to the
extent of any inconsistency between the Warrant Agreement and this Warrant, the
Warrant Agreement controls.
A-6
<PAGE>
[Form of Election to Purchase]
(To Be Executed upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____ shares of Common Stock
and herewith (i) tenders payment for such shares to the order of Wilmar
Industries, Inc. (the "Company") in the amount of $_____ or (ii) surrenders ____
Warrants exercisable for _____ shares of Common Stock pursuant to a Cashless
Exercise (select one), in each case, in accordance with the terms hereof. The
undersigned requests that a certificate for such shares be registered in the
name of ______________, whose address is __________ and that such shares be
delivered to _________ whose address is ___________. If said number of shares
is less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of such shares be registered in the name of ___________, whose address
is ________, and that such Warrant Certificate be delivered to ___________,
whose address is ________________. The undersigned acknowledges that the shares
of Common Stock to be received may be subject to the terms of the Shareholders
Agreement dated May 16, 2000 as amended, modified or supplemented from time to
time, among the Company and the parties named therein.
Signature:
Date:
Signature Guaranteed:
A-7
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Wilmar Industries,
Inc.
This Certificate relates to ____ Warrants held by ______ (the
"Transferor").
The Transferor has requested the Company by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request, the Transferor does hereby certify
that Transferor is familiar with the Warrant Agreement (the "Agreement")
relating to the Warrants and the restrictions on transfers thereof as provided
in Section 6 of such Agreement, and that the transfer of this Warrant requested
hereby does not require registration under the Securities Act (as defined below)
because[*]:
[_] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 6(a)(y)(A) or Section 6(d)(i)(A) of
the Agreement).
[_] Such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")), in reliance on Rule 144A or in accordance with Regulation S
under the 1933 Act. If such transfer is in accordance with Regulation S, an
opinion of counsel, reasonably satisfactory to the Company, to the effect that
such transfer does not require registration under the Securities Act accompanies
this Certificate.
[_] Such Warrant is being transferred in accordance with Rule 144
under the Securities Act. An opinion of counsel, reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act accompanies this Certificate.
[_] Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration re-
B-1
<PAGE>
quirements of the Securities Act, other than Rule 144A or Rule 144 or Regulation
S under the Securities Act. An opinion of counsel, reasonably satisfactory to
the Company, to the effect that such transfer does not require registration
under the Securities Act accompanies this Certificate.
The Transferor hereby also acknowledges that (i) such exercise is in
compliance with all federal and state securities laws and with the terms of the
Shareholders Agreement dated May 16, 2000 as amended, modified or supplemented,
among Wilmar Industries, Inc. and the parties named therein and (ii) the
provisions of this Warrant relating to the Warrant Shares shall remain binding
on the holders of Warrant Shares notwithstanding the exercise of this Warrant.
______________________________
[INSERT NAME OF TRANSFEROR]
By:___________________________
Date: _____________
*Check applicable box.
B-2
<PAGE>
EXHIBIT C
Transferee Letter of Representation
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, NJ 08057
Ladies and Gentlemen:
In connection with our proposed purchase of Warrants to purchase
Common Stock (the "Securities") of Wilmar Industries, Inc. (the "Company"), we
confirm that:
1. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Warrant
Agreement dated as of May 16, 2000 relating to the Securities as well as in
the Shareholders Agreement dated May 16, 2000 among the Company and the
parties named therein, in each case as amended, modified or supplemented
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the Securities have not been registered under
the Securities Act, and that the Securities may not be offered or sold
except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities within two years after the
original issuance of the Securities, we will do so only (A) to the Company
or any subsidiary thereof, (B) inside the United States to a "qualified
institutional buyer" in compliance with Rule 144A under the Securities Act,
(C) inside the United States to an "institutional accredited investor" (as
defined below) that, prior to such transfer, furnishes to you a signed
letter substantially in the form of this letter, (D) outside the United
States to a foreign person in compliance with Rule 904 of Regulation S
under the Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant
C-1
<PAGE>
to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Securities
from us a notice advising such purchaser that resales of the Securities are
restricted as stated herein.
3. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Company such certifications, legal
opinions and other information as the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Securities purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Securities purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
The Company is entitled to rely upon this letter and is irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
_________________________________
(Name of Purchaser)
By:______________________________
Date:____________________________
C-2
<PAGE>
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:______________________________
Address:___________________________
Taxpayer ID Number:________________
C-3
<PAGE>
EXHIBIT B.1
REVOLVING CREDIT AND TERM
LOAN AGREEMENT
WILMAR INDUSTRIES, INC.
Dated as of May 16, 2000
____________
FLEET NATIONAL BANK
AND
OTHER LENDING INSTITUTIONS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
AND
FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT
AND
GMAC BUSINESS CREDIT, LLC, AS DOCUMENTATION AGENT
AND
FIRST UNION NATIONAL BANK, AS SYNDICATION AGENT
AND
FLEETBOSTON ROBERTSON STEPHENS INC., AS ARRANGER
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
SECTION I - DEFINITIONS
1.1 Definitions................................................. 1
1.2 Terms of General Application................................ 29
SECTION II - DESCRIPTION OF CREDIT
2.1 The Loans................................................... 31
2.2 The Notes................................................... 34
2.3 Conversion.................................................. 35
2.4 Notice and Manner of Borrowing, Continuation or
Conversion of Loans..................................... 35
2.5 Commitment Fee.............................................. 36
2.6 Reserved.................................................... 36
2.7 Fee Letter.................................................. 37
2.8 Reduction of Revolving Credit Commitment.................... 37
2.9 Duration of Interest Periods................................ 37
2.10 Interest Rates and Payments of Interest..................... 37
2.11 Changed Circumstances....................................... 39
2.11A Indemnity................................................... 41
2.12 Capital Requirements........................................ 42
2.12A Taxes....................................................... 42
2.13 Payments and Prepayments of the Loans....................... 45
2.14 Method of Payment........................................... 50
2.15 Default Rate Interest, Etc.................................. 51
2.16 Reserved.................................................... 51
2.17 Computation of Interest and Fees; Maximum Interest.......... 51
2.18 Letters of Credit........................................... 51
2.18A Notice and Reports.......................................... 52
2.18B Reimbursement............................................... 52
2.19 Letter of Credit Fees....................................... 53
2.20 Interdependence of Borrower Affiliated Group................ 53
SECTION III - CONDITIONS OF LOAN
3.1 Conditions Precedent to Term Loan A, Term Loan B,
Initial Revolving Loan and Initial Letter of Credit..... 54
3.2 Conditions Precedent to all Loans and Letters of Credit..... 59
</TABLE>
-i-
<PAGE>
SECTION IV - REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
4.1 Organization and Qualification............................. 60
4.2 Organizational Authority................................... 60
4.3 Valid Obligations.......................................... 61
4.4 Consents or Approvals...................................... 61
4.5 Title to Properties; Absence of Encumbrances............... 61
4.6 Reserved................................................... 62
4.7 Financial Statements....................................... 62
4.8 Changes.................................................... 63
4.9 Defaults................................................... 63
4.10 Taxes...................................................... 63
4.11 Litigation................................................. 63
4.12 Subsidiaries............................................... 63
4.13 Investment Company Act..................................... 63
4.14 Compliance with ERISA...................................... 64
4.15 Environmental Matters...................................... 64
4.16 Disclosure................................................. 64
4.17 Solvency................................................... 65
4.18 Compliance with Statutes, Etc.............................. 65
4.19 Capitalization............................................. 65
4.20 Labor Relations............................................ 65
4.21 Certain Transactions....................................... 66
4.22 Restrictions on the Borrower Affiliated Group.............. 66
4.23 Leases..................................................... 66
4.24 Franchises, Patents, Copyrights, Etc....................... 67
4.25 Year 2000 Compliance....................................... 67
4.26 Collateral................................................. 68
4.27 Material Contracts......................................... 68
SECTION V - AFFIRMATIVE COVENANTS
5.1 Financial Statements and other Reporting Requirements...... 68
5.2 Conduct of Business........................................ 71
5.3 Maintenance and Insurance.................................. 72
5.4 Taxes...................................................... 73
5.5 Inspection by the Administrative Agent..................... 73
5.6 Maintenance of Books and Records; Operating Account........ 73
5.7 Interest Rate Protection................................... 73
5.8 Environmental Indemnification.............................. 73
5.9 Use of Proceeds............................................ 74
5.10 Pension Plans.............................................. 74
5.11 Fiscal Year................................................ 74
5.12 Additional Real Properties................................. 74
5.13 Further Assurances......................................... 75
</TABLE>
-ii-
<PAGE>
SECTION VI - NEGATIVE COVENANTS
<TABLE>
<S> <C>
6.1 Indebtedness............................................... 75
6.2 Contingent Liabilities..................................... 77
6.3 [Intentionally Omitted.]................................... 78
6.4 Sale and Leaseback......................................... 78
6.5 Encumbrances............................................... 78
6.6 Merger; Consolidation; Sale or Lease of Assets;
Acquisitions........................................... 80
6.7 Funded Debt Ratio.......................................... 81
6.8 Fixed Charge Coverage Ratio................................ 82
6.9 Interest Coverage Ratio.................................... 82
6.10 Minimum EBITDA............................................. 83
6.11 Maximum Capital Expenditures............................... 84
6.12 Restricted Payments........................................ 85
6.13 Investments................................................ 86
6.14 ERISA...................................................... 86
6.15 Transactions with Affiliates............................... 86
6.16 [Intentionally Omitted.]................................... 87
6.17 Borrowing Base............................................. 87
6.18 No Amendments to Certain Documents......................... 87
SECTION VII - DEFAULTS
7.1 Events of Default.......................................... 89
7.2 Remedies................................................... 93
SECTION VIII - CONCERNING THE ADMINISTRATIVE
AGENT AND THE BANKS
8.1 Appointment and Authorization.............................. 93
8.2 Administrative Agent and Affiliates........................ 93
8.3 Future Advances............................................ 94
8.4 Delinquent Bank............................................ 95
8.5 Payments................................................... 95
8.6 Action by Administrative Agent............................. 96
8.7 Notification of Defaults and Events of Default............. 96
8.8 Consultation with Experts.................................. 96
8.9 Liability of Administrative Agent.......................... 96
8.10 Indemnification............................................ 97
8.11 Independent Credit Decision................................ 97
8.12 Successor Administrative Agent............................. 98
8.13 Other Agents............................................... 98
</TABLE>
-iii-
<PAGE>
SECTION IX - MISCELLANEOUS
<TABLE>
<S> <C>
9.1 Notices..................................................... 98
9.2 Expenses.................................................... 99
9.3 Indemnification............................................. 100
9.4 Set-Off..................................................... 100
9.5 Term of Agreement........................................... 100
9.6 No Waivers.................................................. 101
9.7 Governing Law............................................... 101
9.8 Amendments, Waivers, Etc.................................... 101
9.9 Binding Effect of Agreement................................. 101
9.10 Successors and Assigns...................................... 102
9.11 Letter Regarding Redemption of the FCF Subordinated Debt.... 103
9.12 Counterparts................................................ 103
9.13 Partial Invalidity.......................................... 103
9.14 Captions.................................................... 103
9.15 Waiver of Jury Trial........................................ 104
9.16 Waiver of Special Damages................................... 104
9.17 Entire Agreement............................................ 104
9.18 Confidentiality............................................. 104
</TABLE>
EXHIBITS
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Term Note A
EXHIBIT A-3 - Form of Term Note B
EXHIBIT B - Form of Notice of Borrowing or Conversion
EXHIBIT C - Indebtedness; Encumbrances
EXHIBIT D - Disclosure
EXHIBIT E - Form of Opinion of Counsel to the Borrower and the Guarantors, Etc.
EXHIBIT F - Form of Borrowing Base Report
EXHIBIT G - Form of Report of Chief Financial Officer
EXHIBIT H - Form of Assignment and Assumption
EXHIBIT I - Leasehold Provisions
-iv-
<PAGE>
SCHEDULES
SCHEDULE 1 - Commitments and Commitment Percentages
-v-
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Dated as of May 16, 2000
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of May 16,
2000, by and among WILMAR INDUSTRIES, INC., a New Jersey corporation having its
chief executive office at 303 Harper Drive, Moorestown, New Jersey 08057 (the
"Borrower"), Fleet National Bank ("Fleet"), a national bank having its head
office at 100 Federal Street, Boston, Massachusetts 02110, each of the other
lending institutions listed on Schedule 1 hereto on the date hereof (Fleet and
each such other lending institution, and the other lending institutions which
may become parties hereto pursuant to Section 9.10 individually, a "Bank" and
collectively, the "Banks"), and Fleet, as administrative agent for itself and
each other Bank, GMAC Business Credit, LLC, as documentation agent for itself
and each other Bank and First Union National Bank as syndication agent for
itself and each other Bank.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
SECTION I
---------
DEFINITIONS
-----------
1.1. Definitions.
-----------
All capitalized terms used in this Agreement, in the Notes or in any
other Loan Document (as such terms are defined below), or in any certificate,
report or other document made or delivered pursuant to this Agreement (unless
otherwise defined therein) shall have the respective meanings assigned to them
below:
Account and Accounts Receivable. Individually and 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 guaranties 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. Ace Maintenance Mart USA, Inc., a California corporation which
---
is a wholly-owned Subsidiary of the Borrower.
-1-
<PAGE>
Adjusted LIBOR Rate. Applicable to any Interest Period, shall mean a
-------------------
rate per annum determined pursuant to the following formula:
--- -----
ALR = [ IOR ]*
---------
1.00 - RP
ALR = Adjusted LIBOR Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
*The amount in brackets shall be rounded upwards, if necessary,
to the next higher l/l00 of l%.
Where:
"Interbank Offered Rate" applicable to any LIBOR Loan for any
Interest Period means the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (Boston,
Massachusetts time) 2 Business Days prior to the first day of
such Interest Period for a term comparable to such Interest
Period. If for any reason the rate described above is
unavailable, the term "Interbank Offered Rate" applicable to any
LIBOR Loan for any Interest Period means the rate of interest
determined by the Administrative Agent to be the prevailing rate
per annum at which deposits in U.S. dollars are offered to the
Administrative Agent by leading banks in the London interbank
market on or about 11:00 a.m. (Boston, Massachusetts time) 2
Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the LIBOR
Loan to which such Interest Period is to apply for a period of
time approximately equal to such Interest Period.
"Reserve Percentage" applicable to any Interest Period means the
rate (expressed as a decimal) applicable to the Administrative
Agent during such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve
System for determining the maximum reserve requirement
(including, without limitation, any basic, supplemental,
emergency or marginal reserve requirement) of the Administrative
Agent with respect to "LIBOR liabilities" as that term is defined
under such regulations.
The Adjusted LIBOR Rate shall be adjusted automatically as of the effective date
of any change in the Reserve Percentage.
Administrative Agent. Fleet in the capacity as Administrative Agent
--------------------
for the Banks under this Agreement and the other Loan Documents, including
(where the context so admits) any other Person or Persons succeeding to the
functions of the Administrative Agent pursuant to this Agreement and the other
Loan Documents.
-2-
<PAGE>
Affected Bank. See Section 2.12.
-------------
Affiliate. With reference to any Person, (i) any other Person
---------
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, warrants, 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.
Agreement. This Agreement, as the same may be renewed, extended,
---------
modified, supplemented or amended from time to time.
AHYDO Amount. See definition of AHYDO Amount in the FCF Purchase
------------
Agreement, as in effect on the date hereof.
Ancillary Documents. Collectively, (i) the Recapitalization
-------------------
Documents, (ii) the Subordinated Debt Documents, and (iii) the Parthenon
Management Agreement, as any of the foregoing may be amended, modified or
supplemented from time to time, provided that such amendment shall not be
--------
prohibited by Section 6.18 or Section 12 of the FCF Purchase Agreement.
Applicable Law. As to any Person, all applicable provisions of
--------------
constitutions, laws, statutes, ordinances, rules, treaties, regulations,
interpretations and orders of courts or Governmental Authorities and all orders
and decrees of all courts and arbitrators applicable to, or binding upon such
Person or to which any of its material property is subject.
Applicable LIBOR Margin. The Applicable LIBOR Margin is set forth in
-----------------------
Section 2.10.
Applicable Prime Rate Margin. The Applicable Prime Rate Margin is set
----------------------------
forth in Section 2.10.
Arranger. FleetBoston Robertson Stephens Inc.
--------
Assignee. See Section 9.10(ii).
--------
Bailee Notices. Collectively, the separate bailee notices which have
--------------
been or are executed and delivered to the Administrative Agent, for the ratable
benefit of the Banks and the Administrative Agent, by the owners of public
warehouses in which the Borrower or any other member of the Borrower Affiliated
Group (other than any Excluded Foreign Subsidiary) stores Inventory or other
Collateral.
Banks. See Preamble.
-----
-3-
<PAGE>
Base Account. An Account Receivable of a Credit Party as to which the
------------
Administrative Agent has a valid and perfected first-priority security interest
(subject to the Permitted Borrowing Base Encumbrances) and the Borrower has
furnished to the Administrative Agent information as required by Section 5.1(d).
If and when a Base Account exists by virtue of constituting proceeds of Base
Inventory, the Inventory giving rise to the Base Account automatically loses its
status as Base Inventory.
Base Inventory. Inventory consisting solely of finished goods as to
--------------
which (i) a Credit Party has acquired title prior to, on or after the date
hereof, (ii) the Administrative Agent has acquired and continues to have a valid
and perfected first-priority security interest (subject to Permitted Borrowing
Base Encumbrances), (iii) the Borrower has furnished to the Administrative Agent
information as required by Section 5.1(d), and (iv) with respect to any
Inventory located at a facility leased by a Credit Party or in a public
warehouse, respectively, at which Inventory of the Credit Parties in excess of
$750,000 is located (valued at cost), the Administrative Agent has received any
of a Landlord Waiver, a Landlord Waiver and Consent or a Bailee Notice, in form
and substance reasonably satisfactory to the Administrative Agent from the
landlord or warehouseman at such premises. Inventory immediately loses the
status of Base Inventory if and when a Credit Party sells it, otherwise
transfers title thereto (other than any sale or transfer to any other Credit
Party), consigns or consumes it or the Administrative Agent releases or
transfers its security interest therein.
Borrower. See preamble.
--------
Borrower Affiliated Group. Collectively, (i) the Borrower and (ii)
-------------------------
each of the Subsidiaries of the Borrower.
Borrowing Base. In relation to the Credit Parties as at any
--------------
particular date, an amount equal to the sum, as determined by reference to the
most recent Borrowing Base Report as at such date, of: (i) (A) 60% of the Net
Security Value of Base Inventory as at such date, and (B) 85% of the Net
Outstanding Amount of Base Accounts as at such date, plus (ii) without
duplication, as of the date of determination, 60% of the Stated Amount of any
trade Letter of Credit outstanding as of such date issued for the purchase of
Inventory which is insured in accordance with the requirements of this
Agreement. The Borrowing Base calculation shall be set forth in the Borrowing
Base Report required to be delivered by the Borrower pursuant to Section 5.1(d),
provided that the Administrative Agent reserves the right, in its reasonable
- --------
discretion, based upon a determination that a material change in the Collateral
has occurred, to update the Base Inventory or Base Accounts included in the
Borrowing Base Report to reflect such Inventory and Accounts as of the date of
such update. Notwithstanding the foregoing, the LC Reserve shall be reserved and
excepted from the Borrowing Base for the period commencing on the Closing Date
and ending on the date the Borrower and the Administrative Agent shall determine
to terminate the LC Reserve, in accordance with Section 2.18D.
Borrowing Base Report. See Section 5.1(d).
---------------------
-4-
<PAGE>
Business Day. (i) For all purposes other than as covered by clause
------------
(ii) below, any day other than a Saturday, Sunday or legal holiday on which
banks in Boston, Massachusetts are open for the conduct of a substantial part of
their commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on,
LIBOR Loans, any day that is a Business Day described in clause (i) and that is
also a day on which trading takes place between banks in United States dollar
deposits in the London interbank market.
Capital Expenditures. To the extent capitalized in accordance with
--------------------
GAAP, any expenditure for fixed assets (both tangible and intangible) including
assets being 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
Borrower or any other member of the Borrower Affiliated Group.
Carryover LC's. See (S)2.
--------------
Cash Equivalents. Collectively, (i) 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, (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 A-
1 or their equivalents by Moody's Investors Service, Inc. or Standard & Poor's
Comstock, 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. The Comprehensive Environmental Response, Compensation and
------
Liability Act of 1980, as the same may from time to time be supplemented or
amended and remain in effect.
Closing Date. May 16, 2000.
------------
-5-
<PAGE>
Code. The Internal Revenue Code of 1986 and the rules and regulations
----
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Collateral. Collectively, all of the agreements, instruments,
----------
contracts (including, without limitation, any Interest Rate Protection
Agreement), property (real and personal, tangible and intangible), assets,
accounts, Accounts Receivable, Inventory, equipment, general intangibles,
investment property, patents, trademarks, copyrights, other intellectual
property and monies, and all of the income, proceeds and products of any
thereof, under or in respect of which the Administrative Agent or any Bank or
any of the nominees, agents or legal representatives of the Administrative Agent
or any Bank shall have at the relevant time of reference to the term
"Collateral," any rights or interest as security for the payment or performance
of all or any part of the Obligations.
Collateral Assignment of Asbestos Indemnity. The Collateral
-------------------------------------------
Assignment of Asbestos Indemnity that may be entered into by the Borrower in
favor of the Agent, for the ratable benefit of the Banks and the Agent.
Commitment. With respect to each Bank, the amount set forth on
----------
Schedule 1 as such Bank's (i) Revolving Credit Commitment, (ii) Term Loan A
- ----------
Commitment and (iii) Term Loan B Commitment, as such Bank's Commitment may be
modified pursuant hereto and as in effect from time to time (as evidenced by an
updated Schedule 1 circulated by the Administrative Agent from time to time to
----------
reflect assignments permitted by Sections 9.10).
Commitment Fee. The commitment fee payable by the Borrower to the
--------------
Banks pursuant to Section 2.5.
Commitment Percentage. With respect to each Bank, the percentage set
---------------------
forth on Schedule 1 hereto as such Bank's percentage of the aggregate Revolving
----------
Credit Commitments, Term Loan A Commitments and Term Loan B Commitments.
Schedule 1 may be updated by the Administrative Agent from time to time to
- ----------
reflect any changes to the Commitment Percentages to reflect assignments
permitted by Sections 9.10.
Consolidated Net Working Capital. As of any date, with respect to the
--------------------------------
Borrower Affiliated Group on a Consolidated basis, an amount equal to (i)
current assets, excluding cash and Cash Equivalents, minus (ii) current
-----
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.
Consolidated Non-Cash Charges. As of any date, with respect to the
-----------------------------
Borrower Affiliated Group 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.
-6-
<PAGE>
Common Stock. The common stock, no par value per share, of the
------------
Borrower.
Consolidated and Consolidating. The terms Consolidated and
------------------------------
Consolidating shall have the respective meanings ascribed to such terms under
GAAP.
Controlled Group. All trades or businesses (whether or not
----------------
incorporated) under common control that, together with the Borrower, are treated
as a single employer under Section 414(b) or 414(c) of the Code or Section 400l
of ERISA.
Copyright Assignment. The Notice of Security Interest in Copyrights
--------------------
dated as of the date hereof and executed and delivered by the Credit Parties to
the Administrative Agent, for the ratable benefit of the Banks and the Agent, as
amended, modified or otherwise supplemented from time to time.
Credit Party. Collectively, the Borrower, each Domestic Subsidiary
------------
and each Foreign Subsidiary (other than any Excluded Foreign Subsidiary) which
has provided the Administrative Agent with a perfected, first-priority security
interest in the properties and assets described in the Security Agreement,
subject only to Permitted Encumbrances.
Default. An event or condition that, but for the requirement that
-------
time elapse or notice be given, or both, would constitute an Event of Default.
Default Rate. See Section 2.15.
------------
Delinquent Bank. See Section 8.4.
---------------
Dollar or $. Dollars in lawful currency of the United States of
-----------
America.
Domestic Subsidiaries. At any time, each of the direct and indirect
---------------------
Subsidiaries of the Borrower that is incorporated or organized under the laws of
the United States of America, any state thereof or the District of Columbia.
Dormant Subsidiaries. Collectively, (i) Supply Depot, (ii) Management
--------------------
Supply, and (iii) One Source.
EBITDA. In relation to the Borrower Affiliated Group on a
------
Consolidated basis for any period, an amount equal to the net income (or net
loss), determined in accordance with GAAP, of the Borrower Affiliated Group
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 Consolidated Non-Cash Charges for such period,
(vi) transaction expenses incurred in connection with (a) the acquisition of
J.A. Sexauer, Inc. and Trayco of S.C., Inc. and any related financing in an
aggregate amount not to exceed $5,621,423, including
-7-
<PAGE>
severance expenses of up to $2,416,500, (b) the Recapitalization Transactions
and (c) the transactions contemplated by the Loan 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 any member of the Borrower
Affiliated Group during such period in connection with Permitted Acquisitions,
which such expenses have been reasonably approved by the Administrative Agent,
and (viii) the portion of the Parthenon Management Fee paid in such period,
minus, without duplication, to the extent included in net income (or net loss)
- -----
for such period, all non-cash gains during such period.
Eligible Assets. Any assets or any business (or any substantial part
---------------
thereof) used or useful in the same business as the Borrower or its Subsidiaries
were engaged in on the Closing Date (or any reasonable extensions or expansions
thereof).
Eligible Reinvestments. Any acquisition of Eligible Assets.
----------------------
Encumbrances. See Section 6.5.
------------
Environmental Indemnity Agreement. The Environmental Compliance and
---------------------------------
Indemnity Agreement, dated as of the date hereof and executed and delivered by
the Credit Parties to the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent, as amended, modified or otherwise
supplemented from time to time.
Environmental Laws. Any and all applicable foreign, federal, 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 Borrower, any
other member of the Borrower Affiliated Group or any landlord under any real
estate Lease under which the Borrower or such other member of the Borrower
Affiliated Group 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.
ERISA. The Employee Retirement Income Security Act of 1974 and the
-----
rules and regulations thereunder, collectively, as the same may from time to
time be supplemented or amended and remain in effect.
-8-
<PAGE>
Equity Securities. As to any Person, any shares of any class 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.
Event of Default. Any event described in Section 7.1.
----------------
Excess Availability. At any time of reference, the difference between
-------------------
(i) the Borrowing Base then in effect and (ii) the sum of, without duplication,
(A) the Revolving Loans then outstanding, plus (B) the Swingline Loans then
----
outstanding, plus (C) the Stated Amount of Letters of Credit outstanding at such
----
time, plus (D) the aggregate amount of any unreimbursed draws under outstanding
----
Letters of Credit.
Excess Cash Flow. In relation to the Borrower Affiliated Group for
----------------
any period, the amount determined by (A) subtracting from EBITDA for such
period, the following items: (i) cash taxes on income directly or indirectly
paid in such period, (ii) Capital Expenditures paid in cash during such period
(such Capital Expenditures to be subject to the provisions of Section 6.11),
(iii) Total Fixed Charges paid in cash during and for such period, (iv) the
amount of mandatory prepayments made pursuant to clauses (i), (ii), (iii) or
(iv) of Section 2.13(f) or any voluntary prepayments of the principal of Term
Loan A, Term Loan B, or to the extent accompanied by a permanent reduction in
the Revolving Credit Commitments, the Revolving Loans, (v) increases in
Consolidated Net Working Capital and (vi) any extraordinary cash losses; and (B)
adding to EBITDA for such period, (i) any amounts attributable to extraordinary
cash gains, (ii) decreases in Consolidated Net Working Capital, and (iii) to the
extent not already included in EBITDA, any cash amounts received in settlement
or payment of any judgment, or as repayment or redemption of promissory notes or
capital stock of any other Person held by the Borrower or any other member of
the Borrower Affiliated Group.
Excluded Foreign Subsidiaries. Collectively, (i) Sexauer Ltd., unless
-----------------------------
and until Sexauer Ltd. becomes party to applicable Foreign Subsidiary Loan
Documents, and (ii) each of the other Foreign Subsidiaries of the Borrower 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 and has become party to applicable Foreign Subsidiary Loan
Documents or (b) as to which the Borrower 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 and has become party to applicable
Foreign Subsidiary Loan Documents or (c) which is party to applicable Foreign
Subsidiary Loan Documents.
FCF. Fleet Corporate Finance, Inc., a Massachusetts corporation.
---
FCF Notes. See definition of FCF Subordinated Debt Documents.
---------
FCF Purchase Agreement. The Purchase Agreement dated as of the date
----------------------
hereof among the Borrower, certain guarantors described therein, Allied Capital
Corporation and
-9-
<PAGE>
FCF, as amended, modified or otherwise supplemented from time to time as
permitted herein and therein.
FCF Subordinated Debt. The indebtedness of the Borrower pursuant to
---------------------
the FCF Subordinated Debt Documents.
FCF Subordinated Debt Documents. Collectively, (i) the FCF Purchase
-------------------------------
Agreement, (ii) the Subordinated Promissory Notes in an aggregate original
principal amount equal to $40,000,000 (collectively, the "FCF Notes"), (iii) any
PIK Notes (as defined in the FCF Purchase Agreement as in effect on the date
hereof) issued in connection with the FCF Subordinated Debt (herein, the "PIK
Notes"), and (iv) each of any other agreements, contracts and instruments
executed and delivered in connection with the foregoing or relating thereto, in
each case as amended, modified or otherwise supplemented in accordance with
Section 6.17 hereof and Section 12 of the FCF Purchase Agreement.
FDIC. See definition of Qualified Investments.
----
Federal Funds Effective Rate. For any day, a fluctuating interest
----------------------------
rate per annum equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received by
the Administrative Agent from 3 federal funds brokers of recognized standing
selected by the Administrative Agent.
Fee Letter. The letter agreement dated as of the date hereof among
----------
Fleet, the Arranger and the Borrower, as amended, modified or otherwise
supplemented from time to time.
Fee Mortgages. Collectively, the separate Mortgage, Security
-------------
Agreement, Assignment of Rents and Financing Statements dated as of the date
hereof and executed and delivered by the applicable member of the Borrower
Affiliated Group to the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent, with respect to the following locations:
(i) 531 Central Park Avenue, Scarsdale, NY, (ii) 1800 Research Drive,
Jefferstown, KY, and (iii) at each other location from time to time reasonably
required by the Administrative Agent with respect to any real property acquired
by any Credit Party after the Closing Date, in each case, as amended, modified
or otherwise supplemented from time to time.
Fixed Charge Coverage Ratio. For any period, the ratio of (i) EBITDA
---------------------------
for such period, minus the aggregate amount of Capital Expenditures during such
-----
period, minus cash taxes on income paid during such period, to (ii) Total Fixed
-----
Charges for such period.
Foreign Subsidiary. At any time, each of the direct or indirect
------------------
Subsidiaries of the Borrower that is not a Domestic Subsidiary at such time.
-10-
<PAGE>
Foreign Subsidiary Loan Documents. Collectively, each of the loan and
---------------------------------
security documents entered into from time to time by any Foreign Subsidiary in
favor of the Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent, as amended, modified or otherwise supplemented from time
to time.
Fully Satisfied. With respect to the Obligations as of any date,
---------------
that, on or before such date, (a) the principal of and interest accrued to such
date on all outstanding Loans shall have been paid in full in cash, (b) the
Commitments shall have expired or been terminated in full, (c) all outstanding
Letters of Credit and Interest Rate Protection Agreements shall have been (i)
terminated or (ii) cash collateralized by an amount sufficient in the reasonable
judgment of the Administrative Agent to secure any claims under such outstanding
Letters of Credit or Interest Rate Protection Agreements, as the case may be, or
(iii) in the case of any such outstanding Letters of Credit, secured by one or
more letters of credit on terms and conditions, and with one or more financial
institutions, reasonably satisfactory to the Administrative Agent and (d) all
fees, expenses and other amounts then due and payable which constitute
Obligations shall have been paid in cash.
Funded Debt Ratio. As at the end of any fiscal quarter of the
-----------------
Borrower Affiliated Group, 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 Borrower Affiliated Group ending on the last day of such fiscal quarter.
GAAP. Generally accepted accounting principles in the United States
----
of America, consistently applied.
Governmental Authority. Any nation, province, state or political
----------------------
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
Guarantees. As applied to any Person, without duplication, all
----------
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on such Person's Consolidated
balance sheet, including any obligation to furnish funds, directly or indirectly
(whether by virtue of partnership arrangements, by agreement to keep-well or
otherwise), through the purchase of goods, supplies or services, or by way of
stock purchase, capital contribution, advance or loan, or to enter into a
contract for any of the foregoing, for the purpose of payment of obligations of
any other Person.
Guarantors. Collectively, (i) J.A. Sexauer, (ii) Trayco, (iii) 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
Borrower which from time to time become guarantors of the Obligations.
-11-
<PAGE>
Hazardous Material. Any substance (i) the presence of which 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 Borrower or any other member of the Borrower Affiliated
Group or any landlord under any real property lease under which the Borrower or
any other member of the Borrower Affiliated Group is a tenant; or (iv) which
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.
Indebtedness. As applied to any Person, (i) all obligations for
------------
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
Encumbrance 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 Indebtedness of the type described in clauses (i) through (v) of this
definition of any other Person.
Ineligible Account Party. Any (i) account debtor or (ii) consolidated
------------------------
group including such account debtor, who, in either case, has 35% or more of its
aggregate Accounts owing to the Borrower excluded from the definition of "Net
Outstanding Amount of Base Accounts" pursuant to any of the provisions of that
definition.
Initial Financial Statement. See Section 4.7.
---------------------------
Insolvent or Insolvency. The occurrence of one or more of the
-----------------------
following events with respect to a Person: dissolution (except to the extent
permitted by Section 6.6); termination of existence (except to the extent
permitted by Section 6.6); insolvency within the meaning of the United States
Bankruptcy Code or other foreign or domestic applicable
-12-
<PAGE>
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.
Interbank Offered Rate. See definition of Adjusted LIBOR Rate.
----------------------
Interest Charges. For any period, means, without duplication, all
----------------
interest paid or required to be paid in cash on any particular Indebtedness
(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 Indebtedness 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 Borrower Affiliated Group with respect to any hedging agreements
permitted pursuant to Section 6.1(g) in effect during the applicable period (or
any portion thereof).
Interest Coverage Ratio. For any period, the ratio of (i) EBITDA for
-----------------------
such period, to (ii) Interest Charges paid or required to be paid by the
Borrower Affiliated Group during such period.
Interest Period. With respect to each LIBOR Loan, the period
---------------
commencing on the date of the making or continuation of or conversion to such
LIBOR Loan and ending one, two, three or six months thereafter, subject to
availability, as the Borrower may elect in the applicable Notice of Borrowing or
Conversion; provided that:
--------
(i) any Interest Period (other than an Interest Period determined
pursuant to clause (iii) below) that would otherwise end on a
day that is not a Business Day shall be extended to the next
succeeding Business Day unless such Business Day falls in the
next calendar month, in which case such Interest Period shall
end on the immediately preceding Business Day;
(ii) any Interest Period that begins on a day for which there is no
numerically corresponding day in the calendar month in which
such Interest Period ends shall, subject to clause (iii) below,
end on the last Business Day of such calendar month;
(iii) any Interest Period applicable to Revolving Loans that would
otherwise end after the Revolving Credit Maturity Date shall
end on said Revolving Credit Maturity Date; any Interest Period
applicable to any portion of Term Loan A that would otherwise
end after the Term Loan A Maturity
-13-
<PAGE>
Date shall end on said Term Loan A Maturity Date; and any
Interest Period applicable to any portion of Term Loan B that
would otherwise end after the Term Loan B Maturity Date shall
end on said Term Loan B Maturity Date; and
(iv) notwithstanding clause (iii) above, no Interest Period shall
have a duration of less than one month; and if any Interest
Period would be for a shorter period, such Interest Period
shall not be available hereunder.
Interest Rate Protection Agreement(s). See Section 5.7.
-------------------------------------
Inventory. 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. 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.
Investment Documents. Collectively, the shareholders' agreement dated
--------------------
as of the date hereof among the Borrower, the Investor Group and other
shareholders of the Borrower (the "Shareholders Agreement"), and the respective
employment agreements, each dated as of the date hereof, between the Borrower
and each of William S. Green, Michael J. Grebe and William Sanford,
respectively, in each case as amended, modified, or otherwise supplemented from
time to time.
Investment Transactions. 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 Borrower's management shareholders of
approximately $3,000,000, in the aggregate, of their investments in the Borrower
immediately prior to consummation of the Recapitalization Transactions.
-14-
<PAGE>
Investor Group. 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)
Svoboda, Collins & Company QP, L.P., a Delaware limited partnership, (vii)
Svoboda, Collins & Company, L.P., a Delaware limited partnership, (viii) Fleet
Corporation Finance, Inc., a Massachusetts corporation, (ix) Allied Capital
Corporation, a Maryland corporation, (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 Borrower held by any of the foregoing permitted by the
terms of the Shareholders' Agreement as in effect on the Closing Date.
Involuntary Disposition. Any loss of, damage to or destruction of, or
-----------------------
any condemnation or other taking for public use of, any property of the Borrower
or any other member of the Borrower Affiliated Group.
IPO. The closing of an underwritten primary initial public offering
---
(other than a public offering pursuant to a registration statement on Form S-8)
by the Borrower of its common capital stock pursuant to an effective
registration statement filed with the Securities and Exchange Commission in
accordance with the Securities Act of 1933, as amended.
Issuing Bank. (i) First Union National Bank, in its capacity as
------------
issuer of any Letter of Credit, or at the Borrower's election, Fleet National
Bank in its capacity as issuer of any Letter of Credit, or (ii) if First Union
National Bank and Fleet National Bank shall be unwilling to issue any Letter of
Credit in the form requested by the Borrower in accordance with the terms of
Section 2.18, such other Bank selected by the Borrower from time to time to
issue such Letter of Credit, such Bank to be reasonably acceptable to the
Administrative Agent.
J.A. Sexauer. J.A. Sexauer, Inc., a Delaware corporation which is a
------------
wholly-owned Subsidiary of the Borrower.
LC Reserve. An amount equal to $2,500,000.
----------
Landlord Waiver and Consents. Collectively, the separate Landlord
----------------------------
Waiver and Consents which have been executed and delivered to the Administrative
Agent, for the ratable benefit of the Banks and the Administrative Agent, on the
Closing Date and from time to time thereafter pursuant to Section 6.3, in each
case as amended, modified or otherwise supplemented from time to time.
Landlord Waivers. Collectively, the separate landlord waivers which
----------------
have been or are executed and delivered to the Administrative Agent, for the
ratable benefit of the Banks and the Administrative Agent, on the Closing Date,
as amended, modified or otherwise supplemented from time to time, and from time
to time thereafter pursuant to Section 5.12.
-15-
<PAGE>
Leasehold Mortgages. Collectively, the separate Leasehold Mortgage,
-------------------
Security Agreement, Assignment of Leases and Rents and Financing Statements
dated as of the date hereof or from time to time hereafter and executed and
delivered by the applicable member of the Borrower Affiliated Group to the
Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent, with respect to the following locations: (i) 303 Harper
Drive, Moorestown, NJ, (ii) 3333-B Holly Hall, Houston, TX, (iii) 1327P Wood
Branch, Charlotte, NC, (iv) 3901 N 29th Avenue, Hollywood, FL, (v) 1125 Avenue R
(Grand Prairie), Dallas, TX, (vi) 23975 Research Drive (Farmington Hills),
Detroit, MI, and (vii) at each other location from time to time delivered to the
Administrative Agent pursuant to Section 5.12 with respect to any Leases of real
property entered into after the Closing Date by any member of the Borrower
Affiliated Group (other than any Excluded Foreign Subsidiary), in each case, as
amended, modified or otherwise supplemented from time to time.
Leases or Lease. 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.
Letters of Credit. Letters of credit in the form customarily issued
-----------------
by the Administrative Agent as standby or trade Letters of Credit issued or to
be issued for the account of the Borrower by the Issuing Bank, upon the terms
and subject to the conditions contained in this Agreement.
LIBOR Loan. Any Revolving Loan or portion of either Term Loan bearing
----------
interest at a rate determined with reference to the Adjusted LIBOR Rate.
Loan. A Revolving Loan, a Swingline Loan or a Term Loan made to the
----
Borrower by any Bank pursuant to Section II of this Agreement, and "Loans" means
all of such Revolving Loans, Swingline Loans and Term Loans, collectively.
Loan Account. The account or accounts on the books of the
------------
Administrative Agent in which will be recorded Loans and advances (including
issued and outstanding Letters of Credit) made by the Banks to the Borrower
pursuant to this Agreement, payments made on such loans and other appropriate
debits and credits as provided by this Agreement.
Loan Documents. Collectively, this Agreement, the Notes, the Security
--------------
Agreement, the Patent and Trademark Security Agreement, the Copyright
Assignment, the Pledge Agreement, the Subsidiary Guaranty, the Leasehold
Mortgages, the Fee Mortgages, the Environmental Indemnity Agreement, the
Negative Pledge Agreement, the Foreign Subsidiary Loan Documents, if any, the
Letters of Credit (and related documentation and agreements, including any
letter of credit application), the Landlord Waivers, the Landlord Waiver and
Consents, the Bailee Notices, the Interest Rate Protection Agreement, the
Collateral Assignment of Asbestos Indemnity, if any, the Fee
-16-
<PAGE>
Letter, the Syndication Letter Agreement, if any, and the Solvency Certificates,
together with all agreements and other instruments executed in connection
therewith, all certificates delivered in connection therewith from time to time
and all schedules, exhibits and annexes thereto, as any of the foregoing may
from time to time be amended, modified or otherwise supplemented and in effect.
Majority Banks. Any two or more of those Banks whose aggregate
--------------
Commitments constitute at least fifty-one percent (51%) of the Total Commitment
in effect at the relevant time of reference, or if the Commitments have been
terminated, those Banks whose aggregate Loans and Letters of Credit outstanding
constitute at least fifty-one percent (51%) of the aggregate Loans and Letters
of Credit outstanding at the relevant time of reference.
Management Supply. Management Supply Company, a Michigan corporation
-----------------
which is a wholly-owned Subsidiary of the Borrower.
Material Contracts. Collectively, each contract, agreement or license
------------------
which is material to the operations or business of the Borrower Affiliated Group
taken as a whole.
Merger. The merger of WM Acquisition with and into the Borrower
------
pursuant to the Recapitalization Agreement.
Negative Pledge Agreement. The Negative Pledge Agreement dated as of
-------------------------
the date hereof and executed and delivered by the Borrower and each other member
of the Borrower Affiliated Group (including each of the Excluded Foreign
Subsidiaries) to the Administrative Agent, for the ratable benefit of the Banks
and the Administrative Agent, as amended, modified or otherwise supplemented
from time to time.
Net Outstanding Amount of Base Accounts. The net amount of Base
---------------------------------------
Accounts outstanding after eliminating from the aggregate amount of outstanding
Base Accounts any Account which:
(a) is more than 75 days past due or is unpaid more than 105 days
after the initial invoice date;
(b) did not arise in the ordinary course of a Credit Party's business
as a result of services which have been performed for, or the sale of goods
which have been shipped to, the account debtor;
(c) is not the legal, valid and binding obligation of the account
debtor thereunder, is not assignable, is not owned by a Credit Party free and
clear of all Encumbrances (except in favor of the Administrative Agent or
Permitted Borrowing Base Encumbrances) or is evidenced by a promissory note or
other instrument the original of which has not been delivered to the
Administrative Agent;
-17-
<PAGE>
(d) has been reduced or against which a reduction is being sought, as
against the applicable Credit Party, by any offset, counterclaim, adjustment,
credit, allowance, contra account or other defense, but only to the extent of
such reduction, or as to which there is any (or any reasonable basis for any)
return, rejection, loss or damage of or to the goods giving rise thereto, but
only to the extent such Account relates to the goods returned, rejected, damaged
or which sustained loss, or any credit or adjustments, but only to the extent of
such credit or adjustment;
(e) is difficult to collect or uncollectible as a result of any
bankruptcy or insolvency, or because the Borrower is not able to bring suit or
otherwise enforce its remedies against the account debtor through judicial
process (including as a consequence of a failure of the Borrower to be qualified
or licensed in any jurisdiction where such qualification or licensing is
required), all as determined by the Administrative Agent in its reasonable
discretion;
(f) is owing from any Affiliate of the Borrower or any Ineligible
Account Party or any supplier to the Borrower or its Subsidiaries;
(g) is owing from an account debtor not located in the United States
of America, Canada or Puerto Rico unless such Account is either (i) backed by a
letter of credit in favor of the Borrower issued by a financial institution
reasonably satisfactory to the Administrative Agent in its sole discretion and
otherwise in form and substance reasonably acceptable to the Administrative
Agent in its sole discretion, and all of the Borrower's rights under such letter
of credit, including without limitation the Borrower's rights to collect any
proceeds or amounts thereunder, have been duly and validly assigned to the
Administrative Agent and to no other Person (and all, if any, required consents
to such assignment have been obtained and delivered to the Administrative
Agent), or (ii) insured under insurance policies in form and substance
reasonably acceptable to the Administrative Agent in its sole discretion and
which are issued by insurers reasonably acceptable to the Administrative Agent
in its sole discretion, and all of the Borrower's rights under such insurance
policies, including without limitation the Borrower's rights to collect any
proceeds or amounts thereunder, have been duly and validly assigned to the
Administrative Agent and to no other Person (and all, if any, required consents
to such assignment have been obtained and delivered to the Administrative
Agent);
(h) is owing from an account debtor which is the United States of
America or any department, agency or instrumentality thereof, unless the Account
has been properly assigned to the Administrative Agent by compliance with the
Federal Assignment of Claims Act (or jurisdictional equivalent) in a manner
reasonably satisfactory to the Administrative Agent; and
(i) has been designated by the Administrative Agent in its reasonable
discretion as unacceptable by notice to the Borrower, all as determined in good
faith by the Administrative Agent in accordance with its customary practices,
which determination shall be presumed to be correct absent manifest error.
-18-
<PAGE>
Net Proceeds. With respect to the sale, transfer or other disposition
------------
by the Borrower or any other member of the Borrower Affiliated Group 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 Dollars) received by the
Borrower, any other member of the Borrower Affiliated Group or their agents or
the Administrative Agent, 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 Borrower Affiliated Group 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 Borrower or any other member of the
Borrower Affiliated Group as a reserve, in accordance with GAAP, against any
liabilities associated with such sale, transfer or other disposition and
retained by the Borrower or such other member of the Borrower Affiliated Group
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
Indebtedness 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.
Non-Excluded Taxes. See Section 2.12A.
------------------
Net Security Value of Base Inventory. The net value of Base
------------------------------------
Inventory, calculated at the lesser of fair market value or cost determined on
the "first in, first out" basis, after subtracting: (i) the value of any such
Base Inventory which is damaged, defective, used, obsolete or otherwise not in
marketable condition or on consignment and after taking into account charges and
liens, other than those of the Administrative Agent, of all kinds against such
Base Inventory (including, without limitation, third-party processing liens),
and transportation and other handling charges affecting the value thereof, and
(ii) any such Base Inventory which has otherwise been designated by the
Administrative Agent in its reasonable discretion as unacceptable by notice to
the Borrower, all as determined in good faith by the Administrative Agent in
accordance with its customary practices, which determination shall be presumed
to be correct absent manifest error.
Notes. Collectively, (i) the Revolving Credit Notes, (ii) the
-----
Swingline Notes, (iii) the Term Notes A and (iv) the Term Notes B.
Notice of Borrowing or Conversion. See Section 2.4.
---------------------------------
Obligations. Any and all obligations of the Borrower Affiliated Group
-----------
to the Administrative Agent or any Bank (i) under the Loan Documents of every
kind and description, direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, including
obligations to perform acts and refrain from taking action as well as
obligations to pay money, and (ii) in connection with
-19-
<PAGE>
any cash management arrangements or deposit accounts maintained by any member of
the Borrower Affiliated Group with the Administrative Agent or any Bank.
One Source. One Source Supply, Inc., a Florida corporation which is a
----------
wholly-owned Subsidiary of the Borrower.
Opening Balance Sheet. The Consolidated balance sheet of the Borrower
---------------------
Affiliated Group dated as of March 31, 2000 (but after giving effect to the
Recapitalization Transactions and the Loans made hereunder on the Closing Date).
Other Taxes. See Section 2.12A(b).
-----------
Parthenon. 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 Administrative Agent has consented, which such consent will not be
unreasonably withheld or delayed.
Parthenon Management Agreement. The Management Agreement, dated as of
------------------------------
May 16, 2000, between Parthenon and the Borrower, as from time to time amended,
modified or otherwise supplemented in accordance with Section 6.18.
Parthenon Management Fee. The fee required to be paid to Parthenon
------------------------
pursuant to Section 1 of the Parthenon Management Agreement.
Participant. See Section 9.10.
-----------
Patent and Trademark Security Agreement. The Patent and Trademark
---------------------------------------
Security Agreement dated as of the date hereof and executed and delivered by
each Credit Party to the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent, as amended, modified or otherwise
supplemented from time to time.
PBGC. The Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
PCB. See definition of Hazardous Material.
---
Permitted Acquisition. 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 consolidation with such other Person by the Borrower (so
long as the Borrower is the surviving entity) or any Subsidiary of the Borrower,
provided that (i) any Person acquired is in substantially the same field of
- --------
business as the Borrower or any Subsidiary of the Borrower (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
-20-
<PAGE>
the same business as the Borrower or its Subsidiaries were engaged in on the
Closing Date (or any reasonable extensions or expansions thereof), (ii) no
Indebtedness is assumed or incurred in connection with the acquisition other
than Indebtedness permitted under Section 6.1, (iii) the acquisition is
"friendly" or non-hostile in nature, (iv) (x) if the Person acquired is to
become a Domestic Subsidiary, the Borrower shall (I) cause such Person to become
party to the Subsidiary Guaranty, the Security Agreement, the Patent and
Trademark Security Agreement (if applicable) and the Pledge Agreement, (II) once
the applicable UCC-1 financing statements in favor of the Administrative Agent
are filed in the appropriate jurisdictions pursuant to the Security Agreement
(and with respect to Collateral which can not be perfected by filing under the
Uniform Commercial Code in effect in the applicable jurisdiction, the
appropriate instruments required for perfection pursuant to the applicable Loan
Document have been filed or recorded or have been delivered to the
Administrative Agent), the Administrative Agent shall have a valid, perfected,
first-priority security interest in the Collateral described in the Security
Agreement or other applicable Loan Document, to the extent a security interest
in the Collateral can be perfected by such filings or recordings or delivery, in
each case subject only to Permitted Encumbrances, (III) cause 100% of the issued
and outstanding capital stock or other equity interests of such Person to be
delivered (if certificated) to the Administrative Agent (together with undated
stock or other equity interest powers signed in blank) and pledged to the
Administrative Agent pursuant to the Pledge Agreement or an appropriate pledge
agreement(s) in substantially the form of the Pledge Agreement and otherwise in
form and substance reasonably acceptable to the Administrative Agent, and the
Administrative Agent, shall have a perfected, first-priority security interest
in 100% of such stock or other equity interest, and (IV) use commercially
reasonable efforts to cause to be delivered to the Administrative Agent with
respect to Real Property owned or leased by the Person to become a Domestic
Subsidiary, such real property documents, instruments and other items, in form
and substance reasonable acceptable to the Administrative Agent, as the
Administrative Agent shall reasonably request in order to provide the
Administrative Agent with a first-priority, perfected lien (subject to Permitted
Encumbrances) in such Real Property to secure the Obligations, (y) if the Person
acquired is to become a direct Foreign Subsidiary of a Credit Party, cause 65%
of the issued and outstanding capital stock or other equity interests entitled
to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of such Person
to be delivered (if certificated) to the Administrative Agent (together with
undated stock or other equity interest powers signed in blank (unless, with
respect to a Foreign Subsidiary, such stock or other equity interest powers are
deemed unnecessary by the Administrative Agent in its reasonable discretion
under the law of the jurisdiction of organization of such Person)) and pledged
to the Administrative Agent pursuant to the Pledge Agreement or an appropriate
pledge agreement(s) in substantially the form of the Pledge Agreement and
otherwise in form and substance acceptable to the Administrative Agent and the
Administrative Agent shall have a perfected, first-priority security interest in
100% of such stock or other equity interests and (z) the Borrower shall cause
any Person acquired to deliver such other documentation as the Administrative
Agent may reasonably request in connection with the foregoing,
-21-
<PAGE>
including, without limitation, appropriate UCC-1 financing statements, (v) the
Borrower shall have delivered to the Administrative Agent a pro forma compliance
certificate demonstrating compliance with Sections 6.7 through 6.10, inclusive
(after giving effect to such acquisition on a pro forma basis), demonstrating
Excess Availability of at least $2,500,000 (after giving effect to such
acquisition on a pro forma basis), and certifying that no Default or Event of
Default would exist after giving effect to such acquisition, (vi) the
representations and warranties made by the Borrower Affiliated Group in the Loan
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,
(vii) if such transaction involves the purchase of an interest in a partnership
between the Borrower (or a Subsidiary of the Borrower) as a general partner and
entities unaffiliated with the Borrower 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
Borrower or a Subsidiary newly formed for the sole purpose of effecting such
transaction and (viii) the aggregate Qualifying Consideration for each such
acquisition occurring after the Closing Date shall not exceed (1) $5,000,000 for
any such acquisition, and (2) $27,500,000 in the aggregate for all such
acquisitions occurring after the Closing Date, it being agreed by the Borrower
that of such $27,500,000, an amount up to $2,500,000 (the "Park Supplies
Basket") shall be used in connection with the acquisition of Park Supplies, Inc.
and to the extent the Park Supplies Basket is not so used, such amount not so
used shall not be available for other Permitted Acquisitions. For purposes of
the foregoing clause (viii), "Qualifying Consideration" shall mean, with respect
to any acquisition, all cash and non-cash consideration actually paid or
required to be paid by the Borrower Affiliated Group, including the principal
amount of any assumed Indebtedness and deferred amounts in the nature of
holdbacks (to the extent not distributed to any member of the Borrower
Affiliated Group), other than consideration consisting of (a) the value
attributable to any Equity Securities of the Borrower issued to the seller of
the capital stock or property acquired in such acquisition, (b) the proceeds of
any issuance by the Borrower of Equity Securities consummated in connection with
and for the purpose of financing such acquisition and (c) the proceeds of
Subordinated Indebtedness issued by the Borrower pursuant to Section 6.1(l).
Permitted Borrowing Base Encumbrances. Collectively, those Permitted
-------------------------------------
Encumbrances which are subordinated to the Encumbrances in favor of the
Administrative Agent or the Banks under any Loan Document, and other Permitted
Encumbrances in an aggregate amount at any one time outstanding not exceeding
$1,000,000.
Permitted Encumbrances. See Section 6.5.
----------------------
Person or person. An individual, a company, a corporation, an
------ ------
association, a partnership, a joint venture, a limited liability company or
partnership, an unincorporated
-22-
<PAGE>
trade or business enterprise, a trust, an estate, or a government (national,
regional or local) or an agency, instrumentality or official thereof.
PIK Notes. See definition of PIK Notes in the definition of FCF
---------
Notes.
Plan. 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 Borrower or any
member of the Controlled Group for employees of the Borrower 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 Borrower 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.
Pledge Agreement. The Pledge Agreement dated as of the date hereof
----------------
and executed and delivered by the applicable Credit Parties to the
Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent, as amended, modified or otherwise supplemented from time
to time.
Prime Rate. The greater of (i) the rate of interest announced from
----------
time to time by Fleet at its head office as its Prime Rate, and (ii) the Federal
Funds Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary, to
the next 1/8 of 1%).
Prime Rate Loan. Any Revolving Loan or portion of either Term Loan
---------------
bearing interest calculated by reference to the Prime Rate.
Pro Forma Financial Statements. See Section 4.7.
------------------------------
Proxy Statement. The Proxy Statement of the Borrower filed with the
---------------
Securities and Exchange Commission on April 19, 2000 and relating to the Merger.
Qualified Investments. As applied to the Borrower or any other member
---------------------
of the Borrower Affiliated Group, 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 Moody's Investors Service, Inc. or Standard & Poor's
Comstock, 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
-23-
<PAGE>
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 amounts of insurance thereunder to the extent
constituting Investments; (viii) accounts receivable created, acquired or made
by a member of the Borrower Affiliated Group 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 a member of the Borrower Affiliated Group 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 Exhibit D; (xi) advances or
---------
loans to directors, officers or employees of any member of the Borrower
Affiliated Group, made in the ordinary course of business and consistent with
past practices, that do not exceed $500,000 in the aggregate at any one time
outstanding, provided that no such advances to any single director, officer or
--------
employee shall exceed $50,000 in the aggregate; (xii) loans to directors,
officers and employees in an aggregate amount not to exceed $1,000,000 at any
one time to finance the purchase of Equity Securities of the Borrower; (xiii)
Investments in (A) any Credit Party and (B) any Excluded Foreign Subsidiary so
long as such Investments in all such Excluded Foreign Subsidiaries (1) do not
exceed $2,000,000 in the aggregate in any fiscal year and (2) do not exceed
$6,000,000 in the aggregate from and after the Closing Date (it being agreed
that to the extent that 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 to the
applicable Credit Party, 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 6.15 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
$5,000,000 at any one time outstanding, (B) the Borrower may not guarantee any
Indebtedness 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. See definition of Permitted Acquisition.
------------------------
Rate Period. The period beginning on the third Business Day following
-----------
delivery to the Administrative Agent of the annual or quarterly financial
statements required to be delivered pursuant to Section 5.1(a) or Section 5.1(b)
and ending on the second Business Day after the day on which the next such
quarterly (or annual, as applicable) financial statements are delivered to the
Administrative Agent.
Real Property or Real Properties. Collectively, (i) the several
--------------------------------
parcels of land together with the improvements now or hereafter located thereon,
which are owned by
-24-
<PAGE>
the Borrower or another member of the Borrower Affiliated Group, and (ii) the
several parcels of land together with the improvements now or hereafter located
thereon, which are leased by the Borrower or another member of the Borrower
Affiliated Group pursuant to a real property Lease.
Recapitalization Agreement. The Agreement and Plan of Merger and
--------------------------
Recapitalization dated December 22, 1999 between the Borrower and WM
Acquisition, as amended on March 27, 2000.
Recapitalization Documents. 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 in
accordance with Section 6.18.
Recapitalization Transactions. The recapitalization of the Borrower
-----------------------------
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, and (iii) the Subordinated Debt Transactions, all as more fully
described in the Recapitalization Agreement and other Recapitalization Documents
and the FCF Subordinated Debt Documents.
Reportable Event. See Section 5.1(j).
----------------
Reserve Percentage. See Definition of Adjusted LIBOR Rate.
------------------
Restricted Payment. (i) Any cash or property dividend, distribution
------------------
or payment, direct or indirect, by the Borrower or any of its Subsidiaries to
any Person who now holds, or who in the future holds, an equity interest in the
Borrower 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 a member of the Borrower Affiliated Group and any such dividends,
distributions or other payments described in this clause (i) to a member of the
Borrower Affiliated Group, 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 a Credit Party, (ii) any
payment (other than payment of Equity Securities of a member of the Borrower
Affiliated Group) on account of the purchase, redemption, retirement or other
acquisition for value of any capital stock or other equity security of the
Borrower or its Subsidiaries (including the Senior Preferred Stock), (iii) any
management or similar fees paid or payable by the Borrower or any of its
Subsidiaries to any Person or an Affiliate of such Person who now holds, or in
the future holds, directly or indirectly, an equity interest in the Borrower or
any of its Subsidiaries, (iv) any payment on any Subordinated Debt, and (v) the
Retention Bonus.
-25-
<PAGE>
Retention Bonus. The Retention Bonus as defined in the employment
---------------
agreement of even date herewith between the Borrower and William Green, as in
effect on the date hereof, of up to $3,000,000 plus any interest on any
promissory notes issued pursuant to Section 4 of such employment agreement.
Revolving Credit Commitment. In relation to any Bank, without
---------------------------
duplication, (i) the maximum amount of Revolving Loans that such Bank shall be
committed to make to the Borrower, (ii) the maximum amount of Swingline Loans
that such Bank shall be committed to make to, or to participate in, in favor of,
the Borrower, and (iii) the maximum amount of Letters of Credit which such Bank
shall be committed to issue to, or to participate in, in favor of, the Borrower
upon the terms and subject to the conditions contained in this Agreement, as set
forth on Schedule 1, as such Schedule 1 may be updated by the Administrative
---------- ----------
Agent from time to time to reflect assignments permitted by Sections 9.10 or
reductions pursuant to Section 2.8.
Revolving Credit Maturity Date. May 16, 2005.
------------------------------
Revolving Credit Notes. See Section 2.2.
----------------------
Revolving Loans. Collectively, the loans in the maximum aggregate
---------------
principal amount of $60,000,000 made or to be made to the Borrower by the Banks
pursuant to Section 2.1(a) of this Agreement and subject to the limitations
contained herein.
Security Agreement. The Security Agreement dated as of the date
------------------
hereof and executed and delivered by each of the Credit Parties to the
Administrative Agent, for the ratable benefit of the Banks and the
Administrative Agent, as amended, modified or otherwise supplemented from time
to time.
Senior Preferred Stock. The Senior Preferred Stock, $0.01 par value
----------------------
per share, of the Borrower.
Sexauer Dispositions. The disposition by the Borrower of the two fee
--------------------
owned properties acquired by the Borrower in connection with its acquisition of
Sexauer Ltd. and J.A. Sexauer, together with the improvements and fixtures
thereon.
Sexauer Ltd. Sexauer Ltd., a company organized under the laws of
-----------
Ontario, Canada which is a wholly-owned Subsidiary of J.A. Sexauer and,
indirectly, a wholly-owned Subsidiary of the Borrower.
Shareholders Agreement. See definition of Investment Documents.
----------------------
Solvency Certificate. Collectively, (i) the solvency certificate
--------------------
dated as of the date hereof and executed and delivered by the chief financial
officer of the Borrower to the Administrative Agent, for the ratable benefit of
the Banks and the Administrative Agent, and (ii) the solvency certificate dated
as of the date hereof and executed and delivered by the chief financial officer
of the Borrower, on behalf of itself and the other Credit Parties
-26-
<PAGE>
on a Consolidated basis, to the Administrative Agent, for the ratable benefit of
the Banks and the Administrative Agent.
Special Payment Conditions. Collectively, the following conditions:
--------------------------
(i) all sums which shall have become due and payable by the Borrower to the
Administrative Agent or the Banks under any of the Loan Documents 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 Amount. With respect to each Letter of Credit outstanding at
-------------
any time, the maximum amount then available to be drawn thereunder (without
regard to whether any conditions to drawing could then be met).
Subordinated Debt. Indebtedness described in Sections 6.1(e) and
-----------------
6.1(l) hereof.
Subordinated Debt Documents. Collectively, (i) the FCF Subordinated
---------------------------
Debt Documents, and (ii) each of the other documents, agreements and instruments
executed and delivered to the lender thereof in connection with any Subordinated
Debt (other than the FCF Subordinated Debt).
Subordinated Debt Transactions. The transactions evidenced by the FCF
------------------------------
Subordinated Debt Documents.
Subsidiary. 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.
Subsidiary Guaranty. The Subsidiary Guaranty entered into by each
-------------------
Guarantor in favor of the Administrative Agent, for the ratable benefit of the
Banks and the Administrative Agent, as amended, modified or otherwise
supplemented from time to time.
Supply Depot. Supply Depot, Inc., a Texas corporation which is a
------------
wholly-owned Subsidiary of the Borrower.
Swingline Commitment. The obligation of the Swingline Lender to make
--------------------
Swingline Loans to the Borrower in a maximum principal amount not exceeding at
any time the amount set forth opposite the Swingline Lender's name on Schedule 1
----------
hereto. On the Closing Date, the Swingline Commitment shall be $5,000,000.
-27-
<PAGE>
Swingline Lender. Fleet (or any successor Administrative Agent) in
----------------
its capacity as swingline lender hereunder.
Swingline Loans. Collectively, the loans in the maximum aggregate
---------------
principal amount of $5,000,000 made or to be made by the Swingline Lender to the
Borrower pursuant to Section 2.1(d) of this Agreement and subject to the
limitations contained herein.
Swingline Note. See Section 2.2.
--------------
Swingline Termination Date. The Revolving Credit Maturity Date.
--------------------------
Syndication Letter Agreement. The letter agreement dated as of the
----------------------------
date hereof among Fleet, the Arranger, Parthenon and the Borrower.
Term Loan A. The term loan in the original principal amount of
-----------
$50,000,000 made or to be made to the Borrower on the Closing Date by the Banks
having a Term Loan A Commitment pursuant to Section 2.1(b) hereof.
Term Loan A Commitment. In relation to any Bank, the maximum
----------------------
liability of such Bank, as set forth on Schedule 1, to participate in making
----------
Term Loan A to the Borrower upon the terms and subject to the conditions
contained in this Agreement. Schedule 1 shall be updated by the Administrative
----------
Agent from time to time to reflect any changes in the Term Loan A Commitments as
a result of assignments permitted by Sections 9.10.
Term Loan A Commitment Percentage. With respect to each Bank having a
---------------------------------
Term Loan A Commitment, the percentage set forth on Schedule 1 as such Bank's
----------
percentage of the aggregate Term Loan A Commitments of all the Banks. Schedule
--------
1 shall be updated by the Administrative Agent from time to time to reflect any
- -
changes in the Term Loan A Commitment Percentages.
Term Loan A Maturity Date. May 16, 2005.
-------------------------
Term Loan B. The term loan in the original principal amount of
-----------
$50,000,000 made or to be made to the Borrower on the Closing Date by the Banks
having a Term Loan B Commitment pursuant to Section 2.1(c) hereof.
Term Loan B Commitment. In relation to any Bank, the maximum
----------------------
liability of such Bank, as set forth on Schedule 1, to participate in making the
----------
Term Loan B to the Borrower upon the terms and subject to the conditions
contained in this Agreement. Schedule 1 shall be updated by the Administrative
----------
Agent from time to time to reflect any changes in the Term Loan B Commitments as
a result of assignments permitted by Sections 9.10.
Term Loan B Commitment Percentage. With respect to each Bank having a
---------------------------------
Term Loan B Commitment, the percentage set forth on Schedule 1 as such Bank's
----------
percentage
-28-
<PAGE>
of the aggregate Term Loan B Commitments of all the Banks. Schedule 1 shall be
----------
shall be updated by the Administrative Agent from time to time to reflect any
changes in the Term Loan B Commitment Percentages.
Term Loan B Maturity Date. May 16, 2007.
-------------------------
Term Loans. Collectively, (i) Term Loan A, and (ii) Term Loan B.
----------
Term Notes. Collectively, (i) the Term Notes A, and (ii) the Term
----------
Notes B.
Term Notes A. See Section 2.2.
------------
Term Notes B. See Section 2.2.
------------
Total Commitment. As of any date, the sum of the then-current
----------------
Commitments of the Banks, provided that the Total Commitment shall not at any
--------
time exceed $160,000,000.
Total Fixed Charges. For any period, without duplication, (i)
-------------------
Interest Charges paid or required to be paid in cash by the Borrower Affiliated
Group in such period, plus (ii) the aggregate amount of scheduled principal
----
payments required to be made by the Borrower Affiliated Group during such period
with respect to any Indebtedness 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 Indebtedness for borrowed money
or capital lease obligations, plus (iv) all Restricted Payments made in cash
----
pursuant to Section 6.12 during such period, if any, plus (v) all payments, if
----
any, made in cash in respect of original issue discount (including, without
limitation, the AHYDO Amount) during such period.
Total Funded Debt. As at any date of determination, on a Consolidated
-----------------
basis for the Borrower Affiliated Group, 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
----
amount of unreimbursed draws under the outstanding Letters of Credit, plus (iv)
----
the aggregate principal amount of the Subordinated Debt (including the FCF
Subordinated Debt) outstanding on such date, plus (v) all principal obligations
----
arising under capital leases in effect on such date required to capitalized in
accordance with GAAP, plus (vi) all other Guarantees and Indebtedness for
----
borrowed money of the Borrower Affiliated Group outstanding on such date.
Trayco. Trayco of South Carolina, Inc., a Delaware corporation which
------
is a wholly-owned Subsidiary of the Borrower.
Wilmar Financial. Wilmar Financial, Inc., a Delaware corporation
----------------
which is a wholly-owned Subsidiary of the Borrower.
Wilmar Holdings, Inc. Wilmar Holdings, Inc., a Delaware corporation
---------------------
which is a wholly-owned Subsidiary of the Borrower.
-29-
<PAGE>
WM Acquisition. 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 Loan 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 United States Dollars, shall be to Dollars;
(iv) accounting terms not otherwise defined in this Agreement or any
of the other Loan Documents have the meanings assigned to them in accordance
with GAAP;
(v) all financial statements and other financial information
provided by the Borrower and each other member of the Borrower Affiliated Group,
to the Administrative Agent or any Bank shall be provided with reference to
Dollars;
(vi) all of the obligations of the Credit Parties under this
Agreement and each other Security Document shall be the joint and several
obligations of the Borrower and such other members of the Borrower Affiliated
Group;
(vii) this Agreement and the other Loan Documents are the result of
negotiation among, and have been reviewed by counsel to, among others, the
Borrower Affiliated Group, Parthenon and the Administrative Agent and are the
product of discussions and negotiations among all parties. Accordingly, this
Agreement and the other Loan Documents are not intended to be construed against
the Administrative Agent or any of the Banks merely on account of the
Administrative Agent's or any Bank's involvement in the preparation of such
documents; and
(viii) for purposes of all calculations made under the financial
covenants set forth in Sections 6.7, 6.8, 6.9, 6.10 (including but not limited
to, the calculation of compliance with such covenants on a pro forma basis) and
--- -----
the determination of the Applicable LIBOR Margin and the Applicable Prime Rate
Margin, (a) following consummation of any sale,
-30-
<PAGE>
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) Indebtedness 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 Borrower Affiliated
Group on a Consolidated basis in accordance with GAAP or in accordance with any
defined terms set forth in Section 1.1, be included to the extent relating to
any period applicable in such calculations, (ii) (A) Indebtedness 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 Indebtedness 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 Indebtedness 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
Borrower and are reasonably acceptable to the Administrative Agent.
SECTION II
----------
DESCRIPTION OF CREDIT
---------------------
2.1. The Loans.
---------
(a) Revolving Loans. Subject to the terms and conditions set forth in
---------------
this Agreement, each of the Banks having a Revolving Credit Commitment severally
agrees to lend to the Borrower and the Borrower may borrow, repay and reborrow
from time to time between the Closing Date and the Revolving Credit Maturity
Date, such amounts as are requested by the Borrower up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Revolving Credit Commitment; provided,
--------
however, that the maximum aggregate principal amount of all Revolving Loans
- -------
outstanding (after giving effect to the amounts requested), plus the aggregate
----
principal amount of all Swingline Loans outstanding, plus the aggregate Stated
----
Amount of Letters of Credit outstanding at such time, plus the aggregate amount
----
of all unreimbursed draws under outstanding Letters of Credit, shall not at any
time exceed the lesser of (i) the aggregate amount of the Revolving Credit
Commitments of all of the Banks at such time, and (ii) the Borrowing Base at
such time; and provided, further, that at the time the Borrower requests a
-------- -------
Revolving Loan and after giving effect to the making thereof, no Default or
Event of Default has occurred and is continuing. It is understood and agreed
that for a period of 60 days after the Closing Date, the Borrower shall not be
required to calculate the Borrowing Base or to submit the Borrowing Base Report
required by Section 5.1(d). Accordingly, it is further agreed that for all
purposes of this Agreement (including the next paragraph of this clause (a),
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<PAGE>
Section 2.18 and Section 6.17) for such initial 60 day period, the Borrowing
Base shall be deemed to be equal to $60,000,000.
The Revolving Loans shall be made pro rata in accordance with the
--- ----
Commitment Percentage of each Bank having a Revolving Credit Commitment. If the
aggregate principal amount of Revolving Loans outstanding at any time, plus the
----
aggregate principal amount of all Swingline Loans outstanding, plus the
----
aggregate Stated Amount of Letters of Credit outstanding at such time, plus the
----
aggregate amount of any unreimbursed draws under outstanding Letters of Credit
shall at any time exceed the aggregate Revolving Credit Commitments of all the
Banks then in effect or the Borrowing Base then in effect, the Borrower shall
immediately pay to the Administrative Agent for the respective accounts of the
Banks the amount of such excess (and any such payment shall be applied first to
repay any outstanding Swingline Loans). Failure to make such payment on demand
shall be an Event of Default hereunder.
(b) Term Loan A. Subject to the terms and conditions set forth in
-----------
this Agreement, each of the Banks having a Term Loan A Commitment severally
agrees to lend to the Borrower on the Closing Date, and the Borrower agrees to
borrow on such date and repay in accordance with Section 2.13, an amount equal
to such Bank's Term Loan A Commitment.
(c) Term Loan B. Subject to the terms and conditions set forth in
-----------
this Agreement, each of the Banks having a Term Loan B Commitment severally
agrees to lend to the Borrower on the Closing Date, and the Borrower agrees to
borrow on such date and repay in accordance with Section 2.13, an amount equal
to such Bank's Term Loan B Commitment.
(d) Swingline Loans.
---------------
(i) Availability. Subject to the terms and conditions of this
-----------
Agreement, the Swingline Lender agrees to make Swingline Loans to the Borrower
from time to time from the Closing Date through, but not including, the
Swingline Termination Date; provided, that the aggregate principal amount of all
--------
outstanding Swingline Loans (after giving effect to any amount requested) at any
time, shall not exceed the least of (x) the aggregate Revolving Credit
Commitments of all the Banks less the sum of (A) all outstanding Revolving Loans
----
at such time, (B) the aggregate Stated Amount of Letters of Credit outstanding
at such time and (C) the aggregate amount of all unreimbursed draws under
outstanding Letters of Credit at such time, (y) the Swingline Commitment at such
time, and (z) the Borrowing Base at such time. Swingline Loans hereunder may be
requested for a period of up to 7 days and shall be repaid and reborrowed in
accordance with the terms hereof. The Swingline Lender shall initiate the
transfer of funds representing the Swingline Loan to the Borrower by 4:00 p.m.
(Boston, Massachusetts time) on the Business Day of the requested borrowing, so
long as the Swingline Loan has been requested by the Borrower no later than
12:00 p.m. (Boston, Massachusetts time) on such Business Day.
-32-
<PAGE>
(ii) Repayment. The Borrower shall repay the outstanding
---------
principal amount of each Swingline Loan on the earliest to occur of: (x) the
seventh day after the date on which such Swingline Loan was made, (y) the
Swingline Termination Date or (z) (i) if it shall receive notice of demand for
payment from the Swingline Lender prior to 12:00 p.m. (Boston, Massachusetts
time) on any Business Day, on the Business Day next succeeding such Business Day
and (ii) if it shall receive such notice after 12:00 p.m. (Boston, Massachusetts
time) on any day, on the Business Day which is 2 Business Days after it shall
receive such notice.
(iii) Refunding and Conversion of Swingline Loans to Revolving
--------------------------------------------------------
Loans.
- -----
(A) Swingline Loans shall be refunded by the Banks on
demand by the Swingline Lender, in which case the Borrower shall be deemed to
have requested on such date of demand a Revolving Loan comprised solely of Prime
Rate Loans in the principal amount of such Swingline Loan. Such refundings of
the Swingline Loan and/or fundings of such Revolving Loans shall be made by the
Banks in accordance with their respective Commitment Percentage applicable to
Revolving Loans and shall thereafter be reflected as Revolving Loans of the
Banks on the books and records of the Administrative Agent (including the Loan
Account). Each Bank shall fund its respective Commitment Percentage of Revolving
Loans as required to repay Swingline Loans outstanding to the Swingline Lender
upon demand by the Swingline Lender but in no event later than 2:00 p.m.
(Boston, Massachusetts time) on the next succeeding Business Day after such
demand is made. No Bank's obligation to fund its respective Commitment
Percentage of a Swingline Loan shall be affected by any other Bank's failure to
fund its Commitment Percentage of a Swingline Loan, nor shall any Bank's
Commitment Percentage be increased as a result of any such failure of any other
Bank to fund its Commitment Percentage. To the extent any Bank does not fund its
respective Commitment Percentage of any Revolving Loan deemed to be made to the
Borrower pursuant to this Section, the Borrower shall repay such amounts to the
Swingline Lender in accordance with the provisions of Section 8.3(c) as if such
Loan were a Revolving Loan for which a Bank did not advance its share to the
Administrative Agent.
(B) If, at the time the Borrower receives notice of a
demand for repayment of a Swingline Loan from the Swingline Lender, the
aggregate principal amount of all Revolving Loans outstanding, plus the
aggregate principal amount of all Swingline Loans outstanding (including the
Swingline Loan for which demand for payment is then made by the Swingline
Lender), plus the aggregate Stated Amount of Letters of Credit outstanding at
such time, plus the aggregate of all unreimbursed draws under outstanding
Letters of Credit, equals or exceeds the lesser of (A) the aggregate amount of
the Revolving Credit Commitments of all of the Banks at such time, and (B) the
Borrowing Base at such time, the Borrower shall repay such Swingline Loan in
accordance with Section 2.1(d)(ii). The Borrower hereby authorizes the
Administrative Agent to charge any account maintained with the Swingline Lender
(up to the amount available therein) in order to immediately pay the Swingline
Lender the amount of such Swingline Loans to the extent amounts received from
the Banks are not sufficient to
-33-
<PAGE>
repay in full the outstanding Swingline Loans requested or required to be
refunded, provided, that if there is availability under the Revolving Credit
--------
Commitments and the Borrowing Base to repay such Swingline Loans and the
conditions of Section 3.2 (other than Section 3.2(a)) have been met, the Agent
will first debit the Loan Account in the amount of such Swingline Loans, to the
extent of the availability of Revolving Loans, prior to charging any other
account maintained with the Swingline Lender. If any portion of any such amount
paid to the Swingline Lender shall be recovered by or on behalf of the Borrower
from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Banks that have reimbursed the
Swingline Lender pursuant to clause (A) above in accordance with their
respective ratable share (unless the amounts so recovered by or on behalf of the
Borrower pertain to a Swingline Loan extended after the occurrence and during
the continuance of an Event of Default of which the Administrative Agent has
received actual notice and which such Event of Default has not been waived by
the Majority Banks or the Banks, as applicable).
(C) Each Bank acknowledges and agrees that, absent the
gross negligence or willful misconduct of the Swingline Lender, its obligation
to refund Swingline Loans with Revolving Loans in accordance with the terms of
this Section 2.1(d) is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including, without limitation, non-satisfaction of
the conditions set forth in Section 2.1(a) of Article III. Further, each Bank
agrees and acknowledges that if prior to the refunding of any outstanding
Swingline Loans pursuant to this Section 2.1(d), one of the events described in
Section 7.1(g) or (h) shall have occurred, each Bank will, on the date the
applicable Revolving Loan would have been made pursuant to Section 2.1(d)(iii)
hereof, purchase an undivided participating interest in the Swingline Loan to be
refunded in an amount equal to its Commitment Percentage (applicable to
Revolving Loans) of the aggregate amount of such Swingline Loan. Each Bank will
immediately transfer to the Swingline Lender, in immediately available funds,
the amount of its participation. Whenever, at any time after the Swingline
Lender has received from any Bank such Bank's participating interest in a
Swingline Loan, the Swingline Lender receives any payment on account thereof,
the Swingline Lender will distribute to such Bank its participating interest in
such amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Bank's participating interest was
outstanding and funded).
(D) Each Bank's Commitment Percentage applicable to any
Swingline Loan shall be identical to its Commitment Percentage applicable to
Revolving Loans.
(e) Loan Account. The Administrative Agent shall enter Loans and
------------
advances made by the Banks to the Borrower pursuant to this Agreement
(including, without limitation, on account of the Revolving Loans, Swingline
Loans, Term Loans and any Letters of Credit) as debits in the Loan Account. The
Administrative Agent shall also record in the Loan Account all payments made by
the Borrower on account of the Loans and may also record therein, in accordance
with customary accounting practices, other debits and credits, including
customary banking charges and all interest, fees, charges and
-34-
<PAGE>
expenses chargeable to the Borrower under this Agreement. The debit balance of
the Loan Account shall reflect the amount of the Borrower's Obligations
hereunder and shall be considered correct absent manifest error. The
Administrative Agent shall render to the Borrower a monthly accounting of
transactions with respect to the Loans setting forth the balance of the Loan
Account, which such monthly accounting shall be presumed to be correct absent
manifest error. If there shall be a conflict, discrepancy or inconsistency
between the Loan Account and any Note Schedule, the entries and records in the
Loan Account shall control, supersede and prevail.
2.2. The Notes.
---------
(a) The Revolving Credit Notes. The Revolving Loans shall be
--------------------------
evidenced by separate Revolving Credit Notes of the Borrower to each Bank having
a Revolving Credit Commitment in or substantially in the form of Exhibit A-1
-----------
hereto (as amended, modified or otherwise supplemented from time to time,
collectively, the "Revolving Credit Notes"), with appropriate insertions.
(b) The Term Notes A. The Term Loan A shall be evidenced by separate
----------------
Term Notes A of the Borrower to each Bank having a Term Loan A Commitment in or
substantially in the form of Exhibit A-2 hereto (as amended, modified or
-----------
otherwise supplemented from time to time, collectively, the "Term Notes A"),
with appropriate insertions.
(c) The Term Notes B. The Term Loan B shall be evidenced by separate
----------------
Term Notes B of the Borrower to each Bank having a Term Loan B Commitment in or
substantially in the form of Exhibit A-3 hereto (as amended, modified or
-----------
otherwise supplemented from time to time, collectively, the "Term Notes B"),
with appropriate insertions.
(d) The Swingline Note. The Swingline Loans shall be evidenced by a
------------------
Swingline Note of the Borrower to the Swingline Lender in or substantially in
the form of Exhibit A-4 hereto (as amended, modified or otherwise supplemented
-----------
from time to time, the "Swingline Note"), with appropriate insertions.
(e) Note Schedules. The Administrative Agent and each Bank may,
--------------
instead of or in addition to maintaining a loan account, and is hereby
irrevocably authorized by the Borrower to, enter on the schedule forming a part
of its Notes or otherwise in its records, appropriate notations (collectively,
the "Note Schedules") evidencing the date and the amount of each Loan, as
applicable, the interest rate applicable thereto and the date and amount of each
payment of principal and interest made by the Borrower with respect thereto; and
in the absence of manifest error, such notations shall be presumed to be
correct. The Administrative Agent and each Bank is hereby irrevocably authorized
by the Borrower to attach to and make a part of its respective Notes a
continuation of any such schedule as and when required. No failure on the part
of the Administrative Agent or any Bank to make any notation as provided in this
subsection (e) shall in any way affect any Loan or the rights of the Banks or
the Obligations of the Borrower with respect thereto. If there shall be a
-35-
<PAGE>
conflict, discrepancy or inconsistency between the Loan Account and any Note
Schedule, the entries and records in the Loan Account shall control, supersede
and prevail.
2.3. Conversion; Continuation. Provided that no Default or Event of
------------------------
Default shall have occurred and be continuing, and subject to and in accordance
with the provisions of Section 2.4(a), (x) the Borrower may convert all or any
part (in integral multiples of $250,000) of any outstanding Loan into a Loan of
the other type provided for in this Agreement in the same aggregate principal
amount, on any Business Day (which, in the case of a conversion of a LIBOR Loan,
shall be the last day of the Interest Period applicable to such LIBOR Loan) and
(y) the Borrower may continue a LIBOR Loan as a LIBOR Loan on the last day of
the Interest Period applicable to such LIBOR Loan. The Borrower shall give the
Administrative Agent prior notice of each such conversion (which notice shall be
effective upon receipt) in accordance with Section 2.4. All such conversions
shall be made pro rata in accordance with each Bank's Commitment Percentage
--- ----
applicable to the type of Loan being converted.
2.4. Notice and Manner of Borrowing, Continuation or Conversion of
-------------------------------------------------------------
Loans.
- -----
(a) Whenever the Borrower desires to obtain or continue a Loan
hereunder or convert an outstanding Loan into a Loan of the other type provided
for in this Agreement, the Borrower shall notify the Administrative Agent (which
notice shall be irrevocable) by telecopy or telephone (i) received no later than
1:00 p.m. (Boston, Massachusetts time) on the date 1 Business Day before the day
on which the requested Loan is to be made or converted to a Prime Rate Loan,
(ii) received no later than 12:00 p.m. (Boston, Massachusetts time) on the day
on which a Swingline Loan is to be made, and (iii) received no later than 1:00
p.m. (Boston, Massachusetts time) on the date 3 Business Days before the day on
which the requested Loan is to be made or continued as or converted to a LIBOR
Loan, provided that no more than 10 LIBOR Loans may be outstanding at any one
--------
time. Such notice by the Borrower shall specify (i) the effective date and
amount of each Loan to be obtained, continued or converted (or portion thereof
to be continued or converted, as the case may be), subject to the limitations
set forth in Section 2.1, (ii) the interest rate option to be applicable
thereto, and (iii) the duration of the applicable Interest Period, if any
(subject to the provisions of the definition of Interest Period and Section
2.9). Each LIBOR Loan must be for an amount equal to at least $250,000 and in
additional increments of $250,000. Each such notification by telephone pursuant
to Section 2.3 or this Section 2.4(a) (a "Notice of Borrowing or Conversion")
shall be immediately followed by a written confirmation thereof by the Borrower
in substantially the form of Exhibit B hereto, provided that if such written
--------- --------
confirmation differs in any material respect from the action taken by the
Administrative Agent, the records of the Administrative Agent shall be presumed
to be correct absent manifest error.
(b) Subject to the terms and conditions hereof, (x) each Bank
shall make available to the Administrative Agent, in immediately available
funds, no later than 1:00 p.m., Boston, Massachusetts time, on the date upon
which any Prime Rate Loan or LIBOR Loan is to be made, such Bank's Commitment
Percentage of the requested Loan and (y) the Swingline Lender shall make
available to the Administrative Agent, in immediately
-36-
<PAGE>
available funds, no later than 4:00 p.m. (Boston, Massachusetts time), on the
date upon which any Swingline Loan is to be made, the amount of such Swingline
Loan to be made on such date. The Administrative Agent shall, in turn, make each
Loan on the effective date specified therefor by crediting the amount of such
Loan to the Borrower's demand deposit account with the Administrative Agent. In
no event shall the Administrative Agent (in its capacity as Administrative
Agent) have any obligation to make any funding or shall any Bank be obligated to
fund more than its Commitment Percentage of the requested Prime Rate Loan or
LIBOR Loan. Revolving Loans to be made for the purpose of refunding Swingline
Loans shall be made by the Banks as provided in Section 2.1(d) hereof.
2.5. Commitment Fee. The Borrower shall pay to the Administrative
--------------
Agent, for the accounts of the Banks having Revolving Credit Commitments, in
accordance with their respective Revolving Credit Commitment Percentages, from
the Closing Date through the Revolving Credit Maturity Date, a commitment fee
computed at the rate of .50% per annum on the average daily amount, during each
fiscal quarter or portion thereof, of the unborrowed portion of the Revolving
Credit Commitment minus the Stated Amount of outstanding Letters of Credit
-----
minus, without duplication, the aggregate amount of unreimbursed draws under
- -----
outstanding Letters of Credit and minus the principal amount of any outstanding
-----
Swingline Loans. Commitment fees shall be payable quarterly in arrears, on the
last Business Day of March, June, September and December of each year beginning
June 30, 2000, and on the Revolving Credit Maturity Date or, if earlier, on the
date the Revolving Loans become due and payable (by reason of acceleration or
otherwise).
2.6. Reserved.
--------
2.7. Fee Letter. The Borrower shall pay to the Administrative Agent
----------
fees in the amounts and at the times outlined in the Fee Letter.
2.8. Reduction of Revolving Credit Commitment. The Borrower may from
----------------------------------------
time to time by written notice delivered to the Administrative Agent at least 5
Business Days prior to the date of the requested reduction, reduce by a minimum
amount of $1,000,000, and in additional increments of $500,000, any unborrowed
portion of the Revolving Credit Commitment. No reduction of the Revolving
Credit Commitment shall be subject to reinstatement.
2.9. Duration of Interest Periods.
----------------------------
(a) Subject to the provisions of the definition of Interest
Period, the duration of each Interest Period applicable to a LIBOR Loan shall be
as specified in the applicable Notice of Borrowing or Conversion. The Borrower
shall have the option to elect a subsequent Interest Period to be applicable to
such Loan by giving notice of such election to the Bank received no later than
1:00 p.m. (Boston, Massachusetts time) on the date 3 Business Days before the
end of the then applicable Interest Period if such Loan is to be continued as or
converted to a LIBOR Loan.
-37-
<PAGE>
(b) If the Administrative Agent does not receive a notice of
election of duration of an Interest Period for a LIBOR Loan pursuant to
subsection (a) above within the applicable time limits specified therein, or if,
when such notice must be given, a Default or an Event of Default exists, the
Borrower, notwithstanding the provisions of Section 2.3, shall be deemed to have
elected to convert such Loan in whole into a Prime Rate Loan on the last day of
the then current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, the Borrower may not select an
Interest Period that would end, but for the provisions of the definition of
Interest Period, after the Term Loan B Maturity Date.
2.10. Interest Rates and Payments of Interest.
---------------------------------------
(a) Each Revolving Loan, portion of Term Loan A and portion of
Term Loan B which is a Prime Rate Loan, and each Swingline Loan (until its
refunding and conversion into a Revolving Loan), shall bear interest on the
outstanding principal amount thereof at a rate per annum equal to the Prime Rate
plus the Applicable Prime Rate Margin, which rate shall change contemporaneously
with any change in the Prime Rate. Such interest shall be payable on the last
Business Day of any month in which a Swingline Loan or a Prime Rate Loan is
outstanding hereunder, and when the principal of such Loan is due (whether at
maturity, by reason of acceleration or otherwise).
(b) Each Revolving Loan, portion of Term Loan A and portion of
Term Loan B which is a LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for each Interest Period applicable thereto, at a rate
per annum equal to the Adjusted LIBOR Rate plus the Applicable LIBOR Margin.
Such interest shall be payable for such Interest Period on the last day thereof
and when the principal of such LIBOR Loan is due (whether at maturity, by reason
of acceleration or otherwise) and, if such Interest Period is longer than 3
months, at intervals of 3 months after the first day thereof.
(c) With reference to Revolving Loans and Term Loan A (i) the
"Applicable Prime Rate Margin" shall be equal to (A) from the Closing Date
through the second Business Day after the date on which the financial statements
required to be delivered pursuant to Section 5.1(b) for the second full fiscal
quarter of the Borrower following the Closing are delivered to the
Administrative Agent, a percentage equal to 2.00%, and (B) thereafter, the
percentage determined for each Rate Period by reference to Table 1 below, and
(ii) the "Applicable LIBOR Margin" shall be equal to (A) from the Closing Date
through the second Business Day after the date on which the financial statements
required to be delivered pursuant to Section 5.1(b) for the second full fiscal
quarter of the Borrower following the Closing are delivered to the
Administrative Agent, a percentage equal to 3.25%, and (B) thereafter, the
percentage determined for each Rate Period by reference to Table 1 below:
-------
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<PAGE>
Table 1
-------
Revolving Loans and Term Loan A
<TABLE>
<CAPTION>
Applicable Prime Applicable
Funded Debt Ratio Rate Margin LIBOR Margin
----------------- ----------- ------------
<S> <C> <C>
a) greater than or equal to 4.50 to 1 2.00% 3.25%
b) less than 4.50 to 1 but equal to or 1.75% 3.00%
greater than 4.00 to 1
c) less than 4.00 to 1 but equal to or 1.50% 2.75%
greater than 3.50 to 1
d) less than 3.50 to 1 but equal to or 1.25% 2.50%
greater than 3.00 to 1
e) less than 3.00 to 1 1.00% 2.25%
</TABLE>
With reference to Term Loan B (i) the "Applicable Prime Rate Margin" shall
be equal to (A) from the Closing Date through the second Business Day after the
date on which the financial statements required to be delivered pursuant to
Section 5.1(b) for the second full fiscal quarter of the Borrower following the
Closing are delivered to the Administrative Agent, a percentage equal to 2.50%,
and (B) thereafter, the percentage determined for each Rate Period by reference
to Table 2 below, and (ii) the "Applicable LIBOR Margin" shall be equal to (A)
from the Closing Date through the second Business Day after the date on which
the financial statements required to be delivered pursuant to Section 5.1(b) for
the second full fiscal quarter of the Borrower following the Closing are
delivered to the Administrative Agent, a percentage equal to 3.75%, and (B)
thereafter, the percentage determined for each Rate Period by reference to Table
-----
2 below:
- -
-39-
<PAGE>
Table 2
-------
Term Loan B
<TABLE>
<CAPTION>
Applicable Prime Applicable
Funded Debt Ratio Rate Margin LIBOR Margin
----------------- ----------- ------------
<S> <C> <C>
a) greater than or equal to 4.50 to 1 2.50% 3.75%
b) less than 4.50 to 1 but equal to or 2.25% 3.50%
greater than 3.00 to 1
c) less than 3.00 to 1 2.00% 3.25%
</TABLE>
For purposes of determining the Applicable Prime Rate Margin and the Applicable
LIBOR Margin, the Funded Debt Ratio will be tested quarterly, commencing with
the third full fiscal quarter of the Borrower following the Closing Date, based
on the annual or quarterly financial statements required to be delivered
pursuant to Section 5.1(a) or 5.1(b), respectively. For purposes of determining
the interest rate for any Rate Period hereunder, any interest rate change shall
be effective 3 Business Days after the date on which the financial statements
required to be delivered pursuant to Section 5.1(a) or Section 5.1(b) are
delivered to the Administrative Agent, together with a notice to the
Administrative Agent (which shall be verified by the Administrative Agent)
specifying any change in the Applicable Prime Rate Margin and the Applicable
LIBOR Margin. If the Borrower has failed to deliver the financial statements
required to be delivered by it pursuant to Section 5.1(a) or Section 5.1(b), the
Applicable Prime Rate Margin and the Applicable LIBOR Margin that are then in
effect shall automatically be increased by .25% until such financial statements
are delivered.
2.11. Changed Circumstances.
---------------------
(a) Circumstances Affecting LIBOR Rate Availability. If with respect
-----------------------------------------------
to any Interest Period the Administrative Agent or any Bank (after consultation
with Administrative Agent) shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars, in the applicable amounts, are not being quoted via Telerate Page
3750 or offered to the Administrative Agent for such Interest Period, or that
the Adjusted LIBOR Rate does not reflect the cost of funding LIBOR Loans by the
Banks, then the Administrative Agent shall forthwith give notice thereof to the
Borrower. Thereafter, until the Administrative Agent notifies the Borrower that
such circumstances no longer exist, the obligation of the Banks to make LIBOR
Loans and the right of the Borrower to convert any Loan to or continue any Loan
as a LIBOR Loan shall be suspended, and the Borrower shall repay in
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<PAGE>
full (or cause to be repaid in full) the then outstanding principal amount of
each such LIBOR Loan, together with accrued interest thereon, on the last day of
the then current Interest Period applicable to such LIBOR Loan or convert the
then outstanding principal amount of each such LIBOR Loan to a Prime Rate Loan
as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the date
--------------------------------------
hereof, the introduction of, or any change in, any Applicable Law or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or any of their respective
lending offices by which its eurodollar loans are made) with any request or
directive (whether or not having the force of law) of any such Authority,
central bank or comparable agency, shall make it unlawful or impossible for any
of the Banks (or any of their respective lending offices by which its eurodollar
loans are made) to honor its obligations hereunder to make or maintain any LIBOR
Loan, such Bank shall promptly give notice thereof to the Administrative Agent
and the Administrative Agent shall promptly give notice to the Borrower and the
other Banks. Thereafter, until the Administrative Agent notifies the Borrower
that such circumstances no longer exist, (i) the obligations of such Bank to
make LIBOR Loans and the right of the Borrower to convert any Loan or continue
any Loan as a LIBOR Loan shall be suspended and thereafter any request for a
LIBOR Loan (or to convert a Prime Rate Loan to a LIBOR Loan with respect to such
Bank's Commitment Percentage of such Loan or to continue a LIBOR Loan for an
additional Interest Period) shall, as to such Bank, be deemed a request for a
Prime Rate Loan (or a request to convert a LIBOR Loan to a Prime Rate Loan or a
request to continue a Prime Rate Loan as the case may be), and (ii) if any of
the Banks may not lawfully continue to maintain a LIBOR Loan to the end of the
then current Interest Period applicable thereto as a LIBOR Loan, such Bank's
Commitment Percentage of the applicable LIBOR Loan shall immediately be
converted to a Prime Rate Loan for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of,
---------------
or any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Banks (or any of their respective lending offices) with any request or directive
(whether or not having the force of law) of such Governmental Authority, central
bank or comparable agency:
(i) shall subject any of the Banks (or any of their respective
lending offices) to any tax, duty or other charge with respect to any Loan, Note
or Letter of Credit which changes the basis of taxation of payments to any of
the Banks (or any of their respective lending offices) of the principal of or
interest on any Loan, Note or Letter of Credit or any other amounts due under
this Agreement in respect thereof (except for changes in the rate of tax
(including franchise tax) on the overall net income of any of the Banks or any
of their respective lending offices imposed by the jurisdiction in which such
Bank is organized or is or should be qualified to do business or such lending
office is located); or
-41-
<PAGE>
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any of the Banks (or any of their respective lending offices) or
shall impose on any of the Banks (or any of their respective lending offices) or
the foreign exchange and interbank markets any other condition affecting any
Loan or Note;
and the result of any of the foregoing is to increase the costs to any of the
Banks of maintaining any LIBOR Loan or issuing or participating in Letters of
Credit or to reduce the yield or amount of any sum received or receivable by any
of the Banks under this Agreement or under the Notes in respect of a LIBOR Loan
or Letter of Credit, then such Bank shall promptly notify the Administrative
Agent, and the Administrative Agent shall promptly notify the Borrower of such
fact and demand compensation therefor in writing and, within 15 days after such
notice by the Administrative Agent, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank or Banks for such
increased cost or reduction. The Administrative Agent will promptly notify the
Borrower of any event of which it has knowledge which will entitle such Bank to
compensation pursuant to this Section 2.11(c); provided, that the Administrative
--------
Agent shall incur no liability whatsoever to the Banks or the Borrower in the
event it fails to do so. A certificate of such Bank setting forth the basis for
determining such amount or amounts necessary to compensate such Bank shall be
forwarded to the Borrower through the Administrative Agent and shall be presumed
to be correct absent manifest error. The Banks shall determine the
applicability of, and the amount due under, this Section 2.11 consistent with
the manner in which they apply similar provisions and calculate similar amounts
payable to them by other borrowers having in their credit agreements provisions
comparable to this Section 2.11.
Section 2.11A. Indemnity. The Borrower hereby indemnifies each of
---------
the Banks against any loss or expense which may arise or be attributable to each
Bank's obtaining, liquidating or employing deposits or other funds acquired to
effect, fund or maintain any Loan (a) as a consequence of any failure by the
Borrower to make any payment when due (or any prepayment on the date notified to
the Administrative Agent) of any amount due hereunder in connection with a LIBOR
Loan, (b) due to any failure of the Borrower to borrow (or continue or convert
into) a LIBOR Loan on a date specified therefor in a Notice of Borrowing or
Conversion and/or (c) due to any payment, prepayment or conversion of any LIBOR
Loan on a date other than the last day of the Interest Period therefor. The
amount of such loss or expense shall be determined, in the reasonable exercise
of the applicable Bank's sole discretion, based upon the assumption that such
Bank funded its Commitment Percentage of the LIBOR Loans in the London interbank
market and using any reasonable attribution or averaging methods which such Bank
deems reasonable, appropriate and practical. A certificate of such Bank setting
forth the basis for determining such amount or amounts necessary to compensate
such Bank shall be forwarded to the Borrower through the Administrative Agent
and shall be presumed to be correct absent manifest error.
-42-
<PAGE>
Section 2.12 Capital Requirements. If after the date hereof either
--------------------
(a) the introduction of, or any change in, or change in the interpretation of,
any Applicable Law or (b) compliance with any guideline or request from any
central bank or comparable agency or other Governmental Authority (whether or
not having the force of law), has or would have the effect of reducing the rate
of return on the capital of, or has affected or would affect the amount of
capital required to be maintained by, any Bank, or any corporation controlling
such Bank as a consequence of, or with reference to the Revolving Credit
Commitments or Swingline Commitment and other commitments of this type
hereunder, below the rate which the Bank or such other corporation could have
achieved but for such introduction, change or compliance, then within 5 Business
Days after written demand by any such Bank, the Borrower shall pay to such Bank
from time to time as specified by such Bank additional amounts sufficient to
compensate such Bank or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrower and the Administrative Agent by such
Bank, shall be presumed to be correct absent manifest error. Banks shall
determine the applicability of, and the amount due under, this Section 2.12
consistent with the manner in which they apply similar provisions and calculate
similar amounts payable to them by other borrowers having in their credit
agreements provisions comparable to this Section 2.12.
Upon the receipt by the Borrower from any Bank (an "Affected Bank") of
a claim for compensation under Section 2.11, this Section 2.12 or Section 2.12A,
which claim shall be delivered to the Borrower promptly after the Affected Bank
has determined that it is entitled to compensation, the Borrower may: (i)
request one or more of the other Banks to acquire and assume all or part of such
Affected Bank's Loans and Commitments; or (ii) designate a replacement lending
office of such Bank or a replacement bank or financial institution reasonably
satisfactory to the Administrative Agent in its sole discretion. If one or more
of the other Banks in its sole discretion agrees to acquire all or part of such
Affected Bank's Loans and Commitments or if such a satisfactory replacement bank
or financial institution is designated, the Affected Bank shall promptly assign
all or such part of its Loans and Commitments.
Section 2.12A Taxes.
-----
(a) Payments Free and Clear. Any and all payments by the Borrower
-----------------------
hereunder or under the Notes or the Letters of Credit shall be made free and
clear of and without deduction for any and all present or future taxes,
franchise or excise taxes, levies, imposts, deductions, charges or withholding,
and all liabilities with respect thereto excluding, (i) in the case of each Bank
and the Administrative Agent, income and franchise taxes on net income
(including any so-called branch profits taxes) imposed by the jurisdiction under
the laws of which such Bank or the Administrative Agent (as the case may be) is
organized or is, or should be (as evidenced by a final, non-appealable
determination by the relevant taxing authority or other Governmental Authority),
qualified to do business or any political subdivision thereof and (ii) in the
case of each Bank, income and franchise taxes on net income (including any so-
called branch profits taxes) imposed by the jurisdiction of such Bank's lending
office or any political
-43-
<PAGE>
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Non-
Excluded Taxes"). If the Borrower shall be required by law to deduct any Non-
Excluded Taxes from or in respect of any sum payable hereunder or under any Note
or Letter of Credit to any Bank or the Administrative Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.12A) such Bank or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrower shall make such deductions, (C) the
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law, and (D) the Borrower shall
deliver to the Administrative Agent evidence of such payment to the relevant
taxing authority or other authority in the manner provided in Section 2.12A(d).
(b) Stamp and Other Taxes. In addition, the Borrower shall pay any
---------------------
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or security interests in respect thereto (hereinafter referred to as
"Other Taxes").
(c) Indemnity. The Borrower shall indemnity each Bank and the
---------
Administrative Agent for the full amount of Non-Excluded Taxes and Other Taxes
(including, without limitation, any Non-Excluded Taxes and Other Taxes imposed
by any jurisdiction on amounts payable under this Section 2.12A) paid by such
Bank or the Administrative Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Non-Excluded Taxes or Other Taxes were correctly or
legally assessed. Such indemnification shall be made within 30 days from the
date such Bank or the Administrative Agent (as the case may be) makes written
demand therefor.
(d) Evidence of Payment. Within 30 days after the date of any
-------------------
payment of Non-Excluded Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 9.1, the original or
a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Bank organized under the laws of a
---------------------
jurisdiction other than the United States or any state thereof shall deliver to
the Borrower, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two copies of United States Internal Revenue Service Forms W-8
BEN, W-8 ECI or W-8 IMY, as applicable (or successor forms) properly completed
and certifying in each case that such Bank is entitled to a complete exemption
from withholding or deduction for or on
-44-
<PAGE>
account of any United States federal income taxes, and (ii) an Internal Revenue
Service Form W-9 or successor applicable form, as the case may be, to establish
an exemption from United States backup withholding taxes. Each such Bank further
agrees to deliver to the Borrower, with a copy to the Administrative Agent, a
Form W-8 BEN, W-8 ECI or W-8 IMY and Form W-9, or successor applicable forms or
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Borrower,
certifying in the case of a Form W-8 BEN, W-8 ECI or W-8 IMY that such Bank is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes (unless in any such case
an event (including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would otherwise be
required which renders such forms inapplicable or the exemption to which such
forms relate becomes unavailable and such Bank notifies the Borrower and the
Administrative Agent that it is not entitled to receive payments without
deduction or withholding of United States federal income taxes) and, in the case
of a Form W-9, establishing an exemption from United States backup withholding
tax.
Each Bank shall promptly notify the Administrative Agent and the Borrower at any
time it determines that it is no longer in a position to provide any previously
delivered certificate or form to the Borrower. Notwithstanding any other
provision of this Section 2.12A(e), any Bank organized under the laws of a
jurisdiction other than the United States or any state thereof shall not be
required to deliver any form pursuant to this Section 2.12A(e) that such Bank is
not legally able to deliver.
(f) For any period with respect to which a Bank has failed to provide
the Borrower with the appropriate form described in Subsection 2.12A(e) 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 2.12A(e) above), such Bank shall not
be entitled to any additional payments under Section 2.12A with respect to Non-
Excluded Taxes imposed by the United States by reason of such failure; provided,
--------
however, that should a Bank become subject to Non-Excluded Taxes because of its
- -------
failure to deliver a form required hereunder, the Borrower shall take such steps
as the Bank reasonably shall request to assist the Bank to recover such Non-
Excluded Taxes.
(g) If a Bank or the Administrative Agent receives a refund in
respect to any Non-Excluded Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to Section 2.12A, it shall, if no Event of Default has occurred and is
continuing, within 30 days from the date of such receipt pay over the amount of
such refund to the Borrower, net of all reasonable out-of-pocket expenses of
such Bank or the Administrative Agent and without interest (other than interest
paid by the relevant taxation authority with respect to such refund); provided
--------
that the Borrower, upon the written request of such Bank of the Administrative
Agent, agrees to repay promptly the amount paid over to the Borrower (plus
penalties, interest or other reasonable charges) to such Bank or the
Administrative Agent in the event such
-45-
<PAGE>
Bank or the Administrative Agent is required to repay such refund to such
taxation authority, and provided, further, if an Event of Default has occurred
-------- -------
and is continuing, any such refund shall be applied by the Administrative Agent
to the Obligations in accordance with Section 8.5.
(h) Survival. Without prejudice to the survival of any other
--------
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.12A shall survive the payment in full of
the Obligations and the termination of the Commitments.
2.13. Payments and Prepayments of the Loans.
-------------------------------------
(a) The entire principal of the Revolving Credit Notes shall be
absolutely due and payable by the Borrower to the Banks on the Revolving Credit
Maturity Date. All of the other Indebtedness evidenced by the Revolving Credit
Notes shall, if not sooner paid, also be absolutely due and payable by the
Borrower to the Banks on the Revolving Credit Maturity Date.
(b) The entire principal of the Term Notes A shall be payable by the
Borrower to the Administrative Agent for the account of the Banks in 20
consecutive quarterly installments of principal. Such quarterly installments of
principal shall be payable on the installment payment dates, and shall be in the
amounts, set forth below:
<TABLE>
<CAPTION>
Installment Aggregate Amount
Payment Date of Payment
------------ ----------------
<S> <C>
09/30/00 $ 1,250,000
12/31/00 $ 1,250,000
03/31/01 $ 1,250,000
06/30/01 $ 1,250,000
09/30/01 $ 1,875,000
12/31/01 $ 1,875,000
03/31/02 $ 1,875,000
06/30/02 $ 1,875,000
09/30/02 $ 2,500,000
12/31/02 $ 2,500,000
03/31/03 $ 2,500,000
06/30/03 $ 2,500,000
09/30/03 $ 3,125,000
12/31/03 $ 3,125,000
03/31/04 $ 3,125,000
06/30/04 $ 3,125,000
09/30/04 $ 3,750,000
12/31/04 $ 3,750,000
03/31/05 $ 3,750,000
05/16/05 $ 3,750,000
</TABLE>
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<PAGE>
All of the Indebtedness evidenced by each Term Note A which is outstanding
shall, if not sooner paid, be in any event absolutely and unconditionally due
and payable in full by the Borrower to the Banks on the Term Loan A Maturity
Date.
(c) The entire principal of the Term Notes B shall be payable by the
Borrower to the Administrative Agent for the account of the Banks having Term
Loan B Commitments in 28 consecutive quarterly installments of principal. Such
quarterly installments of principal shall be payable on the installment payment
dates, and shall be in the amounts, set forth below:
<TABLE>
<CAPTION>
Installment Aggregate Amount
Payment Date of Payment
------------ ----------------
<S> <C>
09/30/00 $ 125,000
12/31/00 $ 125,000
03/31/01 $ 125,000
06/30/01 $ 125,000
09/30/01 $ 125,000
12/31/01 $ 125,000
03/31/02 $ 125,000
06/30/02 $ 125,000
09/30/02 $ 125,000
12/31/02 $ 125,000
03/31/03 $ 125,000
06/30/03 $ 125,000
09/30/03 $ 125,000
12/31/03 $ 125,000
03/31/04 $ 125,000
06/30/04 $ 125,000
09/30/04 $ 125,000
12/31/04 $ 125,000
03/31/05 $ 125,000
06/30/05 $ 125,000
09/30/05 $ 5,937,500
12/31/05 $ 5,937,500
03/31/06 $ 5,937,500
06/30/06 $ 5,937,500
09/30/06 $ 5,937,500
12/31/06 $ 5,937,500
03/31/07 $ 5,937,500
05/16/07 $ 5,937,500
</TABLE>
All of the Indebtedness evidenced by each Term Note B which is outstanding
shall, if not sooner paid, be in any event absolutely and unconditionally due
and payable in full by the Borrower to such Banks on the Term Loan B Maturity
Date.
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<PAGE>
(d) Revolving Loans that are Prime Rate Loans may be voluntarily
prepaid at any time, without premium or penalty, upon 5 Business Days' prior
written notice to the Administrative Agent. Subject to the provisions of
Section 2.11A, Revolving Loans that are LIBOR Loans may be voluntarily prepaid
at any time, without premium or penalty, upon 5 Business Days' prior written
notice to the Administrative Agent. Any interest accrued on the amounts so
prepaid to the date of such payment must be paid at the time of any such
payment. No prepayment of the Revolving Loans prior to the Revolving Credit
Maturity Date shall affect the Total Commitment or impair the Borrower's right
to borrow as set forth in Section 2.l. Partial prepayments of the Revolving
Loans shall be in an amount equal to $500,000 or an integral multiple thereof.
In the case of any partial payment of the Revolving Loans, the total amount of
such partial payment shall be allocable among the Revolving Loans, subject to
adjustment as provided in Section 8.5, pro rata in accordance with the
--- ----
Commitment Percentage of each Bank having a Revolving Credit Commitment in
accordance with subsection (g) below.
(e) Subject to the provisions of Section 2.11A, the Term Loans may be
voluntarily prepaid at any time, in whole or in part, without premium or
penalty, upon 5 Business Days' prior written notice to the Administrative Agent,
provided that interest accrued on the amounts so paid to the date of such
- --------
payment must be paid at the time of any such payment. Partial prepayments of
the Term Loans shall be in an amount equal to $500,000 or an integral multiple
thereof. In the case of any partial prepayment of either Term Loan, such
prepayments shall be applied ratably to the outstanding installments of Term
Loan A and Term Loan B, and in each case shall be applied to installments of
principal due under the applicable Term Loan pro rata to each Bank having a Term
--- ----
Loan A Commitment or Term Loan B Commitment in accordance with each such Bank's
Commitment Percentage relating to either of such Term Loans in accordance with
subsection (g) below, provided, however, that prior to repayment in full of Term
-------- -------
Loan A, upon at least 3 Business Days' prior written notice to the
Administrative Agent and the Borrower, at the election of any Bank having a Term
Loan B Commitment, the full amount of any voluntary prepayment proposed to be
made to such Bank (or so much thereof as would be required to prepay Term Loan A
in full) shall be allocable to Term Loan A, pro rata to each Bank having a Term
--- ----
Loan A Commitment, in accordance with each such Bank's Term Loan A Commitment
Percentage.
(f) The Borrower shall be required to make mandatory prepayments of
the Loans as set forth below (each a "Mandatory Prepayment"), such payments
being due and payable on the later of (x) the day on which any Net Proceeds are
received and (y) the Business Day following the last day on which a member of
the Borrower Affiliated Group is entitled by the terms hereof to make Eligible
Reinvestments with such Net Proceeds, with respect to clauses (i) through (iv)
below, and on the date on which the financial statements referred to below are
required to be delivered, whether or not such financial statements are actually
delivered, with respect to clause (v) below:
(i) an amount equal to 100% of the Net Proceeds received by
the Borrower or any other member of the Borrower
Affiliated Group
-48-
<PAGE>
from the sale or other disposition of any of their
respective assets or properties (other than Equity
Securities and Involuntary Dispositions), except for (v)
sales or other dispositions of assets or properties in
the ordinary course of business, (w) any sale or
disposition of assets or properties to (I) a Credit
Party, or (II) an Excluded Foreign Subsidiary of
Inventory having an aggregate value equal to or less than
$3,000,000 in any fiscal year of the Borrower, 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
Inventory or its fair market value, (x) sales or other
dispositions of assets or properties not in the ordinary
course of business in an aggregate amount (valued at the
lower of cost or fair market value) not to exceed
$1,000,000 in any fiscal year of the Borrower, provided
--------
that all such sales are made at fair market value and the
Net Proceeds of such sales or other dispositions are used
to make Eligible Reinvestments within 180 days after the
receipt thereof, (y) sales or other dispositions of
obsolete equipment or other assets no longer used or
useful in the business of the Borrower Affiliated Group
and (z) the Sexauer Dispositions;
(ii) an amount equal to 100% of the Net Proceeds received from
the incurrence of any Indebtedness for borrowed money,
except for (x) the Indebtedness incurred on the date
hereof under the FCF Subordinated Debt Documents, and (y)
any Indebtedness described in, and otherwise permitted
by, Section 6.1;
(iii) an amount equal to 100% of the Net Proceeds received by
the Borrower, any other member of the Borrower Affiliated
Group or the Administrative Agent as a result of an
Involuntary Disposition (including in the nature of
insurance proceeds) in excess of $1,000,000 in any fiscal
year of the Borrower, so long as such Net Proceeds of
less than $1,000,000 which are not required to be paid
under this clause (iii) are used within 180 days of
receipt thereof to make Eligible Reinvestments, provided
--------
that if a Default or Event of Default exists at the time
of such receipt of Net Proceeds, 100% of such Net
Proceeds shall be paid to the Administrative Agent for
application to the Loans;
(iv) an amount equal to 50% of the Net Proceeds received from
the sale of any Equity Securities of the Borrower by the
Borrower, except for (a) the Equity Securities issued or
converted in connection with the Merger on the date
hereof, (x) Equity Securities of the Borrower issued to
employees or directors of any member of the Borrower
Affiliated Group in connection with an employee benefit
or option plan adopted by the Board of Directors of any
member of
-49-
<PAGE>
the Borrower Affiliated Group, (y) Equity Securities of
the Borrower in respect of which any member of the
Borrower Affiliated Group has advanced or loaned the
employee or director of any member of the Borrower
Affiliated Group purchasing such Equity Securities the
amount utilized by such employee or director to purchase
such Equity Securities or (z) the proceeds of any
issuance by the Borrower of Equity Securities of the
Borrower consummated in connection with and for the
purpose of financing a Permitted Acquisition; and
(v) an amount equal to 75% of the Excess Cash Flow of the
Borrower (x) for the period commencing on the Closing
Date and ending on December 31, 2000, and (y) for each
fiscal year of the Borrower thereafter, in each case as
evidenced by the financial statements required to be
delivered pursuant to Section 5.1(a); notwithstanding the
foregoing, if at the end of any fiscal year of the
Borrower the Funded Debt Ratio (as evidenced by the
annual audited financial statements required to be
delivered pursuant to Section 5.1(a)) is less than 3.5 to
1 for the four consecutive fiscal quarters ending with
the last fiscal quarter of such fiscal year, the
percentage of Excess Cash Flow required to be prepaid
under this clause (v) shall be reduced to 50% of Excess
Cash Flow for such fiscal year.
Subject to the rights of the holders of Term Loan B to reject Mandatory
Prepayments in certain circumstances, as more fully described below, Mandatory
Prepayments (other than Net Proceeds of the Sexauer Disposition) shall be
applied ratably (based on outstanding principal balances at the time of
prepayment) to the outstanding installments of Term Loan A and Term Loan B, and
in each case shall be applied to installments of principal due under the
applicable Term Loan on a pro rata basis in accordance with subsection (g)
--- ----
below, until the Term Loans have been paid in full. Mandatory prepayments of
Prime Rate Loans shall be made without any premium or penalty. Subject to
Section 2.11A, Mandatory Prepayments of LIBOR Loans shall be made without any
premium or penalty, provided that, if no Default or Event of Default has
--------
occurred, the Borrower shall be permitted to make any such Mandatory Prepayment
that is due prior to the end of an Interest Period to a cash collateral account
established and controlled by the Administrative Agent as collateral for the
repayment of such LIBOR Loans. Any such amounts will be held in such cash
collateral account until the end of the applicable Interest Period and then
applied to the Term Loans or Revolving Loans as described in this clause (f),
and such payment of the Term Loans or Revolving Loans shall be deemed made at
the end of such Interest Period for purposes of Section 2.11A. At the
reasonable request of the Borrower, amounts deposited in such cash collateral
account will be invested by the Administrative Agent in Cash Equivalents
maturing prior to the date or dates on which it is anticipated that such amounts
will be applied to prepay such LIBOR Loans; any interest earned on such Cash
Equivalents will be for the account of the Borrower and the Borrower will
deposit with the Administrative Agent the amount
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<PAGE>
of any loss on any such Cash Equivalents to the extent necessary in order that
the amount of the prepayment to be made with the deposited amounts may not be
reduced. All such Mandatory Prepayments shall be allocable to the Term Loans,
pro rata to each Bank having a Term Loan A Commitment or a Term Loan B
- --- ----
Commitment, in accordance with each such Bank's Commitment Percentage relating
to either of such Term Loans in accordance with subsection (g) below; provided,
--------
however, that prior to repayment in full of Term Loan A, at the election of any
- -------
Bank having a Term Loan B Commitment (such election to be made by written notice
and delivered to the Administrative Agent no later than 1 Business Day after
receipt of notice of such prepayment from the Administrative Agent), the full
amount of any Mandatory Prepayment proposed to be made to such Bank (or so much
thereof as would be required to prepay Term Loan A in full) shall be allocable
only to Term Loan A, pro rata to each Bank having a Term Loan A Commitment, in
--- ----
accordance with each such Bank's Term Loan A Commitment Percentage. Upon payment
in full of the Term Loans, all Mandatory Prepayments shall be applied to the
Revolving Loans (without reduction of the Revolving Credit Commitments).
Notwithstanding the provisions of Section 2.13(f)(i), the Net Proceeds of the
Sexauer Dispositions shall not be applied to reduce the outstanding balance of
the Term Loans, but instead shall be applied to the Revolving Loans (without
reduction of the Revolving Credit Commitments).
(g) Amounts to be applied pursuant to this Section 2.13 to the
prepayment of Term Loans and Revolving Loans shall be applied first to prepay
outstanding Prime Rate Loans and then to prepay outstanding LIBOR Loans.
2.14. Method of Payment. All payments and prepayments of principal
-----------------
and all payments of interest and other amounts due in respect of Term Loan A,
Term Loan B and a Revolving Loan which is not a Swingline Loan or reimbursement
of a drawing under a Letter of Credit shall be made by the Borrower to the
Administrative Agent, for the respective accounts of the Banks or (as the case
may be) the Administrative Agent, at 100 Federal Street, Boston, Massachusetts
02110, in immediately available funds, on or before 1:00 p.m. (Boston,
Massachusetts time) on the due date thereof, free and clear of, and without any
deduction or withholding for, any Non-Excluded Taxes or other payments. The
Borrower authorizes the Administrative Agent and each Bank, to advance to the
Borrower and to charge to it as a Revolving Loan a sum sufficient to pay all
principal, interest, fees, charges, taxes , expenses and other amounts due under
the Loan Documents if such sums are not paid on the date due (after giving
effect to any applicable grace periods) and to charge to any deposit account
which the Borrower may maintain with the Administrative Agent or such Bank the
principal, interest, fees, charges, taxes and expenses provided for in the Loan
Documents if, on the day that such interest, principal, fees, charges, taxes,
expenses and other amounts become due (after giving effect to any applicable
grace periods) such amounts are not paid and the aggregate principal amount of
all Revolving Loans (including Swingline Loans) outstanding, plus the aggregate
Stated Amount of Letters of Credit outstanding at such time, plus the aggregate
amount of all unreimbursed draws under outstanding Letters of Credit, equals or
exceeds the lesser of (A) the aggregate amount of the Revolving Credit
Commitments of all of the Banks at such time, and (B) the Borrowing Base at such
time, in each case
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<PAGE>
with advice thereafter sent to the Borrower's chief financial officer in
accordance with the Administrative Agent's or such Bank's customary practice.
2.15. Default Rate Interest, Etc.
---------------------------
After and during the continuance of an Event of Default, all amounts
outstanding hereunder or under any other Loan Document (including, without
limitation, all principal, interest and fees outstanding) shall, at the option
of the Majority Banks, bear interest from and including the due date thereof
until paid, compounded daily and payable on demand, at a per annum rate 2%
greater than the rate which would otherwise be applicable (or if no rate is
applicable, whether in respect of interest, fees or other amounts, then the rate
applicable to Prime Rate Loans plus 2%) (the "Default Rate").
----
2.16. Reserved.
--------
2.17. Computation of Interest and Fees; Maximum Interest. Interest
--------------------------------------------------
and all fees payable hereunder on account of LIBOR Loans shall be computed daily
on the basis of a year of 360 days and paid for the actual number of days for
which due. Interest payable hereunder on account of Prime Rate Loans shall be
computed daily on the basis of a year of 365 days and paid for the actual number
of days for which due. If the due date for any payment of principal is extended
by operation of law, interest shall be payable for such extended time. If any
payment required by this Agreement becomes due on a day that is not a Business
Day such payment may be made on the next succeeding Business Day (subject to
clause (i) of the definition of Interest Period), and such extension shall be
included in computing interest in connection with such payment. Notwithstanding
any other term of this Agreement, the Notes or any other document referred to
herein or therein, the maximum amount of interest which may be charged to or
collected from any person liable hereunder or under any Notes by any Bank shall
be absolutely limited to, and shall in no event exceed, the maximum amount of
interest which could lawfully be charged or collected under applicable law
(including, to the extent applicable, the provisions of Section 5197 of the
Revised Statutes of the United States of America, as amended, 12 U.S.C. Section
85, as amended), so that the maximum of all amounts constituting interest under
applicable law, howsoever computed, shall never exceed as to any Person liable
therefor such lawful maximum, and any term of this Agreement, the Notes, the
Letter of Credit applications, or any other document referred to herein or
therein which could be construed as providing for interest in excess of such
lawful maximum shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.
2.18. Letters of Credit. Upon the terms and subject to the
-----------------
conditions of this Agreement, and in reliance upon the representations,
warranties and covenants of the Borrower made herein, the Issuing Bank agrees to
issue, to the extent permitted by law and the Uniform Custom Practices of the
International Chamber of Commerce governing Letters of Credit (Publication No.
500 or any successor thereto), as in effect on the date of issuance, one or more
Letters of Credit on the application and for the account of the Borrower, during
the period from the Closing Date to 30 days prior to the Revolving
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<PAGE>
Credit Maturity Date; provided that the Stated Amount of Letters of Credit
--------
outstanding at any time, plus the aggregate amount of all unreimbursed draws
----
under such outstanding Letters of Credit, shall not at any time (i) exceed (x)
$3,000,000 in the aggregate with respect to standby letters of credit or (y)
$7,000,000 with respect to trade letters of credit, or (ii) when added to the
then outstanding amount of Revolving Loans at such time, exceed the lesser of
(x) the Revolving Credit Commitment then in effect of all the Banks or (y) the
Borrowing Base at such time; and provided, further that at the time the Borrower
-------- -------
requests the issuance of a Letter of Credit and after giving effect to the
issuance thereof, there has not occurred and is not continuing a Default or an
Event of Default. The issuance of any such Letter of Credit shall result in a
reduction of availability of Revolving Loans in accordance with Section 2.1.
Upon the issuance of each Letter of Credit by the Issuing Bank, each Bank having
a Revolving Credit Commitment shall be deemed to automatically have purchased a
participation in such Letter of Credit in accordance with its Commitment
Percentage of the Revolving Credit Commitment and each Bank severally agrees
that it shall be absolutely liable (absent the gross negligence or willful
misconduct of the Issuing Bank), without regard to the occurrence of any Default
or Event of Default or any other condition precedent whatsoever, to the extent
of such Bank's Commitment Percentage of the Revolving Credit Commitment, to
reimburse the Issuing Bank on demand an amount equal to its Commitment
Percentage of the amount of each draft paid by such Issuing Bank under each
Letter of Credit to the extent that such amount is not reimbursed by the
Borrower pursuant hereto. In addition, all Letters of Credit shall, unless the
Issuing Bank and the Banks otherwise agree in writing, have a stated expiration
date not to exceed one year (provided that any such Letter of Credit may contain
customary "evergreen" provisions pursuant to which the expiry date is
automatically extended by a specific time period unless the applicable Issuing
Bank gives notice to the beneficiary of such Letter of Credit at least 30 days
prior to the expiry date then in effect) and shall, in any event, expire not
later than 30 days prior to the Revolving Credit Maturity Date.
In order to evidence such Letters of Credit, the Borrower shall enter
into, with the Issuing Bank, such agreements and execute such customary
instruments and documents as the Issuing Bank reasonably requires, including,
but not limited to, a letter of credit application and agreement.
2.18A. Notice and Reports. The request for the issuance of a Letter
------------------
of Credit shall be submitted by the Borrower to the Issuing Bank at least 3
Business Days prior to the requested date of issuance. At least quarterly (and
more frequently upon request), the Issuing Bank shall provide to the
Administrative Agent and the Borrower a detailed report specifying the Letters
of Credit issued by such Issuing Bank which are then issued and outstanding and
any activity with respect thereto which may have occurred since the date of the
prior report, and including therein, among other things, the beneficiary, the
face amount and the expiry date, as well as any payment or expirations which may
have occurred. The Administrative Agent shall disseminate promptly to each of
the Banks the information provided by the Issuing Bank(s) pursuant to this
subsection.
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<PAGE>
2.18B. Reimbursement. In the event of any drawing under any Letter
-------------
of Credit, the Issuing Bank will promptly notify the Borrower and the
Administrative Agent. The Borrower promises to reimburse the Issuing Bank (such
reimbursement to made to the Administrative Agent for the account of the Issuing
Bank) for each drawing under any Letter of Credit (either with the proceeds of a
Swingline or Revolving Loan obtained hereunder or otherwise) in same day funds
(i) if it shall receive notice of such drawing from the Issuing Bank prior to
12:00 p.m. (Boston, Massachusetts time) on any Business Day, on such Business
Day and (ii) if it shall receive such notice after 12:00 p.m. (Boston,
Massachusetts time) on any day, on the next Business Day after it shall receive
such notice.
2.18C. Carryover LC's. Prior to the Closing Date, certain trade
--------------
letters of credit having an aggregate balance outstanding on the Closing Date of
$1,839,731.78 were issued for the account of the Borrower by First Union
National Bank (collectively, the "Carryover LC's"). The parties hereto agree
that, on the Closing Date, the Carryover LC's shall remain outstanding and shall
be deemed to have been issued pursuant to this Agreement by First Union National
Bank, in its capacity as Issuing Bank hereunder, and such Carryover LC's shall
be treated, for all purposes of this Agreement and the other Loan Documents, as
outstanding Letters of Credit.
2.18D. LC Reserve. In order to facilitate the issuance of trade
----------
Letters of Credit by First Union National Bank in its capacity as an Issuing
Bank hereunder, First Union National Bank and the Borrower have requested that a
reserve be established against the Borrowing Base in the amount of $2,500,000
(the "LC Reserve"). So long as the LC Reserve is in effect, and provided that
--------
the conditions set forth in Section 3.1 (with respect to Letters of Credit
issued on the Closing Date) and Section 3.2 have been met, First Union National
Bank may from time to time issue trade Letters of Credit up to an aggregate face
amount of the LC Reserve (after taking into account the Stated Amount of the
Carryover LC's) pursuant to a Notice of Borrowing or Conversion submitted by the
Borrower to it and to the Administrative Agent without a daily settlement with
the Administrative Agent, and without the face amount of such Letters of Credit
reducing availability for Revolving Loans under Section 2.1(a) or being counted
as outstanding Letters of Credit for purposes of Section 6.17, provided,
--------
however, that no less frequently than every 2 weeks, First Union National Bank
- -------
shall provide the Administrative Agent with a detailed accounting of the trade
Letters of Credit issued since the previous such accounting. At the Borrower's
request, the Administrative Agent shall have the right to increase or decrease
(or eliminate) the LC Reserve so long as such reserve is never below the
aggregate Stated Amount, plus any unreimbursed draws under, outstanding trade
----
Letters of Credit issued pursuant to this Section 2.18D.
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<PAGE>
2.19. Letter of Credit Fees.
---------------------
(a) A per annum Letter of Credit fee shall be payable upon the
issuance thereof to the Administrative Agent, for the ratable accounts of the
Banks, on each standby Letter of Credit at a rate per annum equal to the
Applicable LIBOR Margin applicable to Revolving Loans then in effect multiplied
by the Stated Amount of such Letter of Credit, along with, solely for the
account of the Issuing Bank, such documentary processing and other fees as are
customarily charged by the Issuing Bank on standby Letters of Credit (including,
without limitation, a fronting fee equal to .25% multiplied by the face amount
of such Letter of Credit payable on the issuance thereof).
(b) A per annum Letter of Credit fee shall be payable upon the
issuance thereof to the Administrative Agent, for the ratable accounts of the
Banks, on each trade Letter of Credit at a rate per annum equal to the
Applicable LIBOR Margin applicable to Revolving Loans then in effect multiplied
by the face amount of such Letter of Credit, along with, solely for the account
of the Issuing Bank, such documentary processing and other fees as are
customarily charged by the Issuing Bank on trade Letters of Credit (including,
without limitation, a fronting fee equal to .25% multiplied by the Stated Amount
of such Letter of Credit payable on the issuance thereof).
2.20. Interdependence of Borrower Affiliated Group. In order to
--------------------------------------------
induce each of the Banks to enter into this Agreement and the other Loan
Documents to which it is a party, and grant the Loans hereunder and issue the
Letters of Credit, the Borrower and each other member of the Borrower Affiliated
Group hereby jointly and severally represent and warrant that:
(i) the business of each member of the Borrower Affiliated Group
shall benefit from the successful performance of the business of each other
member of the Borrower Affiliated Group, and the Borrower Affiliated Group as a
whole;
(ii) each member of the Borrower Affiliated Group has cooperated to
the extent necessary and shall continue to cooperate with each other member of
the Borrower Affiliated Group to the extent necessary in the development and
conduct of each other member of the Borrower Affiliated Group's business, and
shall to the extent necessary share and participate in the formulation of
methods of operation, distribution, leasing, inventory control, and other
similar business matters essential to each member of the Borrower Affiliated
Group's business;
(iii) the failure of any member of the Borrower Affiliated Group to
cooperate with all other members of the Borrower Affiliated Group in the conduct
of their respective businesses shall have an adverse impact on the business of
each other member of the Borrower Affiliated Group, and the failure of any
member of the Borrower Affiliated Group to associate or cooperate with all other
members of the Borrower Affiliated Group is reasonably likely to impair the
goodwill of such other members of Borrower Affiliated Group and the Borrower
Affiliated Group as a whole; and
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<PAGE>
(iv) each Credit Party is accepting joint and several liability for
the Obligations and represents and warrants that the financial accommodations
being provided hereby are for the mutual benefit, directly and indirectly, of
each member of the Borrower Affiliated Group.
SECTION III
-----------
CONDITIONS OF LOANS
-------------------
3.1. Conditions Precedent to Term Loan A, Term Loan B, Initial
---------------------------------------------------------
Revolving Loan and Initial Letter of Credit. The obligation of the Banks to make
- -------------------------------------------
Term Loan A, Term Loan B and the initial Revolving Loan, and to issue any Letter
of Credit on the Closing Date, is subject to the fulfillment on the Closing Date
of each of the following conditions precedent:
3.1.1. Loan Documents, Ancillary Documents, Etc.
-----------------------------------------
(i) Each of (A) the Loan Documents dated the date hereof or
prior to the date hereof (other than the Interest Rate Protection Agreement and
the Assignment of Interest Rate Protection Agreement) and (B) the Ancillary
Documents (other than the Shareholders Agreement and the Proxy Statement), shall
have been duly and properly authorized, executed and delivered by the respective
parties thereto (if applicable) and shall be in full force and effect on and as
of the Closing Date.
(ii) Executed original counterparts of each of the Loan
Documents dated the date hereof or prior to the date hereof (other than the
Interest Rate Protection Agreement and the Assignment of Interest Rate
Protection Agreement), shall have been furnished to the Administrative Agent and
copies of each of the Ancillary Documents, as executed and delivered by the
respective parties thereto, shall have been made available to the Administrative
Agent.
3.1.2. Legality of Transactions. No change in applicable law or
------------------------
regulation shall have occurred as a consequence of which it shall have become
and continue to be unlawful (i) for the Administrative Agent or any of the Banks
to extend credit or perform any of their other material agreements or
obligations under any of the Loan Documents to which they are a party on the
Closing Date, or (ii) for Parthenon or any other member of the Investor Group,
WM Acquisition, the Borrower, or any other member of the Borrower Affiliated
Group to perform any of its agreements or obligations under any of the Loan
Documents or its material agreements or obligations under any of the Ancillary
Documents (other than the Shareholders Agreement and the Proxy Statement) to
which it is a party on the Closing Date.
3.1.3. Representations and Warranties. Each of the
------------------------------
representations and warranties made by or on behalf of the Borrower and each
other member of the Borrower Affiliated Group to the Administrative Agent and
the Banks in this Agreement or the other Loan Documents shall be true and
correct when made, shall, for all purposes of this
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<PAGE>
Agreement, be deemed to be repeated on and as of the Closing Date, and shall be
true and correct on and as of such date.
3.1.4. Performance, Consents, No Defaults, Litigation, Etc.
---------------------------------------------------
Each of Parthenon, WM Acquisition, the Borrower, and each other member of the
Borrower Affiliated Group shall have duly performed, complied with and observed
each of its covenants, agreements and obligations contained in any of the Loan
Documents (except to the extent expressly waived by Administrative Agent), and
shall have duly performed, complied with and observed, in all material respects,
each of its covenants, agreements and obligations contained in any of the
Ancillary Documents, (other than the Shareholders Agreement and the Proxy
Statement) in each case to which it is a party or by which it is bound which are
required to be performed on the Closing Date. All necessary consents and/or
waivers in connection with the consummation of the Recapitalization Transactions
and the transactions contemplated by the Loan Documents shall have been obtained
by the Borrower and the other members of the Borrower Affiliated Group and
copies thereof shall have been delivered to the Administrative Agent. No event
shall have occurred on or prior to the Closing Date and be continuing on such
Closing Date, and no condition shall exist on such Closing Date, which
constitutes a Default or an Event of Default. No litigation or other proceeding
shall be continuing, or pending or threatened in writing, which could reasonably
be expected to have a material adverse effect on the condition (financial or
otherwise), business, assets, operations, income, or prospects of the Borrower
Affiliated Group taken as a whole.
3.1.5. Certified Copies of Charter Documents. The
-------------------------------------
Administrative Agent shall have received from each of the Borrower and the other
members of the Borrower Affiliated Group a copy, certified by a duly authorized
officer of each of the Borrower and such other members of the Borrower
Affiliated Group to be true and complete on the Closing Date, of (i) its charter
or other incorporation documents, as in effect on such date of certification,
certified as of a recent date by the Secretary of State of its jurisdiction of
incorporation (or jurisdictional equivalent), and (ii) its by-laws as in effect
on such date.
3.1.6. Proof of Corporate Action. The Administrative Agent
-------------------------
shall have received from each of the Borrower and each other member of the
Borrower Affiliated Group a copy, certified by a duly authorized officer of each
of the Borrower and such other member of the Borrower Affiliated Group to be
true and complete on the Closing Date, of records of all corporate action taken
by each of the Borrower and such member of the Borrower Affiliated Group to
authorize, as applicable (i) its execution and delivery of the Loan Documents
and the FCF Subordinated Debt Documents to which it is or is to become a party,
(ii) its performance of all of its agreements and obligation under each of such
documents, and (iii) any borrowings and other transactions contemplated by this
Agreement.
3.1.7. Incumbency Certificate. The Administrative Agent shall
----------------------
have received from each of the Borrower and each other member of the Borrower
Affiliated Group an incumbency certificate, dated the Closing Date and signed by
the duly authorized officers of each of the Borrower and such other member of
the Borrower Affiliated Group, and giving the name and bearing a specimen
signature of each individual who shall be
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<PAGE>
authorized, as applicable: (i) to sign, in the name and on behalf of each of the
Borrower and such other member of the Borrower Affiliated Group, each of the
Loan Documents to which it is or is to become a party; (ii) to make application
for the Loans or conversion thereof; and (iii) to give notices to take other
action on its behalf under the Loan Documents.
3.1.8. Proceedings and Documents. All corporate, governmental
-------------------------
and other proceedings in connection with the transactions contemplated by the
Loan Documents, the Ancillary Documents, and all instruments and documents
incidental thereto, shall be reasonably satisfactory to the Administrative Agent
and the Administrative Agent shall have received all such counterpart originals
or certified or other copies of all such instruments and documents as the
Administrative Agent shall have reasonably requested.
3.1.9. Good Standing, Etc. The Administrative Agent shall have
-------------------
received a long-form certificate (if available in the jurisdiction) of the
Secretary of State dated as of a recent date of the respective jurisdictions of
incorporation (or jurisdictional equivalent) of each Credit Party as to each
Credit Party's legal existence and good standing in such jurisdiction and
listing all documents on file in the office of said Secretary of State. The
Administrative Agent shall also have received in respect of each Credit Party
certificates of qualification to do business from any jurisdictions in which
such Credit Party holds or stores Collateral.
3.1.10. Fees. The Borrower shall have complied with its
----
obligations under Section 2.7 to pay the fees described in the Fee Letter, and
if any Letters of Credit are outstanding on the Closing Date, the Letter of
Credit fees described in Section 2.19, and all reasonable legal fees and
reasonable expenses and reasonable collateral examination fees and other
reasonable fees and expenses incurred by the Administrative Agent in connection
with the consummation of the transactions contemplated by this Agreement.
3.1.11. Legal Opinions. The Administrative Agent shall have
--------------
received a written legal opinion, addressed to the Administrative Agent and the
Banks, dated the Closing Date, from Paul, Weiss, Rifkind, Wharton & Garrison
and/or Morgan, Lewis & Bockius, LLP, counsel to the Borrower, each other member
of the Borrower Affiliated Group, in or substantially in the form of Exhibit E
---------
hereto, together with opinions from local real estate counsel to the Borrower
Affiliated Group in connection with the Real Properties and the Leasehold
Mortgages and Fee Mortgages, in each case reasonably satisfactory to the
Administrative Agent. The Administrative Agent shall have also received copies
of all of the legal opinions delivered in connection with the Recapitalization
Transactions, and shall be entitled to rely on each thereof. The Administrative
Agent shall have also received copies of all fairness or similar opinions
rendered in connection with the Recapitalization Transactions, including the
fairness opinion delivered by William Blair & Company, LLC.
3.1.12. Collateral Examination; Financial Condition. The
-------------------------------------------
Administrative Agent shall have completed its due diligence, including a review
of the assets of the Borrower and the other members of the Borrower Affiliated
Group. In addition, the Borrower shall have confirmed that its acquisition of
100% of the capital stock of J.A. Sexauer and Trayco was completed. The
Administrative Agent shall have received the
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<PAGE>
following financial statements (including the notes thereto) of the Borrower:
(i) a Consolidated balance sheet as of December 31, 1999, audited and certified
by Deloitte and Touche LLP, and (ii) a Consolidated statement of operations and
cash flows for the fiscal year ended December 31, 1999, audited and certified by
Deloitte and Touche LLP, in each case prepared in accordance with GAAP. The
Administrative Agent also shall have received the Pro Forma Financial
Statements. The Administrative Agent shall be satisfied that there has been no
material adverse change in the condition (financial or otherwise), business,
assets, operations, income or prospects of the Borrower Affiliated Group taken
as a whole since the most recent financial statements referred to in Section
4.7.
3.1.13. Loan Documents; U.C.C. Search Reports; Insurance;
-------------------------------------------------
Patents, Trademarks and Copyrights; Primary Operating Accounts. The Loan
- --------------------------------------------------------------
Documents pursuant to which the Administrative Agent is granted a security
interest in the Collateral and the appropriate financing statements (in the name
of the Borrower and each other member of the Borrower Affiliated Group (other
than any Excluded Foreign Subsidiary)) and other documents in respect thereto
and necessary to enable the Administrative Agent to perfect a legal, valid and
enforceable first-priority security interest thereunder subject to Permitted
Encumbrances for the benefit of the Banks, shall have been duly executed by each
of the Borrower and such other members of the Borrower Affiliated Group, and
delivered to the Administrative Agent in form suitable for filing in all
appropriate filing offices or other locations necessary for the perfection of
such first-priority interests. The Administrative Agent shall have received
reports concerning the results of searches of the Patent and Trademark Office,
the Copyright Office and Uniform Commercial Code filing offices for the Borrower
and each other member of the Borrower Affiliated Group in each jurisdiction
where Collateral or other assets are located made no more than 30 days prior to
the Closing Date. The Administrative Agent shall have received the original
stock certificates, together with stock powers endorsed in blank, for (i) all of
the issued and outstanding capital stock of each member of the Borrower
Affiliated Group except the Borrower and the Excluded Foreign Subsidiaries, and
(ii) 65% of the issued and outstanding capital stock of the Excluded Foreign
Subsidiary. The Administrative Agent shall have received reasonably satisfactory
evidence that liability insurance and casualty insurance, including any
insurance as is required by the Loan Documents to be in effect in respect of all
real and personal property and fixtures, of each of the Borrower and each other
member of the Borrower Affiliated Group is in effect and the interest of the
Administrative Agent as mortgagee, loss payee and additional insured, as
applicable, has been duly endorsed upon all instruments of insurance issued in
respect of such property and in respect of liability. All such insurance shall
provide for 10 days' advance written notice to the Administrative Agent of any
cancellation thereof for non-payment of premiums and 30 days' advance written
notice to the Administrative Agent of any cancellation thereof for any other
reason. The Administrative Agent shall also have received signed Landlord Waiver
and Consents, Landlord Waivers and/or Bailee Notices, as applicable, for each
location leased by the Borrower or any Domestic Subsidiary, to the extent
required by the Administrative Agent, each in form and substance satisfactory to
the Administrative Agent. Arrangements reasonably satisfactory to the
Administrative Agent shall have been made for the due filing of the Patent and
Trademark Security Agreements in the United States Patent and
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Trademark Office and of the Copyright Assignments in the United States Copyright
Office. The Borrower shall have opened its operating account with the
Administrative Agent.
3.1.14. Pro Forma EBITDA. The Borrower shall have delivered to
----------------
the Administrative Agent a compliance certificate evidencing to the reasonable
satisfaction of the Administrative Agent th at the pro forma EBITDA of the
--- -----
Borrower (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 Loan Documents) is at least equal to
$33,800,000. EBITDA for purposes of this Section 3.1.14 shall be equal to the
Consolidated operating income of the Borrower Affiliated Group, 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.
3.1.15. Pro Forma Leverage Ratio. The Borrower shall have
------------------------
delivered to the Administrative Agent a compliance certificate evidencing to the
reasonable satisfaction of the Administrative Agent that the pro forma ratio of
--- -----
(i) Total Funded Debt as of the Closing Date to (ii) the Borrower Affiliated
Group's pro forma EBITDA as calculated pursuant to Section 3.1.14 for the 4
--- -----
consecutive fiscal quarters ended on December 31, 1999, does not exceed 5.20 to
1.0.
3.1.16. Solvency. The Administrative Agent shall have received
--------
each of the Solvency Certificates duly executed by the applicable chief
financial officer of the Borrower Affiliated Group, together with pro forma
--- -----
financial statements as of a recent date, after giving effect to the
Recapitalization Transactions and the Loans to be made hereunder on the Closing
Date, in form and substance reasonably satisfactory to the Administrative Agent
and the Banks.
3.1.17. Consummation of Corporate Transactions. The
--------------------------------------
Recapitalization Transactions shall have been completed and become effective as
of the Closing Date upon the respective terms set forth in the Recapitalization
Documents and the FCF Subordinated Debt Documents (in the form delivered to and
approved by the Administrative Agent to its reasonable satisfaction), and the
Recapitalization Transactions shall have occurred pursuant to the
Recapitalization Documents and the FCF Subordinated Debt Documents, without
recourse to any provision of said Recapitalization Documents or FCF Subordinated
Debt Documents permitting the waiver by any party thereto of any material
condition, obligation, covenant or other requirement, or amendment to any such
material condition, obligation, covenant or other requirement, without the
Administrative Agent's prior written consent, which consent shall not be
unreasonably withheld or delayed. The Administrative Agent must be reasonably
satisfied in all respects with the Recapitalization Documents and the FCF
Subordinated Debt Documents and the terms of the Recapitalization Transactions
must be reasonably acceptable to the Administrative Agent. Upon consummation of
the Recapitalization Transactions, the Investor Group shall have invested at
least $130,000,000 in the Borrower and shall own at least the number of shares
of issued and outstanding capital stock of the Borrower necessary to give the
Investor Group control of the voting interests of the Borrower, and certain
existing management shareholders of the Borrower shall,
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immediately prior to the closing hereunder, have rolled-over their investments
in the Borrower having an aggregate value of approximately $3,000,000.
3.1.18. Payoff and Release Letter. The Administrative Agent
-------------------------
shall have received a payoff and release letter (and related UCC-3 financing
statements or other discharges) in form and substance reasonably satisfactory to
the Administrative Agent from First Union National Bank, as Administrative
Agent, and arrangements reasonably satisfactory to the Banks shall have been
made by the Borrower with respect thereto.
3.2. Conditions Precedent to all Loans and Letters of Credit. The
-------------------------------------------------------
obligation of each Bank to make each Loan and issue each Letter of Credit,
including the initial Loan, or continue or convert Loans to Loans of the other
type, is further subject to the following conditions:
(a) timely receipt by the Administrative Agent of the Notice of
Borrowing or Conversion as provided in Section 2.4;
(b) the representations and warranties contained in Section IV shall
be true and accurate in all material respects on and as of the date of such
Notice of Borrowing or Conversion (except to the extent that such
representations and warranties expressly relate to an earlier date) and on the
effective date of the making, continuation or conversion of each Loan as though
made at and as of each such date (except to the extent that such representations
and warranties expressly relate to an earlier date), and no Default or Event of
Default shall have occurred and be continuing, or would result from such Loan;
(c) the resolutions referred to in Section 3.1.6 shall remain in full
force and effect; and
(d) no change shall have occurred in any law or regulation or
interpretation thereof that, in the written opinion of counsel for the
Administrative Agent or any Bank, would make it illegal or against the written
regulation or policy of any governmental agency or authority for such Bank to
make Loans hereunder.
The making of each Loan shall be deemed to be a representation and
warranty by the Borrower on the date of the making, continuation or conversion
of such Loan as to the accuracy of the facts referred to in subsection (b) of
this Section 3.2.
SECTION IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Administrative Agent and the Banks to enter
into this Agreement and to make Loans and issue Letters of Credit hereunder, the
Borrower represents and warrants to the Administrative Agent and each Bank that:
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4.1. Organization and Qualification. As of the Closing Date, each
------------------------------
member of the Borrower Affiliated Group and such Person's jurisdiction of
incorporation is listed on Exhibit D hereto. The Borrower and each other member
---------
of the Borrower Affiliated Group (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 on the business, condition (financial or otherwise), assets, operations
or prospects of the Borrower Affiliated Group taken as a whole.
4.2. Organizational Authority. The execution, delivery and
------------------------
performance of each of the Loan Documents and Ancillary Documents (other than
the Proxy Statement and the Shareholders Agreement) to which the Borrower or any
other member of the Borrower Affiliated Group 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 Borrower or such member of the Borrower Affiliated Group 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 Borrower or such member of the Borrower
Affiliated Group (other than any such consent that has been obtained prior to
the Closing Date (or if later, the date of effectiveness of such Loan Document
or Ancillary Document) and delivered to the Administrative Agent), (b)
contravene any provision of the charter documents or by-laws of the Borrower or
such member of the Borrower Affiliated Group, (c) contravene any law, rule or
regulation applicable to the Borrower or such member of the Borrower Affiliated
Group, (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 Borrower or such member of the
Borrower Affiliated Group, or (e) result in or require the imposition of any
Encumbrance (other than Encumbrances in favor of the Administrative Agent) on
any of the properties, assets or rights of the Borrower or such member of the
Borrower Affiliated Group, except in case of clauses (c) and (d) with respect to
the Ancillary Documents only, any contraventions and defaults that 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 Borrower Affiliated Group taken as a whole.
4.3. Valid Obligations. Each of the Loan Documents and Ancillary
-----------------
Documents (other than the Proxy Statement and the Shareholders Agreement) to
which the Borrower or any other member of the Borrower Affiliated Group is or is
to become a party and all of their respective terms and provisions are the
legal, valid and binding obligations of the Borrower or such member of the
Borrower Affiliated Group enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency, reorganization,
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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.
4.4. Consents or Approvals. The execution, delivery and performance
---------------------
of each of the Loan Documents and Ancillary Documents (other than the Proxy
Statement and the Shareholders Agreement) to which the Borrower or any other
member of the Borrower Affiliated Group 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 (a) filings under the Uniform Commercial
Code and with the Patent and Trademark Office and the Copyright Office in
connection with the Collateral, (b) recordation of the Leasehold Mortgages
(including recordation of the underlying leases), (c) such filings and consents
as have been made or obtained and are in full force and effect and delivered to
the Administrative Agent, and (d) in respect of the Ancillary Documents only,
such approvals, consents, filings or registrations, the failure of which to make
or obtain could not reasonably be expected to result in a material adverse
effect on the business, condition (financial or otherwise), assets, operations
or prospects of the Borrower Affiliated Group taken as a whole.
4.5. Title to Properties; Absence of Encumbrances. Each of the
--------------------------------------------
Borrower and each other member of the Borrower Affiliated Group 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 such member of the Borrower Affiliated Group, 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 Encumbrances except Permitted
Encumbrances, and, except as so disclosed, free from all defects of title that
could reasonably be expected to materially adversely effect any of such
properties, assets or rights. To the knowledge of the Borrower, all such
properties and assets purported to be owned by it and all of the interest of the
Borrower Affiliated Group in properties which are leaseholds are free and clear
of all material title defects or material objections, liens, claims, charges,
security interests and other Encumbrances (except Permitted Encumbrances) 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 Borrower's or any other member of the Borrower Affiliated
Group's use of such properties, (ii) liens for current taxes not yet due, and
(iii) as otherwise disclosed on Exhibit D hereto. The rights, properties and
---------
other assets presently owned, leased or licensed by each of the Borrower and
each other member of the Borrower Affiliated Group include all material rights,
properties and other assets necessary to permit the Borrower and such member of
the Borrower Affiliated Group to conduct its businesses in all material respects
in the same manner as its businesses have been conducted prior to the date
hereof. At the time the
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Borrower or any other member of the Borrower Affiliated Group pledges, sells,
assigns or transfers to the Administrative Agent any instrument, document of
title, security, chattel paper or other property (including Base Inventory,
contract rights and Accounts) or any proceeds or products thereof, or any
interest therein, the Borrower or such member of the Borrower Affiliated Group
shall be the lawful owner thereof and shall, to the extent of its rights
therein, have the right to collaterally pledge, sell, assign or transfer the
same; none of such properties shall have been pledged, sold, assigned or
transferred to any Person other than the Administrative Agent (other than
pursuant to Permitted Encumbrances); and the Borrower or such member of the
Borrower Affiliated Group shall defend the same against the claims and demands
of all Persons.
4.6. Reserved.
--------
4.7. Financial Statements. The Borrower has furnished to the
--------------------
Administrative Agent the Consolidated balance sheet of the Borrower Affiliated
Group as of December 25, 1998 and the related Consolidated statements of income,
changes in stockholders' equity and cash flow of the Borrower Affiliated Group
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
Borrower has also furnished to the Administrative Agent (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 statement of income as of December 31, 1999,
--- -----
prepared on a basis consistent with the Initial Financial Statement. The
Borrower has also furnished to the Administrative Agent the Opening Balance
Sheet (together with the unaudited pro forma financial statements referred to in
--- -----
clause (iii) above, the "Pro Forma Financial Statements"). The Borrower has
also furnished to the Administrative Agent the unaudited pro forma Consolidated
--- -----
projected balance sheets of the Borrower Affiliated Group 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 5 fiscal years, as if
the Loans had been made and the Recapitalization Transactions had occurred as of
the Closing Date. The Borrower has also furnished to the Administrative Agent
management reports for the Borrower Affiliated Group 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 Borrower
Affiliated Group as of such dates and the results of the operations of the
Borrower Affiliated Group 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 Borrower
based upon reasonable assumptions and on a basis consistent with the Initial
Financial Statement. The Administrative Agent and the Banks acknowledge that
the Pro Forma Financial
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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.
4.8. 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 Borrower Affiliated Group taken as a whole, the
effect of which has, individually or in the aggregate, been materially adverse
to the Borrower Affiliated Group taken as a whole.
4.9. Defaults. As of the date of this Agreement, no Default or Event
--------
of Default exists.
4.10. Taxes. Each of the Borrower and each other member of the
-----
Borrower Affiliated Group 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 Borrower or such other member of the Borrower
Affiliated Group in excess of $100,000, individually and in the aggregate, have
been fully paid other than any taxes, assessments and other governmental charges
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been established therefor. Neither the Borrower
nor any other member of the Borrower Affiliated Group has executed any waiver of
limitations in respect of tax liabilities. Each member of the Borrower
Affiliated Group has established on its books reserves adequate for the payment
of all federal, state and other tax liabilities.
4.11. Litigation. Except as set forth on Exhibit D hereto, there is
---------- ---------
no litigation, arbitration, claim, proceeding or investigation pending or
threatened in writing against the Borrower or any other member of the Borrower
Affiliated Group that, if adversely determined, could reasonably be expected to
result in a forfeiture of all or any substantial part of the property of the
Borrower or the Borrower Affiliated Group taken as a whole, or could otherwise
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), assets, operations or prospects of the
Borrower Affiliated Group taken as a whole.
4.12. Subsidiaries. As of the date of this Agreement, no member of
------------
the Borrower Affiliated Group has any Subsidiaries except as set forth on
Exhibit D hereto with respect to such member of the Borrower Affiliated Group.
- ---------
4.13. Investment Company Act. Neither the Borrower nor any other
----------------------
member of the Borrower Affiliated Group is required to be registered as an
investment company within the meaning of the Investment Company Act of l940, as
amended.
4.14. Compliance with ERISA. Each of the Borrower and each other
---------------------
member of the Borrower Affiliated Group 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
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<PAGE>
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.
4.15. Environmental Matters. See the representations and warranties
---------------------
set forth in the Environmental Indemnity Agreement, which are incorporated
herein by this reference.
4.16. Disclosure. As of the Closing Date, the representations and
----------
warranties made by each member of the Borrower Affiliated Group in this
Agreement, any other Loan Document, in the Proxy Statement or in any other
agreement, instrument, document, certificate, statement or letter furnished to
the Administrative Agent, the Arranger, or the Banks by or on behalf of any
member of the Borrower Affiliated Group, and the factual information heretofore
or contemporaneously furnished by or on behalf of any member of the Borrower
Affiliated Group to the Administrative Agent, the Arranger or the Banks, in
connection with any of the transactions contemplated by any of the Loan
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 each member of the
Borrower Affiliated Group in this Agreement, any other Loan Document, in the
Proxy Statement or in any other agreement, instrument, document, certificate,
statement or letter furnished to the Administrative Agent, the Arranger, or the
Banks by or on behalf of any member of the Borrower Affiliated Group, and the
factual information furnished by or on behalf of any member of the Borrower
Affiliated Group to the Administrative Agent, the Arranger or the Banks after
the Closing Date, in connection with any of the transactions contemplated by any
of the Loan Documents taken as a whole 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. No member of the Borrower
Affiliated Group is aware of any fact which it has not disclosed in writing to
the Administrative Agent that has had, or could reasonably be expected to have,
a material adverse effect on the business, condition (financial or otherwise),
assets, operations or prospects of the Borrower Affiliated Group taken as a
whole. It is recognized by the Administrative Agent, the Arranger and the Banks
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.
4.17. Solvency. Both before and after giving effect to the
--------
Recapitalization Transactions, and all Indebtedness incurred by the Borrower and
the other members of the Borrower Affiliated Group on the Closing Date, neither
the Borrower nor the Borrower and its Subsidiaries on a Consolidated basis (i)
is Insolvent, or will be rendered Insolvent by the Indebtedness incurred in
connection therewith, (ii) will be left with unreasonably small capital with
which to engage in its business, (iii) will have incurred Indebtedness beyond
its ability to pay such Indebtedness as it matures, or (iv) will fail to have
assets (both tangible
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<PAGE>
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).
4.18. Compliance with Statutes, etc. Each of the Borrower and each
------------------------------
other member of the Borrower Affiliated Group 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 on the business,
condition (financial or otherwise), assets, operations or prospects of the
Borrower Affiliated Group taken as a whole.
4.19. Capitalization. On and as of the Closing Date (and after
--------------
giving effect to the Recapitalization Transactions), the authorized capital
stock of the Borrower 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 Exhibit D, 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 Exhibit D. On and as of the
---------
Closing Date, the authorized capital stock of each other member of the Borrower
Affiliated Group, and the number of issued and outstanding shares thereof, is as
set forth in Exhibit D hereto. All such outstanding shares of each member of
---------
the Borrower Affiliated Group have been duly and validly issued and are fully
paid and non-assessable. No member of the Borrower Affiliated Group (other than
the Borrower) 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 Exhibit D with respect to such member of the Borrower Affiliated Group.
---------
As of the Closing Date, the Borrower 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 Exhibit D.
---------
4.20. Labor Relations. Neither the Borrower nor any other member of
---------------
the Borrower Affiliated Group is engaged in any unfair labor practice. Except
as disclosed on Exhibit D, (i) there is no unfair labor practice complaint
---------
pending or threatened in writing against the Borrower or any other member of the
Borrower Affiliated Group before the National Labor Relations Board which if
adversely determined could reasonably be expected to have a material adverse
effect on the business, condition (financial or otherwise), assets, operations
or prospects of the Borrower Affiliate Group taken as a whole, 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 on the business, condition (financial or otherwise),
assets, operations or
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<PAGE>
prospects of the Borrower Affiliated Group taken as a whole is so pending
against the Borrower or any other member of the Borrower Affiliated Group or, to
the knowledge of the Borrower Affiliated Group, threatened against it in
writing, (ii) there is no labor dispute, slowdown or stoppage pending against
the Borrower or any other member of the Borrower Affiliated Group or, to the
knowledge of the Borrower Affiliated Group, threatened in writing against the
Borrower or any other member of the Borrower Affiliated Group which if adversely
determined could reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), assets, operations or prospects of
the Borrower Affiliated Group taken as a whole, and (iii) to the knowledge of
the Borrower Affiliated Group, no union representation question exists with
respect to the employees of the Borrower or any other member of the Borrower
Affiliated Group and no union organizing activities are taking place which could
reasonably be expected to have a material adverse effect on the business,
condition (financial or otherwise), assets, operations or prospects of the
Borrower Affiliated Group taken as a whole.
4.21. Certain Transactions. As of the date of this Agreement, except
--------------------
as set forth on Exhibit D or as expressly permitted hereunder, none of the
---------
officers, partners or directors of the Borrower or any other member of the
Borrower Affiliated Group is presently a party to any transaction with the
Borrower or any other member of the Borrower Affiliated Group (other than in
connection with services as 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 Borrower Affiliated Group, 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 Borrower Affiliated Group 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.
4.22. Restrictions on the Borrower Affiliated Group. Neither the
---------------------------------------------
Borrower nor any other member of the Borrower Affiliated Group 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
Borrower Affiliated Group taken as a whole.
4.23. Leases. As of the date hereof, Exhibit D 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 Borrower or any other member of the Borrower Affiliated
Group leases real property, and written license agreements granted by any member
of the Borrower Affiliated Group 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 Borrower to
the Administrative 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 Borrower Affiliated Group, the landlord,
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<PAGE>
under any Real Property Lease under which the Borrower 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 Borrower Affiliated Group taken as a
whole. Each of the Real Property Leases under which the Borrower or any other
member of the Borrower Affiliated Group is the tenant currently in effect is in
possession of its respective premises and is open for business in accordance
with the Borrower's or such member's ordinary course practices, and no such
tenant has assigned any of its interest in any of the Real Property Leases under
which the Borrower 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 Exhibit D hereto
---------
or as is expressly permitted hereunder. To the knowledge of the Borrower
Affiliated Group, 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 performed 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 Borrower Affiliated Group
taken as a whole.
4.24. Franchises, Patents, Copyrights, Etc. Except as otherwise set
------------------------------------
forth on Exhibit D hereto, each of the Borrower and each other member of the
---------
Borrower Affiliated Group 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 on the business, condition (financial
or otherwise), assets, operations or prospects of the Borrower Affiliated Group
taken as a whole and, in each case, free of any Encumbrance that is not a
Permitted Encumbrance.
4.25. Year 2000 Compliance. The Borrower reasonably believes that
--------------------
all reprogramming required to permit the proper functioning, in and following
the year 2000, of the Borrower Affiliated Group's 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 Borrower Affiliated Group 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 Borrower Affiliated Group to conduct
their respective businesses as conducted prior to January 1, 2000 without any
material adverse effect on the Borrower Affiliated Group taken as a whole.
4.26. Collateral. All of the Obligations of the Borrower Affiliated
----------
Group (other than any Excluded Foreign Subsidiary) to the Administrative Agent
and the Banks under
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<PAGE>
the Loan Documents will, at all times from and after the execution and delivery
of each of the Loan Documents, be entitled to the benefits of and be secured by
each of such Loan Documents to the extent provided therein and under applicable
law.
4.27. Material Contracts. As of the Closing Date, Exhibit D sets
------------------ ---------
forth each of the contracts, agreements and licenses which is a Material
Contract.
SECTION V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank has any commitment to make Loans or issue Letters
of Credit hereunder and until the Loans and other Obligations hereunder are
Fully Satisfied, the Borrower hereby covenants, and shall cause the other
members of the Borrower Affiliated Group to covenant, as follows:
5.1. Financial Statements and other Reporting Requirements. The
-----------------------------------------------------
Borrower shall furnish to the Administrative Agent (which will in turn furnish
to each of the Banks):
(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 Borrower Affiliated Group 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 Administrative Agent; 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 6.7 through 6.12, 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 Borrower Affiliated Group,
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 certified by the chief
financial officer of the Borrower, but subject, however, to normal year-end
audit adjustments that shall not in the aggregate be materially adverse;
(c) as soon as available, but in any event within 30 days after the
end of each fiscal month of the Borrower Affiliated Group, 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 certified by the chief financial
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<PAGE>
officer of the Borrower, but subject, however, to normal year-end audit
adjustments that shall not in the aggregate be materially adverse;
(d) as soon as practical and, in any event, within 15 days after the end
of each fiscal month of the Borrower, a written report in the form of Exhibit F
---------
hereto (such report being hereinafter referred to as a "Borrowing Base Report"),
setting forth the Borrowing Base as of the last day of such fiscal month and
including a break-down of all Indebtedness in respect of purchase money security
interests on Inventory of the Credit Parties as of the last day of such fiscal
month in detail reasonably satisfactory to the Administrative Agent, certified
on behalf of the Credit Parties by the chief financial officer of the Borrower;
(e) on or before the 30th day after the first day of each fiscal year of
the Borrower Affiliated Group, (i) an annual operating budget presented on a
quarterly basis for such fiscal year, and (ii) Consolidated pro forma
--- -----
projections of the Borrower Affiliated Group for such succeeding fiscal year in
form reasonably acceptable to the Administrative Agent (it being recognized by
the Administrative Agent 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);
(f) concurrently with the delivery of each financial statement pursuant to
subsections (a) and (b) of this Section 5.l, a report in substantially the form
of Exhibit G hereto signed on behalf of the Borrower Affiliated Group by the
---------
chief financial officer of the Borrower, and including, without limitation,
computations in reasonable detail evidencing compliance with the covenants
contained in Sections 6.7 through 6.11, inclusive;
(g) 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 Borrower and reviewed by Deloitte and Touche, LLP,
which review shall not result in any material changes to the Opening Balance
Sheet;
(h) upon the Administrative Agent's request from time to time, copies of
any reports submitted to any member of the Borrower Affiliated Group by
independent public accountants in connection with any interim review of the
accounts of the Borrower or such member of the Borrower Affiliated Group made by
such accountants;
(i) promptly after the same are available, copies of all financial
statements, proxy material, and reports as the Borrower or any other member of
the Borrower Affiliated Group shall send to its stockholders or that the
Borrower or any other member of the Borrower Affiliated Group may file with the
Securities and Exchange Commission;
(j) if and when the Borrower or any other member of the Borrower
Affiliated Group 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
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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;
(k) (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 Borrower or
any other member of the Borrower Affiliated Group which could reasonably be
expected to have a material adverse effect on the business, condition (financial
or otherwise), assets, operations or prospects of the Borrower Affiliated Group
taken as a whole, 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 any member of the
Borrower Affiliated Group;
(l) 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
Borrower or any other member of the Borrower Affiliated Group 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 on the business, property, assets, operations, condition (financial or
otherwise), or prospects of the Borrower Affiliated Group taken as a whole,
written notice thereof and the action being or proposed to be taken with respect
thereto;
(m) 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 Borrower or any other member of the Borrower Affiliated
Group 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 any member of the Borrower Affiliated Group (or its
representatives) in connection therewith and the action being or proposed to be
taken with respect thereto;
(n) simultaneously with the giving thereof by the Borrower or any
other member of the Borrower Affiliated Group, copies of any notice of optional
redemption given pursuant to Section 9.2 of the FCF Purchase Agreement;
(o) at least 5 Business Days after entering into any Real Property
Lease or any Material Contract, written notice thereof to the Administrative
Agent, provided that if such Real Property Lease or Material Contract provides
--------
for payments in the aggregate to or from any member of the Borrower Affiliated
Group in excess of $5,000,000, such written notice shall be provided at least 5
Business Days prior to entering into such Real Property Lease or Material
Contract; and
(p) from time to time, with reasonable promptness, such other
financial data and other information or documents (financial or non-financial)
about the Borrower and each
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other member of the Borrower Affiliated Group as the Administrative Agent or any
Bank may reasonably request.
5.2. Conduct of Business. The Borrower shall and shall cause each
-------------------
other member of the Borrower Affiliated Group 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 on the
business, property, assets, operations or condition (financial or otherwise) of
Borrower Affiliated Group taken as a whole, 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 6.6);
(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 Borrower or any other member of the Borrower
Affiliated Group 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 Borrower shall provide the Administrative Agent with written
notice thereof; and
(d) the Borrower will and will cause any newly organized or acquired
Subsidiary of the Borrower (other than Excluded Foreign Subsidiaries) as
promptly as practicable and in any event on the date of organization or
acquisition of such Subsidiary to enter into such agreements, in each case
reasonably satisfactory to counsel for the Administrative Agent, acknowledging
that the Subsidiary is a member of the Borrower Affiliated Group and unless the
Subsidiary is an Excluded Foreign Subsidiary, the Borrower will cause such
Subsidiary on such date to enter into or become bound by the terms of such Loan
Documents as the Administrative Agent reasonably requires.
5.3. Maintenance and Insurance. The Borrower shall, and shall cause
-------------------------
each other member of the Borrower Affiliated Group 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 Borrower will
make or cause to be made, and cause each other member of the Borrower Affiliated
Group to make or cause to be made, all necessary and proper repairs, renewals,
replacements, additions and improvements thereto so that the business of the
Borrower and such other members of the Borrower Affiliated Group 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 Borrower's and
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each other member of the Borrower Affiliated Group's business. The Borrower
shall and shall cause each other member of the Borrower Affiliated Group to at
all times maintain liability and casualty insurance with financially sound and
reputable insurers in such amounts as the officers of the Borrower and such
other member of the Borrower Affiliated Group in the exercise of their
reasonable judgment deem to be adequate in the manner and custom of companies in
the same or similar businesses, but which, in the case of Inventory, shall in no
event be less than the full replacement value of the property so insured. The
Administrative Agent shall be named as mortgagee, loss payee and additional
insured (as applicable) and shall be given (x) 10 days' prior written notice of
any cancellation or modification of insurance as a result of the failure of any
member of the Borrower Affiliated Group to pay the premiums thereon and (y) 30
days' prior written notice of any cancellation or modification of insurance for
any reason other than non-payment of premiums thereon (except, in each case,
with respect to the insurance of the Excluded Foreign Subsidiaries). If the
Borrower or any other member of the Borrower Affiliated Group (other than any
Excluded Foreign Subsidiary) fails to provide such insurance, the Administrative
Agent, in its sole and reasonable discretion, may provide such insurance and
charge the cost thereof to the Loan Account and if, at the time such sums are
(or are to be) charged to the Loan Account, such sums, plus the aggregate
principal amount of all Revolving Loans outstanding, plus the aggregate
principal amount of all Swingline Loans outstanding, plus the aggregate Stated
Amount of Letters of Credit outstanding at such time, plus the aggregate amount
of all unreimbursed draws under outstanding Letters of Credit, equals or exceeds
the lesser of (A) the aggregate amount of the Revolving Credit Commitments of
all of the Banks at such time, and (B) the Borrowing Base at such time, the
Administrative Agent may charge the cost thereof to the Borrower's or any such
other member of the Borrower Affiliated Group's deposit account with the
Administrative Agent. Any payment not recovered from the Borrower or any other
member of the Borrower Affiliated Group shall bear interest at the Prime Rate
plus the Applicable Prime Rate Margin then in effect applicable to Revolving
Loans. The Administrative Agent shall not, by the fact of approving,
disapproving, accepting, obtaining or failing to obtain any such insurance,
incur liability for the form or legal sufficiency of insurance contracts,
solvency of insurance companies or payment of lawsuits, and the Borrower and
each other member of the Borrower Affiliated Group hereby expressly assumes full
responsibility therefor and liability, if any, thereunder (unless such liability
results from the gross negligence or willful misconduct of the Administrative
Agent). The Borrower shall, and shall cause each other member of the Borrower
Affiliated Group to, from time to time furnish to the Administrative Agent with
reasonable promptness certificates or other evidence satisfactory to the
Administrative Agent of compliance with the foregoing insurance provisions. The
provisions of this Section 5.3 shall be deemed to be supplemental to, but not
duplicative of, the provisions of any of the Loan Documents that require the
maintenance of insurance.
5.4. Taxes. The Borrower shall, and shall cause each other member of
-----
the Borrower Affiliated Group 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.
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5.5. Inspection by the Administrative Agent. The Borrower shall, and
--------------------------------------
shall cause each other member of the Borrower Affiliated Group to, permit the
Banks, solely through the Administrative Agent or the Administrative Agent's
designee, at such reasonable times during normal business hours and as often as
may be reasonably desired, upon reasonable advance notice to such Person, to (i)
visit and inspect the properties (including the Real Properties) of the Borrower
and such other members of the Borrower Affiliated Group and conduct field
examinations (provided that unless a Default or Event of Default has occurred
--------
and is continuing, the Administrative Agent and the Banks will not conduct more
than one field examination in any fiscal year of the Borrower), (ii) examine and
make copies of and take abstracts from the books and records of the Borrower and
such other members of the Borrower Affiliated Group, and (iii) discuss the
affairs, finances and accounts of the Borrower and such other members of the
Borrower Affiliated Group with its appropriate officers, employees and
accountants; provided, that with respect to employees and accountants, so long
--------
as no Default or Event of Default has occurred and is continuing, the Borrower
shall be given prior notice and the opportunity to participate in such
discussions; and provided further, however, when an Event of Default has
-------- ------- -------
occurred and is continuing the Administrative Agent or any Bank may do any of
the foregoing at the expense of the Borrower Affiliated Group at any time during
normal business hours and without advance notice.
5.6. Maintenance of Books and Records; Operating Account. The
---------------------------------------------------
Borrower shall, and shall cause each other member of the Borrower Affiliated
Group 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. The Borrower shall maintain an
operating account with the Administrative Agent.
5.7. Interest Rate Protection. On or prior to the 60th day following
------------------------
the Closing Date, the Borrower shall enter into, and thereafter the Borrower
shall maintain in effect for a period of at least three years, interest rate
protection agreements, swaps or similar arrangements in form and substance
reasonably satisfactory to the Administrative Agent with respect to not less
than $66,500,000 of principal of the Loans (any such agreement or arrangements
individually, an "Interest Rate Protection Agreement" and collectively, the
"Interest Rate Protection Agreements").
5.8. Environmental Indemnification. The Borrower covenants and
-----------------------------
agrees that it will, and will cause each other member of the Borrower Affiliated
Group to, indemnify and hold the Administrative Agent and each Bank harmless
from and against any and all claims, expense, damage, loss or liability incurred
by the Administrative Agent or any Bank in connection with environmental matters
with respect to the Real Properties to the extent set forth in the Environmental
Indemnity Agreement. It is expressly acknowledged by the Borrower that, except
to the extent otherwise expressly provided therein, the Environmental Indemnity
Agreement shall survive any foreclosure or any modification, release or
discharge of any or all of the Loan Documents or the payment of the Loans and
shall inure to the benefit of the Administrative Agent and the Banks and their
respective successors and
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assigns. The obligations under this Section 5.8 shall constitute "Obligations"
for all purposes of the Loan Documents.
5.9. Use of Proceeds. The proceeds of the Term Loans, the Revolving
---------------
Loans and the Swingline Loans will be used by the Borrower solely for the
following purposes: (i) up to $66,500,000 may be used to repay in full the
Borrower's obligations for borrowed money to First Union National Bank, as
Administrative Agent for a group of lenders, (ii) to provide funding for the
Recapitalization Transactions and to pay the costs and expenses incurred in
connection therewith, (iii) for working capital and other general corporate
purposes not in contravention of any requirement of law or of any Loan Document,
and (iv) for Permitted Acquisitions to the extent permitted by the terms of this
Agreement. No portion of any Loans 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.
5.10. 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 Borrower
will, and will cause each other member of the Borrower Affiliated Group 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
Administrative Agent (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.
5.11. Fiscal Year. Each of the Borrower and each other member of the
-----------
Borrower Affiliated Group shall have a fiscal year ending on the last Friday in
December of each year and shall notify the Administrative Agent of any change in
such fiscal year (whereupon, notwithstanding the provisions of Section 9.8, the
Administrative Agent 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).
5.12. Additional Real Properties. The Borrower will, and will cause
--------------------------
each other Credit Party to, use commercially reasonable efforts in good faith to
provide the Administrative Agent with a first-priority, perfected lien (subject
to Permitted Encumbrances) to secure the Obligations in Real Property acquired
or leased by such Credit Party after the date hereof, including but not limited
to the delivery to the Administrative Agent of such real property documents,
instruments and other items (including, without limitation, a Leasehold
Mortgage, Landlord Waiver and Consent and/or Landlord Waiver), in form and
substance reasonable acceptable to the Administrative Agent, as the
Administrative Agent shall reasonably request. Without limitation of the
foregoing, with respect to any new Real Property Lease entered into by the
Borrower after the Closing Date, the Borrower will, and will cause each other
Credit Party to, use commercially reasonable efforts to include in each such
Lease the provisions set forth in Exhibit I hereto, provided, however, that
--------- -------- -------
"commercially
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reasonable efforts" as used in this Section 5.12 shall take into account whether
leases of a similar term, scope or purpose to the Real Property Lease in
question is customarily mortgageable.
5.13. Further Assurances. At any time and from time to time the
------------------
Borrower 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 Administrative Agent or any Bank to effect the purposes of the
Loan Documents. Without limitation of the foregoing, upon receipt of an
affidavit of an officer of any Bank 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 Borrower will issue, in lieu
thereof, a replacement Note in the same principal amount thereof and otherwise
of like tenor.
SECTION VI
----------
NEGATIVE COVENANTS
------------------
So long as any Bank has any commitment to make Loans and issue Letters
of Credit hereunder and until the Loans and other Obligations hereunder are
Fully Satisfied, the Borrower hereby covenants, and shall cause the other
members of the Borrower Affiliated Group to covenant, as follows:
6.1. Indebtedness. The Borrower shall not, nor shall permit any
------------
other member of the Borrower Affiliated Group to, create, incur, assume,
guarantee or be or remain liable with respect to any Indebtedness other than the
following:
(a) Indebtedness of the Borrower to the Administrative Agent or the
Banks under any Security Document;
(b) Indebtedness in respect of current liabilities, other than for
borrowed money, of the Borrower Affiliated Group incurred in the ordinary course
of business;
(c) Indebtedness in respect of capital leases and purchase money
security interests of the Borrower Affiliated Group incurred in the ordinary
course of business; provided, that the aggregate principal amount of
--------
Indebtedness permitted by this clause (c) shall not exceed $5,000,000 at any one
time outstanding;
(d) Indebtedness existing on the date of this Agreement and disclosed
on Exhibit C hereto (including any renewals, refinancings and extensions thereof
---------
which do not have the effect of increasing the principal amount thereof, fees
thereon (except for such fees which are reasonable and customary), or the
amortization thereof, or of shortening the maturity date thereof other than, if
as a result of such shortening, the maturity date of such Indebtedness is a date
after the date which is 6 months after the Term Loan B Maturity Date);
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(e) The FCF Subordinated Debt, provided that (A) all such FCF
--------
Subordinated Debt (including the PIK Notes) shall at all times be and remain
subordinated, on the terms contained in the FCF Purchase Agreement, to the
Obligations, and (B) the FCF Subordinated Debt shall not exceed an aggregate
principal amount of $40,000,000 (plus the Indebtedness evidenced by the PIK
Notes) at any one time outstanding;
(f) Indebtedness secured by Encumbrances permitted by Sections
6.5(c);
(g) obligations of the Borrower in respect of hedging agreements
entered into in order to manage existing or anticipated interest rate or
exchange rate risks and not for speculative purposes, including without
limitation any Interest Rate Protection Agreement;
(h) unsecured intercompany Indebtedness owed to another member of the
Borrower Affiliated Group arising out of loans, advances and Guarantees
permitted hereunder;
(i) Guarantees by any member of the Borrower Affiliated Group with
respect to any Indebtedness of another member of the Borrower Affiliated Group
permitted by this Section 6.1 or Section 6.2;
(j) Indebtedness of any Subsidiary of the Borrower that existed at
the time such Person became a Subsidiary of the Borrower or Indebtedness assumed
by any member of the Borrower Affiliated Group in connection with any Permitted
Acquisition, provided, that, in each case, such Indebtedness (i) was not
-------- ----
incurred in contemplation of such Permitted Acquisition or the transaction by
which such Person become a Subsidiary of the Borrower, (ii) is Indebtedness of
the kind permitted by Section 6.1(b), (c) and (f), and (iii) the aggregate
principal amount of such Indebtedness outstanding at any time shall not exceed
$1,000,000 (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), or the amortization thereof, or of
shortening the maturity date thereof, other than, if as a result of such
shortening, the maturity date of such Indebtedness is a date after the date
which is 6 months after the Term Loan B Maturity Date;
(k) other unsecured Indebtedness of the Borrower Affiliated Group in
an aggregate principal amount outstanding at any one time not to exceed
$1,500,000;
(l) other unsecured Indebtedness of the Borrower Affiliated Group
(taken as a whole) with an aggregate principal amount not to exceed $5,000,000
at any time outstanding, provided, however, that (i) all such Indebtedness shall
-------- -------
at all times be and remain subordinated, on terms reasonably satisfactory to the
Administrative Agent, to the Obligations, (ii) both before and after the
incurrence thereof, no Default or Event of Default shall be continuing, (iii)
such Indebtedness may be incurred only to finance Permitted Acquisitions and
owed only to sellers under such Permitted Acquisitions, and (iv) the
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documentation evidencing such Indebtedness shall be in form and substance
reasonably satisfactory to the Administrative Agent;
(m) Indebtedness of the Borrower Affiliated Group issued to holders
of capital stock of the Borrower that is required to be repurchased by the
Borrower pursuant to the Shareholders Agreement, provided that (i) such
--------
Indebtedness is expressly subordinated to the Obligations on terms reasonably
satisfactory to the Administrative Agent, (ii) no cash interest or principal is
payable on such Indebtedness until after the Obligations are Fully Satisfied,
(iii) the holders of such Indebtedness have no rights to enforce against the
Borrower until the Obligations are Fully Satisfied, (iv) both before and after
giving effect to the incurrence thereof, no Default or Event of Default shall
have occurred and be continuing, and (iv) the documentation evidencing such
Indebtedness shall be in form and substance reasonably satisfactory to the
Administrative Agent; and
(n) unsecured Indebtedness of the Borrower to William Green in
respect of the Retention Bonus, provided that (i) such Indebtedness is expressly
--------
subordinated to the Obligations on terms reasonably satisfactory to the
Administrative Agent, (ii) no cash interest or principal is payable on such
Indebtedness until after the Obligations are Fully Satisfied, and (iii) the
holder of such Indebtedness shall have no rights to enforce against the Borrower
until the Obligations are Fully Satisfied.
6.2. Contingent Liabilities. The Borrower shall not, nor shall permit
----------------------
any other member of the Borrower Affiliated Group to, create, incur, assume or
remain liable with respect to any Guarantees other than the following:
(a) Guarantees in favor of the Administrative Agent or the Banks
under any Loan Document;
(b) Guarantees existing on the date of this Agreement and disclosed
on Exhibit C 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), or the amortization thereof,
or shortening the maturity date thereof, other than, if as a result of such
shortening, the maturity date of such Indebtedness is a date after the date
which is 6 months after the Term Loan B Maturity Date);
(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 $500,000;
(e) Guarantees in respect of interest rate protection arrangements
required hereby; and
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(f) Guarantees of Indebtedness permitted under Section 6.1.
6.3. [Intentionally Omitted.]
6.4. Sale and Leaseback. The Borrower shall not, nor shall permit
------------------
any other member of the Borrower Affiliated Group 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 Borrower or such other member of the Borrower Affiliated Group intends
to use for substantially the same purpose as the property being sold or
transferred.
6.5. Encumbrances. The Borrower shall not, nor shall permit any
------------
other member of the Borrower Affiliated Group 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 ("Encumbrances"),
------------
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 Encumbrances"):
----------------------
(a) Encumbrances in favor of the Administrative Agent or the Banks
under any Loan Document;
(b) Encumbrances existing on the date of this Agreement and disclosed
in Exhibit C hereto securing Indebtedness described therein, and refinancings,
---------
extensions and renewals of any such Indebtedness secured by such Encumbrances,
provided that the principal amount of Indebtedness so secured and the fees
- --------
thereon (except for reasonable and customary fees) and the amortization thereof
are not increased, or the maturity date thereof is not shortened other than, if
as a result of such shortening, the maturity date of such Indebtedness is a date
after the date which is 6 months after the Term Loan B Maturity Date;
(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 5.4;
(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;
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(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 Encumbrances relating to real property and not
interfering in a material way with the ordinary conduct of its business;
(g) Encumbrances securing the purchase price of capital assets and
inventory (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 Indebtedness to which such Encumbrance applies is permitted under
Section 6.1(c), provided, however, that (A) each such Encumbrance 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 Indebtedness
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 Indebtedness does not exceed the $5,000,000 aggregate limitation contained
in Section 6.1(c);
(h) Encumbrances securing Indebtedness permitted by Section 6.1(j),
so long as such Encumbrances are of the kind permitted by this Section 6.5 and
cover only the real or personal property acquired in such Permitted Acquisitions
and not any other property;
(i) leases or subleases granted by a member of the Borrower
Affiliated Group to others not interfering with the business of the Borrower or
a member of the Borrower Affiliated Group, provided that such leases are subject
--------
to the applicable Fee Mortgages and Leasehold Mortgages, and provided, further,
-------- -------
that the Borrower has notified the Administrative Agent prior to entering into
any such lease and that the form of such lease is reasonably satisfactory to the
Administrative Agent;
(j) any interest of title of a lessor under, and Encumbrances 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) Encumbrances of a collection bank arising under Section 4-210 of
the Uniform Commercial Code on items in the course of collection;
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(m) any exception included in a title insurance policy approved by
the Administrative Agent or the Encumbrance of any Lease approved by the
Administrative Agent; and
(n) discounts of Accounts Receivable payable to a Credit Party not in
excess of $25,000 in the aggregate in any fiscal year of the Borrower.
In addition, the Borrower shall not, nor shall the Borrower permit any
other member of the Borrower Affiliated Group to, enter into or permit to exist
any arrangement or agreement which directly or indirectly prohibits the Borrower
or any such other member of the Borrower Affiliated Group from creating or
incurring any Encumbrance in favor of the Administrative Agent for the benefit
of the Banks and the Administrative Agent under the Loan Documents.
6.6. Merger; Consolidation; Sale or Lease of Assets; Acquisitions.
------------------------------------------------------------
The Borrower shall not, nor shall permit any other member of the Borrower
Affiliated Group to, (a) sell, lease or otherwise dispose of assets or
properties (valued at the lower of cost or fair market value), other than (i)
sales of Inventory in the ordinary course of business, (ii) Involuntary
Dispositions resulting in Net Proceeds to the Credit Parties having an aggregate
value (or in an aggregate amount, as applicable) of less than $1,000,000 in any
fiscal year of the Borrower, (iii) sales, leases or other dispositions of assets
or properties not in the ordinary course of business in an aggregate amount not
to exceed $1,000,000 in any fiscal year of the Borrower, (iv) sales, leases and
other dispositions of obsolete equipment or other assets no longer used or
useful in the business of the Borrower Affiliated Group, (v) sales, leases or
other disposition to a Credit Party or any sale or disposition of Inventory to
an Excluded Foreign Subsidiary having an aggregate value (determined at the
lower of cost or fair market value of such Inventory) equal to or less than
$3,000,000 in any fiscal year of the Borrower, 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 Inventory
or its fair market value of such asset or property, and (vi) the Sexauer
Dispositions; or (b) 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 Borrower may merge or consolidate into or
with (x) the Borrower if the Borrower is the surviving company, or (y) any other
wholly-owned Subsidiary of the Borrower if the surviving person is a Credit
Party, (B) the Borrower or any Subsidiary of the Borrower 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 member of the Borrower
Affiliated Group and if such transaction involves the Borrower, the Borrower
shall be the surviving corporation, and (C) any Subsidiary of the Borrower may,
upon 15 days' prior written notice to the Administrative Agent, 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 a Credit Party, and provided,
--------
further, that such dissolution, liquidation or winding up, as applicable, could
- -------
not reasonably be expected to have a material adverse effect on the
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<PAGE>
business, condition (financial or otherwise), assets, operations or prospects of
the Borrower Affiliated Group taken as a whole. The Borrower will not, nor will
it permit any of its Subsidiaries to, without the prior written consent of the
Majority Banks, 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.
Upon a sale of assets or the sale of Equity Securities of a member of
the Borrower Affiliated Group permitted hereunder and upon a Sexauer
Disposition, the Administrative Agent shall (to the extent applicable) deliver
to the Borrower, upon the Borrower's request and at the Borrower's sole cost and
expense, such documentation as is reasonably necessary to evidence the release
of the Administrative Agent's security interest, if any, in such assets or
Equity Securities, including, without limitation, amendments or terminations of
UCC financing statements, if any, termination of the Fee Mortgage encumbering
any applicable Real Property, and the return of stock certificates and the
release of such Person from all Obligations (other than (except in the case of a
sale of the capital stock or other equity interests of a Subsidiary) any
indemnification Obligations or other Obligations which by their terms survive
the termination of the Loan Documents), if any, under the Loan Documents.
6.7. Funded Debt Ratio. The Borrower shall not at any time permit
-----------------
the Funded Debt Ratio of the Borrower Affiliated Group 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:
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<PAGE>
<TABLE>
<CAPTION>
Maximum
-------
Four Consecutive Fiscal Quarters Ending On Ratio
------------------------------------------ -----
<S> <C>
September 29, 2000 5.50 to 1
December 29, 2000 and March 30, 2001 5.25 to 1
June 29, 2001 and September 28, 2001 5.00 to 1
December 28, 2001 and March 29, 2002 4.75 to 1
June 28, 2002 and September 27, 2002 4.25 to 1
December 27, 2002, March 28, 2003, 3.75 to 1
June 27, 2003 and September 26, 2003
December 26, 2003, March 26, 2004, 3.50 to 1
June 25, 2004 and September 24, 2004
December 31, 2004, March 25, 2005, 3.00 to 1
June 24, 2005 and September 30, 2005
December 30, 2005, March 31, 2006, 2.75 to 1
June 30, 2006 and September 29, 2006
Any fiscal quarter ending on or after December 29, 2006 2.50 to 1
</TABLE>
6.8. Fixed Charge Coverage Ratio. The Borrower shall not permit the
---------------------------
Fixed Charge Coverage Ratio of the Borrower Affiliated Group 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
1.10 to 1
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<PAGE>
6.9. Interest Coverage Ratio. The Borrower shall not permit the
-----------------------
Interest Coverage Ratio of the Borrower Affiliated Group for any fiscal period
identified below to be less than the ratio specified below opposite such fiscal
period:
<TABLE>
<CAPTION>
Minimum
-------
Period Ratio
------ -----
<S> <C>
For the fiscal quarter ending on September 29, 2000 1.75 to 1
For the two fiscal quarters ending on December 29, 2000 1.85 to 1
For the three fiscal quarters ending on March 30, 2001 1.85 to 1
For the four consecutive fiscal quarters ending June 1.85 to 1
29, 2001 and September 28, 2001
For the four consecutive fiscal quarters ending on or 2.25 to 1
after December 28, 2001 through September 27, 2002
For the four consecutive fiscal quarters ending on or 2.50 to 1
after December 27, 2002 through September 24, 2004
For the four consecutive fiscal quarters ending on or 2.75 to 1
after December 31, 2004 through September 30, 2005
For any four consecutive fiscal quarters ending on or 3.00 to 1
after December 30, 2005
</TABLE>
6.10. Minimum EBITDA. The Borrower shall not permit the EBITDA of
--------------
the Borrower Affiliated Group for any fiscal period identified below to be less
than the amount specified below opposite such period:
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<PAGE>
<TABLE>
<CAPTION>
Four consecutive fiscal quarters ending on Amount
------------------------------------------ ------
<S> <C>
September 29, 2000 $32,000,000
December 29, 2000, March 30, 2001, $32,500,000
June 29, 2001 and September 28, 2001
December 28, 2001, March 29, 2002, $35,000,000
June 28, 2002 and September 27, 2002
December 27, 2002, March 28, 2003, $37,500,000
June 27, 2003 and September 26, 2003
December 26, 2003, March 26, 2004, $40,000,000
June 25, 2004 and September 24, 2004
December 31, 2004, March 25, 2005, $42,500,000
June 24, 2005 and September 30, 2005
Any fiscal quarter ending on or after December 30, 2005 $45,000,000
</TABLE>
6.11. Maximum Capital Expenditures. The Borrower Affiliated Group
----------------------------
shall not make any Capital Expenditures, in the aggregate, in any fiscal year
identified below in excess of the amount specified below opposite such fiscal
year, plus up to $2,000,000 of the unused amount available for Capital
Expenditures under this Section 6.11 for the preceding fiscal year:
<TABLE>
<CAPTION>
Fiscal Year Maximum Amount
----------- --------------
<S> <C>
For the fiscal year ending December 29, 2000 $4,500,000
For the fiscal year ending December 28, 2001 $4,500,000
For the fiscal year ending December 27, 2002 $4,500,000
For the fiscal year ending December 26, 2003 $5,000,000
For the fiscal year ending December 31, $5,500,000
2004, and each fiscal year thereafter
</TABLE>
For purposes of the foregoing computation, there shall be excluded from
Capital Expenditures (a) expenditures of the Net Proceeds received as a result
of an Involuntary
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<PAGE>
Disposition used to make Eligible Reinvestments and (b) expenditures of the
proceeds of sales of property, plant and equipment to acquire replacement
property, plant and equipment used for the same purpose.
6.12. Restricted Payments. The Borrower shall not, nor shall permit
-------------------
any of its Subsidiaries to, pay, make or declare any Restricted Payment.
Notwithstanding the foregoing, (i) prior to May 17, 2005, a member of the
Borrower Affiliated Group may make interest payments at a rate of 10% per annum
on the FCF Subordinated Debt to the extent permitted by Section 12 of the FCF
Purchase Agreement, (ii) after May 16, 2005, a member of the Borrower Affiliated
Group may make interest payments at a rate of 15% per annum on the FCF
Subordinated Debt to the extent permitted by Section 12 of the FCF Purchase
Agreement, (iii) after May 16, 2005, a member of the Borrower Affiliated Group
may pay the AHYDO Amount, so long as prior to making any such payment of the
AHYDO Amount, the Borrower shall have delivered to the Administrative Agent a
pro forma compliance certificate substantially in the form of Exhibit G
- --- ----- ---------
demonstrating that at the time any such AHYDO Amount is proposed to be paid, and
after giving effect to such payment, the Credit Parties are in compliance with
the Loan Documents and certifying in such Exhibit G that there is no Default or
---------
Event of Default that has occurred and is continuing or that would occur as a
result of such payment, (iv) a member of the Borrower Affiliated Group may make
interest payments on Subordinated Debt (other than the FCF Subordinated Debt)
permitted to be incurred hereunder to the extent such payments are permitted by
the terms of the applicable Subordinated Debt Documents, (v) a member of the
Borrower Affiliated Group 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, (vi) a member of the Borrower Affiliated Group
may consummate any of the transactions described on Exhibit D, (vii) a member of
---------
the Borrower Affiliated Group may consummate the repurchase, redemption or other
acquisition or retirement for value of any Equity Securities of the Borrower
held by officers, directors or employees of the Borrower Affiliated Group in an
aggregate cash amount not to exceed (x) $750,000 in any fiscal year of the
Borrower, and (y) $1,250,000 in the aggregate during the term of this Agreement,
(viii) payments in respect of capital stock that is required to be repurchased
by the Borrower pursuant to the Shareholders Agreement, provided that (1) such
--------
payments are not made in cash but are evidenced by a promissory note expressly
subordinated to the Obligations on terms reasonably satisfactory to the
Administrative Agent, (2) no cash interest or principal is payable on such
Indebtedness until after the Obligations are Fully Satisfied, (3) the holders of
such Indebtedness have no rights to enforce against the Borrower until the
Obligations are Fully Satisfied, (4) both before and after the incurrence
thereof, no Default or Event of Default shall be continuing, and (5) the
documentation evidencing such Indebtedness shall be in form and substance
reasonably satisfactory to the Administrative Agent, and (ix) the Borrower may
pay the Retention Bonus to William Green, provided that if at the time any such
--------
payment is proposed to be made, (1) an Event of Default under Section 7.1(a)
shall have occurred and be continuing or (2) the Credit Parties are not, or
after giving effect to such payment would not be, in compliance with Sections
6.7 through 6.11, inclusive, hereof, then such payment shall
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<PAGE>
not be made in cash but shall be permitted to be made by the issuance of a
promissory note in the principal amount of the Retention Bonus then payable,
which note (a) shall be expressly subordinated to the Obligations on terms
reasonably satisfactory to the Administrative Agent, (b) shall not allow for
cash interest or principal to be payable on such Indebtedness until after the
Obligations are Fully Satisfied, and (c) shall provide that the holder of such
Indebtedness shall have no rights to enforce against the Borrower until the
Obligations are Fully Satisfied, and provided, further, that prior to making any
-------- -------
such payment in cash, the Borrower shall have delivered to the Administrative
Agent a pro forma compliance certificate substantially in the form of Exhibit G
--- ----- ---------
demonstrating that at the time any such payment is proposed to be made, and
after giving effect thereto, the Credit Parties are in compliance with Sections
6.7 through 6.11, inclusive, hereof. Neither the Borrower nor any other member
of the Borrower Affiliated Group will enter into any agreement, contract or
arrangement (other than the Loan Documents) restricting the ability of any
Subsidiary of the Borrower (i) to pay or make dividends or distributions in cash
or kind, (ii) to make loans, advances or other payments of any nature or (iii)
to make transfers or distributions of all or any part of its assets to the
Borrower or any other member of the Borrower Affiliated Group, other than, with
respect to clause (iii) only, to the extent set forth in documents evidencing
Encumbrances permitted by Section 6.1(g) and customary anti-assignment
provisions in Leases and other contracts, agreements and licenses (other than
Material Contracts) entered into by a member of the Borrower Affiliated Group or
as otherwise disclosed on Exhibit D.
---------
6.13. Investments. The Borrower shall not, nor shall permit any
-----------
other member of the Borrower Affiliated Group to, make or maintain any
Investments other than Qualified Investments.
6.14. ERISA. Neither the Borrower nor any member of the Controlled
-----
Group 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 Borrower or any other
member of the Borrower Affiliated Group 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 Borrower or any other member of the Borrower Affiliated
Group in excess of $1,000,000.
6.15. Transactions with Affiliates. The Borrower shall not, nor
----------------------------
shall permit any other member of the Borrower Affiliated Group to, enter into or
participate in any agreements or transactions of any kind with any officer,
director or Affiliate of such Person, except (i) agreements or transactions
contemplated, required or allowed by any Loan Document or any Ancillary Document
as in effect on the date of this Agreement, or as amended in accordance with
Section 6.18, provided that such agreements or transactions are not otherwise
--------
prohibited by this Agreement or any of the Loan Documents; (ii) agreements or
transactions (in each case) in the ordinary course of business and on an arms-
length basis which (A) include only terms which are fair and equitable to the
Borrower or such other member of the Borrower Affiliated Group, (B) do not
violate or conflict with any of the
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<PAGE>
terms of any of the Loan Documents (other than representations or warranties
made under Section 4.21), (C) require the payment of no fees, charges or
commissions by the Borrower or such member of the Borrower Affiliated Group to
any Affiliate except those which are reasonable and, if such fees, charges or
commissions exceed $250,000 in respect of any single agreement or transaction,
disclosed to the Administrative Agent, and (D) involve terms no less favorable
to the Borrower or such other member of the Borrower Affiliated Group than would
be the terms of a similar agreement or transaction with any Person other than an
Affiliate; (iii) customary compensation, and reimbursement of expenses of
officers and directors of a member of the Borrower Affiliated Group, including,
but not limited to, the issuance of Equity Securities of the Borrower, in each
case in the ordinary course of business; (iv) transactions permitted by Sections
6.12 and 6.13; (v) agreements and transactions among the Credit Parties not
prohibited hereunder; (vi) any sale or disposition of Inventory to an Excluded
Foreign Subsidiary having an aggregate value (determined at the lower of the
cost or fair market value of such Inventory) equal to or less than $3,000,000 in
any fiscal year of the Borrower, 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 Inventory or its fair market
value; and (vii) as disclosed on Exhibit D. Neither the Borrower nor any other
---------
member of the Borrower Affiliated Group will enter into any agreement containing
any provision which would be violated or breached by the performance by the
Borrower or such other member of the Borrower Affiliated Group of its
obligations hereunder or under any of the other Loan Documents.
6.16. [Intentionally Omitted.]
6.17. Borrowing Base. The Borrower shall not cause or permit the
--------------
aggregate principal amount of all Revolving Loans outstanding at any time, plus
----
the aggregate amount of all Swingline Loans outstanding at such time, plus the
----
aggregate Stated Amount of Letters of Credit outstanding at such time, plus the
----
aggregate amount of any unreimbursed draws under outstanding Letters of Credit,
to exceed the lesser of (x) the aggregate amount of the Revolving Credit
Commitments of all the Banks at such time and (y) the Borrowing Base at such
time.
6.18. No Amendments to Certain Documents. The Borrower shall not,
----------------------------------
nor shall it permit any other member of the Borrower Affiliated Group to, at any
time cause or permit any of the Ancillary Documents (other than the Proxy
Statement) or charter or other incorporation documents or by-laws of the
Borrower or such other member of the Borrower Affiliated Group to be modified,
amended or supplemented in any respect , except for such supplement,
modification or amendment that could not reasonably be expected to effect any
change materially adverse to the Administrative Agent's or the Banks' rights
under the Loan Documents (including on the ability of the Borrower or such other
member of the Borrower Affiliated Group to pay or perform the Obligations), or
could not reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), assets, operations or prospects of
the Borrower Affiliated Group taken as a whole, without (in each case) the prior
written agreement, consent or approval of the Administrative Agent. Without
limitation of the foregoing, the FCF Subordinated Debt Documents may be amended
or
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<PAGE>
modified in any respect except for the following amendments and modifications,
each of which shall require the prior written consent of the Administrative
Agent and the Majority Banks:
(i) any amendment or modification which increases the principal
amount of the FCF Subordinated Debt;
(ii) any amendment or modification which shortens the maturity of
the FCF Subordinated Debt (except as otherwise permitted in
Section 12 of the FCF Purchase Agreement) or any change in any
of the prepayment or repurchase provisions, or any other
alteration of the repayment provisions of the FCF Subordinated
Debt in any respect (other than any such other alteration
which has the effect of extending the maturity of the FCF
Subordinated Debt);
(iii) any amendment or modification which increases the interest
rate (including the default rate of interest), fees or premium
applicable to the FCF Subordinated Debt, or which increases
the percentage of cash payments of interest on the FCF
Subordinated Debt;
(iv) any amendment of or modification to any of the subordination
provisions contained in the FCF Purchase Agreement (including,
without limitation, in Section 12 thereof) or in the FCF
Warrant Agreement or the related Warrant (each as defined in
the FCF Purchase Agreement), or any amendment or modification
of the FCF Warrant Agreement or the related Warrant, in each
case, which adds a "put" or "call" provision, or any amendment
of or modification to Sections 7.2 (a) or (b) of the FCF
Purchase Agreement to the extent relating to the amount of the
Obligations, or any amendment or modification which further
subordinates the FCF Subordinated Debt to any other
Indebtedness of the Borrower or its Subsidiaries;
(v) any amendment to or modification of any representations,
warranties, covenants, defaults or events of default contained
in the FCF Subordinated Debt Documents so as to make them more
restrictive than they are on the Closing Date;
(vi) any amendment or modification which adds any representations,
warranties, covenants, defaults or events of default to the
FCF Subordinated Debt Documents; or
(vii) any amendment or modification which adds the requirement of
any lien or other security for, or guaranty of, the FCF
Subordinated Debt (other than the Guarantees (as defined in
the FCF Purchase Agreement) provided at closing of the FCF
Subordinated Debt or subsequent to such closing to the extent
the Administrative Agent has received a guarantee from such
Subsidiary).
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<PAGE>
SECTION VII
-----------
DEFAULTS
--------
7.1. Events of Default. There shall be an Event of Default hereunder
-----------------
if any of the following events occurs:
(a) the Borrower shall fail to pay (i) any amount of principal of any
Loans when due or (ii) any amount of interest thereon or any fees, expenses or
any other amounts payable hereunder or under any Note or any other Loan Document
within 3 Business Days after the due date therefor; or
(b) the Borrower or any other member of the Borrower Affiliated Group
shall fail to perform, comply with or observe or shall otherwise breach any one
or more of the terms, obligations, covenants or agreements contained in any of
Sections 5.1, 5.2(b), 5.2(d), 5.5, 5.9, or in Section VI; or
(c) the Borrower or any other member of the Borrower Affiliated Group
shall fail to perform, comply with or observe or shall otherwise breach any one
or more of the terms, covenants, obligations or agreements (other than in
respect of subsections 7.1(a) and (b) hereof) contained in this Agreement or in
any other Loan Document and such failure shall continue for 25 days after the
earlier to occur of (i) the date upon which written notice thereof is given to a
member of the Borrower Affiliated Group by the Administrative Agent or (ii) the
date upon which an executive officer of a member of the Borrower Affiliated
Group becomes aware thereof; or
(d) any representation or warranty of the Borrower or any other
member of the Borrower Affiliated Group made in any Loan Document to the Agent
or any Bank or any other documents or agreements delivered to the Agent or any
Bank in connection with the transactions contemplated by this Agreement or in
any certificate delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or
(e) the Borrower or any other member of the Borrower Affiliated Group
shall, individually or in the aggregate, make or owe U.S. Federal, state and
local income tax for which a payment in respect of the Borrower's income taxes
is due on June 15, 2000 in excess of $3,000,000; or
(f) the Borrower or any other member of the Borrower Affiliated Group
shall fail to pay when due whether at maturity or otherwise, or after giving
effect to any applicable period of grace, any amount on any Indebtedness of the
Borrower or any other member of the Borrower Affiliated Group which is
outstanding in a principal amount, individually or in the aggregate, in excess
of $1,000,000, or fail to observe or perform any term, covenant or agreement
evidencing or securing such Indebtedness in each case, the result of which
failure is to permit the holder or holders of such Indebtedness to cause such
Indebtedness to become due prior to its stated maturity upon delivery of
required notice, if
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<PAGE>
any, or to permit any party to any agreement evidencing such Indebtedness to
terminate or cancel such agreement; or
(g) the Borrower or any other member of the Borrower Affiliated Group
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar official of
itself or of all or a substantial part of its property, (ii) admit in writing
its inability to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (v) with
respect to itself or any other member of the Borrower Affiliated Group, take any
action or commence any case or proceeding under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts, or
any other law providing for the relief of debtors, (vi) fail to contest in a
timely or appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code (as now or
hereafter in effect) or other law, (vii) take any action under the laws of its
jurisdiction of incorporation or organization similar to any of the foregoing,
(viii) without duplication of any of the foregoing subsections of this clause
(g) or of subsection (ix) below, be Insolvent, or (ix) pass any board resolution
or take any corporate action for the purpose of effecting any of the foregoing;
or
(h) a proceeding or case shall be commenced, without the application
or consent of the Borrower or other applicable member of the Borrower Affiliated
Group in any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets, or (iii) similar
relief in respect of it, under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or adjustment of debts or any other
law providing for the relief of debtors, and such proceeding or case shall
continue undismissed, or unstayed and in effect, for a period of 60 days; or an
order for relief shall be entered in an involuntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), against the Borrower or any
other member of the Borrower Affiliated Group; or action under the laws of the
jurisdiction of incorporation or organization of the Borrower or any other
member of the Borrower Affiliated Group similar to any of the foregoing shall be
taken with respect to the Borrower or any such member of the Borrower Affiliated
Group and shall continue unstayed and in effect for any period of 60 days; or
(i) judgments or orders for the payment of money shall be entered
against the Borrower or any other member of the Borrower Affiliated Group by any
court, or a warrant of attachment or execution or similar process shall be
issued or levied against property of the Borrower or any other member of the
Borrower Affiliated Group, that in the aggregate exceed $1,000,000 in value and
such judgments, orders, warrants or process shall continue undischarged or
unstayed for 30 days; or
(j) the Borrower, any other member of the Borrower Affiliated Group
or any member of the Controlled Group shall fail to pay when due an aggregate
amount in excess of $1,000,000 which it shall have become liable to pay to the
PBGC or to a Plan under Title
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<PAGE>
IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed
under Title IV of ERISA by the Borrower, any other member of the Borrower
Affiliated Group or any member of the Controlled Group, any plan administrator
or any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans against the Borrower or any other member of
the Borrower Affiliated Group and such proceedings shall not have been dismissed
within 30 days thereafter; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any such Plan or
Plans must be terminated, but only to the extent any of the foregoing could
reasonably be expected to result in a liability to a member of the Borrower
Affiliated Group in excess of $1,000,000; or
(k) prior to an IPO, any change in equity ownership of the Borrower
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 Borrower
or (ii) Parthenon owning, both beneficially and of record, less than (x) 20% of
the issued and outstanding Common Stock of the Borrower and (y) 20% of the
Senior Preferred Stock; or after an IPO, any change in equity ownership of the
Borrower which would result in (i) Parthenon and the Investor Group owning, both
beneficially and of record, less than 33% of the Common Stock of the Borrower,
or (ii) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act) other than the Investor Group and
Borrower's management shareholders, owning beneficially, directly or indirectly,
more than 33% of the Common Stock of the Borrower; or
(l) [Intentionally Omitted.]
(m) [Intentionally Omitted.]
(n) the Borrower or any other member of the Borrower Affiliated Group
shall be enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting any part of its
business, which order could reasonably be expected to result in a material
adverse effect on the business, property, assets, operations or condition
(financial or otherwise) of the Borrower Affiliated Group taken as a whole, and
which order shall continue in effect for more than 30 days, or the Borrower or
any other member of the Borrower Affiliated Group shall be indicted for a state,
federal, provincial (or similar foreign jurisdiction) crime, or any criminal
action shall otherwise have been brought or threatened in writing against the
Borrower or any other member of the Borrower Affiliated Group, a punishment for
which in any such case could reasonably be expected include forfeiture of any
assets of the Borrower Affiliated Group having a fair market value in excess of
$1,000,000; or
(o) there shall occur any material damage to, or loss, theft or
destruction of, the Collateral taken as a whole which is not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than 45
consecutive days, the cessation or substantial curtailment of
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revenue producing activities at any facility of the Borrower or any other member
of the Borrower Affiliated Group if such event or circumstance is not covered by
business interruption insurance and could reasonably be expected to have a
material adverse effect on the business, property, assets, operations or
condition (financial or otherwise) of the Borrower Affiliated Group taken as a
whole; or
(p) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired if such
loss, suspension, revocation or failure to renew could reasonably be expected to
have a material adverse effect on the business, property, assets, operations or
condition (financial or otherwise) of the Borrower Affiliated Group taken as a
whole; or
(q) any covenant, agreement or obligation of the Borrower or any
other member of the Borrower Affiliated Group contained in or evidenced by any
Loan Document to which the Borrower or such member of the Borrower Affiliated
Group is a party, or any covenant, agreement or obligation contained in Section
12 of the FCF Purchase Agreement (or any applicable provision in any
Subordinated Debt Document dealing with subordination to the Administrative
Agent and the Banks) shall, prior to the date on which such document shall
terminate with the prior written agreement, consent or approval of the
Administrative Agent, cease in any material respect to be legal, valid, binding
or enforceable in accordance with the terms thereof; or
(r) except as a result of or in connection with a dissolution, merger
or disposition of a Subsidiary or the sale, lease or other disposition of assets
or properties permitted hereunder, any Loan Document shall be canceled,
terminated, revoked or rescinded (or any notice of such cancellation,
termination, revocation or rescission given by a member of the Borrower
Affiliated Group) otherwise than with the prior written agreement, consent or
approval of the Administrative Agent; or any action at law, suit in equity or
other legal proceeding to cancel, revoke, or rescind any Loan Document shall be
commenced by or on behalf of the Borrower or any other member of the Borrower
Affiliated Group, or by any court or any other governmental or regulatory
authority or agency of competent jurisdiction; or any court or any other
governmental or regulatory authority or agency of competent jurisdiction shall
make a determination that, or shall issue a judgment, order, decree or ruling to
the effect that, any one or more of the Loan Documents or any one or more of the
obligations of the Borrower or any other member of the Borrower Affiliated Group
under any one or more of the Loan Documents are invalid or unenforceable in
accordance with the terms thereof; or
(s) (i) any event of default (as defined in the FCF Subordinated Debt
Documents) shall occur and be continuing under the FCF Subordinated Debt
Documents, or (ii) any event of default shall occur and be continuing under any
other Ancillary Document and, in the case of any such event of default under
this clause (ii), the Administrative Agent determines, in the exercise of its
reasonable discretion, that such event of default could reasonably be expected
to have (x) a material adverse effect on the business, operations, property,
assets or condition (financial or otherwise) of the Borrower Affiliated Group
taken as a whole, or (y) a material adverse effect on the rights of the
Administrative Agent or the
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Banks under the Loan Documents (including on the ability of the Borrower or such
other member of the Borrower Affiliated Group to pay or perform the
Obligations); or
(t) any optional redemption shall occur under Section 9.1 of the FCF
Purchase Agreement or notice thereof shall be given by the Borrower pursuant to
Section 9.2 of the FCF Purchase Agreement, or any Change in Control (as defined
in the FCF Purchase Agreement) shall occur.
7.2. Remedies. Upon the occurrence of an Event of Default described
--------
in subsections 7.1(g) and (h), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the instruction of the Majority Banks and
upon the Administrative Agent's declaration:
(a) each Bank's commitment to make any further Loans hereunder shall
terminate;
(b) the unpaid principal amount of the Loans together with accrued
interest, all other Obligations owing or payable, and all other obligations
owing or payable of the Borrower to the Administrative Agent and each Bank of
any kind under the Loan Documents shall become immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived; and
(c) the Administrative Agent may exercise (on behalf of itself and
the Banks) any and all rights the Administrative Agent and the Banks have under
this Agreement, the Notes, the Loan Documents, or any other documents or
agreements executed in connection herewith, or at law or in equity, and proceed
to protect and enforce the Administrative Agent's and the Banks' rights by any
action at law, in equity or other appropriate proceeding.
SECTION VIII
------------
CONCERNING THE ADMINISTRATIVE AGENT AND THE BANKS
-------------------------------------------------
8.1. Appointment and Authorization. Each of the Banks hereby appoints
-----------------------------
Fleet to serve as Administrative Agent under this Agreement and irrevocably
authorizes the Administrative Agent to take such action on such Bank's behalf
under this Agreement and to exercise such powers and to perform such duties
under this Agreement and the other documents and instruments executed and
delivered in connection with the consummation of the transactions contemplated
hereby (including, without limitation, all Loan Documents) as are delegated to
the Administrative Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
8.2. Administrative Agent and Affiliates. Fleet shall also have the
-----------------------------------
same rights and powers under this Agreement of a Bank and may exercise or
refrain from exercising the same as though it were not the Administrative Agent,
and Fleet and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with
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the Borrower or any other member of the Borrower Affiliated Group or any
Affiliate of any member of the Borrower Affiliated Group as if it were not the
Administrative Agent hereunder. Except as otherwise provided by the terms of
this Agreement, nothing herein shall prohibit any Bank from accepting deposits
from, lending money to or generally engaging in any kind of business with the
Borrower or any other member of the Borrower Affiliated Group or any Affiliate
of any member of the Borrower Affiliated Group.
8.3. Future Advances.
---------------
(a) In order more conveniently to administer the Loans, the
Administrative Agent may, unless notified to the contrary by any Bank prior to
the date upon which any Revolving Loan is to be made, assume that such Bank has
made available to the Administrative Agent on such date the amount of such
Bank's share of such Revolving Loan to be made on such date as provided in this
Agreement, and the Administrative Agent may (but it shall not be required to),
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If any Bank makes available to the Administrative Agent such amount on a
date after the date upon which the Revolving Loan is made, such Bank shall pay
to the Administrative Agent on demand an amount equal to the product of (i) the
average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Administrative Agent for federal
funds acquired by the Administrative Agent during each day included in such
period, multiplied by (ii) the amount of such Bank's share of such Revolving
---------- --
Loan, multiplied by (iii) a fraction, the numerator of which is the number of
---------- --
days that elapsed from and including such date to the date on which the amount
of such Bank's share of such Revolving Credit Loan shall become immediately
available to the Administrative Agent, and the denominator of which is 365. A
statement of the Administrative Agent submitted to such Bank with respect to any
amounts owing under this subsection shall be prima facie evidence of the amount
----- -----
due and owing to the Administrative Agent by such Bank.
(b) The Administrative Agent may at any time, in its sole discretion,
upon notice to any Bank, refuse to make any Revolving Loan to the Borrower on
behalf of such Bank unless such Bank shall have provided to the Administrative
Agent immediately available federal funds equal to such Bank's share of such
Revolving Loan in accordance with this Agreement.
(c) Anything in this Agreement to the contrary notwithstanding, the
obligations to make Loans under the terms of this Agreement shall be the several
and not joint obligation of each of the Banks and any advances made by the
Administrative Agent on behalf of any Bank are strictly for the administrative
convenience of the parties and shall in no way diminish any Bank's liability to
repay the Administrative Agent for such Loans and advances. If the amount of
any Bank's share of any Revolving Loan which the Administrative Agent has
advanced to the Borrower is not made available to the Administrative Agent by
such Bank within 1 Business Day following the date upon which such Revolving
Loan is made, the Administrative Agent shall promptly notify the Borrower and
shall be entitled to recover such amount from the Borrower within 3
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Business Days following the date upon which such Revolving Loan was made, with
interest thereon at the rate per annum applicable to such Revolving Loans.
8.4. Delinquent Bank. Notwithstanding anything to the contrary
---------------
contained in this Agreement, any Bank that fails to make available to the
Administrative Agent its share of any Revolving Loan when and to the full extent
required by the provisions of this Agreement shall be deemed delinquent (a
"Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such
delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any
and all payments due to it from the Borrower, whether on account of outstanding
Loans, interest, fees or otherwise, to the remaining non-delinquent Banks for
application to, and reduction of, their respective pro rata shares of all
--- ----
outstanding Revolving Loans. The Delinquent Bank hereby authorizes the
Administrative Agent to distribute such payments to the non-delinquent Banks in
proportion to their respective pro rata shares of all outstanding Revolving
--- ----
Loans. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned payments to
all outstanding Revolving Loans of the non-delinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans have returned to those in
--- ----
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency. No Delinquent Bank shall have a right to
participate in any vote taken by the Banks hereunder, which shall be calculated
as if the Commitments of the Delinquent Bank did not exist.
8.5. Payments.
--------
(a) All payments and prepayments of principal of and interest on
Revolving Loans and the Term Loans received by the Administrative Agent shall be
paid to each of the Banks pro rata in accordance with their respective interests
--- ----
in such Loans; and any other payments received by the Administrative Agent
hereunder shall be paid to the Banks or the Administrative Agent or both pro
---
rata as their respective interests appear. All such payments received by the
- ----
Administrative Agent hereunder for the accounts of the Banks prior to 1:00 p.m.
on any Business Day shall be paid to the Banks on such Business Day and all such
payments received by the Administrative Agent hereunder for the accounts of the
Banks at or after 1:00 p.m. shall be paid to the Banks on the next Business Day.
(b) Each of the Banks and the Administrative Agent hereby agrees
that if it should receive any amount (whether by voluntary payment, by the
exercise of the right of set-off or banker's lien, by counterclaim or cross
action, by the enforcement of any right hereunder or otherwise) in respect of
principal of, or interest on, the Loans or any fees which are to be shared among
the Banks, which, as compared to the amounts theretofore received by the other
Banks with respect to such principal, interest or fees, is in excess of such
Bank's pro rata share of such principal, interest or fees as provided in this
--- ----
Agreement, such Bank shall share such excess, less the costs and expenses
(including, reasonable attorneys' fees and disbursements) incurred by such Bank
in connection with such realization, exercise, claim or action, pro rata with
--- ----
all other Banks in proportion to their respective interests therein, and such
sharing shall be deemed a
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purchase (without recourse) by such sharing party of participation interests in
the Loans or such fees, as the case may be, owed to the recipients of such
shared payments to the extent of such shared payments; provided, however, that
-------- -------
if all or any portion of such excess amount is thereafter recovered from such
Bank, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest unless the Bank from which such
payment is recovered is required to pay interest thereon, in which case each
Bank returning funds to such Bank shall pay its pro rata share of such interest.
--- ----
8.6. Action by Administrative Agent.
------------------------------
(a) The obligations of the Administrative Agent hereunder are
only those expressly set forth herein. The Administrative Agent shall have no
duty to exercise any right or power or remedy hereunder or under any other
document or instrument executed and delivered in connection with or as
contemplated by this Agreement or to take any affirmative action hereunder or
thereunder.
(b) The Administrative Agent shall keep all records of the
Loans and payments hereunder, and shall give and receive notices and other
communications to be given or received by the Administrative Agent hereunder on
behalf of the Banks.
(c) Upon the occurrence and during the continuance of an
Event of Default the Administrative Agent may, and upon the direction of the
Majority Banks pursuant to Section 7.2 the Administrative Agent shall, exercise
the option of the Banks pursuant to Section 7.2 to declare all Loans and other
Obligations immediately due and payable and may take such action as may appear
necessary or desirable to collect the Obligations and enforce the rights and
remedies of the Administrative Agent or the Banks.
8.7. Notification of Defaults and Events of Default. Each Bank
----------------------------------------------
hereby agrees that, upon learning of the existence of a Default or an Event of
Default, pursuant to Section 5.1(j) or otherwise, it shall notify the
Administrative Agent thereof. The Administrative Agent hereby agrees that upon
actual receipt of any notice under this Section 8.7, it shall notify the other
Banks of the existence of such Default or Event of Default.
8.8. Consultation with Experts. The Administrative Agent shall be
-------------------------
entitled to retain and consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable to the
Banks for any action taken, omitted to be taken or suffered in good faith by it
in accordance with the advice of such counsel, accountants or experts. The
Administrative Agent may employ Administrative Agents and attorneys-in-fact and
shall not be liable to the Banks for the default or misconduct of any such
Administrative Agents or attorneys.
8.9. Liability of Administrative Agent. The Administrative Agent
---------------------------------
shall exercise the same care to protect the interests of each Bank as it does to
protect its own interests,
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so that so long as the Administrative Agent exercises such care it shall not be
under any liability to any of the Banks, except for the Administrative Agent's
gross negligence or willful misconduct with respect to anything it may do or
refrain from doing. Subject to the immediately preceding sentence, neither the
Administrative Agent nor any of its directors, officers, Administrative Agents
or employees shall be liable for any action taken or not taken by it in
connection herewith in its capacity as Administrative Agent. Without limiting
the generality of the foregoing, neither the Administrative Agent nor any of its
directors, officers, Administrative Agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify: (i) any statement,
warranty or representation made in connection with this Agreement, any Security
Document, or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Sections 3.1 or 3.2, except receipt of items required to
be delivered to the Administrative Agent; (iv) the validity, effectiveness,
enforceability or genuineness of this Agreement, the Notes, any other Loan
Document or any other document or instrument executed and delivered in
connection with or as contemplated by this Agreement; (v) the existence, value,
collectibility or adequacy of the Collateral or any part thereof or the
validity, effectiveness, perfection or relative priority of the liens and
security interests of the Banks (through the Administrative Agent) therein; or
(vi) the filing, recording, refiling, continuing or re-recording of any
financing statement or other document or instrument evidencing or relating to
the security interests or liens of the Banks (through the Administrative Agent)
in the Collateral. The Administrative Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement or other
writing (which may be a bank wire, telecopy or similar writing) believed by it
to be genuine or to be signed or sent by the proper party or parties.
8.10. Indemnification. Each Bank agrees to indemnify the
---------------
Administrative Agent (to the extent the Administrative Agent is not reimbursed
by the Borrower), ratably in accordance with its Commitment Percentage, from and
against any cost, expense (including attorneys' fees and disbursements), claim,
demand, action, loss or liability which the Administrative Agent may suffer or
incur in connection with this Agreement, or any action taken or omitted by the
Administrative Agent hereunder, or the Administrative Agent's relationship with
the Borrower hereunder, including, without limitation, the costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers and duties hereunder and of taking or
refraining from taking any action hereunder, but excluding any costs, expenses
or losses directly arising from the Administrative Agent's gross negligence or
willful misconduct. No payment by any Bank under this Section shall in any way
relieve the Borrower of its obligations under this Agreement with respect to the
amounts so paid by any Bank, and the Banks shall be subrogated to the rights of
the Administrative Agent, if any, in respect thereto.
8.11. Independent Credit Decision. Each of the Banks represents and
---------------------------
warrants to the Administrative Agent that it has, independently and without
reliance upon the Administrative Agent or any other Bank and based on the
financial statements referred to in Section 4.7 and such other documents and
information as it has deemed appropriate,
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made its own independent credit analysis and decision to enter into this
Agreement. Each of the Banks acknowledges that it has not relied upon any
representation by the Administrative Agent and that the Administrative Agent
shall not be responsible for any statements in or omissions from any documents
or information concerning the Borrower, this Agreement, the Notes, any other
Loan Document or any other document or instrument executed and delivered in
connection with or as contemplated by this Agreement. Each of the Banks
acknowledges that it will, independently and without reliance upon the
Administrative Agent or other Bank and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
8.12. Successor Administrative Agent. Fleet, or any successor
------------------------------
Administrative Agent, may resign as Administrative Agent at any time by giving
30 days prior written notice thereof to the Banks and to the Borrower. Upon any
such resignation, the Banks shall have the right to appoint a successor
Administrative Agent, which successor Administrative Agent shall be reasonably
acceptable to the Borrower. If no successor Administrative Agent shall have
been so appointed by the Banks, and shall have accepted such appointment, within
30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the Banks,
appoint a successor Administrative Agent, which shall be a commercial bank (or
Affiliate thereof) or savings and loan association organized under the laws of
the United States of America or any State thereof or under the laws of another
country which is doing business in the United States of America or any State
thereof and having a combined capital, surplus and undivided profits of at least
$100,000,000 and shall be reasonably acceptable to the Borrower. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from all further duties and obligations under this
Agreement. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 8 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
8.13. Other Agents. The syndication agent and the documentation agent
------------
shall have no rights or obligations in their capacities as such.
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SECTION IX
----------
MISCELLANEOUS
-------------
9.1. Notices. Unless otherwise specified herein, all notices
-------
hereunder to any party hereto shall be in writing and shall be deemed to have
been given when delivered by hand, when properly deposited in the mails postage
prepaid, when sent by electronic facsimile transmission, or when delivered to an
overnight courier, addressed to such party at its address indicated below:
If to the Borrower, at
Wilmar Industries, Inc.
303 Harper Drive
Moorestown, New Jersey 08057
Attention: William S. Green, Chief Executive Officer
Telecopy: (609) 439-8846
with copies to
Parthenon Capital, Inc.
200 State Street
Boston, Massachusetts 02109
Attention: Drew Sawyer, Principal
Telecopy: (617) 478-7010
- and -
If to the Administrative Agent or Fleet, at
Fleet National Bank
100 Federal Street
Boston, Massachusetts 02110
Attention: Timothy G. Clifford, Director
Telecopy: (617) 434-4929
with a copy to
Goulston & Storrs, P.C.
400 Atlantic Avenue
Boston, Massachusetts 02110
Attention: Philip A. Herman, Esq.
Telecopy: (617) 574-4112
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If to any Bank, at the address for such Bank set forth on Schedule 1,
----------
or at any other address specified by such party in writing.
9.2. Expenses. The Borrower will pay on demand all reasonable
--------
expenses of the Arranger and the Administrative Agent in connection with the
administration of the Loans and the preparation, waiver or amendment of this
Agreement, the Notes, the Loan Documents or other documents executed in
connection therewith, and the reasonable expenses of the Arranger, the
Administrative Agent or any Bank in connection with a default or collection of
the Loans or other Obligations or exercise, preservation or enforcement of any
of its rights or remedies hereunder or thereunder, including, without
limitation, reasonable fees of a single outside legal counsel for the
Administrative Agent and the Banks and a single local counsel in each
jurisdiction for the Administrative Agent and the Banks, accounting, consulting,
brokerage or other similar professional fees or expenses, all reasonable out-of-
pocket costs and expenses (including reasonable fees of Goulston & Storrs) of
the Arranger and the Administrative Agent incurred in connection with the
syndication of the Loans (provided that in the event that the Loans are fully
--------
syndicated on the Closing Date (as determined by the Arranger in good faith),
such out-of-pocket costs and expenses relating to the syndication of the Loans
shall be submitted by the Arranger and the Administrative Agent to the Borrower
within 120 days after the Closing Date), and any reasonable fees or expenses
associated with any travel or other costs relating to any appraisals or
examinations conducted in connection with the Obligations or any Collateral
therefor.
9.3. Indemnification. The Borrower shall absolutely and
---------------
unconditionally indemnify and hold harmless the Administrative Agent, the
Arranger and each of the Banks from and against any and all claims, demands,
suits, actions, causes of action, damages, losses, settlement payments,
obligations, costs, expenses (including, without limitation, reasonable fees and
disbursements of counsel) and all other liabilities whatsoever which shall at
any time or times be incurred or sustained by the Administrative Agent, the
Arranger or any of the Banks or by any of their shareholders, directors,
officers, employees, subsidiaries, affiliates or Administrative Agents (other
than to the extent of the gross negligence or willful misconduct of the
Administrative Agent, the Arranger or any of the Banks) on account of, or in
relation to, or in any way in connection with, any of the arrangements or
transactions contemplated by, associated with or ancillary to either this
Agreement, any of the other Loan Documents or any of the Ancillary Documents,
whether or not all or any of the transactions contemplated by, associated with
or ancillary to this Agreement, any of such Loan Documents or any of such
Ancillary Documents, are ultimately consummated. Without prejudice to the
survival of any other covenant of the Borrower hereunder, the covenants of this
Section 9.3 shall survive the termination of this Agreement and the payment or
satisfaction of payment of amounts owing with respect to the Notes or any other
Loan Document.
9.4. Set-Off. Regardless of the adequacy of any collateral or other
-------
means of obtaining repayment of the Obligations, any deposits, balances or other
sums credited by or due from any Bank or any of its branch or affiliate offices
to the Borrower or any other
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member of the Borrower Affiliated Group may, at any time and from time to time
after the occurrence and during the continuance of an Event of Default
hereunder, without notice to the Borrower or such member of the Borrower
Affiliated Group or compliance with any other condition precedent now or
hereafter imposed by statute, rule of law, or otherwise (all of which are hereby
expressly waived), be set off, appropriated, and applied by any Bank against any
and all obligations of the Borrower or such member of the Borrower Affiliated
Group to such Bank or any of its affiliates in such manner as the head office of
the Bank or any of its branch offices in their sole discretion may determine.
Each Bank agrees promptly to notify the Borrower and the Administrative Agent
after any such set-off and application made by such Bank; provided, however,
-------- -------
that the failure to give such notice shall not affect the validity of such set-
off and application.
9.5. Term of Agreement. This Agreement shall continue in force and
-----------------
effect so long as any Bank has any commitment to make Loans hereunder and until
the Obligations are Fully Satisfied.
9.6. No Waivers. No failure or delay by the Administrative Agent or
----------
any Bank in exercising any right, power or privilege hereunder or under any Note
or under any other documents or agreements executed in connection herewith shall
operate as a waiver thereof; nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and in the Notes
provided are cumulative and not exclusive of any rights or remedies otherwise
provided by agreement or law.
9.7. Governing Law. This Agreement, the Notes and the other Loan
-------------
Documents shall be construed in accordance with and governed by the laws of the
State of New York (without giving effect to any conflicts of laws provisions
contained therein). Any legal action or proceeding arising out of or relating
to this Agreement, any other Loan Document or any Obligation may be instituted,
in the Administrative Agent's sole discretion, in the courts of the State of New
York, the Commonwealth of Massachusetts, or the United States of America for the
Districts of New York and Massachusetts, and the Administrative Agent, the
Banks, the Borrower and each other member of the Borrower Affiliated Group
hereby irrevocably submits to the jurisdiction of each such court in any such
action or proceeding; provided, however, that the foregoing shall not limit the
-------- -------
Administrative Agent's rights to bring any legal action or proceeding in any
other appropriate jurisdiction.
9.8. Amendments, Waivers, Etc. Except as otherwise expressly
------------------------
provided in this Agreement or any of the other Loan Documents: (i) each of the
Loan Documents may be modified, amended or supplemented in any respect whatever
only with the prior written consent or approval of the Majority Banks and the
Borrower; and (ii) the performance or observance by the Borrower of any of its
covenants, agreements or obligations under any of the Loan Documents may be
waived only with the written consent of the Majority Banks; provided, however,
-------- -------
that the following changes shall require the written consent, agreement or
approval of all of the Banks directly affected thereby (with respect to clauses
(A), (B) and (D)) and of all the Banks (with respect to clauses (C), (E) and
(F)): (A) any decrease in the amount of or postponement of the scheduled or
otherwise required payment date for any of
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the Obligations (including, without limitation, principal, interest and fees);
(B) any decrease in the interest rates prescribed in any of the Notes; (C) any
increase in the Commitment or Commitment Percentage of any of the Banks, except
as permitted by Section 9.10; (D) any release of any Subsidiary Guarantees or
all or any substantial part of the Collateral (except for any such releases of
Subsidiary Guarantees and Collateral permitted or provided for in the Loan
Documents); (E) any change in the definition of Majority Banks; and (F) any
change in the proviso contained in the third sentence of Section 2.13(e) or in
the terms of this Section 9.8. Any change to Section 9 or any other provision of
this Agreement affecting the rights or obligations of the Administrative Agent
shall not be amended or modified without the prior written consent of the
Administrative Agent.
9.9. Binding Effect of Agreement. This Agreement shall be binding
---------------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that (i) the Borrower may not assign or
--------
transfer its rights or obligations hereunder, and (ii) no Bank may assign or
transfer its rights or obligations hereunder to any Person except in accordance
with the provisions of Section 9.10.
9.10. Successors and Assigns.
----------------------
(i) Any Bank may at any time grant to one or more banks or other
financial institutions (each, a "Participant") participating interests in any of
its Commitments or any or all of its Loans on such terms as such Bank may deem
appropriate; provided, however, that, except as set forth on Schedule 2, no Bank
-------- ------- ----------
will participate to any Participant less than an aggregate amount equal to the
lesser of (x) $5,000,000 of such Bank's Commitments and interest in the Loans
(as such interest may be reduced pursuant to the terms hereof) or (y) the
remaining amount of such Bank's Commitments. In the event of any such grant by
a Bank of a participating interest to a Participant, whether or not upon notice
to the Borrower and the Administrative Agent, such Bank shall remain responsible
for the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement; provided, however, that such participation agreement may provide
-------- -------
that such Bank will not agree, without the consent of the Participant, to any
modification, amendment or waiver of this Agreement requiring the consent,
agreement or approval of all of the Banks, as described in Section 9.8. The
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.11, 2.12 and 2.12A with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (ii) below
shall be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (i).
(ii) Any Bank may at any time assign to one or more banks or other
financial institutions (each, an "Assignee") all, or a part of all, of its
rights, interests and
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<PAGE>
obligations under this Agreement and the Notes (or any one of its Notes) on such
terms, as between such Bank and each of its Assignees, as such Bank may deem
appropriate (it being understood that any such assignments do not have to be
made proportionately among the facilities), and such Assignee shall assume such
rights, interests and obligations, pursuant to an instrument executed by such
Assignee and such transferor Bank; provided, however, that (A) prior to
-------- -------
assigning any interest to any Assignee hereunder, such Bank will (x) notify the
Borrower and the Administrative Agent in writing identifying the proposed
Assignee and stating the aggregate principal amount of the proposed interest to
be assigned, and (y) receive the prior written consent of the Administrative
Agent and, prior to the occurrence (which is continuing) of an Event of Default,
the Borrower, which consent may not be unreasonably withheld or delayed by
either the Borrower or the Administrative Agent, and (B) no Bank will assign to
any Assignee less than an aggregate amount equal to the lesser of (x) $5,000,000
of such Bank's Commitments and interest in the Notes (as such interest may be
reduced pursuant to the terms hereof) or (y) the remaining amount of such Bank's
Commitments. It is understood and agreed that the proviso contained in the
immediately preceding sentence shall not be applicable in the case of, and this
subsection (ii) shall not restrict, an assignment or other transfer by any Bank
to an Affiliate of such Bank or to any other Bank or a collateral assignment or
other similar transfer to a Federal Reserve Bank. Upon execution and delivery of
such an instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, payment to (or waiver by) the Administrative Agent of the fee required
by subsection (iv) below, and notice that the assignment has taken place is
given to the Borrower and the Administrative Agent, such Assignee shall be a
Bank party to this Agreement and shall have all the rights, interests and
obligations of a Bank with the Commitments as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (ii), the transferor Bank, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, new Notes are
issued to the Assignee.
(iii) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Sections 2.11,
2.11A, 2.12 and 2.12A than such Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or at a time when the circumstances giving rise
to the right to such greater payment did not exist.
(iv) Assignments (other than to an Affiliate of a Transferor Bank)
require a fee payable to the Administrative Agent by the transferor Bank, solely
for the account of the Administrative Agent, in the amount of $2,500.
9.11. Letter Regarding Redemption or Amendment of the FCF
---------------------------------------------------
Subordinated Debt. If the Borrower elects to redeem the FCF Subordinated Debt
- -----------------
pursuant to Section 9 of the FCF Purchase Agreement or amend the FCF
Subordinated Debt, within 15 Business Days of the written request of the
Borrower therefor, the Agent will deliver to the
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<PAGE>
Borrower a letter to the Borrower executed by the Agent on behalf of the Agent
and the Banks stating one of the following: (a) that such redemption or
amendment, as applicable, is prohibited by the terms of the Loan Documents and
the Banks do not consent to such redemption or amendment, as applicable; or (b)
that notwithstanding any prohibition in the Loan Documents to such redemption or
amendment, as applicable, the Agent and the required Banks have consented
thereto; or (c) no consent by the Agent or the Banks is necessary for such
redemption or amendment, as applicable.
9.12. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
9.13. Partial Invalidity. The invalidity or unenforceability of any
------------------
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
9.14. Captions. The captions and headings of the various sections
--------
and subsections of this Agreement are provided for convenience only and shall
not be construed to modify the meaning of such sections or subsections.
9.15. WAIVER OF JURY TRIAL. THE BORROWER, THE BANKS AND THE
--------------------
ADMINISTRATIVE AGENT MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE
AGENT AND THE BANKS TO ENTER INTO THIS AGREEMENT AND TO MAKE LOANS AND EXTEND
CREDIT TO THE BORROWER. The Borrower (i) certifies that neither the
Administrative Agent, nor any Bank nor any representative, Administrative Agent
or attorney of the Administrative Agent or any Bank has represented, expressly
or otherwise, that the Administrative Agent or any Bank would not, in the event
of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that,
in entering into this agreement and the other Loan Documents to which the
Borrower is a party, the Administrative Agent and the Banks are relying upon,
among other things, the waivers and certifications contained in this Section
9.15.
9.16. WAIVER OF SPECIAL DAMAGES. EXCEPT AS PROHIBITED BY LAW, THE
-------------------------
BORROWER HEREBY WAIVES ANY RIGHTS WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THE LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION THIS AGREEMENT,
THE NOTES AND THE LOAN DOCUMENTS AND ANY AMENDMENTS THEREOF, ANY SPECIAL,
EXEMPLARY OR PUNITIVE
-106-
<PAGE>
DAMAGES. THE BORROWER (A) CERTIFIES THAT NO BANK, ADMINISTRATIVE AGENT OR
REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY THEREOF HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH ENTITY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT, IN ENTERING
INTO THIS AGREEMENT, THE BANKS AND THE ADMINISTRATIVE AGENTS ARE RELYING UPON,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION
9.16.
9.17. Entire Agreement. This Agreement, the Notes, the other Loan
----------------
Documents and the other documents and agreements executed in connection herewith
constitute the final agreement of the parties hereto and supersede any prior
agreement or understanding, written or oral, with respect to the matters
contained herein and therein.
9.18. Confidentiality. Each Bank and the Administrative Agent agrees
---------------
to take and to cause its Affiliates, representatives, agents, employees and
officers, to take reasonable precautions and exercise due care to maintain the
confidentiality of all information provided to it by or on behalf of the
Borrower or any other member of the Borrower Affiliated Group, or by the
Administrative Agent on any such Person's behalf, in connection with this
Agreement or any other Loan Document, and neither it 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
Loan Documents or in connection with other business now or hereafter existing
with Borrower or any other member of the Borrower Affiliated Group, except to
the extent such information (i) was or becomes generally available to the public
other than as a result of disclosure by such Person or its Affiliates,
representatives, agents, employees or officers, or (ii) was or becomes available
on a non-confidential basis from a source other than the Borrower, any other
member of the Borrower Affiliated Group and their respective representatives,
agents, employees or officers, provided that such source is not bound by a
confidentiality agreement with any such Person known to the Bank; provided,
--------
however, that any Bank may disclose such information (A) at the request or
- -------
pursuant to any requirement of any Governmental Authority to which such Bank is
subject or in connection with an examination of such Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable requirement of law; (D) to the
extent reasonably required in connection with any litigation or proceeding
involving the Borrower or any other member of the Borrower Affiliated Group to
which the Administrative Agent, any Bank or their respective Affiliates may be
party; (E) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (F) to such Bank's
independent auditors, rating agencies and other professional advisors; (G) to
any Participant or Assignee, actual or potential, provided that such Person
agrees in writing to keep such information confidential to the same extent
required of the Banks and the Administrative Agent hereunder; (H) as to any
Bank, the Administrative Agent or their respective Affiliates, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower or any other member of the Borrower
Affiliated Group is party with such Bank or such Affiliate;
-107-
<PAGE>
and (I) to its Affiliates, representatives, agents, employees or officers,
provided that such Person is advised of the confidentiality requirements set
forth herein and further provided that with respect to clauses (A), (B), (C),
and (D), the Administrative Agent or such Bank, to the extent practicable, use
reasonable efforts to give notice to the Borrower before releasing such
information, but the Administrative Agent and such Bank shall have no liability
whatsoever for the failure to give such notice.
-108-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
The Borrower:
--- --------
WILMAR INDUSTRIES, INC.
By:__________________________________
Title: President
The Administrative Agent:
--- -------------- -----
FLEET NATIONAL BANK
By:__________________________________
Title:
The Syndication Agent:
--- ----------- -----
FIRST UNION NATIONAL BANK
By:__________________________________
Title:
The Documentation Agent:
--- ------------- -----
GMAC BUSINESS CREDIT, LLC
By:__________________________________
Title:
-109-
<PAGE>
The Banks:
--- -----
ANTARES CAPITAL CORPORATION
By:__________________________________
Title:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Trustee of the Antares Funding Trust
created under Trust Agreement dated as of
November 30, 1999
By:__________________________________
Title:
BANK OF NEW YORK
By:__________________________________
Title:
COMERICA BANK
By:__________________________________
Title:
DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN
BRANCHES
By:__________________________________
Title:
By:__________________________________
Title:
-110-
<PAGE>
FIRST UNION NATIONAL BANK
By:__________________________________
Title:
FLEET NATIONAL BANK
By:__________________________________
Title:
GMAC BUSINESS CREDIT, LLC
By:__________________________________
Title:
NATIONAL CITY BANK
By:__________________________________
Title:
ORIX BUSINESS CREDIT, INC.
By:__________________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By:__________________________________
Title:
-111-
<PAGE>
SCHEDULE 1
----------
Commitment and Commitment Percentages
-------------------------------------
<TABLE>
<CAPTION>
Revolving
Credit
1) Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
Comerica Bank $ 3,750,000 6.2500%
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226-3268
Dresdner Bank AG, New York And $ 5,625,000 9.3750%
Grand Cayman Branches
75 Wall Street
New York, NY 10005-2889
First Union National Bank $ 9,375,000 15.6250%
Widener Building
1339 Chestnut Street
Philadelphia, PA 19107
Fleet National Bank $14,488,637 24.1477%
75 State Street
Boston, MA 02109
GMAC Business Credit, LLC $ 9,375,000 15.6250%
630 Fifth Avenue
30/th/ Floor
New York, NY 10111
National City Bank $ 8,181,818 13.6364%
One South Broad Street
18/th/ Floor
Philadelphia, PA 19107
</TABLE>
I-1
<PAGE>
<TABLE>
<S> <C> <C>
Orix Business Credit, Inc. $ 5,454,545 9.0909%
846 East Algonquin Road
Suite 101
Schaumberg, IL 60173
PNC Bank, National Association $ 3,750,000 6.2500%
1600 Market Street
30/th/ Floor
Philadelphia, PA 19107
TOTAL $60,000,000 100%
Swingline
2) Bank Commitment Percentage
---- ---------- ----------
Fleet National Bank $5,000,000 100%
75 State Street
Boston, MA 02109
Term Loan A
3) Bank Commitment Percentage
---- ---------- ----------
Comerica Bank $3,125,000 6.2500%
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226-3268
Dresdner Bank AG, New York And $4,687,500 9.3750%
Grand Cayman Branches
75 Wall Street
New York, NY 10005-2889
First Union National Bank $7,812,500 15.6250%
Widener Building
1339 Chestnut Street
Philadelphia, PA 19107
</TABLE>
I-2
<PAGE>
<TABLE>
<S> <C> <C>
Fleet National Bank $12,073,863 24.1477%
75 State Street
Boston, MA 02109
GMAC Business Credit, LLC $ 7,812,500 15.6250%
630 Fifth Avenue
30/th/ Floor
New York, NY 10111
National City Bank $ 6,818,182 13.6364%
One South Broad Street
18/th/ Floor
Philadelphia, PA 19107
Orix Business Credit, Inc. $ 4,545,455 9.0909%
846 East Algonquin Road
Suite 101
Schaumberg, IL 60173
PNC Bank, National Association $ 3,125,000 6.2500%
1600 Market Street
30/th/ Floor
Philadelphia, PA 19107
TOTAL $50,000,000 100%
Term Loan B
4) Bank Commitment Percentage
---- ---------- ----------
Antares Capital Corp. $4,000,000 8%
311 South Wacker Drive
Chicago, IL 60606-6604
Chase Bank of Texas, National $6,000,000 12%
Association, as Trustee of the
Antares Funding Trust created under
Trust Agreement dated as of
November 30, 1999
c/o Antares Capital Corp.
311 South Wacker Drive
Chicago, IL 60606-6604
</TABLE>
I-3
<PAGE>
<TABLE>
<S> <C> <C>
Comerica Bank $3,125,000 6.2500%
One Detroit Center
500 Woodward Avenue
Detroit, MI 48226-3268
Dresdner Bank AG, New York And $ 4,687,500 9.3750%
Grand Cayman Branches
75 Wall Street
New York, NY 10005-2889
First Union National Bank $ 7,812,500 15.6250%
Widener Building
1339 Chestnut Street
Philadelphia, PA 19107
Fleet National Bank $13,437,500 26.8750%
75 State Street
Boston, MA 02109
GMAC Business Credit, LLC $ 7,812,500 15.6250%
630 Fifth Avenue
30/th/ Floor
New York, NY 10111
PNC Bank, National Association $ 3,125,000 6.2500%
1600 Market Street
22/nd/ Floor
Philadelphia, PA 19107
TOTAL $50,000,000 100%
</TABLE>
I-4
<PAGE>
SCHEDULE 2
----------
Antares Capital Corp. may participate $2,000,000 of its Term Loan B Commitment.
I-5
<PAGE>
EXHIBIT A-1
-----------
[FORM OF REVOLVING CREDIT NOTE]
[to be inserted]
A-1-1
<PAGE>
EXHIBIT A-2
-----------
[FORM OF TERM NOTE A]
[to be inserted]
A-2-1
<PAGE>
EXHIBIT A-3
-----------
[FORM OF TERM NOTE B]
[to be inserted]
A-3-1
<PAGE>
EXHIBIT B
---------
[FORM OF NOTICE OF BORROWING OR CONVERSION]
[To be inserted]
B-1
<PAGE>
EXHIBIT C
---------
INDEBTEDNESS; ENCUMBRANCES
--------------------------
[To be provided by the Borrower]
C-1
<PAGE>
EXHIBIT D
---------
DISCLOSURE
----------
[To be provided by the Borrower]
D-1
<PAGE>
EXHIBIT E
---------
FORM OF OPINION OF COUNSEL TO THE BORROWER AND THE GUARANTORS, ETC.
-------------------------------------------------------------------
[To be inserted]
E-1
<PAGE>
EXHIBIT F
---------
[FORM OF BORROWING BASE REPORT]
Borrowing Base Report
[To be inserted]
F-1
<PAGE>
EXHIBIT G
---------
[FORM OF REPORT OF CHIEF FINANCIAL OFFICER]
[To be inserted]
G-1
<PAGE>
SCHEDULE A
to
EXHIBIT G
---------
FINANCIAL COVENANTS
-------------------
[To be inserted]
G-2
<PAGE>
EXHIBIT H
---------
[FORM OF ASSIGNMENT AND ASSUMPTION]
[To be inserted]
I-1
<PAGE>
EXHIBIT I
---------
Leasehold Mortgage Provisions
-----------------------------
1. Definitions. The terms "mortgage" and "leasehold mortgage" shall
-----------
include whatever security instruments are used in the locale of the Demised
Premises, such as, without limitation, mortgages, deeds of trust, mortgage
deeds, security deeds and conditional deeds, as well as financing statements,
security agreements and other documentation which the lender may require, and
the terms "holder of a mortgage" and "mortgage" or "holder of a leasehold
mortgage" and "leasehold mortgagee" shall mean the secured party in any of the
foregoing instruments, and such secured party's successors and assigns.
2. Right to Mortgage. Lessee shall have the right, without Lessor's
-----------------
consent to mortgage Lessee's interest in the Lease and the Demised Premises upon
the condition that all rights acquired under such leasehold mortgage(s) shall be
subject to each and all of the covenants, conditions and restrictions set forth
in this Lease as amended hereby. Neither the execution and delivery of a
leasehold mortgage, nor any foreclosure or sale thereunder shall relieve Lessee
of its obligations hereunder. The Lease shall not be subordinate to any
mortgage or security interest now or hereafter encumbering the fee estate in the
Demised Premises (a "fee mortgage") unless, pursuant to a separate agreement
between such fee mortgagee and Lessee reasonably satisfactory to Lessee and any
then existing leasehold mortgagee, the holder of such fee mortgage agrees in
writing not to disturb the Lessee's tenancy under the Lease in the event of a
foreclosure or deed-in-lieu thereof or similar proceeding under the fee
mortgage, provided, at the initiation of such proceeding Lessee is not then in
default under the Lease beyond applicable notice and grace periods.
3. If Lessor shall have received notification of the execution of a
leasehold mortgage, together with written notice specifying the name and address
of the leasehold mortgagee, then so long as such leasehold mortgage shall remain
unsatisfied or record, the following provisions shall apply (in respect of such
leasehold mortgage and of any other leasehold mortgages which also comply with
the above notice provision):
(a) The Lease shall not be canceled, surrendered or amended without in
each case the prior written consent of the leasehold mortgagee, nor shall any
merger result from the acquisition by, or devolution upon any one entity of the
fee and the leasehold estates in the Demised Premises.
(b) In the event of any default by the Lessee under the Lease, Lessor
shall give the leasehold mortgagee written notice of such default (the "Lender
Default Notice") and shall not exercise any remedies under the Lease (including,
without limitation, the right under the Lease, at law or otherwise to terminate
the Lease or to re-
I-1
<PAGE>
enter the Demised Premises) by reason of such default so long as the leasehold
mortgagee cures all defaults on the part of the Lessee under the Lease which are
reasonably susceptible of cure by the leasehold mortgagee within the applicable
grace periods provided below in this paragraph (b):
(i) Lessor shall grant the leasehold mortgagee an additional
period in which to cause the cure of any such default, which additional period
shall be 10 business days in the case of a monetary default and, subject to
clause (ii) below, 30 days in the case of a non-monetary default. In each case,
leasehold mortgagee's cure period shall commence to run on the later to occur of
(x) the day after the Lessee's cure period expires and (y) the date on which the
Lender Default Notice is delivered to leasehold mortgagee.
(ii) In the event of a non-monetary default which is not
reasonably capable of being cured by leasehold mortgagee within 30 days
(including any non-monetary default the cure of which reasonably requires
leasehold mortgagee's possession of the Demised Premises) provided the leasehold
mortgagee shall have commenced the prosecution of such cure, or commencement of
a foreclosure or similar action, as the case may be, within such 45 day period,
leasehold mortgagee shall have such additional period of time to cure such
default as may be reasonable under the circumstances.
(iii) Lessor shall accept such payment or performance by or at the
instigation of a leasehold mortgagee as if same had been undertaken by Lessee.
(c) Property Insurance Proceeds. Any fire and other property insurance
---------------------------
proceeds in respect of the Demised Premises shall be first applied to the full
restoration of the Demised Premises before being applied for any other purpose.
Prior to such application, such proceeds shall be held by Lessee or a financial
institution.
(d) Estoppel. Either party, within 10 days after a request in writing
--------
by the other party hereto or the leasehold mortgagee, shall furnish a written
statement, duly acknowledged, certifying that the Lease is in full force and
effect, that the Lease has not been amended, or if there are any amendments,
identifying and attaching copies thereof, and that there are no defaults
thereunder by either party, or if there are any defaults, such statement shall
specify the defaults.
(e) Exercise of Options. If Lessee fails to exercise any extension,
-------------------
renewal or purchase option in the Lease, such option shall not lapse unless and
until (i) Lessor has sent to the leasehold mortgagee written notice thereof and
(ii) the leasehold mortgagee fails within 30 days after receipt of such notice
to exercise such option on behalf of Lessee (which exercise Lessor hereby agrees
to accept).
I-2
<PAGE>
(f) Transfers. The sale or transfer of Lessee's interest in the Lease
---------
and the Demised Premises in connection with a foreclosure, whether by judicial
proceedings or by virtue of any power of sale contained in a leasehold mortgage,
or any conveyance of Lessee' interest in the Lease and the Demised Premises to
the leasehold mortgagee or its nominee or designee by virtue of or in lieu of
foreclosure or other proceedings, or any conveyance of Lessee' interest in the
Lease and the Demised Premises by the leasehold mortgagee or its nominee or
designee (after leasehold mortgagee or its nominee or designee has acquired such
interest) to a third party, shall not require the consent or approval of Lessor
or constitute a breach of any provision of or a default under the Lease.
(g) Limitation on Liability. If the leasehold mortgagee or its nominee
-----------------------
or designee takes possession of the Demised Premises or succeeds to the interest
of Lessee under the Lease, (i) the leasehold mortgagee or its nominee or
designee shall have no personal liability for the payment of rent or the
performance of any of Lessee's covenants and agreements under the Lease, and
Lessor's recourse for any default by leasehold mortgagee or such nominee or
designee shall be limited to such person's interest in the Lease and the Demised
Premises; and (ii) the leasehold mortgagee or its nominee or designee shall be
obligated under the Lease only so long as it is vested (other then as security
for debt) with title to all of, or interest in the leasehold estate under the
Lease and upon any subsequent transfer of such interest, the transferor shall be
relieved of all obligations hereunder.
(h) Lessee Bankruptcy. If Lessee rejects the Lease in a bankruptcy
-----------------
proceeding, Lessor shall, at the request of any leasehold mortgagee having a
first lien on the Lease and upon payment by such leasehold mortgagee of all
accrued and unpaid rent due under the Lease, enter into a new Lease with such
leasehold mortgagee which shall be on the same terms as the Lease, and which
shall have the same priority over any then existing liens and encumbrances as
was enjoyed by the Lease.
4. Amendments. This Amendment of Lease may not be modified or terminated
----------
orally, and constitutes the entire agreement between the parties with respect to
the subject matter hereof.
5. Full Force; Conflicts. Except as expressly amended hereby, the Lease
---------------------
and all of the terms, covenants and conditions thereof remain in full force and
effect. In the event of any conflict between the provisions of the Lease and
the provisions of this Amendment, the provisions of this Amendment shall
control.
6. Memorandum of Lease. Upon the request of either party hereto or by a
-------------------
leasehold mortgagee, the parties hereto shall execute, acknowledge and deliver a
memorandum of the Lease (as amended to date) in recordable form and otherwise
reasonably acceptable to both parties. The fees for recording such memorandum
shall be shared equally by the parties, it being understood that each party
shall bear its own legal fees in connection therewith.
I-3
