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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
_______________________________
Date of Report: February 18, 2000
Pameco Corporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Georgia 001-12837 51-0287654
- ------------------------------ ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
</TABLE>
1000 Center Place, Norcross, Georgia 30093
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 798-0700
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Item 5.
On February 18, 2000, Pameco Corporation, a Georgia corporation (the
"Company") and Littlejohn Fund II, L.P. ("Littlejohn Fund") and Quilvest
American Equity, Ltd. ("Quilvest" and, collectively with Littlejohn Fund, the
"Purchasers") signed a series of agreements (the "Transaction") pursuant to
which the Purchasers have agreed to pay $35 million (the "Purchase") in exchange
for shares of the Company's Series A Cumulative Pay-in-Kind Preferred Stock, par
value $1.00 per share (the "Preferred Stock") and warrants to purchase
additional such shares (the "Warrants"), subject to certain terms and
conditions. With regard to the Purchase, Littlejohn Fund will contribute $28
million of the purchase price and Quilvest will contribute $7 million of the
purchase price. The Purchasers have informed the Company that the source of the
funds from which Littlejohn Fund will draw to purchase the Preferred Stock is
capital to be contributed by its limited partners. Quilvest S.A. is a financial
holding company that controls Quilvest Overseas Ltd. Quilvest is a subsidiary of
Quilvest Overseas Ltd. and Quilvest makes direct and direct equity and debt
investments in the United States. Quilvest's portion of the purchase of the
Preferred Stock will be funded by liquidity made available to Quilvest from
Quilvest S.A.
Conditions to the closing of the Purchase include (i) the Company's closing
and obtaining financing under a senior credit facility amounting to an aggregate
of $130 million arranged by Fleet Capital Corporation (the "Credit Facility")
and (ii) the Company's closing and obtaining financing under a subordinated debt
agreement pursuant to which the Company will have the ability to borrow up to
$20 million (the "Subdebt Facility"). The closing of each of the Purchase,
Credit Facility and Subdebt Facility is conditioned on the closing of the other
agreements in this sentence.
Pursuant to the Purchase and applicable law, Littlejohn Fund's director
nominees will be appointed to the Board at the closing, which will occur on the
day no earlier than the day which is ten days after the date of the mailing on
this Statement. In connection with the transaction, the Purchasers, the Company
and certain other holders of the Company's Class B Common Stock entered into a
Shareholders Agreement which will enable Littlejohn Fund to retain control of
the Board so long as it beneficially owns at least 25% of the Common Stock. The
Board currently has five members. Pursuant to the Shareholders Agreement, one
member of the current Board, Mr. Richard A. Boarse, will resign.
The Shareholders Agreement further requires that the Board have nine
directors at all times. So long as shares of Class B Common Stock are
outstanding, the Board will be composed of two persons elected by the holders of
the Class A Common Stock (the "Class A Directors") and seven persons elected by
the holders of the Class B Common Stock (the "Class B Directors"). Pursuant to
the Shareholders Agreement, Littlejohn Fund will nominate five persons to stand
for election to serve as Class B Directors, and Quilvest shall nominate one
person to stand for election to serve as a Class B Director. The then existing
members of the Board will nominate the remaining three directors, none of whom
shall be affiliates or associates (as defined in the Securities Exchange Act o
f1934, as amended, or the Georgia Business Corporation Code) of Quilvest or
Littlejohn. After such time as there are no Class B shares outstanding,
Littlejohn Fund will retain the right to nominate five persons to stand for
election to serve as directors, Quilvest shall nominate one person to stand for
election to serve as a director and the remaining three directors shall be
nominated in accordance with the requirements of applicable law, and none of
whom shall be affiliates or associates (as defined in the Securities Exchange
Act of 1934, as amended, or the Georgia Business Corporation Code) of Quilvest
or Littlejohn.
The Transaction contemplates that the terms of the Preferred Stock
ultimately will entitle holders of Preferred Stock to convert their shares of
Preferred Stock into the Company's common stock, which the Company will be
required to register, pursuant to certain terms and conditions, and that holders
of the Preferred Stock will be entitled to vote as a class with holders of the
Company's common stock. However, the New York Stock Exchange requires
shareholder approval of such voting and conversion rights before they become
effective because the Transaction would result in the issuance of securities
convertible into more than 20% of the Company's outstanding common stock;
approval by the majority of a quorum of shareholders is required for issuances
of such magnitude. Accordingly, the Company will, and pursuant to the terms of
the Transaction is required to, conduct a special meeting of shareholders for
the purpose of voting to approve such voting and conversion rights. The Purchase
is not conditioned upon the receipt of such approval. The Company is preparing
proxy materials for filing and distribution and anticipates that the special
meeting will occur on or about May 15, 2000.
Pursuant to the Shareholder Agreement and other related agreements,
Quilvest and other holders of the Company's Class B Common Stock, who together
control more than 50% of the voting power of the Company have agreed to vote to
approve the aforementioned voting and conversion rights and, in connection
therewith, have granted Littlejohn Fund an irrevocable proxy. Accordingly, the
approval required by the New York Stock Exchange will be obtained.
After such shareholder approval, Littlejohn Fund will beneficially own
approximately 60% of the outstanding voting securities of the Company and
Quilvest will beneficially own approximately 20% often outstanding voting
securities of the Company, assuming the exercise of the Warrants.
Item 7. Exhibits.
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Exhibit No. Description
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3-1 Form of Certificate of Designation of Series A Cumulative Pay-in-
Kind Preferred Shares of Pameco Corporation.
4-1 Warrant to Subscribe for and Purchase Series A Cumulative Pay-in-
Kind Preferred Stock of Pameco Corporation.
10-35 Securities Purchase Agreement, dated as of February 18, 2000, by
and Among Pameco Corporation, Littlejohn Fund II, L.P., and
Quilvest American Equity, LTD.
10-36 Shareholders Agreement, dated as of February 18, 2000, by and Among
Pameco Corporation, Littlejohn Fund II, L.P., Quilvest American
Equity, LTD, and Willem F.P. de Vogel.
10-37 Registration Rights Agreement, dated as of February 18, 2000, among
Pameco Corporation, Littlejohn Fund II, L.P., Quilvest American
Equity, LTD and International Comfort Products Corporation USA.
10-38 Voting Agreement, dated as of February 18, 2000, by and among
Littlejohn Fund II, L.P., Pameco Corporation and J. William Uhrig.
10-39 Voting Agreement, dated as of February 18, 2000, by and among
Littlejohn Fund II, L.P., Pameco Corporation and Terbem Limited.
10-40 Irrevocable Proxy, dated as of February 18, 2000, from Willem F. P.
de Vogel to Littlejohn Fund II, L.P.
10-41 Loan and Security Agreement, dated February 17, 2000, by and
among Pameco Corporation, the Financial Institutions Party thereto
from time to time, Fleet Capital Corporation and FleetBoston
Robertson Stephens, Inc.
10-42 Securities Purchase Agreement, dated as of February 18, 2000, by
and among Pameco Corporation, E.I. DuPont de Nemours and Company,
Mueller Industries, Inc., International Comfort Products
Corporation (USA), and Emerson Electric Co.
10-43 Note Agreement, dated as of February 18, 2000, by and among Pameco
Corporation, E.I. DuPont de Nemours and Company, Mueller
Industries, Inc., International Comfort Products Corporation (USA),
and Emerson Electric Co.
EX-99 Press Release
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PAMECO CORPORATION
By /s/ Mark S. Sellers
-----------------------------------
Name: Mark S. Sellers
Title: Vice Chairman and Chief Financial Officer
Date: February 18, 2000
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EXHIBIT INDEX
Exhibit No. Description
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3-1 Form of Certificate of Designation of Series A Cumulative Pay-in-
Kind Preferred Shares of Pameco Corporation.
4-1 Warrant to Subscribe for and Purchase Series A Cumulative Pay-in-
Kind Preferred Stock of Pameco Corporation.
10-35 Securities Purchase Agreement, dated as of February 18, 2000, by
and Among Pameco Corporation, Littlejohn Fund II, L.P., and
Quilvest American Equity, LTD.
10-36 Shareholders Agreement, dated as of February 18, 2000, by and Among
Pameco Corporation, Littlejohn Fund II, L.P., Quilvest American
Equity, LTD, and Willem F.P. de Vogel.
10-37 Registration Rights Agreement, dated as of February 18, 2000, among
Pamceo Corporation, Littlejohn Fund II, L.P., Quilvest American
Equity, LTD and International Comfort Products Corporation USA.
10-38 Voting Agreement, dated as of February 18, 2000, by and among
Littlejohn Fund II, L.P., Pameco Corporation and J. William Uhrig.
10-39 Voting Agreement, dated as of February 18, 2000, by and among
Littlejohn Fund II, L.P., Pameco Corporation and Terbem Limited.
10-40 Irrevocable Proxy, dated as of February 18, 2000, from Willem F. P.
de Vogel to Littlejohn Fund II, L.P.
10-41 Loan and Security Agreement, dated February 17, 2000, by and
among Pameco Corporation, the Financial Institutions Party thereto
from time to time, Fleet Capital Corporation and FleetBoston
Robertson Stephens, Inc.
10-42 Securities Purchase Agreement, dated as of February 18, 2000, by
and among Pameco Corporation, E.I. DuPont de Nemours and Company,
Mueller Industries, Inc., International Comfort Products
Corporation (USA), and Emerson Electric Co.
10-43 Note Agreement, dated as of February 18, 2000, by and among Pameco
Corporation, E.I. DuPont de Nemours and Company, Mueller
Industries, Inc., International Comfort Products Corporation (USA),
and Emerson Electric Co.
EX-99 Press Release
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EXHIBIT 3.1
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A CUMULATIVE PAY-IN-KIND
PREFERRED SHARES
OF
PAMECO CORPORATION
__________________________________________________
Pursuant to Section 14-2-602 of the
Business Corporation Code of the State of Georgia
__________________________________________________
Pameco Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Georgia, certifies that pursuant to the
authority contained in Section 5.1 of its Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and in accordance with the
provisions of Section 14-2-602 of the Business Corporation Code of the State of
Georgia, the board of directors of the Company (the "Board of Directors"), at a
meeting duly called and held on February 14, 2000, approved and adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Articles of Incorporation, the Board of Directors does hereby
designate, create, authorize and provide for the issuance of Series A Cumulative
Pay-in-Kind Preferred Stock, par value $1.00 per share (the "Series A Preferred
Shares"), with a stated value of $250.00 per share at the time of initial
issuance, and initially consisting of 600,000 shares, for Series A Preferred
Shares (the "Certificate of Designation"). The Series A Preferred Shares will
have the following voting powers, preferences and relative, optional and other
special rights, and qualifications, limitations and restrictions set forth in
this certificate of designation (the "Certificate of Designation"):
1. Certain Definitions. Unless the context otherwise requires, the terms
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defined in this Section 1 shall have, for all purposes of this resolution and
this Certificate of Designation, the meanings herein specified (with terms
defined in the singular having comparable meanings when used in the plural).
"Additional Warrants" has the meaning set forth in Section 3(a)(iii)
hereof.
"Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including,
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with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to elect a majority of the board of directors (or other
governing body) or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise and, in any event and without limiting the generality of
the foregoing, any Person owning 10% or more of the voting securities of another
Person shall be deemed to control that Person.
"Approval Date" means the date on which the Holders of the requisite
number of shares of Common Stock approve, at a special meeting of the
shareholders entitled to vote thereon duly called and held in accordance with
applicable law, including the GBCC, and for which a proxy statement has been
distributed and filed in accordance with the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), the agreement pursuant to which the Series A Preferred Shares
are being issued and the transactions contemplated thereby.
"Articles of Incorporation" means the articles of incorporation of the
Company, as in effect from time to time.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors, as the same may be
constituted from time to time.
"Business Day" means any day other than a Legal Holiday.
"Business Combination Proposal" means any proposal made to the Company
or its shareholders involving (a) a sale of a substantial portion of the Capital
Stock of, or other equity interest in, the Company, (b) a sale of a substantial
portion of the assets of the Company, or (c) a merger, business combination,
recapitalization or other similar transaction involving the Company.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of a limited liability company or association, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Certificate of Designation" means the certificate of designation of
the Series A Preferred Shares, as in effect from time to time.
"Class A Common Stock" means the common stock, par value $.01 per
share, designated as "Class A Common Stock" in the Articles of Incorporation.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" means Pameco Corporation.
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"Compounding Date" has the meaning set forth in Section 3(a)(i) below.
"Conversion Price" means $2.50, as the same may be adjusted from time
to time in accordance with Section 7 below.
"Dividend Series A Preferred Shares" means unissued Series A Preferred
Shares to which a Holder is entitled as of a particular date, assuming the
declaration of dividends payable in the form of Series A Preferred Shares under
Section 3(a)(i) or 3(a) (ii) below.
"GBCC" means the Georgia Business Corporation Code.
"Governmental Body" means any government, or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Holder" means the record holder of one or more Series A Preferred
Shares, as shown on the books and records of the Company.
"Initial Dividend Period" has the meaning set forth in Section 3(a)(i)
below.
"Initial Dividend Rate" has the meaning set forth in Section 3(a)(i)
below.
"Issue Date" means the first date on which any Series A Preferred
Shares are issued by the Company.
"Junior Securities" has the meaning set forth in Section 2 below.
"Legal Holiday" means a Saturday, a Sunday, a federal holiday or a day
on which banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed.
"Liquidation Date" has the meaning set forth in Section 4(a) below.
"Liquidation Preference" means an amount per Series A Preferred Share,
equal to $250.00 plus accrued and unpaid dividends (whether or not declared and
including, without limitation, Dividend Series A Preferred Shares and Warrant
Series A Preferred Shares, if any), and the Penalty Amount (if any), subject to
adjustment from time to time to accurately reflect stock splits, subdivisions or
combinations with respect to the Series A Preferred Shares.
"Parity Securities" has the meaning set forth in Section 2 below.
"Penalty Amount" means the contingent amount that exists only if the
Company, in accordance with Section 3(a)(ii), has not notified the Holders that
it elected to accrue and pay dividends after the Initial Dividend Period in the
same manner as during the Initial Dividend Period and the Company thereafter
failed to declare and pay the applicable cash dividend in full on a relevant
Compounding Date, and which is equal to the difference between the accrued and
unpaid dividend attributable to the relevant Compounding Date and the amount
that would have been the accrued and unpaid dividend attributable to the
relevant Compounding Date had the
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dividend rate set forth in Section 3(a)(ii) below been calculated at 16% per
annum, not 14% per annum.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, limited liability company or partnership, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Put Date" has the meaning set forth in Section 6(b) below.
"Put Price" has the meaning set forth in Section 6(a) below.
"Put Right" has the meaning set forth in Section 6(a) below.
"Redemption Date" has the meaning set forth in Section 5(c) below.
"Redemption Price" has the meaning set forth in Section 5(a) below.
"Senior Securities" has the meaning set forth in Section 8(c)(i)
below.
"Series A Preferred Shares" means the Company's Series A Cumulative
Pay-in-Kind Preferred Stock, par value $1.00 per share, as the same may be
amended or modified from time to time.
"Stated Value" means an amount per Series A Preferred Share, equal to
$250.00, subject to adjustment from time to time to accurately reflect stock
splits, subdivisions or combinations with respect to the Series A Preferred
Shares.
"Subsequent Preferred Shares" means any shares of preferred stock, par
value $1.00 per share, of the Company, issued pursuant to that certain
Securities Purchase Agreement dated as of February 18, 2000, among the Company,
Littlejohn Fund II, L.P. and Quilvest American Equity, Ltd., other than the
Series A Preferred Shares.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at. the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Trading Day" means with respect to the Class A Common Stock (x) if
the applicable security is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which the New York
Stock Exchange or such other national securities exchange is open for business
or (y) if the applicable security is quoted on the Nasdaq National Market, a day
on which trading may be made on the Nasdaq National Market or (z) if the
applicable security is not otherwise listed, admitted for trading or quoted, any
day other than a Legal Holiday.
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"Warrant Series A Preferred Shares" means, as of a relevant date, the
Series A Preferred Shares to which a Holder would be entitled upon a cashless
exercise of all Additional Warrants held by such Holder on such date (including
any unissued Additional Warrants to which such Holder would be entitled to as of
such date assuming the declaration of dividends, under Section 3(a)(iii). For
purposes of this definition of Warrant Series A Preferred Shares, "cashless
exercise" means the exercise of Additional Warrants whereby the Holder thereof
shall receive only (i) the aggregate number of Series A Preferred Shares to
which the Holder is entitled under such Additional Warrants less (ii) the
aggregate number of Series A Preferred Shares with a fair market value equal to
the exercise price of such Additional Warrants.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of Class A Common Stock as reported by Bloomberg
Information Systems, Inc.; provided, however, if there shall occur any
adjustment to the Conversion Price as a result of Section 7(b)(iv) below, the
Weighted Average Trading Price shall be proportionally adjusted to the extent
not so reflected in the report of Bloomberg Information Systems, Inc.
2. Ranking. The Series A Preferred Shares shall, with respect to
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dividends, distributions and distributions upon the liquidation, winding-up or
dissolution of the Company, rank: (i) senior to all classes of Common Stock of
the Company and to each other class of Capital Stock or series of preferred
stock established after the Issue Date by the Board of Directors, the terms of
which do not expressly provide that it ranks senior to or on a parity with the
Series A Preferred Shares as to dividends, distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (together with the
Common Stock of the Company, collectively referred to as "Junior Securities");
and (ii) on a parity with any additional shares of Series A Preferred Shares
issued by the Company in the future in accordance with Section 3 hereof and any
other class of Capital Stock or series of preferred stock established after the
Issue Date by the Board of Directors (including any series of Subsequent
Preferred Shares), the terms of which expressly provide that such class or
series will rank on a parity with the Series A Preferred Shares as to dividends,
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Parity Securities").
3. Dividends.
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(a) (i) For the three-year period following the Issue Date (the
"Initial Dividend Period"), the Holders of the Series A Preferred Shares shall
be entitled to receive on each such share, when, as and if declared by the Board
of Directors, out of funds of the Company legally available therefor, cumulative
preferential dividends, compounding quarterly to the extent unpaid on each
March 1, June 1, September 1 and December 1 (each a "Compounding Date"),
commencing on June 1, 2000, and accruing from the date of issuance at the rate
of 14% per annum on the Stated Value of each Series A Preferred Share and of
each Dividend Series A Preferred Share then deemed to have been issued (the
"Initial Dividend Rate"); provided, however, if with respect to a particular
period, the Company's earnings before interest, taxes, depreciation and
amortization, as determined in accordance with generally accepted accounting
principles consistently applied and maintained, is at least equal to $25.5
million for the year ended February 28, 2002 and/or $35.4 million for the year
ended February 28, 2003, then with respect to a particular one-year period, the
rate at which dividends would accrue, accumulate and compound during such one
year period would be recalculated retroactively to 8% instead of 14%, such
recalculation to occur as soon as practicable after the receipt of the Company's
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audited financial statements, accompanied by a signed opinion of its independent
accountants, relating to the applicable one year period. When and if declared
by the Board of Directors, such dividends shall be payable by issuance of such
number of additional Series A Preferred Shares (including fractional shares)
determined by dividing the dollar amount of the dividend to be paid by the
Stated Value on the date such dividend is so paid; provided, however, if a
dividend is declared and paid in the form of Series A Preferred Shares and the
dividend rate is subsequently recalculated pursuant to this Section 3(a)(i),
then the Company shall promptly advise the Holders of the recalculated dividend
amount (which recalculation shall be binding absent manifest error) and the
Holders shall promptly surrender for cancellation certificates representing a
sufficient number of Series A Preferred Shares so that the number of Series A
Preferred Shares issued to them in such dividend is appropriately adjusted to
reflect the retroactive reduction of the dividend rate.
(ii) From and after the Initial Dividend Period, the Holders of
the Series A Preferred Shares shall be entitled to receive on each such share,
when, as and if declared by the Board of Directors, out of funds of the Company
legally available therefor, cumulative preferential cash dividends, compounding
quarterly to the extent unpaid, on each Compounding Date commencing on June 1,
2003 and accruing thereafter at the rate of 14% per annum on the Stated Value of
each Series A Preferred Share and of each Dividend Series A Preferred Share then
deemed to have been issued, except that the Company may provide written notice
to the Holders at least 30 days prior to the end of the Initial Dividend Period,
that such dividends, with respect to periods after the Initial Dividend Period
shall continue to accrue and be payable in the same manner as during the Initial
Dividend Period.
(iii) To the extent a Holder of Series A Preferred Shares
receives payment of a dividend pursuant to subsections (i) or (ii) in the form
of additional Series A Preferred Shares, then, such Holder shall also be
entitled to receive a warrant to purchase such number of additional Series A
Preferred Shares equal to the number of Series A Preferred Shares received in
payment of such dividend, having an exercise price equal to 125% of the
conversion price of the Series A Preferred Shares in effect at the time of
payment of such dividend, such warrant to be in substantially the form of the
warrants originally issued to Holders on the Issue Date (the "Additional
Warrants").
(b) In addition to the dividends described in Section 3(a), if the
Company declares and pays a dividend on the Class A Common Stock, a Holder of
Series A Preferred Shares shall be entitled to 50% of the dividends such Holder
would have been entitled to had such Holder fully converted the Series A
Preferred Shares into Class A Common Stock pursuant to Section 7 immediately
prior to the record date for the distribution. Dividend distributions under
this Section 3(b) shall be made pro rata among the Holders of Series A Preferred
Shares and holders of Class A Common Stock.
(c) All dividends paid with respect to Series A Preferred Shares
pursuant to this Section 3 shall be made pro rata among the Holders based upon
the aggregate Series A Preferred Shares held by each such Holder. If and when
any Series A Preferred Shares are issued under Section 3 for the payment of
dividends, such Shares shall be validly issued and outstanding and fully paid
and nonassessable, and shall initially have a Conversion Price equal to that of
the Series A Preferred Shares then in effect on the date such Series A Preferred
Shares are issued.
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(d) In the case of Series A Preferred Shares issued on the Issue
Date, dividends shall accrue from such date. In the case of Series A Preferred
Shares issued as a dividend on Shares of Series A Preferred Shares or the Series
A Preferred Shares issued upon exercise of any warrants to purchase Series A
Preferred Shares, dividends shall accrue from the date on which such Series A
Preferred Shares were issued.
(e) Each fractional Series A Preferred Share outstanding shall also
be entitled to a ratably proportionate amount of any other distributions made
with respect to each outstanding or due to be issued and outstanding Series A
Preferred Share, and all such distributions shall be payable in the same manner
and at the same time as distributions on each outstanding or due to be issued
and outstanding Series A Preferred Share.
4. Distributions Upon Liquidation, Dissolution or Winding Up. Upon any
---------------------------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company (which for purposes of this Certificate of Designation shall
include any transaction effected pursuant to a Business Combination Proposal),
or any reduction or decrease in its Capital Stock resulting in a distribution of
assets to the Holders of any class or series of the Company's Capital Stock (the
date of such occurrence, the "Liquidation Date"), the Company shall, out of the
assets of the Company available for distribution, make the following payments in
respect of its Capital Stock:
(a) first, payments on any Senior Securities;
(b) second, on a pro rata basis, (i) to Holders of the Series A
Preferred Shares equal to the greater of (A) the aggregate Liquidation
Preference with respect to the Series A Preferred Shares held by such Holder on
the Liquidation Date (including the Dividend Series A Preferred Shares to which
such Holder would be entitled as of such date), plus the aggregate Liquidation
Preference with respect to the Warrant Series A Preferred Shares deemed held by
such Holder on the Liquidation Date (which cannot be less than zero), or (B) the
amount which would be payable to such Holder in respect of Class A Common Stock
if such Holder had been deemed to have converted all Series A Preferred Shares,
all Dividend Series A Preferred Shares and all Warrant Series A Preferred Shares
whether or not convertible by the terms hereof, held (or deemed held) by such
Holder as of the Liquidation Date into Class A Common Stock immediately prior to
the Liquidation Date; and (ii) due on Parity Securities; and
(c) third, payments on any Junior Securities.
5. Redemption by the Company.
-------------------------
(a) From time to time, on and after the sixth anniversary of the
Issue Date, the Company may redeem the Series A Preferred Shares held by a
Holder on the Redemption Date at a price per share, payable in cash, equal to
105% of the Liquidation Preference (the "Redemption Price"). If there shall be a
legal impediment imposed by the GBCC to the Company's repurchase of any such
shares, the Company shall use its best efforts to remove or remedy such
impediment.
(b) In case of redemption of less than all of the Series A Preferred
Shares, such Series A Preferred Shares to be redeemed shall be redeemed on a pro
rata basis among all Holders.
-7-
<PAGE>
(c) Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified for
redemption in such notice (the "Redemption Date"), by U.S. express mail,
overnight courier guaranteeing next Business Day delivery, postage or charges
prepaid, to all Holders of record of the Series A Preferred Shares at their last
addresses as they shall appear on the books of the Company; provided, however,
the validity of the proceedings for the redemption of any Series A Preferred
Shares shall only be affected with respect to any Holder to whom the Company has
failed to give notice or except as to the Holder to whom notice was defective.
In addition to any information required by law, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the number of Series A
Preferred Shares to be redeemed and, if less than all such shares held by such
Holder are to be redeemed, the number of such shares to be redeemed; (iv) the
place or places where certificates for the Series A Preferred Shares are to be
surrendered for payment of the Redemption Price; (v) the Conversion Price then
in effect; (vi) that the Holder's right to convert the Series A Preferred Shares
into Class A Common Stock shall terminate on the close of business on the third
Business Day preceding such Redemption Date; and (vii) that dividends on the
Series A Preferred Shares to be redeemed will cease to accumulate on the
Redemption Date. Upon the sending of any such notice of redemption, the Company
shall become obligated to redeem on the applicable Redemption Date all such
Series A Preferred Shares called for redemption and the Company shall take all
steps necessary to pay the Redemption Price on the Redemption Date.
(d) If notice has been sent in accordance with Section 5(c) above and
provided that on or before the Redemption Date specified in such notice, all
funds necessary for such redemption shall have been set aside by the Company,
separate and apart from its other funds in trust for the pro rata benefit of the
Holders of such Series A Preferred Shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the applicable
Redemption Date, dividends on the Series A Preferred Shares so called for
redemption shall cease to accumulate, and such shares shall no longer be deemed
to be outstanding and shall not have the status of Series A Preferred Shares,
and all rights of the Holders thereof as shareholders of the Company (except the
right to receive from the Company the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates for any Series A
Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice shall so state), such shares shall be
redeemed by the Company at the Redemption Price.
(e) Any deposit of funds with a bank or trust company for the purpose
of redeeming Series A Preferred Shares shall be irrevocable except that any
balance of monies so deposited by the Company and unclaimed by the Holders of
the Series A Preferred Shares entitled thereto at the expiration of one year
from the applicable Redemption Date shall be repaid, together with any interest
or other earnings earned thereon, to the Company, and after any such repayment,
the Holders of the shares entitled to the funds so repaid to the Company shall
look only to the Company for payment without interest or other earnings;
provided, however, that any funds deposited for the purpose of redeeming Series
A Preferred Shares which are subsequently converted in accordance with Section 7
hereof shall be repaid to the Company upon such conversion.
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<PAGE>
6. Put Right.
---------
(a) Commencing upon the fifth anniversary of the Issue Date, each
Holder may elect to sell to the Company all or any part of the Series A
Preferred Shares held by a Holder, and to require the Company to purchase from
such Holder such shares at a per share price, payable in cash, equal to the
Liquidation Preference (the "Put Price") applicable to such shares (the "Put
Right"). The Company shall take all necessary actions to pay the Put Price on
the Put Date. If there shall be a legal impediment imposed by the GBCC to the
Company's repurchase of any such shares, the Company shall use its best efforts
to remove or remedy such impediment. The Company shall pay the Put Price on a
pro rata basis among all Holders exercising a Put Right based on the number of
shares sought to be repurchased.
(b) Notice of any Put Right shall be sent to the Company by or on
behalf of a Holder exercising such right not less than 5 nor more than 30 days
prior to the date specified for sale in such notice (the "Put Date"), by U.S.
express mail or overnight courier guaranteeing next Business Day delivery,
postage or charges prepaid. Such notice shall state: (i) the Put Date; (ii) the
number of Series A Preferred Shares to be sold to the Company; and (iii) the
date and the place where for the closing of the Put Right so as to pay the Put
Price as soon as possible as set forth herein.
7. Conversion.
----------
(a) (i) At any time after the Approval Date and subject to
compliance with applicable law, including the HSR Act, by a particular Holder,
any such Holder shall have the right to convert any of the then outstanding
Series A Preferred Shares owned by it which have not been previously redeemed or
repurchased into fully paid, nonassessable shares of Class A Common Stock. For
the purpose of conversion, each Series A Preferred Share shall be valued at the
Liquidation Preference, which shall be divided by the Conversion Price in effect
on the conversion date to determine the number of shares issuable upon such
conversion. In case any Series A Preferred Shares are to be redeemed pursuant
to Section 5 above or repurchased in connection with Section 6 above, such right
of conversion shall cease and terminate as to the Series A Preferred Shares to
be redeemed or repurchased at the close of business on the third Business Day
preceding the date fixed for redemption (in the case of Section 5 above) or
repurchase (in the case of Section 6 above), unless the Company shall default in
the payment of the applicable price prior to the close of business on the date
fixed for redemption or repurchase. Any Holder desiring to convert such shares
into Class A Common Stock shall surrender the certificate or certificates
(unless such certificates have not yet been issued by the Company but are
otherwise due such Holder pursuant to Section 3 hereof) evidencing such Series A
Preferred Shares at the office of the transfer agent (which may be the Company)
for the Series A Preferred Shares, which certificate or certificates, if the
Company shall so require, shall be duly endorsed to the Company or in blank, or
accompanied by proper instruments of transfer to the Company or in blank,
accompanied by an irrevocable written notice to the Company that the Holder
elects so to convert such Series A Preferred Shares and specifying the name or
names (with address or addresses) in which a certificate or certificates
evidencing shares of Class A Common Stock are to be issued. In the event that a
Holder fails to notify the Company of the number of Series A Preferred Shares
which such Holder wishes to convert, such Holder shall be deemed to have elected
to convert all shares represented by the certificate or certificates so
surrendered for conversion.
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<PAGE>
(ii) Holders at the close of business on a record date for such
dividend actually paid shall be entitled to receive the dividend payable on the
Series A Preferred Shares being converted on the corresponding dividend payment
date notwithstanding the conversion thereof following such record date and prior
to such dividend payment date.
(iii) The Company shall, as soon as practicable after such
deposit of certificates (to the extent required above) evidencing Series A
Preferred Shares accompanied by the written notice and compliance with any other
conditions herein contained, deliver at such office of such transfer agent to
the person for whose account such Series A Preferred Shares were so surrendered,
or to the nominee or nominees of such Person, certificates evidencing the number
of full shares of Class A Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction a share of
Class A Common Stock as hereinafter provided. Subject to the following
provisions of this paragraph (iii), each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which the
certificates for Series A Preferred Shares to be converted shall have been
surrendered (to the extent required above) together with the irrevocable written
notice and payment of taxes (if applicable) as provided for in paragraphs (i)
and (ii) above, and the Person or Persons entitled to receive the Class A Common
Stock deliverable upon conversion of such Series A Preferred Shares shall be
treated for all purposes as the record holder or holders of such Class A Common
Stock at such time on such date, unless the stock transfer books of the Company
shall be closed on such date, in which event such Person or Persons shall be
deemed to have become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which such
Series A Preferred Shares shall have been surrendered for conversion and such
notice (and, if applicable, payment) received by the Company. Immediately
following such conversion, the rights of the Holders with respect to converted
Series A Preferred Shares shall cease.
(iv) Any conversion of Series A Preferred Shares hereunder shall
also be deemed, automatically and without any further action on the part of the
Holder or the Company, to be a conversion of the Series A Preferred Shares
issuable upon exercise of the Warrant Series A Preferred Shares.
(b) The Conversion Price at which Series A Preferred Shares are
convertible into Class A Common Stock shall be subject to adjustment from time
to time, as follows:
(i) In case at any time after the date hereof, the Company shall
pay or make a dividend or other distribution on all or any portion of its Common
Stock or shall make a dividend or other distribution on any other class of
Capital Stock of the Company, which dividend or distribution consists of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be decreased by multiplying
such Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares plus the total number of shares constituting such dividend or other
distribution, such decrease to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (i), the number of shares of Common Stock at any time
outstanding shall not include
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<PAGE>
shares held in the treasury of the Company, but shall include shares issuable in
respect of scrip Common Stock. If any dividend or distribution of the type
described in this Section 7(b)(i) is declared but not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(ii) In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all of its Common Stock
consisting of, or shall otherwise issue, rights, warrants, options, or
convertible or exchangeable securities (not being available on an equivalent
basis to Holders upon conversion) entitling the holders thereof to subscribe for
or purchase, Common Stock at a price per share less than the Current Market
Price Per Share of the Common Stock (determined as provided in paragraph (viii)
of this Section 7(b)) on the date of or distribution or issuance such rights,
warrants, options, or convertible or exchangeable securities (other than
pursuant to a dividend reinvestment plan), the Conversion Price in effect at the
opening of business on the day following the date of such distribution or
issuance shall be decreased by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock immediately
prior to such distribution or issuance plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would receive at such
Current Market Price Per Share, and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the date of such
distribution or issuance plus the number of shares of Common Stock so offered
for subscription or purchase, such decrease to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (ii), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but will include shares issuable in respect of scrip
certificates, if any, issued in lieu of fractions of shares of Common Stock. The
Company will not issue any rights, warrants or options in respect of Common
Stock held in the treasury of the Company (or, if rights, warrants or options
are issued in respect of all of the Common Stock of the Company, will not
exercise any such rights, warrants or options in respect of Common Stock held in
the treasury of the Company). The value of such consideration, if other than
cash, shall be determined in the reasonable good faith judgment of the Board of
Directors, whose determination shall be conclusive. To the extent any securities
are issued which give rise to an adjustment to the Conversion Price pursuant to
this clause (ii), and such securities expire unexercised, then the Conversion
Price shall be readjusted as if such expired securities had never been issued.
(iii) In case at any time after the date hereof, the Company
shall issue Common Stock at a price per share less than the Current Market Price
Per Share of the Common Stock on the date of such issuance of Common Stock, the
Conversion Price in effect at the opening of business on the day following such
issuance date shall be decreased by multiplying such Conversion price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to issuance plus the number of shares of Common
Stock which the aggregate of the offering price of the shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market Price
Per Share, and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock so offered for subscription or
-11-
<PAGE>
purchase, such decrease to become effective immediately after the opening of
business on the day following the date of such issuance.
(iv) In case at any time after the date hereof, all or any
portion of the Common Stock outstanding shall be subdivided into a greater
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced and, conversely in case at any time
after the date hereof, all or any portion of the shares of Common Stock
outstanding shall each be combined into a smaller number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(v) In case at any time after the date hereof, the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities, rights, warrants
or options, but excluding any rights, warrants, or options referred to in
paragraph (ii) of this Section 7(b)) entitling the holders of Common Stock to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price Per Share of the Common Stock, the Conversion Price in
effect at the opening of business on the date fixed for the determination of
shareholders entitled to such distribution shall be by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to receive such
distribution by a fraction of which the numerator shall be the Current Market
Price Per Share of the Common Stock on the date fixed for such determination
less the then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the portion of the assets or evidence of
indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price Per Share of the Common Stock,
such adjustment to become effective immediately prior to the opening of business
on the day following the date fixed for the determination of shareholders
entitled to receive such distribution. If any dividend or distribution of the
type described in this Section 7(b)(v) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(vi) The reclassification of Common Stock into securities other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 7(d) below applies) shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of shareholders entitled to receive such
distribution" and "the date fixed for such determination within the meaning of
paragraph (ii) of this Section 7(b)) and (B) a subdivision or combination, as
the case may be, of the number of Common Stock outstanding immediately prior to
such reclassification into the number of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective," as the case may be,
and " the day upon which such subdivision or combination becomes effective"
within the meaning of the paragraph (iv) of this Section 7(b)).
(vii) Intentionally Omitted.
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<PAGE>
(viii) For the purpose of any computation under paragraphs (ii),
(iii), or (v) of this Section 7(b), the Current Market Price Per Share of Common
Stock on any date shall be deemed to be the Weighted Average Trading Price for
the 20 consecutive Trading Days immediately preceding the day in question.
(ix) Notwithstanding any other provision of this Section 7, no
adjustment to the Conversion Price shall reduce the Conversion Price below the
then par value per share of the Common Stock, and any such purported adjustment
shall instead reduce the Conversion Price to such par value. The Company hereby
covenants not to take any action (A) to increase the par value per share of the
Common Stock or (B) that would or does result in any adjustment in the
Conversion Price that would cause the Conversion Price to be less than the then
par value per share of the Common Stock.
(x) Notwithstanding any other provision of this Section 7, no
adjustment in the Conversion Price need be made until all cumulative adjustments
amount to 1% or more of the Conversion Price as last adjusted. Any adjustments
that are not made shall be carried forward and taken into account in any
subsequent adjustment.
(xi) Whenever the Conversion Price is adjusted as herein
provided:
(1) the Company shall compute the adjusted Conversion
Price and shall prepare a certificate signed by the Treasurer of the Company
setting forth the adjusted Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed with the transfer agent for the Series A Preferred Shares; and
(2) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall as soon as
practicable be mailed by the Company to all record Holders at their last
addresses as they shall appear upon the stock transfer books of the Company.
(xii) In any case in which this Section 7(b) provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (A) issuing to the
Holder of any Series A Preferred Share converted after such record date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (B) paying to such Holder any amount in cash in
lieu of any fractional share of Common Stock pursuant to Section 7(c).
(c) The Company shall not issue fractional shares or scrip
representing fractional shares of Common Stock upon conversion of Series A
Preferred Shares. Instead the Company shall make a cash payment equal to the
value of such fractional amount. If more than one certificate evidencing Series
A Preferred Shares shall be surrendered for conversion at one time by the same
Holder, the number of shares issuable upon conversion thereof shall be computed
on the basis of the aggregate number of Series A Preferred Shares so
surrendered.
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<PAGE>
(d) In the event that the Company shall be a party to any
transaction, including without limitation any (i) recapitalization or
reclassification of the Common Stock (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 of the Common Stock), (ii) any consolidation of the
Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), (iii) any sale or transfer of all or substantially
all of the assets of the Company or (iv) any compulsory share exchange, pursuant
to which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as part
of the terms of such transaction whereby the Holder of each Series A Preferred
Share then outstanding shall have the right thereafter, to convert such share
into the kind and amount of securities, cash and other property receivable upon
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange by a holder of the number of shares of Common Stock into which
such Series A Preferred Share might have been converted immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange. The Company or the Person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The above provisions shall similarly
apply to successive recapitalization, reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(e) The Company shall at all times reserve and keep available, out of
its authorized and unissued Capital Stock, solely for the purpose of effecting
the conversion of the Series A Preferred Shares, such number of shares of its
Class A Common Stock, free of preemptive rights, as shall from time to time be
sufficient to effect the conversion of all Series A Preferred Shares from time
to time outstanding. The Company shall from time to time, in accordance with
the laws of the State of Georgia, use its best efforts to increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized and unissued Class A Common Stock shall not be sufficient to
permit the conversion of all the then outstanding shares of Series A Preferred
Shares. The Company shall pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Class A Common Stock on
conversion of the Series A Preferred Shares. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Class A Common Stock (or other securities or assets)
in a name other than that in which the Series A Preferred Shares so converted
were registered, and no such issue or delivery shall be made unless and until
the Person requesting such issue has paid to the Company the amount of such tax
or has established, to the satisfaction of the Company, that such tax has been
paid.
(f) In case:
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<PAGE>
(i) the Company shall authorize or take an action that would,
upon consummation, require a Conversion Price adjustment pursuant to
subparagraphs (i), (iii), (iv) or (v) of Section 7(b); or
(ii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(iii) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the stock transfer books of the Company, at
least 20 days prior to the proposed record or effective date, as the case may
be, notice stating (x) the date on which a record (if any) is to be taken for
the purpose of such action, dividend or distribution, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend or distribution are to be determined or (y) the date
on which such action, reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such action, reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
(g) Notwithstanding the foregoing provisions, (i) neither the
issuance of any shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan and the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any employee benefit plan or program
of the Company or pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the Issue Date, nor (ii)
the issuance of any Subsequent Preferred Shares, shall be deemed to constitute
an issuance of Common Stock or exercisable, exchangeable or convertible
securities by the Company to which any of the adjustment provisions described
above applies.
(i) For purposes of this Section 7, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
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<PAGE>
8. Voting Rights.
-------------
(a) Holders shall vote their Series A Preferred Shares as a separate
class as set forth in paragraph (c) hereof, as may be further set forth in the
Company's Articles of Incorporation and as otherwise expressly permitted by the
GBCC.
(b) In addition to the rights set forth in Section 8(a) above, after
the Approval Date, and subject to compliance with applicable law, including the
HSR Act, by a particular Holder, with no further action upon the part of such
Holder or the Company, such Holder shall be entitled to one vote for each share
of Common Stock to which such Holder is entitled to receive at such time upon
conversion of the Series A Preferred Shares in accordance with Section 7 hereof,
whether or not such Holder has actually converted such shares, and shall vote
such shares together with the Class A Common Stock as a single class on all
matters brought before a vote of the holders of the Common Stock.
(c) The Company shall not, without the affirmative vote of the
Holders of a majority of the Series A Preferred Shares then outstanding:
(i) authorize, create (by way of reclassification or otherwise)
or issue any securities which are senior to the Series A Preferred Shares as to
dividends, distributions or distributions upon liquidation, winding up or
dissolution of the Company ("Senior Securities"), any Parity Securities (other
than additional Series A Preferred Shares issued in accordance with Section 3(a)
hereof or Subsequent Preferred Shares) or any obligation or security convertible
into, exchangeable for or evidencing the right to purchase any Senior Securities
or Parity Securities;
(ii) amend or otherwise alter its Articles of Incorporation in
any manner that adversely affects the rights, privileges and preferences of the
Series A Preferred Shares set forth in this Certificate of Designation; or
(iii) take any action requiring a vote of shareholders of the
Company that adversely affects the rights, preferences and privileges of the
Series A Preferred Shares set forth in this Certificate of Designation.
9. Payment.
-------
(a) All amounts payable in cash with respect to the Series A
Preferred Shares shall be payable in United States dollars at the principal
executive office of the Company or, at the option of the Holder, payment of
dividends (if any) may be made by official bank check sent by overnight courier
guaranteeing next Business Day delivery to such Holder of the Series A Preferred
Shares at its address set forth in the register of Holders maintained by the
Company.
(b) Any payment on the Series A Preferred Shares due on any day that
is not a Business Day need not be made on such day, but may be made on the next
succeeding Business Day with the same force and effect as if made on such due
date.
10. Exclusion of Other Rights. Except as may otherwise be required by law,
-------------------------
the Series A Preferred Shares shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this
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<PAGE>
Certificate of Designation (as it may be amended from time to time) and in the
Articles of Incorporation. The Series A Preferred Shares shall have no
preemptive or subscription rights.
11. Headings of Subdivisions. The headings of the various subdivisions
------------------------
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
12. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Series A
Preferred Shares and qualifications, limitations and restrictions thereof set
forth in this Certificate of Designation (as it may be amended from time to
time) is invalid, unlawful or incapable of being enforced by reason of any rule
of law or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Shares
and qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Shares and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of Series A Preferred Shares and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Series A Preferred Shares and qualifications, limitations and
restrictions thereof unless so expressed herein.
13. Reissuance of Series A Preferred Shares. Series A Preferred Shares
---------------------------------------
that have been issued and reacquired in any manner, including shares purchased,
redeemed, exchanged or converted, shall (upon compliance with any applicable
provisions of the GBCC) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series and may be designated
or redesignated and issued or reissued, as the case may be, as part of any
series of preferred stock of the Company, provided that any issue of such shares
as Series A Preferred Shares must be in compliance with the terms hereof.
14. Amendments. The Certificate of Designation may be amended only with
----------
the consent of the Holders of a majority of the Series A Preferred Shares then
outstanding, except that the Board of Directors may file amendments to this
Certificate of Designation without the consent of the Holders of the Series A
Preferred Shares in order to increase the number of Series A Preferred Shares
authorized by this Designation but only to permit the issuances of such Series A
Preferred Shares as Dividend Series A Preferred Shares and Warrant Series A
Preferred Shares, and only if such additional shares are reserved for issuance
as Dividend Series A Preferred Shares or Warrant Series A Preferred Shares.
-17-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be duly executed this , 2000.
PAMECO CORPORATION
By:
----------------------------------
Name:
Title:
-18-
<PAGE>
EXHIBIT 4.1
THE WARRANT REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND IS BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE WARRANT REPRESENTED HEREBY IS SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE WARRANT REPRESENTED HEREBY AND THE SHARES EXERCISABLE HEREUNDER
ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE SET FORTH IN THE
SHAREHOLDERS AGREEMENT (AS DEFINED HEREIN). THE WARRANT REPRESENTED HEREBY HAS
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF
THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF
THE WARRANTS REPRESENTED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Warrant to Purchase
Series A Preferred Shares
PAMECO CORPORATION
WARRANT
To Subscribe for and Purchase
Series A Cumulative Pay-in-Kind Preferred Stock of
PAMECO CORPORATION
THIS CERTIFIES that, for value received, ____________________ (the
"Purchaser") is the owner of a warrant (the "Warrant") which entitles Purchaser
to purchase from Pameco Corporation (the "Company"), in accordance with the
terms herein, at any time after the date hereof until 5:00 p.m., New York, New
York time on [insert date which is 8 years following the Initial Closing Date],
______/1/ shares, subject to adjustment as set forth herein, of Series A
Cumulative Pay-in-Kind Preferred Stock of the Company, par value $1.00 per share
(the "Preferred Shares") at the price and on the other terms and conditions set
forth herein. This Warrant is one of the Warrants issued pursuant to that
certain Securities Purchase Agreement dated as of February 16, 2000, among the
Purchaser, Quilvest American Equity, Ltd. and the Company (as amended, from time
to time, the "Purchase Agreement"), and is subject to the following provisions,
terms and conditions.
_____________
/1/ Total of 140,000 for all Warrants issued at the Initial Closing.
<PAGE>
1. Payment of Exercise Price and Exercise of Warrant.
-------------------------------------------------
(a) Exercise of Warrant. This Warrant shall be immediately
-------------------
exercisable, in whole or in part commencing on the date hereof and continuing
from time to time hereafter during its term. This Warrant shall be exercisable
to purchase an initial amount of _________ Series A Preferred Shares (the
"Initial Amount") and such other Series A Preferred Shares as set forth in
Section 2 hereof (collectively, the "Warrant Shares").
(b) Exercise Price. This Warrant shall be exercisable at an
--------------
initial exercise price of [insert 12,000% of initial conversion price then in
effect] per Warrant Share, subject to adjustment as set forth in Section 2
hereof (the "Exercise Price").
(c) Payment of Exercise Price. The Purchaser may pay the
-------------------------
Exercise Price for that number of Warrant Shares sought to be purchased (the
"Exercised Shares") in one or a combination of the following methods:
(1) by delivering immediately available funds to the
Company in an amount equal to the Exercise Price; or
(2) by instructing the Company to issue to the Purchaser
that number of Warrant Shares determined by multiplying the number of Exercised
Shares to which it would otherwise be entitled if it paid the Exercise Price in
accordance with clause (1) above, by a fraction, the numerator of which shall be
the excess, if any, of the Fair Market Price Per Share of the Preferred Shares
(as defined herein), as of the date of exercise, over the Exercise Price, and
the denominator of which shall be the Fair Market Price Per Share of the
Preferred Shares as of the date of exercise.
For the purposes hereof, the Fair Market Price Per Share of the Preferred Shares
on any date shall be determined by the Board of Directors of the Company
reasonably and in good faith taking into account the convertibility of such
shares into shares of Class A Common Stock, par value $.01 per share, of the
Company (the "Class A Common Stock"), to the extent such shares are convertible.
(d) Method of Exercise. This Warrant shall be exercisable during
------------------
its term by written notice ("Purchaser Notice"), substantially in the form
attached as Exhibit A. Such Purchaser Notice shall be signed by the Purchaser
and shall be delivered in person, by certified mail or by overnight courier
guaranteeing next business day delivery, to the Company, or such other person as
may be designated by the Company, at the location designated in Section 9
herein, or at such other address as the Company may from time to time designate
in writing. The Purchaser Notice shall be accompanied by full payment of the
Exercise Price in one or a combination of the methods as described in subsection
1(c) above. The certificate or certificates for the Exercised Shares shall be
registered in the name of the Purchaser and shall be legended as may be
reasonably required by the Company and/or applicable law. Subject to subsection
(e) below, the Company agrees that the Exercised Shares so purchased shall be
and are deemed to be issued to Purchaser as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. Subject to subsection
(e) below, certificates for the Exercised Shares so purchased shall be
A-1
<PAGE>
delivered to Purchaser within a reasonable time, not exceeding five days, after
the rights represented by this Warrant shall have been so exercised, and unless
this Warrant shall have been so exercised, or shall have expired, a new Warrant
representing the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised, shall also be delivered to Purchaser
within such time.
(e) Restrictions on Exercise and Transfer. This Warrant may not
-------------------------------------
be exercised if the issuance of the Warrant Shares upon such exercise or the
method of payment of consideration for such Warrant Shares would constitute a
violation of any applicable federal or state securities laws, the rules and
regulations of an applicable securities exchange or quotation, system, or the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"). In furtherance of the
foregoing, and not in limitation thereof, upon receipt of notice from the
Purchaser that it intends to exercise the Warrant, the Company shall promptly
comply with the provisions of Section 7.7 of the Purchase Agreement. The
Purchaser acknowledges that as of the date hereof it has entered into the
Shareholders Agreement dated as of February 18, 2000 (as amended, from time to
time, the "Shareholders Agreement"), among the Purchaser, the Company and
certain other shareholders of the Company, which pertains to the transferability
of this Warrant and the Warrant Shares.
2. Adjustment of Exercise Price and Number of Warrant Shares. The
---------------------------------------------------------
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as described in this Section 2.
(a) Certain Proportional Adjustments. In case at any time after
--------------------------------
the date hereof, there shall be paid a dividend on, or a distribution is made
with respect to, the Preferred Shares (other than the dividends payable pursuant
to Section 3(a) of the Preferred Designation), and such dividend or distribution
is paid or made in the form of additional Preferred Shares, or all or any
portion of the outstanding Preferred Shares shall be subdivided into a greater
number of shares of Preferred Shares, then the Exercise Price in effect at the
opening of business on the day following the day upon which such dividend is
paid, such distribution is made or such subdivision becomes effective shall be
proportionately reduced and, conversely, in case at any time after the date
hereof, all or any portion of the shares of Preferred Shares outstanding shall
each be combined into a smaller number of shares of Preferred Shares, the
Exercise Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such dividend, distribution, subdivision or combination becomes effective.
(b) Minimum Adjustment. Notwithstanding any other provision of
------------------
this Section 3, no adjustment to the Exercise Price shall reduce the Exercise
Price below the then par value per share of the Preferred Shares, and any such
purported adjustment shall instead reduce the Exercise Price to such par value.
The Company hereby covenants not to take any action (A) to increase the par
value per share of the Preferred Shares or (B) that would or does result in any
adjustment in the Exercise Price that would cause the Exercise Price to be less
than the then par value per share of the Preferred Shares. Notwithstanding any
other provision of this
2
<PAGE>
Section 2, no adjustment in the Exercise Price need be made until all cumulative
adjustments amount to 1% or more of the Exercise Price as last adjusted. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.
(c) Fractional Interests. The Company shall not issue fractional
--------------------
shares or scrip representing fractional shares of Preferred Shares upon exercise
of Warrants. Instead the Company shall pay a cash adjustment based upon the Fair
Market Price Per Share of the Preferred Shares on the business day immediately
preceding the date of exercise. If more than one Warrant shall be surrendered
for exercise at one time by the same Holder, the number of shares issuable upon
exercise thereof shall be computed on the basis of the aggregate number of
Warrants so surrendered.
(d) Merger, Consolidation, Etc. In the event that the Company
--------------------------
shall be a party to any transaction, including without limitation any (i)
recapitalization or reclassification of the Preferred Shares (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 of the Preferred
Shares), (ii) any consolidation of the Company with, or merger of the Company
into, any other individual, corporation, partnership, firm, joint venture,
association, limited liability company or partnership, trust, unincorporated
organization or governmental body (each referred to as a "Person"), any merger
of another Person into the Company (other than a merger which does not result in
a reclassification, conversion, exchange or cancellation of outstanding shares
of Preferred Shares), (iii) any sale or transfer of all or substantially all of
the assets of the Company or (iv) any compulsory share exchange, pursuant to
which the Preferred Shares is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as part
of the terms of such transaction whereby the Purchaser of each Warrant Share
then outstanding shall have the right thereafter, to convert such share into the
kind and amount of securities, cash and other property receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Preferred Shares into
which such Warrant Share might have been exercised immediately prior to such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange. The Company or the Person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation, or in other constituent documents, to establish
such right. Such certificate or articles of incorporation, or other constituent
documents, shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation, or other
constituent documents, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 2. The above provisions shall
similarly apply to successive recapitalization, reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(e) Reservation of Shares. The Company shall at all times
---------------------
reserve and keep available, out of its authorized and unissued capital stock,
solely for the purpose of effecting the exercise of the Warrants, such number of
shares of Preferred Shares, free of preemptive rights, as shall from time to
time be sufficient to effect the exercise of all Warrants from time to time
outstanding. The Company shall from time to time, in accordance with the laws of
the State of Georgia, use its best efforts to increase the authorized number of
Preferred Shares if at any time the number of shares of authorized and unissued
Preferred Shares shall not
3
<PAGE>
be sufficient to permit the conversion of all the then outstanding Warrants. The
Company shall pay any and all issue or other taxes that may be payable in
respect of any issue or delivery of Preferred Shares on conversion of the
Warrants. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
Preferred Shares (or other securities or assets) in a name other than that in
which the Warrants so exercised were registered.
(f) Certain Company Obligations. In case:
---------------------------
(i) of any reclassification of the Preferred Shares or
the Class A Common Stock (other than a subdivision or combination of the
outstanding preferred or common stock, or a change in par value, or from par
value to no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company shall be required, or of the sale or transfer
of all or substantially all of the assets of the Company or of any compulsory
share exchange whereby the Preferred Shares or the Class A Common Stock is
converted into other securities, cash or other property; or
(ii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Purchasers, at their last
addresses as they shall appear upon the stock transfer books of the Company, at
least 20 days prior to the proposed record or effective date, as the case may
be, notice stating the date on which such action, reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of record of the Preferred Shares or the Class A Common
Stock shall be entitled to exchange their Preferred Shares or Class A Common
Stock for securities or other property deliverable upon such action,
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(g) Shares Deemed Outstanding. For purposes of this Section 2,
-------------------------
the number of Series A Preferred Shares at any time outstanding shall not
include any Preferred Shares then owned or held by or for the account of the
Company.
3. Redemption by Company.
---------------------
(a) The Company shall have the option to redeem (subject to the
legal availability of funds therefor) all, or any part of, the outstanding (and
due to be issued and outstanding as of such date pursuant to Section 2 above)
Warrants as set forth below. From time to time, on and after the sixth
anniversary of the Issue Date (as defined in the Preferred Designation), the
Company may redeem the Warrants at a price per share of Class A Common Stock
into which the Series A Preferred Shares for which this Warrant is then
exercisable are then convertible, payable in cash, equal to 105% of the excess
of (i) the fair market value of such Class A Common Stock (the "Common Fair
Market Value") over (ii) the Exercise Price then in
4
<PAGE>
effect (the "Redemption Price"). As used herein, the Common Fair Market Value
shall equal (A) the Weighted Average Trading Price (as defined in the Purchase
Agreement) during the 10 trading days immediately prior to the date of the
Redemption Notice or (B) if the Class A Common Stock is not traded on a national
securities exchange or Nasdaq, then as determined reasonably and in good faith
by the Board of Directors. If the Redemption price as calculated is negative,
then the Redemption Price shall be $0.01.
(b) In case of redemption of less than all of the outstanding
Warrants issued pursuant to or in connection with the Purchase Agreement, such
Warrants to be redeemed shall be redeemed on a pro rata basis among all
Purchasers.
(c) Notice of any redemption (the "Redemption Notice") shall be
sent by or on behalf of the Company not less than 30 nor more than 60 days prior
to the date specified for redemption in such notice (the "Redemption Date"), by
U.S. express mail, overnight courier guaranteeing next Business Day delivery,
postage or charges prepaid, to the Purchaser at its last address as it shall
appear on the books of the Purchaser; provided, however, the validity of the
proceedings for the redemption of any Warrants shall only be affected with
respect to any Purchaser to whom the Company has failed to give notice or except
as to the Purchaser to whom notice was defective. In addition to any information
required by law, such notice shall state: (i) the Redemption Date; (ii) the
Redemption Price; (iii) the number of Warrants to be redeemed and, if less than
all such shares held by such Purchaser are to be redeemed, the number of such
shares to be redeemed; (iv) the place or places where the Warrants are to be
surrendered for payment of the Redemption Price; (v) the Exercise Price then in
effect; and (vi) that the Purchaser's right to exercise the Warrants for
Preferred Shares shall terminate on the close of business on the third business
day preceding such Redemption Date. Upon the sending of any such notice of
redemption, the Company shall become obligated to redeem on the applicable
Redemption Date all such Warrants called for redemption and the Company shall
take all steps necessary to pay the Redemption Price on the Redemption Date.
(d) If notice has been sent in accordance with Section 3(c)
above and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Company, separate and apart from its other funds in trust for the pro rata
benefit of the Purchaser of such Warrants so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the applicable
Redemption Date, the Warrants so called for redemption shall no longer be deemed
to be outstanding and shall no longer be exercisable, and all rights of the
Purchaser thereof as Warrant holders (except the right to receive from the
Company the Redemption Price) shall cease. Upon surrender, in accordance with
said notice, of the certificates for any Warrants so redeemed (properly endorsed
or assigned for transfer, if the Company shall so require and the notice shall
so state), such shares shall be redeemed by the Company at the Redemption Price.
(e) Any deposit of funds with a bank or trust company for the
purpose of redeeming Warrants shall be irrevocable except that any balance of
monies so deposited by the Company and unclaimed by the Purchaser of the
Warrants entitled thereto at the expiration of one year from the applicable
Redemption Date shall be repaid, together with any interest or other earnings
earned thereon, to the Company, and after any such repayment, the Purchaser of
the
5
<PAGE>
Warrants entitled to the funds so repaid to the Company shall look only to the
Company for payment without interest or other earnings.
4. Put Right.
---------
(a) The Purchaser is entitled to sell all, or any part of, the
outstanding (and due to be issued and outstanding as of such date pursuant to
Section 2 hereof) Warrants to the Company as set forth below in this Section 4.
The Company shall take all necessary actions to pay the applicable put price on
the Put Date (as defined below), subject to the provisions of the Georgia
Business Corporation Code, as amended ("GBCC") applicable to the repurchase of
its securities. If there shall be a legal impediment imposed by the GBCC to the
Company's repurchase of the Warrant pursuant to this Section 4, the Company
shall use its best efforts to remove or remedy such impediment and pay the Put
Price as soon as possible. Commencing upon the fifth anniversary of the Issue
Date, Purchaser may require the Company to purchase, and the Company shall
purchase, all or any part of the Warrants owned by it (the "Put Right") at a
price per share of Class A Common Stock into which the Series A Preferred Shares
for which this Warrant is then exercisable are then convertible, payable in
cash, equal to the excess of (x) the Common Fair Market Value over (y) the
Exercise Price then in effect (the "Put Price").
(b) Notice of any Put Right shall be sent to the Company by or
on behalf of the Purchasers exercising not less than 5 nor more than 30 days
prior to the date specified for sale in such notice (the "Put Date"), by U.S.
express mail or overnight courier guaranteeing next Business Day delivery,
postage or charges prepaid. Such notice shall state: (i) the Put Date; (ii) the
number of Warrants to be sold to the Company; and (iii) the date and the place
where for the closing of the Put Right as set forth herein.
5. Blue Sky Exemption. The purchase of this Warrant and the
------------------
underlying Warrant Shares is expressly conditioned upon the exemption from
qualification of the offer and sale of this Warrant and the underlying Warrant
Shares from applicable Federal and state securities laws. The Company shall not
be required to qualify this transaction under the securities laws of any
jurisdiction and, should qualification be necessary, the Company may rescind any
sale contracted in the jurisdiction.
6. Exchange and Replacement of Warrant. Upon receipt by the Company
-----------------------------------
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in case of loss, theft or destruction, of an
indemnity reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu thereof.
7. Reservation and Listing of Securities. The Company shall at all
-------------------------------------
times reserve and keep available out of its authorized shares of preferred
stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of preferred stock or other securities, properties or
rights as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of this Warrant and payment of the Exercise Price
therefor, all shares of preferred stock and other securities issuable upon such
exercise shall be
6
<PAGE>
duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any stockholder.
8. No Rights as Shareholders. Nothing contained herein shall be
-------------------------
construed as conferring upon the Purchaser or its transferees the right to vote
or to receive dividends or to consent to or receive notice as shareholders in
respect of any meeting of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company.
9. Notices. All notices required to be given to the parties
-------
hereunder shall be in writing and shall be deemed to have been given
sufficiently for all purposes when presented personally to such party, sent by
facsimile to such party or sent by U.S. express mail, return receipt requested,
or by overnight courier guaranteeing next business day delivery, to such party
at its address set forth below:
Company: Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Telecopier: 770-798-7141
Telephone: 770-798-0700
Purchaser: ________________________
________________________
________________________
Attention: ____________
Telecopier: ____________
Telephone: ____________
Such notice shall be deemed to be given when received if delivered personally,
at the time of transmittal if sent via facsimile during regular business hours
(if sent outside of such regular business hours then at 9:00 a.m. on the next
business day) or the next business day after the date mailed as aforesaid or
delivered to an overnight courier. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of
notice is required, the giving of such notice may be waived in writing by the
party entitled to receive such notice.
10. Governing Law; Jurisdiction, Etc. This Warrant Certificate shall
--------------------------------
be governed by and construed in accordance with the laws of the State of New
York without regard to its conflicts of laws principles. The Purchaser and the
Company each agrees to submit to the jurisdiction of the courts of the State of
New York in New York County and to the jurisdiction of the United States
District Court for the Southern District of New York, and hereby agrees that
service of process may be effected in accordance with the delivery methods
described in Section 9 above.
11. Amendment. The Company may from time to time supplement or amend
---------
this Warrant in order to cure any ambiguity or to correct or supplement any
provision contained
7
<PAGE>
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company may deem necessary or desirable and which shall not be
inconsistent with the provisions of this Warrant and, so long as in the case of
any of the foregoing, it shall not adversely affect the interests of the
Purchaser. Any other amendments hereto may only be made in a writing signed by
both the Company and the Purchaser.
12. Successors. All the covenants and provisions hereof by or for the
----------
benefit of the Company or the Purchaser shall bind and inure to the benefit of
their respective successors and permitted assigns hereunder, except as otherwise
provided herein.
13. No Benefits to Others. Nothing herein shall be construed to give
---------------------
to any person or corporation, other than the Company and the Purchaser (and
their successors and permitted assigns), any legal or equitable right, remedy or
claim hereunder.
14. Captions. The Captions of the sections and subsections hereof
--------
have been inserted for convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, the Company has duly executed this Warrant as of
the _____ day of ____________, ____.
PAMECO CORPORATION
By: /s/ Richard Martin
-----------------------------
Name: Richard Martin
Title: Vice President
8
<PAGE>
EXHIBIT 10.35
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
PAMECO CORPORATION,
LITTLEJOHN FUND II, L.P.,
and
QUILVEST AMERICAN EQUITY, LTD.
Dated as of February 18, 2000
<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
-----------------------
TABLE OF CONTENTS
-----------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
BACKGROUND................................................................................... 1
ARTICLE I - DEFINITIONS...................................................................... 2
ARTICLE II - SERIES A PREFERRED SHARE AND WARRANT PURCHASE................................... 12
2.1. Sale and Purchase of Series A Preferred Shares................................... 12
2.2. Warrants......................................................................... 12
2.3. Purchase Price................................................................... 12
ARTICLE III - PURCHASES OF ADDITIONAL PREFERRED SHARES....................................... 12
ARTICLE IV - THE CLOSINGS.................................................................... 12
4.1. Initial Closing.................................................................. 12
4.2. Deliveries to the Purchaser at the Initial Closing............................... 13
4.3. Deliveries to the Company at the Initial Closing................................. 14
4.4. Additional Closings.............................................................. 14
4.5. Deliveries to the Purchasers at an Additional Closing............................ 15
4.6. Deliveries to the Company at Additional Closing.................................. 15
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 16
5.1. Organization and Good Standing................................................... 16
5.2. Authorization.................................................................... 16
5.3. Capitalization; Georgia Anti-Takeover Laws....................................... 17
5.4. Sale of Shares of Capital Stock; Offering Exemption.............................. 18
5.5. Subsidiaries..................................................................... 18
5.6. Consents......................................................................... 19
5.7. Litigation....................................................................... 19
5.8. Compliance with Law.............................................................. 19
5.9. Title to Assets.................................................................. 20
5.10. Other Representations Regarding the Company's Assets and Liabilities............. 20
5.11. SEC Reports...................................................................... 21
5.12. Financial Statements............................................................. 21
5.13. Taxes............................................................................ 21
5.14. No Undisclosed Liabilities....................................................... 22
5.15. Absence of Certain Developments.................................................. 22
5.16. Material Contracts............................................................... 23
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.17. Employee Relations.................................................................... 23
5.18. ERISA Matters......................................................................... 24
5.19. Environmental Laws.................................................................... 27
5.20. Brokers............................................................................... 28
5.21. No Illegal Payments................................................................... 29
5.22. Year 2000 Compliance.................................................................. 29
5.23. Disclosure............................................................................ 29
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..................................... 29
6.1. Organization and Good Standing........................................................ 29
6.2. Authorization......................................................................... 29
6.3. Consents.............................................................................. 30
6.4. Litigation............................................................................ 30
6.5. Brokers............................................................................... 30
6.6. Investment Intent of the Purchasers................................................... 30
6.7. Disclosure............................................................................ 31
ARTICLE VII - CERTAIN COVENANTS AND OTHER MATTERS................................................. 31
7.1. Confidentiality Agreement............................................................. 31
7.2. Restriction on Certain Discussions and Actions........................................ 31
7.3. Conduct of Business Prior to the Initial Closing Date................................. 32
7.4. Conversion of Class B Common Stock.................................................... 33
7.5. Board of Directors.................................................................... 33
7.6. Required Approval..................................................................... 34
7.7. HSR................................................................................... 35
7.8. Use of Proceeds....................................................................... 35
7.9. Cooperation; Access to Books and Records.............................................. 36
7.10. Commercially Reasonable Efforts....................................................... 36
7.11. Amendment to Articles of Incorporation................................................ 37
7.12. Restrictive Legends................................................................... 37
7.13. Reservation of Shares................................................................. 37
7.14. Listing of Common Stock............................................................... 38
ARTICLE VIII - CONDITIONS TO CLOSING.............................................................. 38
8.1. Conditions to Obligations of the Purchasers - Initial Closing......................... 38
8.2. Conditions to Obligations of the Purchasers - Additional Closings.................... 39
8.3. Conditions to the Obligations of the Company - Initial Closing........................ 41
8.4. Conditions to Obligations of the Company - Additional Closings........................ 41
ARTICLE IX - INDEMNIFICATION AND RELATED MATTERS.................................................. 42
9.1. By the Company........................................................................ 42
9.2. By the Purchaser...................................................................... 43
9.3. Survival of Representations, Warranties and Covenants; Limitation on Indemnification.. 43
</TABLE>
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<TABLE>
<S> <C>
9.4. Notice of Indemnification......................................................... 43
9.5. Indemnification Procedure for Third-Party Claims.................................. 43
9.6. Payment of Indemnification Amounts................................................ 44
ARTICLE X - TERMINATION........................................................................ 44
10.1. Termination Prior to Initial Closing.............................................. 44
10.2. Termination After Initial Closing................................................. 44
10.3. Effect of Termination Under 10.1.................................................. 45
10.4. Effect of Termination Under 10.2.................................................. 45
ARTICLE XI - MISCELLANEOUS..................................................................... 45
11.1. Entire Agreement.................................................................. 45
11.2. Specific Performance.............................................................. 45
11.3. Governing Law..................................................................... 46
11.4. Expenses.......................................................................... 46
11.5. Public Announcements.............................................................. 46
11.6. Intentionally Omitted............................................................. 46
11.7. Notices........................................................................... 46
11.8. Severability...................................................................... 48
11.9. Binding Effect; Successors and Assigns............................................ 48
11.10. Interpretation.................................................................... 48
11.11. Amendments and Warranties......................................................... 48
11.12. Counterparts and Facsimile Signatures............................................. 49
EXHIBITS
- --------
A - SHAREHOLDERS AGREEMENT..................................................................... A-1
B - VOTING AGREEMENT........................................................................... B-1
C - REGISTRATION RIGHTS AGREEMENT.............................................................. C-1
D - ADDITIONAL PREFERRED SHARES DESIGNATION STATEMENT.......................................... D-1
E - SERIES A PREFERRED SHARES DESIGNATION STATEMENT............................................ E-1
F - WARRANT.................................................................................... F-1
G - CADWALADER OPINION......................................................................... G-1
H - KILPATRICK OPINION......................................................................... H-1
I - McLAIN & MERRITT OPINION................................................................... I-1
</TABLE>
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<PAGE>
SECURITIES PURCHASE AGREEMENT
-----------------------------
SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of February, 2000, by and among the following parties:
PAMECO Corporation, a Georgia corporation (the "Company");
Littlejohn Fund II, a Delaware limited partnership ("Littlejohn");
Quilvest American Equity Ltd., a British Virgin Islands
international business company ("Quilvest"; each of Littlejohn and Quilvest is a
"Purchaser" and both Littlejohn and Quilvest are, collectively, the
"Purchasers").
BACKGROUND
----------
A. WHEREAS, the Company is engaged in the business of marketing and
distributing heating, cooling and refrigeration systems and related products
(the "Business");
B. WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, for an aggregate purchase price of $35 million, shares of
the Company's Series A Cumulative Pay-in-Kind Preferred Stock, par value $1.00
per share (the "Series A Preferred Shares"), having a stated value of $35
million, and warrants to purchase additional Series A Preferred Shares, in each
case pursuant to the terms, and subject to the conditions, set forth herein.
C. WHEREAS, subject to the terms and conditions set forth herein, the
Company may issue and sell, and the Purchasers may purchase shares, with an
aggregate stated value and an aggregate purchase price of up to $25 million, of
one or more additional series of the Company's Cumulative Pay-in-Kind Preferred
Stock, par value $1.00 per share (the "Additional Preferred Shares");
D. WHEREAS, on the date hereof, in support of the Contemplated
Transactions (as defined in Section 1 hereof), a Shareholders Agreement in the
form of Exhibit A attached hereto (the "Shareholders Agreement"), a series of
Voting Agreements with the shareholders of the Company listed on Schedule A
attached hereto, each in the form of Exhibit B attached hereto (the "Voting
Agreements"), a Registration Rights Agreement in the form of Exhibit C attached
hereto (the "Registration Rights Agreement"), and a series of irrevocable
proxies in favor of Littlejohn from each of the shareholders of the Company
party to the Shareholders Agreement and the Voting Agreements, in the forms
attached to the Shareholders Agreement and the Voting Agreements (the
"Irrevocable Proxies"), were executed and delivered, all of which are to become
effective as of the Initial Closing (as defined in Section 1 hereof).
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, the Company
and the Purchasers, intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Additional Closing" means the consummation of a purchase and sale of
Additional Preferred Shares.
"Additional Closing Date" has the meaning set forth in Section 4.5
hereof.
"Additional Issue Event" means the determination by the Board of
Directors, including the determination of at least one of those directors
elected by the holders of the Class A Common Stock, to issue and sell Additional
Preferred Shares to fund, in whole or in part, an acquisition, capital
expenditure or working capital program for the growth of the Business approved
by the Board of Directors.
"Additional Preferred Share Designation" means the certificate of
designation for any series of Additional Preferred Shares to be issued pursuant
to this Agreement and in substantially the form attached hereto as Exhibit D.
"Additional Preferred Shares" has the meaning set forth in the
recitals hereof.
"Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to elect a
majority of the board of directors (or other governing body), or the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise
and, in any event and without limiting the generality of the foregoing, any
Person owning 10% or more of the voting securities of another Person shall be
deemed to control that Person.
"Agreement" has the meaning set forth in the recitals hereof.
"Alternative Transaction" has the meaning set forth in Section 7.2
hereof.
"Applicable Percentage" means (a) in the case of Littlejohn, 80%, and
(b) in the case of Quilvest, 20%.
"Benefit Plan" means any Plan established, sponsored, maintained or
contributed to by the Company or its ERISA Affiliates, or by any predecessor of
the Company or its ERISA Affiliates, or with respect to which the Company or any
of its ERISA Affiliates has any Liability.
"Board of Directors" means the board of directors of the Company, as
the same may be constituted from time to time.
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<PAGE>
"Business" has the meaning set forth in the recitals hereof.
"Claim" means any written demand, written claim, Legal Proceeding or
written notice by any Person, including any Environmental Claim, alleging actual
or potential Liability for any Loss, including any Environmental Loss, or
alleging any Default under any Law, Contract, License, Permit or Benefit Plan.
"Class A Common Stock" has the meaning set forth in Section 5.3
hereof.
"Class B Common Stock" has the meaning set forth in Section 5.3
hereof.
"Closing" means, as applicable, the consummation of the purchase of
the Series A Preferred Shares and the Warrants, or the consummation of the
purchase of Additional Preferred Shares, in each case as contemplated by this
Agreement.
"Closing Date" means, as applicable, the date on which either the
Initial Closing or any Additional Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in Section 5.3 hereof.
"Company" has the meaning set forth in the heading hereof.
"Company Articles Amendment" means the articles of amendment to the
Company's articles of incorporation necessary to authorize the issuance of the
Series A Preferred Shares, effective upon filing with the Secretary of State of
the State of Georgia.
"Company Auditor" has the meaning set forth in Section 3.2 hereof.
"Company Documents" means each agreement (other than this Agreement),
document, instrument or certificate contemplated by this Agreement to be
executed by or on behalf of the Company in connection with the consummation of
the Contemplated Transactions.
"Company Financial Advisors" means Houlihan, Lokey, Howard & Zukin
("HLHZ"), and The Lucas Group.
"Company Opinion" has the meaning set forth in Section 4.2 hereof.
"Confidential Information" shall mean (i) with respect to any party to
this Agreement, all financial, technical, commercial or other like information
disclosed by a party (the "Discloser") to another party (the "Recipient") in
connection with the Contemplated Transactions, and (ii) each of the terms,
conditions and other provisions contained in this Agreement and the agreements
or documents to be delivered pursuant to this Agreement.
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<PAGE>
Notwithstanding the preceding sentence, the definition of Confidential
Information shall not include any information that: (A) is in the public domain
at the time of disclosure to the Recipient or becomes part of the public domain
after such disclosure through no fault of the Recipient; (B) is already in the
possession of the Recipient at the time of disclosure to such Recipient; (C) is
disclosed to a party by any Person other than a party to this Agreement
(provided, that the party to whom such disclosure has been made does not have
actual knowledge that such Person is prohibited from disclosing such
information, either by reason of contract or legal or fiduciary obligation); (D)
is developed independently by any party without the use of any Confidential
Information; or (E) is required to be disclosed under Law or Order (provided
that prompt notice of such disclosure will be given as far in advance as
reasonably possible to the Discloser).
"Contemplated Transactions" means the transactions contemplated by
this Agreement, and Company Documents and the Purchaser Documents.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, guarantee, license,
franchise, insurance policy, commitment or other legally binding arrangement,
and all rights and remedies thereunder.
"Current Employees" means all natural persons employed in the Business
on the day immediately prior to the Initial Closing Date, including any natural
persons on disability, sick leave or authorized leave of absence from the
Company or any of its subsidiaries.
"Damages" means all monetary, non-monetary, direct, indirect,
incidental, consequential, special and punitive damages.
"Default" means (a) a violation, breach or default, (b) the occurrence
of an event which, with the passage of time or the giving of notice or both,
would constitute a violation, breach or default, or (c) the occurrence of an
event that (with or without the passage of time or the giving of notice or both)
would give rise to a right of damages, specific performance, termination,
renegotiation or acceleration (including the acceleration of payment).
"EBITDA Targets" has the meaning set forth in Section 7.11 hereof.
"Effective Time" means the opening of business on the Initial Closing
Date.
"Employees" means all Current Employees and all Former Employees.
"Environmental Claim" means any Claim arising out of, related to or in
connection with the use, treatment, removal, storage, disposal, presence,
migration, transport, handling, manufacture, possession, distribution, or the
actual or threatened emission, injection, escape, dumping, spill, leak,
discharge or release of Hazardous Materials.
"Environmental Laws" means all federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), including the Comprehensive
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<PAGE>
Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A.
(S)(S) 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.A.
(S)(S) 6901 et seq., the Clean Water Act, 33 U.S.C.A. (S)(S) 1251 et seq., the
Clean Air Act 42 U.S.C.A. (S)(S) 7401 et seq., the Occupational Safety and
Health Act, 29 U.S.C. (S) 651 et seq., the Toxic Substances Control Act, 15
U.S.C. (S) 2601 et seq., and laws and regulations relating to emissions, spills,
leaks, discharges, releases or threatened releases of Hazardous Materials, or
otherwise relating to the environmental, safety or health aspects of the
manufacture, possession, distribution, use, treatment, storage, disposal,
presence, transport or handling of Hazardous Materials.
"Environmental Loss" means any Liability or Loss arising out of,
related to or in connection with, the use, treatment, removal, storage,
disposal, presence, migration, transport, handling, manufacture, possession,
distribution, or the actual or threatened emission, injection, escape, dumping,
spill, leak, discharge or release of Hazardous Materials, including potential or
actual liability for investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damages, personal injuries or
penalties.
"Equipment" means the furniture, fixtures, machinery, equipment, motor
vehicles, office equipment, computers and replacement parts currently used in
the operation of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, as to any person, any trade or business,
whether or not incorporated, which together with such person would be deemed, at
any time through the Closing Date, to be a single employer pursuant to the rules
set forth in Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exhibit" means any of the lettered exhibits to this Agreement.
"Financial Statement Date" means February 28, 1999.
"Financial Statements" has the meaning set forth in Section 5.12
hereof.
"Former Employees" means any natural persons who were employed by the
Company or any of its subsidiaries at any time prior to the Initial Closing Date
and who are not Current Employees.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"GBCC" has the meaning set forth in 5.3(c) hereof.
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<PAGE>
"Governmental Body" means any government, or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Governmental Consent" means any and all permits, licenses, waivers,
terminations, expirations, consents or approvals ("Consents") of or from any
Governmental Body, including the expiration of any periods of time under
statutory and regulatory notice provisions (with or without action on the part
of any Governmental Body), necessary to consummate the transactions contemplated
hereby or by any Exhibit hereto, or otherwise relating to any Contract with any
Governmental Body, or any Permit, including the transfer thereof in accordance
with the terms hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hazardous Materials" means all explosive or regulated radioactive
materials or substances, hazardous or toxic substances, reactive, corrosive,
carcinogenic, flammable or hazardous pollutant, or other substance, wastes or
chemicals, petroleum or petroleum distillates, natural gas or synthetic gas,
asbestos or asbestos containing materials and all other materials or chemicals
regulated pursuant to any Environmental Laws, including any "hazardous
substance" or "hazardous waste" as defined in Environmental Laws, materials
listed in 49 C.F.R. (S) 172.101, materials defined as hazardous pursuant to
Section 101(14) of CERCLA, and special nuclear or by-product material as defined
by the Atomic Energy Act of 1954, 42 U.S.C.A. (S) 3011 et seq., and the
regulations promulgated thereto.
"Indemnitee" has the meaning set forth in Section 9.5 hereof.
"Indemnitor" has the meaning set forth in Section 9.5 hereof.
"Initial Closing" means the consummation of the purchase and sale of
the Series A Preferred Shares and the Warrants.
"Initial Closing Date" has the meaning set forth in Section 4.1
hereof.
"Intangible Assets" means collectively, (a) all inventions (whether
patentable or unpatentable, and whether or not reduced to practice), all
improvements thereto, and all Patents, (b) all Trademarks, trade dress, logos,
trade names, fictitious names, brand names, brand marks and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights (whether registered or not), and all copyright
applications, (d) all mask works and all applications, registrations, and
renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans, data and
proposals), (f) all computer software (including data, source codes and related
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<PAGE>
documentation), (g) all other proprietary, confidential or intellectual
information, property or rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Inventory" means packaging, finished goods, spare parts, work-in-
progress, cores, stock room inventory, supplies and raw materials of whatever
nature, wherever located and held for sale by the Company.
"Investigatory and Legal Costs" means all reasonable fees, costs,
expenses and disbursements of attorneys, accountants, experts and other advisors
incurred in connection with the investigation, defense or prosecution of any
Legal Proceeding, Claim or Loss, or potential Legal Proceeding, Claim or Loss.
"Irrevocable Proxies" has the meaning set forth in the recitals
hereof.
"Knowledge" means, (i) with respect to the Company, the actual
knowledge of its directors and executive officers, together with the knowledge
which such individuals should have if they had performed their duties on behalf
of the Company in a reasonably prudent manner, (ii) with respect to Littlejohn,
the actual knowledge of the officers of Littlejohn, together with the knowledge
which such individuals should have if they performed their duties on behalf of
Littlejohn in a reasonably prudent manner, and (iii) with respect to Quilvest,
the actual knowledge of the officers of Quilvest, together with the knowledge
which such individuals should have if they performed their duties on behalf of
Quilvest in a reasonably prudent manner.
"Labor Act" means the Labor Management Relations Act, and the rules
and regulations promulgated thereunder.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), claim or governmental proceeding.
"Lender" means General Electric Capital Corporation, as agent for the
lenders to the Company under and pursuant to that certain Amended and Restated
Credit Agreement dated as of March 10, 1998, as amended to dated (the "Existing
Credit Facilities").
"Liabilities" means (a) all indebtedness (whether for borrowed money
or otherwise), obligations, Damages, deficiencies, Liens, penalties, fines,
costs (including any Investigatory and Legal Costs), expenses, and other
liabilities, whether direct or indirect, contingent (including loss contingency)
or otherwise, and (b) any guaranties, surety arrangements or endorsements (other
than endorsements for deposits or collection of checks in the ordinary course of
business) with respect to any of the Liabilities described in clause (a) of any
other Person, in any case whether or not ascertainable.
"Licenses" means all licenses, permits, authorizations, approvals,
franchises, rights, orders, variances (including zoning variances), easements,
rights of way, and similar
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<PAGE>
consents or certificates granted or issued by any Person, other than a
Governmental Body, relating to the Business.
"Lien" means (a) any lien (including any lien relating to Taxes),
pledge or negative pledge, (b) any mortgage, deed of trust, security interest,
charge in the nature of a lien or security interest, (c) any title retention
agreement, right of first refusal, right of first purchase or other option, (d)
any conditional sale agreement, easement, right of way, variance or other real
estate declaration, or (e) any other claim, covenant, condition, restriction,
servitude, transfer restriction or other encumbrance.
"Littlejohn" has the meaning set forth in the heading hereof.
"Littlejohn Financial Advisor" means Schroders plc.
"Littlejohn Information" has the meaning set forth in Section 7.4
hereof.
"Loss" shall mean any and all losses, Damages or Liabilities or any
diminution in value of any real or personal property, including the Preferred
Stock or the Warrants acquired in connection with this Agreement.
"Material Adverse Effect" means any material adverse effect on, or any
effect, condition, event, or circumstance that has resulted or could reasonably
be expected to result in a material and adverse change in, the business,
properties, assets, liabilities, condition (financial or otherwise), results of
operations or cash flow of the Company and its subsidiaries, taken as a whole.
"Material Contracts" has the meaning set forth in Section 5.16 hereof.
"Maximum Amount" has the meaning set forth in Section 9.3 hereof.
"NLRA" has the meaning set forth in Section 5.17 hereof.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award issued, granted, imposed or promulgated by a
Governmental Body.
"Outstanding Derivative Securities" has the meaning set forth in
Section 5.3 hereof.
"Permit" means all licenses, permits, authorizations, approvals,
franchises, rights, orders, variances (including zoning variances), easements,
rights of way, and similar consents or certificates granted or issued by any
Governmental Body.
"Patents" means all letters patent and pending applications for
patents of the United States and all foreign countries, including regional
patents, certificates of invention and utility models, rights of license or
otherwise to or under letters patent, certificates of intention and utility
models which have been opened for public inspection and all reissues, divisions,
continuations and extensions thereof.
-8-
<PAGE>
"Permitted Exceptions" means (i) statutory Liens for current taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings;
(ii) mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not in the aggregate
material to the Business or the assets of the Company; (iii) purchase money
security interests arising or incurred in the ordinary course of business; (iv)
zoning, entitlement and other land use regulations by Governmental Bodies,
provided that such regulations have not been violated; (v) Liens set forth in
Schedule 5.9 hereto; (vi) Liens in favor of the Lender or Quilvest, all of which
shall be released at the Initial Closing; (vii) from and after the Initial
Closing, Liens in favor of Fleet Capital Corporation, as agent under the Senior
Debt; (viii) deposits under workers compensation, unemployment insurance, social
security or similar Laws; (ix) Liens expressly consented to in writing by the
holders of a majority of the outstanding Series A Preferred Shares; and (x) such
other imperfections in title, charges, easements, restrictions and encumbrances
of public record which do not in the aggregate have a Material Adverse Effect or
do not materially interfere with the ownership, use, value, operation or
marketability of the affected material property.
"Per Share Series A Purchase Price" has the meaning set forth in
Section 2.3 hereof.
"Per Warrant Purchase Price" has the meaning set forth in Section 2.3
hereof.
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company or partnership, association, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Physical Inventory" has the meaning set forth in Section 3.2(a)
hereof.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation or holiday pay, day or dependent care, legal services, cafeteria, life,
health, accident, sickness, disability, workmen's compensation, medical, life,
dental or other insurance, severance, separation or other employee benefit,
fringe benefit, plan, program, trust, contract, practice, policy or arrangement
of any kind, whether written or oral, including any "employee benefit plan"
within the meaning of Section 3(3) of ERISA, whether in the nature of formal or
informal understandings, whether or not included in or described in any
employment manual or handbook, and without regard to the number of persons
covered or otherwise benefiting thereunder.
"Preferred Stock" has the meaning set forth in Section 5.3(a) hereof.
"Principal Stock Exchange" means the principal national securities
exchange or other trading market on which the shares of Common Stock registered
under the Exchange Act are then listed or admitted for trading.
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<PAGE>
"Prohibited Transaction" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA respectively.
"Proxy Statement" has the meaning set forth in Section 7.5 hereof.
"Purchaser" has the meaning set forth in the heading hereof.
"Purchaser Documents" means any agreement (other than this Agreement),
document, instrument or certificate contemplated by this Agreement to be
executed by or on behalf of either Purchaser in connection with the consummation
of the Contemplated Transactions.
"Purchaser Information" has the meaning set forth in Section 7.5
hereof.
"Quilvest" has the meaning set forth in the heading hereof.
"Quilvest Opinion" has the meaning set forth in Section 4.3 hereof.
"Registration Rights Agreement" has the meaning set forth in Section
4.7(f) hereof.
"Required Approval" means the approval by the holders of a majority of
the outstanding Common Stock, voting as one class of securities, of the
convertibility of any Preferred Stock issued or to be issued pursuant to this
Agreement into shares of Class A Common Stock and the ability of the holders of
any Preferred Stock issued or to be issued pursuant to this Agreement to vote
such shares, together with the Class A Common Stock as a single class, as if
such shares of Preferred Stock had been converted.
"Schedule" means any of the numbered or lettered schedules to this
Agreement.
"Schedule 14f-1" has the meaning set forth in Section 4.1 hereof.
"SEC Reports" has the meaning set forth in Section 5.11 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Debt" means the $130 million of senior secured debt arranged
by Fleet Capital Corporation, as agent, and the lenders pursuant to a Loan and
Security Agreement, dated the date of this Agreement, having terms and
conditions reasonably satisfactory to Littlejohn, and as may be amended from
time to time after the Initial Closing.
"Series A Designation" means the certificate of designation for the
Series A Preferred Shares attached hereto as Exhibit E.
"Series A Preferred Shares" has the meaning set forth in the recitals
hereof.
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"Shareholders Meeting" has the meaning set forth in Section 7.5
hereof.
"Shareholders Agreement" has the meaning set forth in Section 4.2(g)
hereof.
"Special Committee" means the special committee of the Board of
Directors formed for the purpose of considering this Agreement and the
Contemplated Transactions and where none of its members is an Affiliate or an
"associate" (as defined in the Exchange Act) of Quilvest.
"Subordinated Debt" means the $20 million of subordinated debt issued
by the Company on the date hereof on terms and conditions reasonably
satisfactory to Littlejohn, and as may be amended from time to time after the
Initial Closing.
"Superior Alternative Transaction" has the meaning set forth in
Section 7.2 hereof.
"Taxes" means all federal, state, local and foreign income, property
and sales taxes and tariffs and all charges, fees, levies or other assessments
whether federal, state, local or foreign based upon or measured by income,
capital, net worth or gain and any other tax including but not limited to all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, social security,
unemployment, FICA, FUTA, excise, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever including all
interest and penalties thereon, and additions to tax or additional amounts
imposed or charged by any Governmental Body.
"TCR Management" means Willem F.P. de Vogel.
"Terbem" means Terbem Limited, a British Virgin Islands international
business company.
"Threshold Amount" has the meaning set forth in Section 9.3 hereof.
"Voting Agreement" has the meaning set forth in Section 4.2(h) hereof.
"Warrant" shall have the meaning set forth in Section 2.2 hereof.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of Class A Common Stock as reported by Bloomberg
Information Systems, Inc.; provided, however, if there shall occur any
adjustment to the Conversion Price (as defined in the Series A Designation) as
set forth in Section 7(b)(iv) of the Series A Designation, the Weighted Average
Trading Price shall be proportionally adjusted to the extent not so reflected in
the report of Bloomberg Information Systems, Inc.
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<PAGE>
ARTICLE II
SERIES A PREFERRED SHARE AND WARRANT PURCHASE
2.1. Sale and Purchase of Series A Preferred Shares. On the terms
----------------------------------------------
and subject to the conditions set forth in this Agreement, at the Initial
Closing, the Company agrees to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, agrees to purchase from the Company, that
number of Series A Preferred Shares which are set forth opposite such
Purchaser's name on Schedule 2.1 attached hereto. The Series A Preferred Shares
shall have the rights, preferences, privileges and other terms and conditions
set forth in the Series A Designation.
2.2. Warrants. On the terms and subject to the conditions set forth
--------
in this Agreement, at the Initial Closing, the Company agrees to issue and sell
to each Purchaser, and each Purchaser, severally and not jointly, agrees to
purchase from the Company immediately exercisable warrants in substantially the
form of Exhibit F attached hereto (the "Warrants"), to purchase that number of
Series A Preferred Shares set forth opposite such Purchaser's name in Schedule
2.2 attached hereto.
2.3. Purchase Price. The purchase price for each Series A Preferred
--------------
Share to be purchased pursuant to this Agreement shall be $249.99 (the "Per
Share Series A Purchase Price") and the purchase price for each Warrant to
purchase one Series A Preferred Share shall be $0.01 (the "Per Warrant Purchase
Price").
ARTICLE III
PURCHASES OF ADDITIONAL PREFERRED SHARES
From time to time after the Required Approval has been obtained and
continuing until the third anniversary of the Initial Closing Date, upon the
occurrence of an Additional Issue Event, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, agrees to
purchase from the Company, at an Additional Closing, that stated value of
Additional Preferred Shares determined by multiplying the Applicable Percentage
of such Purchaser by the aggregate stated value of Additional Preferred Shares
to be issued and sold at such Additional Closing. The aggregate purchase price
and the aggregate stated value for all Additional Preferred Shares to be issued
and sold pursuant to this Section 3 shall not exceed $25,000,000.
ARTICLE IV
THE CLOSINGS
4.1. Initial Closing. The Initial Closing shall be effective as of
---------------
the Effective Time, and shall take place on the 10/th/ day (or if such day is
not a Business Day, on the next Business Day) after the date that the Company
mailed, or caused to be mailed, to its shareholders the Schedule 14f-1
contemplated by Section 7.4 hereof, provided that the conditions to the Initial
Closing set forth in Sections 8.1 and Section 8.3 hereof have been satisfied (or
have been waived by the party entitled to the benefit of the condition being
waived), or in the event such conditions are not so satisfied or waived at such
time, on the next Business Day after the satisfaction or
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waiver of such conditions, at 10:00 a.m. New York time, at the offices of Pepper
Hamilton LLP, 3000 Two Logan Square, Philadelphia, PA, or at such other place
and at such other time and date as may be mutually agreed upon by the parties
hereto (the "Initial Closing Date").
4.2. Deliveries to the Purchaser at the Initial Closing. On the Initial
--------------------------------------------------
Closing Date, except as otherwise indicated, the Company shall deliver, or shall
cause to be delivered, to the Purchasers, the following:
(a) the Articles of Incorporation of the Company, including the
Company Articles Amendment authorizing the proper issuance of the Series A
Preferred Shares in the form of the Series A Designation, certified by the
Secretary of State of the State of Georgia;
(b) certificates representing the Series A Preferred Shares duly
executed by authorized officers of the Company;
(c) the Warrants being purchased at the Initial Closing duly executed
by an authorized officer of the Company in the name of such Purchaser;
(d) the legal opinions of Cadwalader Wickersham & Taft, Kilpatrick
Stockton LLP and McLain & Merritt, in substantially the forms of Exhibits G-1,
H-1 and I-1, respectively, attached hereto (the "Company Opinions") hereof;
(e) resolutions duly adopted by the Special Committee recommending
the adoption of the Contemplated Transactions to the Board of Directors, and
resolutions duly adopted by the Board of Directors authorizing the Contemplated
Transactions, in each case in form and substance reasonably satisfactory to
Littlejohn and certified by the Company's Secretary;
(f) certificates issued by appropriate governmental authorities
evidencing, as of a recent date reasonably acceptable to the Purchasers, the
good standing (or subsistence) and nondelinquent tax status of the Company and
its subsidiaries in the states in which they are incorporated or qualified to
transact business as a foreign corporation;
(g) a copy of the By-laws, including all amendments thereto, of
the Company, certified by the Company's Secretary;
(h) intentionally omitted;
(i) a certificate, executed by the Secretary of the Company (whose
incumbency and specimen signature is certified by an executive officer of the
Company), certifying as to the incumbency of the Company's officers and as to
their respective specimen signatures;
(j) a certificate, executed by the chief executive officer and the
chief financial officer of the Company certifying that conditions in Sections
8.1(a) through 8.1(e) hereof have been satisfied.
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<PAGE>
(k) evidence of mailing of the Schedule 14f-1 to all of its
shareholders of record at least 10 days prior to the Initial Closing Date and
otherwise reasonably satisfactory in form and substance to Littlejohn;
(l) evidence that the directors' and officers' liability insurance
referred to in Section 8.1(h) hereof is in full force and effect as of the
Initial Closing Date and that the premium for the one-year period commencing as
of the Initial Closing Date has been paid;
(m) a copy of the fairness opinion issued by HLHZ to the Special
Committee and the Board of Directors in form and substance reasonably acceptable
to Littlejohn; and
(n) the other agreements, instruments and documents referred to in
Section 8.1 hereof and such other agreements, instruments and documents as the
Purchasers may reasonably request.
4.3. Deliveries to the Company at the Initial Closing. On the Initial
------------------------------------------------
Closing Date, except as otherwise indicated, each Purchaser, severally and not
jointly, shall deliver, or shall cause to be delivered, to the Company, the
following:
(a) immediately available funds in an amount equal to the sum of (a)
number of Series A Preferred Shares to be purchased by such Purchaser hereby
multiplied by the Per Share Series A Purchase Price and (b) the number of
Warrants to be purchased by such Purchaser at the Initial Closing Date
multiplied by the Per Warrant Purchase Price;
(b) resolutions duly adopted by the managing body of such Purchaser
authorizing the contemplated transactions certified by an appropriate officer of
such Purchaser;
(c) the charter or other organizational document of such Purchaser,
certified by an appropriate Governmental Body or, in the case of Quilvest, by an
appropriate officer of Quilvest; and
(d) a certificate duly executed by an authorized officer of such
Purchaser certifying as to the fulfillment of the conditions set forth in
Sections 8.3(a) and (b) hereof.
4.4. Additional Closings. Any Additional Closing shall be effective as
-------------------
of the opening of business on the applicable Additional Closing Date and shall
take place, if at all, on the third Business Day following the satisfaction of
the conditions to Closing set forth in Section 8.2 and Section 8.4 hereof (or
the waiver by the party entitled to the benefit of the condition being waived)
at 10:00 a.m. at the offices of Pepper Hamilton LLP, 3000 Two Logan Square,
Philadelphia, PA, but in no event earlier than 12 Business Days following the
date the Company gives the Purchasers written notice of the occurrence of the
applicable Additional Issue Event, or at such other place and at such other time
and date as may be mutually agreed upon by the parties hereto (an "Additional
Closing Date").
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<PAGE>
4.5. Deliveries to the Purchasers at an Additional Closing. At any
-----------------------------------------------------
Additional Closing, the Company shall deliver, or shall cause to be delivered,
to the Purchasers the following:
(a) the Articles of Incorporation of the Company certified by the
Secretary of State of Georgia amended to authorize the Additional Preferred
Shares to be issued at the applicable Additional Closing in substantially the
form of the Additional Preferred Share Designation;
(b) certificates representing the Additional Preferred Shares to be
issued at such Additional Closing, duly executed by authorized officers of the
Company;
(c) a certificate, executed by the chief executive officer and the
chief financial officer of the Company certifying that conditions in Sections
8.2(a) through 8.2(f) hereof have been satisfied;
(d) resolutions duly adopted by the Board of Directors authorizing
the Contemplated Transactions to be consummated at such Additional Closing and
evidencing the Additional Issue Event, certified by the Company's Secretary;
(e) a copy of the By-laws, including all amendments thereto, of
the Company, certified by the Company's Secretary;
(f) a certificate, executed by the Secretary of the Company (whose
incumbency and specimen signature is certified by an executive officer of the
Company), certifying as to the incumbency of the Company's officers and as to
their respective specimen signatures;
(g) any Governmental Consents as the Purchasers shall reasonably
request;
(h) evidence that the shares of Class A Common Stock to be received
upon conversion of the Additional Preferred Shares to be issued at such
Additional Closing have been duly and properly listed on the Principal Stock
Exchange, subject to notice of issuance; and
(i) such other agreements, instruments and documents as the
Purchasers or their counsel may reasonably request, including with respect to
the events, facts and circumstances giving rise to the applicable Additional
Issue Event.
4.6. Deliveries to the Company at Additional Closing. At any Additional
-----------------------------------------------
Closing, each Purchaser, severally and not jointly, shall deliver, or shall
cause to be delivered, to the Company, the following:
(a) immediately available funds in an amount equal to the number of
Additional Preferred Shares to be purchased by such Purchaser multiplied by the
stated value per share of such Additional Preferred Shares;
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<PAGE>
(b) resolutions duly adopted by the managing body of such Purchaser
authorizing the purchase of the Additional Preferred Shares to be purchased by
such Purchaser at such Additional Closing;
(c) the charter or other organizational document of such Purchaser,
certified by an appropriate Governmental Body or, in the case of Quilvest, by an
appropriate officer of Quilvest; and
(d) a certificate executed by a duly authorized officer of such
Purchaser certifying as to the fulfillment of the conditions set forth in
Sections 8.4(a) and (b) hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce each Purchaser to enter into and consummate this Agreement,
the Company hereby represents and warrants to each Purchaser as follows:
5.1. Organization and Good Standing. The Company and each of its
------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has full
corporate power and authority to carry on its business as it is now being
conducted, and, in the case of the Company, to execute, deliver and perform
fully its obligations under this Agreement and each of the Company Documents,
and to consummate the Contemplated Transactions. The Company and each of its
subsidiaries is qualified to do business as a foreign corporation in each state
in which the failure to qualify could reasonably be expected to result in a
Material Adverse Effect.
5.2. Authorization. This Agreement has been, and each of the Company
-------------
Documents to be delivered at a particular Closing will be at such Closing, duly
executed and delivered by the Company (including, for purposes of the Initial
Closing, by a special committee of the Board of Directors which does not include
any director who is an affiliate of either Purchaser), and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Company Documents when so executed and
delivered will constitute, legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Neither the
execution and delivery by the Company of this Agreement or of the Company
Documents to be delivered at a particular Closing, nor the consummation by the
Company of the Contemplated Transactions to be consummated at a particular
Closing, nor the compliance by the Company with any of the provisions hereof or
thereof, does or will (i) conflict with or result in a Default under any
provision of the Articles of Incorporation or By-laws of the Company (ii)
subject to the receipt of the consents set forth in Schedule 5.2 hereto,
conflict with or result in a Default under any Material Contract (including the
Company's listing and other Contracts with the Principal Stock Exchange),
Permit, Order or material License relating to the Business to which the Company
or
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<PAGE>
any of its subsidiaries is a party or by which any of their respective assets
is bound or subject, (iii) constitute a violation of any Law applicable to the
Company or any of its subsidiaries which could reasonably be expected to have a
Material Adverse Effect, or (iv) other than pursuant to or as expressly
contemplated by this Agreement, result in the creation of any Lien (other than a
Permitted Lien) upon any of the Company's or any of its subsidiaries' properties
or assets.
5.3. Capitalization; Georgia Anti-Takeover Laws.
------------------------------------------
(a) The authorized capital stock of the Company consists of (i)
40,000,000 shares of Class A Common Stock, par value $0.01 per share, (ii)
20,000,000 shares of Class B Common Stock par value $0.01 per share (such Class
A Common Stock and Class B Common Stock collectively the "Common Stock") and
(iii) 5,000,000 shares of preferred stock, par value $1.00 per share (the
"Preferred Stock"). As of February 11, 2000, 5,959,534 shares of Class A Common
Stock, 3,272,929 shares of Class B Common Stock and no shares of Preferred Stock
are issued and outstanding. As of the date of the Initial Closing, the issued
and outstanding capital stock of the Company will be as set forth in the
immediately preceding sentence, adjusted only for issuances of Common Stock
pursuant to (A) options, warrants, or rights to purchase Common Stock
outstanding on the date of this Agreement, or (B) issued and outstanding
securities which are convertible into or exchangeable for Common Stock (all of
the foregoing are collectively, the "Outstanding Derivative Securities"). The
warrants to purchase shares of Class A Common Stock originally issued to the
Lender on June 11, 1999 are not currently exercisable and, assuming the Initial
Closing occurs on or prior to February 28, 2000, and all outstanding principal,
interest, fees and expenses due and owing under the Existing Credit Facilities
are repaid in full on or prior to such date, such warrants will terminate
unexercised.
(b) All outstanding shares of Common Stock are duly authorized,
validly issued and fully paid and nonassessable. There are no preemptive or
other similar rights, whether by statute, contract or otherwise, relating to the
capital stock of the Company. Other than the Outstanding Derivative Securities,
which are accurately and completely described on Schedule 5.3(b) hereto, and the
Warrants and the Preferred Stock to be issued and sold in connection with the
Contemplated Transactions, there are no outstanding options, warrants, rights,
puts, calls, commitments, or other contracts, arrangements, or understandings
issued by or binding upon the Company requiring, and there are no outstanding
debt or equity securities of the Company which upon the conversion, exchange or
exercise thereof would require, the issuance, sale or transfer by the Company of
any new or additional equity interests in the Company (or any other securities
of the Company or any of its subsidiaries which, whether after notice, lapse of
time or payment of monies, are or would be convertible into or exercisable or
exchangeable for equity interests in the Company). Except for the Shareholders
Agreement to be executed and delivered at the Initial Closing, there are no
voting trusts or other agreements or understandings to which the Company or any
of its subsidiaries is a party with respect to the voting of capital stock of
the Company. Each share of Class A Common Stock is entitled to vote for the
election of up to two directors of the Company and for no other directors. Each
of the Holders of each share of Class B Common Stock is entitled to vote for the
election of all directors of the Company (other that the two directors who are
elected by the holders of the Class A Common Stock). On all other matters,
including with respect to the Required Approval, each holder of Class A Common
Stock is entitled to one vote per share and each holder of Class B
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<PAGE>
Common Stock is entitled to 10 votes per share, and the Class A Common Stock and
the Class B Common Stock vote together as one class of securities. Neither the
execution, delivery, or performance of the Shareholders Agreement, nor the grant
of the irrevocable proxy contemplated thereby, will result in an automatic
conversion of the Class B Common Stock owned by Quilvest, Terbem or any of the
members of the TCR Management into Class A Common Stock pursuant to the Amended
and Restated Articles of Incorporation or the GBCC.
(c) The provisions of Section 14-2-1132 of the Georgia Business
Corporation (the "GBCC") prohibiting a "business combination" (as defined in the
GBCC for the purpose of Section 14-2-1132 with any "interested stockholder" (as
defined in the GBCC for the purpose of Section 14-2-1132) will not be applicable
to either Purchaser as a result of the transactions contemplated by this
Agreement or any other Company Document or as a result of any investment of any
Purchaser in the Company prior to the date hereof which is known to the Company
as of the date hereof.
(d) The transactions contemplated by this Agreement and the Company
Documents have been duly approved in accordance with the provisions of Section
14-2-1110 through 14-2-1113 of the GBCC.
5.4. Sale of Shares of Capital Stock; Offering Exemption.
---------------------------------------------------
(a) The Series A Preferred Shares, the Additional Preferred Shares and
the Warrants being sold by the Company to the Purchasers hereunder will, upon
the issuance thereof following the payment therefor in accordance with the terms
of this Agreement, be (i) validly issued and outstanding, (ii) fully paid and
nonassessable, (iii) not subject to or issued in violation of any preemptive or
other rights of the shareholders of the Company or others, and (iv) free and
clear of any and all Liens (other than those imposed by applicable securities
laws or those imposed by the Shareholders Agreement to be executed and delivered
at the Initial Closing).
(b) The Series A Preferred Shares will have on the Initial Closing
Date, the designations, powers, preferences, and relative and other special
rights, and the qualifications, limitations and restrictions, contained in the
Series A Designation. The Additional Preferred Shares will have on the
applicable Additional Closing Date the designations, powers, preferences, and
relative and other special rights, and the qualifications, limitations and
restrictions, contained in the applicable Additional Preferred Share
Designation.
(c) Assuming the accuracy of each Purchaser's representation and
warranty set forth in Section 6.6 below, the offering for sale by the Company,
and the actual sale by the Company, of the Series A Preferred Shares, any
Additional Preferred Shares and the Warrants being offered and sold by the
Company to the Purchasers hereunder, are each exempt from registration under the
Securities Act, and from registration or qualification under applicable state
securities or blue sky laws.
5.5. Subsidiaries. Except as listed in Schedule 5.5 attached hereto,
------------
the Company does not have any subsidiaries nor does it own, or have the right to
acquire, directly or
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<PAGE>
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture, limited liability Company or Partnership or other
entity. The Company owns all of the equity securities in each subsidiary, free
and clear of all Liens (other than Permitted Exceptions), and there are no
options, warrants or other agreements, commitments or understandings to issue
any equity securities of any subsidiary, or any outstanding securities which are
convertible into or exchangeable for equity securities of any subsidiary, or any
agreements, commitments or understandings to issue any of the foregoing.
5.6. Consents. No Order or Permit or declaration or filing with, or
--------
notification to any Governmental Body is required on the part of the Company, in
connection with (i) the execution and delivery by the Company of this Agreement
or the Company Documents, (ii) the compliance by the Company with any of the
provisions hereof or thereof, and (iii) the performance of the Company of the
Contemplated Transactions, in each case except as set forth in Schedule 5.6
hereto and except that the Required Approval is necessary in order to permit the
holders of the Series A Preferred Shares and the Additional Preferred Shares to
exercise the conversion feature thereof or to vote such shares on an "as-
converted" basis with the Common Stock as provided therein.
5.7. Litigation. Schedule 5.7 hereto sets forth all pending Legal
----------
Proceedings against the Company or any of its subsidiaries, and all those Legal
Proceedings which, to the knowledge of the Company, are threatened against the
Company or any of its subsidiaries, in each case which (i) is not covered by
insurance, (ii) seeks in excess of $50,000 from the Company or any of its
subsidiaries, (iii) seeks to enjoin or obtain damages in respect of the
consummation of any of the Contemplated Transactions, (iv) questions the
validity of this Agreement, any of the Company Documents or any action taken or
to be taken by the Company in connection with the Contemplated Transactions or
(v) if adversely determined, could reasonably be expected to have a Material
Adverse Effect. There is no Order outstanding against the Company or any of its
subsidiaries having any of the effects or which could reasonably be expected to
have such an effect.
5.8. Compliance with Law. The Company and each of its subsidiaries has
-------------------
complied and currently is in compliance with all applicable Laws and Orders
except for such non-compliance which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its subsidiaries has received, or knows of the issuance of, any
written notice by any person of any such violation or alleged violation. The
Company and each of its subsidiaries has in full force and effect all Permits
necessary for it to own, lease or operate its properties and assets and to carry
on the Business as now conducted, except where the failure to have such Permits
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and the Company has complied, with all of the terms and
conditions of such Permits, and there is no Default under any thereof, in each
case which could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has taken or failed to take any
act which act or failure to act has resulted in or enabled, or could reasonably
be expected to result in or enable, with or without notice or lapse of time or
both, the revocation or termination of any such Permit or the imposition of any
restrictions thereon, in each case which could reasonably be expected to have a
Material Adverse Effect.
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<PAGE>
5.9. Title to Assets. The Company or one of its subsidiaries owns and has
---------------
good and marketable title to or, in the case of leased properties, valid
leasehold interests in, all of its assets, tangible or intangible, including all
of such assets reflected on the most recent Financial Statements, except for
assets disposed of in the ordinary course of business since the Financial
Statement Date. The Company or one of its subsidiaries holds title to its assets
free and clear of all Liens other than Permitted Exceptions. The tangible
personal property included in the properties and assets (including all
Equipment) owned or used by the Company or one of its subsidiaries in the
operation of the Business are in good working order, repair and condition,
reasonable wear and tear excepted.
5.10. Other Representations Regarding the Company's Assets and
--------------------------------------------------------
Liabilities.
- -----------
(a) Accounts Receivable. All of the accounts receivable of the
-------------------
Company and each of its subsidiaries constitute a valid claim in the full amount
thereof (subject only to the allowance for doubtful accounts set forth on the
Financial Statements) against the debtor charged therewith on the consolidated
books of the Company. Except as expressly set forth on Schedule 5.10(a) hereto,
no account debtor has any valid set-off, deduction or defense with respect
thereto, and no account debtor has asserted such set-off, deduction or defense.
(b) Inventory. All items of Inventory reflected in the Financial
---------
Statements are in good and merchantable condition, of a quantity and quality
salable in the ordinary course of business consistent with past practices at
normal mark-ups (subject to customary allowances consistent with past
experience), except for damaged, defective or obsolete Inventory. Such
Inventory is valued at the lower of cost or market on a first-in, first out
basis in accordance with GAAP consistently applied and maintained. Except as set
forth on Schedule 5.10(b) hereto, neither the Company nor any of its
subsidiaries holds any items of Inventory on consignment. All Inventory is
located at premises owned or leased by the Company or one of its subsidiaries,
except for Inventory in transit to the Company.
(c) Leasehold Improvements. All material leasehold improvements,
----------------------
fixtures and appurtenances attached to any real property leased by the Company
or one of its subsidiaries are in good working order, repair and condition,
ordinary wear and tear excepted.
(d) Real Property. The Company or one of its subsidiaries owns the
-------------
real property listed on Schedule 5.10(d) attached hereto. The Company has made
available to the Purchaser correct and complete copies of the leases and
subleases for all real property leased by the Company or one of its
subsidiaries. With respect to each such lease and sublease:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) neither the Company nor any of its subsidiaries has
violated the terms of, or is in Default under, any such lease or sublease, and
no event has occurred which, with or without notice or lapse of time, would
constitute, or could reasonably be expected to constitute, a breach or Default
thereof, or permit termination, modification, or acceleration thereunder; and
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<PAGE>
(iii) to the best knowledge of the Company, no other Person to
the lease or sublease is in breach or Default, and no event has occurred which,
with or without notice or lapse of time, would constitute a breach or Default
thereof, or permit termination, modification, or acceleration thereunder.
(e) Intangible Assets. Except as set forth in Schedule 5.10(e)
-----------------
attached hereto, each of the material Intangible Assets owned by the Company or
any of its subsidiaries is owned by the Company or any of its subsidiaries free
and clear of any and all Liens (other than Permitted Exceptions) and, to the
knowledge of the Company, no other Person has any Claim of ownership with
respect thereto. The Company and each of its subsidiaries have adequate
Licenses or other valid rights to use all of the material Intangible Assets
which it does not own which are utilized by the Company or any of its
subsidiaries and which are material to the conduct of the business as presently
conducted. Except as set forth in Schedule 5.10(e) hereto, the use of its
Intangible Assets by the Company or any of its subsidiaries does not conflict
with, infringe upon, violate or interfere with any intellectual property rights
of any other Person, nor is any other Person infringing upon, violating or
interfering with any rights of the Company or any of its subsidiaries in and to
ownership or use of any such material Intangible Assets, except in each case
which could not reasonably be expected to have a Material Adverse Effect.
5.11. SEC Reports. Except as set forth on Schedule 5.11 attached hereto,
-----------
the Company has filed all reports, proxy statements, registration statements,
prospectuses and other documents (the "SEC Reports") required to be filed by it
when due in accordance with the Exchange Act or the Securities Act. As of their
respective dates, the SEC Reports complied with all applicable requirements of
the Exchange Act or the Securities Act, as the case may be. Except as set forth
on Schedule 5.11 attached hereto, as of their respective dates, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.12. Financial Statements. Except as set forth on Schedule 5.12
--------------------
attached hereto, the consolidated financial statements of the Company and its
subsidiaries contained in the SEC Reports complied as to form in all material
respects with the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis during the periods involved and fairly present, in conformity with GAAP,
the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations, cash flows and changes in shareholders' equity for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements.
5.13. Taxes. Except as set forth in Schedule 5.13, the Company and each
-----
of its subsidiaries has duly and timely filed all information and tax returns
and reports required to be filed by it with any federal, state or local
governmental taxing authority, body or agency, and all Taxes due and payable by
the Company or any of its subsidiaries have been paid, withheld or reserved for
or, to the extent they relate to periods on or prior to the date of the latest
Financial Statements, are reflected as a Liability on the balance sheet included
therein. Without limiting the generality of the foregoing, the Company and each
of its subsidiaries has properly withheld
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<PAGE>
all amounts required by Law to be withheld for income taxes, FICA and
unemployment taxes, including without limitation, with respect to social
security and unemployment compensation, relating to its employees, and has
remitted all withheld amounts required to be remitted to the appropriate taxing
authority, agency or body.
5.14. No Undisclosed Liabilities. Neither the Company nor any of its
--------------------------
subsidiaries has any indebtedness or Liabilities (whether accrued, absolute,
contingent or otherwise, and whether due or to become due) except for (i) those
reflected or reserved against (which reserves the Company represents are
adequate to cover such Liabilities) in the Financial Statements, (ii) those
which are specifically disclosed in this Agreement or a Schedule attached hereto
and (iii) those incurred in the ordinary course of business which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
5.15. Absence of Certain Developments. Except as set forth in Schedule
-------------------------------
5.15 hereto, as expressly set forth in the Company's Quarterly Report on Form
10-Q for the three- and nine-month periods ended November 30, 1999, or as
expressly contemplated by this Agreement, (x) since November 30, 1999, there has
not been any Material Adverse Effect and, (y) since February 28, 1999, the
Company and each of its subsidiaries has operated the Business in the ordinary
course consistent with past practice, and there has not been:
(a) any event or condition of any nature whatsoever which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect;
(b) any amendment to the Articles of Incorporation or Bylaws of the
Company or any of its subsidiaries, except for those expressly approved by the
holders of a majority of the outstanding Series A Preferred Shares;
(c) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
Company's or any of its subsidiaries' capital stock;
(d) the creation or attachment, or notice thereof, of any Lien
(other than Permitted Exceptions) on any of the assets of the Company or any of
its subsidiaries;
(e) the establishment or assumption of any Benefit Plan, or the
amendment of any existing Benefit Plan (or any agreement relating to or issued
in connection with any Benefit Plan), other than an amendment necessary to
conform a Benefit Plan to the requirements of applicable laws;
(f) any change in the accounting methods or practices (including any
change in depreciation or amortization policies or rates) with respect to the
Business or otherwise by the Company or any of its subsidiaries except for those
expressly approved by the holders of a majority of the outstanding Series A
Preferred Shares; or
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(g) any agreement by the Company or any of its subsidiaries to do
any act referred to in any of the preceding clauses.
5.16. Material Contracts. Each Contract presently in effect to which the
------------------
Company or any of its subsidiaries is a party, or by which the Company, any of
its subsidiaries, or any of their respective assets or properties is bound,
which the Company is required to file as an exhibit to any SEC Report pursuant
to Item 601 Regulation S-K promulgated by the Securities and Exchange
Commission, including the employment contracts listed in Schedule 5.16 attached
hereto, and any listing agreement with a national securities exchange to which
the Company is a party (collectively, the "Material Contracts"), is in full
force and effect, there is no Default under any such Material Contract by the
Company or any of its subsidiaries or, to the knowledge of the Company, by any
of the other parties thereto, except for such Defaults as will not individually
or in the aggregate, with the giving of notice or the passage of time or both,
result in a Material Adverse Effect. Except as set forth in Schedule 5.16
attached hereto, there has been no cancellation, termination, limitation or
modification or any notice of cancellation, termination, limitation or material
modification of any such Material Contract. Each of the Material Contracts (i)
constitutes a legal, valid and binding obligation of the Company or its
subsidiaries, and (ii) to the knowledge of the Company, constitutes a legal,
valid and binding obligation of such other party thereto.
5.17. Employee Relations.
------------------
(a) The Company and each of its subsidiaries has complied and is in
compliance, in all material respects, with all Laws which relate to wages,
hours, discrimination in employment and collective bargaining, and is not liable
for any arrears of wages, Taxes or penalties for failure to comply, in all
material respects, with any of the foregoing. Except as described in Schedule
5.17 attached hereto, (i) none of the Employees of the Company or any of its
subsidiaries is represented for purposes of their employment by a labor
organization, (ii), to the knowledge of the Company, no petition has been filed
for recognition of a labor union or association as the exclusive bargaining
agent for any and all of the Employees of the Company or any of its
subsidiaries, and (iii) to the knowledge of the Company, there has not been in
the past five years any general solicitation of representation cards by any
union seeking to represent any or all of the Employees of the Company or any of
its subsidiaries as their bargaining agent. Except as set forth in Schedule
5.17 attached hereto, there is no, and during the past three years there has
been no, (i) unfair labor practice charge, complaint or other proceeding against
the Company or any of its subsidiaries pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board nor, to the
knowledge of the Company, any commitment or involvement in the commission of any
acts or omissions which could give rise to any unfair labor practices by the
Company or any of its subsidiaries, (ii) Claim or Litigation against the Company
or any of its subsidiaries or any of the Employees or agents of the Company or
any of its subsidiaries pending or, to the knowledge of the Company, threatened
under the National Labor Relations Act, as amended, and the rules and
regulations promulgated thereunder (the "NLRA") nor, to the knowledge of the
Company, any commitment or involvement in the commission of any acts or
omissions which could give rise to any Liability under the Labor Act on the part
of the Company or any of its subsidiaries, (iii) labor strike, dispute, slowdown
or stoppage pending or, to the knowledge of the Company, threatened against
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<PAGE>
or involving the Company or any of its subsidiaries, (iv) labor grievance filed
with the Company which has had or could reasonably be expected to have a
Material Adverse Effect; or (v) any pending, or to the knowledge of the Company,
threatened Claim against the Company or any of its subsidiaries or Litigation
involving the Company or any of its subsidiaries, or Litigation which has arisen
out of or under a collective bargaining or other labor Contract. Except as set
forth in Schedule 5.17 attached hereto, there is no Claim or Litigation against
the Company or any of its subsidiaries (whether under federal, state or local
Law, under any employment Contract, or otherwise) brought or, to the knowledge
of the Company, threatened by any Employee on account of or for: (i) overtime
pay, other than overtime pay for work done during the current payroll period;
(ii) wages or salary for any period other than the current payroll period; (iii)
any amount of vacation pay or pay in lieu of vacation time, other than vacation
time or pay in lieu thereof earned in or in respect of the current fiscal year;
or (iv) any violation of any Law relating to minimum wages or maximum hours of
work. Except as set forth in Schedule 5.17 attached hereto, there is no Claim
against the Company or any of its subsidiaries or Litigation (whether under
federal, state or local Law, under any employment Contract, or otherwise)
brought or, to the knowledge of the Company, threatened by any Person (including
any Governmental Body) relating to discrimination or occupational safety in
employment or employment practices (including the Occupational Safety and Health
Act of 1970, as amended, The Fair Labor Standards Act, as amended, Title VII of
the Civil Rights Act of 1964, as amended, or the Age Discrimination in
Employment Act of 1967, as amended).
5.18. ERISA Matters.
-------------
(a) Benefit Plans Generally. Schedule 5.18(a) attached hereto
-----------------------
contains a true and complete list of all Benefit Plans and each "multiemployer
plan" (within the meaning of Section 3(37) of ERISA) with respect to which the
Company or any of its ERISA Affiliates has ever contributed to or otherwise had
any obligation. Except as set forth on Schedule 5.18(a), neither the Company
nor any of its ERISA Affiliates has ever sponsored, maintained, contributed to
or otherwise had any obligation in connection with any pension plan or welfare
benefit plan that is a "multiemployer plan" (within the meaning of Section 3(37)
of ERISA), a "multiple employer plan" (within the meaning of Section 413 of the
Code) or a "multiple employer welfare arrangement" (within the meaning of
Section 3(40) of ERISA). Every Benefit Plan which is an "employee welfare
benefit plan" (within the meaning of Section 3(1) of ERISA) provides benefits
either by making direct payments out of general corporate assets and/or through
the purchase of insurance.
(b) Multiemployer Plans. Except as specifically set forth on
-------------------
Schedule 5.18(b), with respect to each multiemployer plan listed on Schedule
5.18(a):
(i) there has never been a complete or partial withdrawal from
the plan by the Company and/or any of its ERISA Affiliates; and
(ii) there has never been an assessment of withdrawal liability
against the Company and/or any of its ERISA Affiliates; and
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<PAGE>
(iii) if the Company and its ERISA Affiliates completely
withdrew from the plan (as determined under Section 4203 of ERISA) on the date
hereof, there would be no basis for the plan to assess against the Company or
any of its ERISA Affiliates any amount of withdrawal liability.
(c) Qualified Plans; Compliance. With respect to each of the
---------------------------
Benefit Plans, such Benefit Plan has been maintained and administered at all
times in compliance, in all material respects, with its terms and applicable
Law, including (without limitation) ERISA and the Code. With respect to each
Benefit Plan intended to qualify under Section 401(a) or 403(a) of the Code, the
Internal Revenue Service has issued a favorable determination notification
letter as to its form. Except as disclosed on Schedule 5.18(b), the Company has
timely filed or caused to be timely filed with the Internal Revenue Service
annual reports on form 5500 or 5500C/R, as applicable, for each Benefit Plan for
all years and periods for which such reports were required. All statements made
on documents or forms filed with any Government Body with respect to any Benefit
Plan have been true and complete in all material respects and have been filed
timely. No Benefit Plan has been assessed any excise tax Liability. Any Benefit
Plan required by ERISA to maintain a fidelity bond pursuant to Section 412 of
ERISA, has had a fidelity bond in effect for all years and periods for which
such bond was required.
(d) Defined Benefit Pension Plans. Except as set forth on Schedule
-----------------------------
5.18(c), neither the Company nor any ERISA affiliate maintains, sponsors or has
any obligation with respect to (or has ever maintained, sponsored or had any
obligation with respect to) any Plan subject to Title IV of ERISA. With respect
to each Plan set forth on Schedule 5.18(c), the following are true:
(i) No "reportable event" (as described in Section 4043(c) of
ERISA and regulations thereunder) has occurred, other than an event the
reporting of which has been waived by the Pension Benefit Guaranty Corporation
("PBGC");
(ii) To the knowledge of the Company, there exist no facts that
would give PBGC a basis upon which to institute proceedings to terminate the
plan or apply for the appointment of a trustee to administer the Plan. The PBGC
has not asserted any Liability against the Company or any of its ERISA
Affiliates, and all PBGC premiums due before the Closing Date have been paid;
(iii) There exists no accumulated funding deficiency (within
the meaning of Section 302(a)(2) of ERISA or Section 412(a) of the Code), there
has not been issued any waiver of the minimum funding standard under Section 412
of the Code and there does not exist any Liability for any tax imposed by
Section 4971 of the Code; and
(iv) If the Plan was terminated as of the Closing Date, the
assets of the trust maintained in connection with the Plan would be sufficient
(on a termination basis) to provide all benefits accrued under the Plan.
(e) Contributions. All payments and contributions to all Benefit
-------------
Plans have been made on a timely basis as required by the terms of each such
Benefit Plan and any
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<PAGE>
applicable Law. All such payments and contributions relating to the completed
taxable years have been deducted fully by the Company for federal income tax
purposes. Such deductions have not been challenged or disallowed by any
Governmental Body, and the Company has no reason to believe that such deductions
are not properly allowable. The Company has funded or will fund prior to Closing
each Benefit Plan in accordance with the terms of each such Benefit Plan, any
associated insurance contract and all applicable Laws. Except as set forth in
Schedule 5.18(c) attached hereto, no Benefit Plan is subject to Section 302 of
ERISA or Section 412 of the Code.
(f) Documentation. The Company has provided or made available to
-------------
the Purchaser true and complete copies of the following documents: (i) all plan
documents, amendments and trust agreements relating to each Benefit Plan,
including any insurance contracts under which benefits are provided, as
currently in effect; (ii) the most recent annual and periodic accountings of
Benefit Plan assets; (iii) the most recent Internal Revenue Service
determination or notification letters relating to each Benefit Plan intended to
satisfy the qualification requirements of Section 401(a) of the Code and a list
identifying all amendments to each such Benefit Plan not covered by such
determination or notification letter, including the date such amendments were
adopted and effective; (iv) to the extent such reports were required, all annual
reports filed on Form 5500 or 5500C/R, as applicable, for the past two years,
including accompanying schedules; (v) the current summary plan description, if
any was required by ERISA to be prepared and distributed to participants, for
each Benefit Plan; and (vi) all insurance contracts, annuity Contracts,
investment management and advisory Contracts, fiduciary liability policies, if
any, and related applications, and all filings, applications to and material
correspondence with any Governmental Body, written disputed and unsettled claims
made by or against any Benefit Plan, administration Contracts, service provider
Contracts, audit reports, material written legal advice relating to any Benefit
Plan received within the past six years, prohibited transaction exemption
applications, and resolutions of the Board of Directors of the Company relating
to any of the foregoing.
(g) Prohibited Transactions, etc. There (i) has not occurred any
-----------------------------
Prohibited Transaction, with respect to any Benefit Plan, for which no
statutory, class or other exemption exists and (ii) has not occurred any
fiduciary violations, as defined in Section 404 of ERISA, with respect to which
the Company could have any material present or future Liability.
(h) Communications. To the knowledge of the Company, all
--------------
communications regarding each Benefit Plan by the Company or any Employee or
agent of the Company reflect and have always reflected accurately the material
terms of that Benefit Plan.
(i) Litigation. There are no pending or, to the knowledge of the
----------
Company, threatened Claims by or on behalf of any Benefit Plan, or by or on
behalf of any individual participants or beneficiaries of any Benefit Plan,
alleging any violation of ERISA or any other Laws applicable to any Benefit
Plan (other than benefit claims made in the ordinary course of the operation of
such plans), nor is there, to the knowledge of the Company, any basis for any
such Claim. No Benefit Plan is the subject of any pending (or to the knowledge
of the Company, any threatened) investigation or audit by the Internal Revenue
Service, the U.S.
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<PAGE>
Department of Labor, the Pension Benefit Guaranty Corporation or any other
regulatory agency, foreign or domestic.
(j) Taxes. Neither the Company nor any trust existing in connection
-----
with any Benefit Plan has not incurred any Liabilities for Taxes or excise taxes
relating to any Benefit Plan, and no event has occurred and no circumstance
exists or has existed that could give rise to any such Liabilities.
(k) Parachute Payments. Except as set forth on Schedule 5.18(k),
------------------
the execution of and performance of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) result in any payment, acceleration, vesting or increase in
benefits with respect to any employee or former employee of the Company.
Moreover, the execution of and performance of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) result in any payment, acceleration, vesting or increase
in benefits with respect to any employee or former employee of the Company that
would be an "excess parachute payment" under Section 280G of the Code.
(l) Retiree Health. The Company does not maintain any plan or
--------------
arrangement that provides post retirement medical benefits, post retirement
death benefits or other post retirement welfare benefits, other than to the
extent required by Part 6 of Title I of ERISA.
(m) Non-Conforming Group Health Plans. Neither the Company nor any
---------------------------------
of its ERISA Affiliate has contributed to a non-conforming group health plan (as
that term is defined in Code section 5000(c)) or incurred any tax liability
under Code section 5000(a).
5.19. Environmental Laws.
------------------
(a) Except as set forth in Schedule 5.19(a) attached hereto, (i) the
Company and each of its subsidiaries have complied in all material respects with
each, and are not in violation in any material respect of any, Environmental
Laws, (ii) neither the Company nor any of its subsidiaries has received any
written or oral communication from a Governmental Body or any other Person
alleging that the Company or any of its subsidiaries is not in compliance in any
material respect with, or has a material Liability under (including being a
potentially responsible party or allegedly liable for costs associated for
remediation of any site), any Environmental Laws, (iii) the Company and each of
its subsidiaries hold, have complied with and are in compliance with, all
necessary Permits required to conduct its business in compliance with all
Environmental Laws, including any Permits necessary or appropriate to store,
treat, dispose of and otherwise handle Hazardous Materials except for such
Permits, the non-compliance with which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, and (iv)
neither the Company nor any of its subsidiaries has any knowledge of any
Environmental Claim or Environmental Loss other than as set forth in Schedule
5.19(a) attached hereto which could reasonably be expected to have a Material
Adverse Effect.
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<PAGE>
(b) There have been no locations on any real property owned by the
Company or, with respect to any real property leased by the Company or any of
its subsidiaries, since the date such real property was leased by the Company or
any such subsidiary where Hazardous Materials were discharged, leaked, emitted
or entered into the atmosphere, ground, soil, surface water, ground water, any
body of water or sewer system by the Company where such discharge, leak,
emission or entrance could result in an Environmental Claim which could
reasonably be expected to have a Material Adverse Effect. Except as set forth
in Schedule 5.19(b) attached hereto, there are no and have been no above-ground
or under-ground storage tanks located on or in any real property currently or
formerly owned or leased by the Company or its predecessors in interest which
could reasonably be expected to have a Material Adverse Effect.
(c) There is no on-site or off-site location to which the Company or
any of its agents or Affiliates has transported Hazardous Materials, or arranged
for the transportation thereof from the Company's facilities, which location is
the subject of any federal, state or local enforcement litigation under any
Environmental Laws which could reasonably be expected to lead to Claims against
the Company for clean-up costs, remedial work, damages to natural resources or
for personal injury claims, including Claims under CERCLA which could reasonably
be expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 5.19(d) attached hereto no
polychlorinated biphenyl or substances containing polychlorinated biphenyl are
present, in use or stored in any real property owned, leased or used by the
Company or any of its subsidiaries, and no asbestos or materials containing
asbestos have been brought upon, kept or used in or about or discharged, leaked,
emitted or entered into or onto any such real property, in either case which are
reasonably likely to result in a Claim giving rise to a material Liability on
the part of the Company or any of its subsidiaries.
(e) Except as set forth in Schedule 5.19(e) attached hereto, neither
the Company nor any of its subsidiaries has, either expressly, by merger or
similar transaction or, to the knowledge of the Company, otherwise by operation
of law, assumed or undertaken any Liability including, without limitation, any
Liability for corrective remedial action of any other Person relating to
Environmental Law other than any indemnity obligation by the Company or a
subsidiary, as a tenant, or any of its agents to a landlord under any of the
leases or sublease set forth in Schedule 5.10(d).
5.20. Brokers. Except for the Company Financial Advisors, no Person has
-------
acted directly or indirectly as a broker, finder or financial advisor for the
Company, in connection with the negotiations relating to the Contemplated
Transactions or will be entitled to any fee, commission or like payment from the
Company in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of the Company. The Company will be
responsible for the payment of all fees and expenses of the Company Financial
Advisors, has delivered to the Purchasers an accurate and complete copy of the
agreements pursuant to which it has retained the Company Financial Advisors, and
will not amend, modify or supplement such agreements or enter into any new
agreements relating thereto.
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<PAGE>
5.21. No Illegal Payments. Neither the Company, any of its subsidiaries,
-------------------
nor any of their respective officers, directors, employees, agents or other
representatives, has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made or (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books.
5.22. Year 2000 Compliance. All computer software and computerized
--------------------
systems owned or used by the Company or any of its subsidiaries, or licensed by
the Company or any of its subsidiaries, as licensor or as licensee, other than
any shrinkwrap software available to retail customers, is "Year 2000 Compliant"
(as hereinafter defined), except where the failure to be Year 2000 Compliant
could reasonably be expected to have a Material Adverse Effect. For purposes of
this Agreement, "Year 2000 Compliant" shall mean that the applicable computer
applications are able to recognize and properly perform date sensitive functions
involving dates after December 31, 1999.
5.23. Disclosure. The representations and warranties of the Company set
----------
forth in this Agreement (including all Schedules hereto) and in any Company
Document do not contain any untrue statement of a material fact or omit any
material fact necessary in order to make the statements and information
contained herein or therein, as applicable, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
To induce the Company and the other Purchaser to enter into and consummate
this Agreement, each Purchaser, severally and not jointly, hereby represents and
warrants to the Company, and to each other, as follows, provided, however, that
with respect to representations and warranties related to the Purchasers, each
Purchaser only represents and warrants as to itself, and not to any other
Purchaser:
6.1. Organization and Good Standing. Such Purchaser is, in the case of
------------------------------
Littlejohn, a limited partnership, or, in the case of Quilvest, a British Virgin
Islands international company, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, and has all
requisite power and authority to carry on its business as it is now being
conducted, and to execute, deliver and perform this Agreement and to consummate
the Contemplated Transactions.
6.2. Authorization. This Agreement has been, and each of the Purchaser
-------------
Documents to be delivered at a particular Closing by such Purchaser will be at
such Closing, duly authorized, executed and delivered by such Purchaser and
(assuming due authorization, execution and delivery by the other parties hereto
and thereto) this Agreement constitutes, and the Purchaser Documents when so
executed and delivered by such Purchaser will constitute, legal, valid and
binding obligations of such Purchaser, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors rights and remedies generally
and subject, as to enforceability, to
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<PAGE>
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
6.3. Consents. No Order, Permit, License, or declaration or filing with,
--------
or notification to, any Person or Governmental Body is required on the part of
any of such Purchaser in connection with the execution and delivery of this
Agreement or the Purchaser Documents to which it is a party or the compliance by
such Purchaser with any of the provisions hereof or thereof.
6.4. Litigation. There is no Legal Proceeding pending or, to the
----------
knowledge of such Purchaser, threatened, against such Purchaser that seeks to
enjoin or obtain damages in respect of the consummation of the Contemplated
Transactions or that questions the validity of this Agreement, the Purchaser
Documents to which such Purchaser is a party or any action taken or to be taken
by Purchaser in connection with the consummation of the Contemplated
Transactions.
6.5. Brokers. Except for the Littlejohn Financial Advisor, no third
-------
party has acted directly or indirectly as a broker, finder or financial advisor
for such Purchaser in connection with the negotiations relating to this
Agreement or the Contemplated Transactions or will be entitled to any fee or
commission or like payment in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of such Purchaser.
6.6. Investment Intent of the Purchasers. Such Purchaser acknowledges
-----------------------------------
that the Series A Preferred Shares, the Additional Preferred Shares and the
Warrants being purchased pursuant to this Agreement have not been registered
under the Securities Act or any state securities laws. Each Purchaser is
acquiring the Series A Preferred Shares, the Additional Preferred Shares and
the Warrants for its own account and not with the present intent to distribute
them in violation of any securities laws. The Purchaser is an "accredited
investor" or a "qualified institutional buyer" within the meaning of the
Securities Act. Such Purchaser acknowledges and agrees that the certificates,
if any, representing the Series A Preferred Shares, the Additional Preferred
Shares and the Warrants will contain substantially the following legends, to
the extent applicable to the particular Purchaser:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER
STATE OR FEDERAL SECURITIES STATUTE. NO REOFFER, SALE, TRANSFER, PLEDGE OR
OTHER DISPOSITION THEREOF MAY BE MADE UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT AND ANY OTHER APPLICABLE SECURITIES STATUTE, OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS IS APPLICABLE TO SUCH TRANSACTION.
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE SOLD, EXCHANGED
OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS
AND
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<PAGE>
CONDITIONS OF THE SHAREHOLDERS AGREEMENT, AND (II) ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT AND THE IRREVOCABLE PROXY
REFERRED TO THEREIN, EACH DATED AS OF FEBRUARY __, 2000, AS SUCH AGREEMENT
MAY BE AMENDED FROM TIME TO TIME, AND COPIES OF WHICH ARE ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
6.7. Disclosure. The representations and warranties of such Purchaser
----------
set forth in this Agreement or in any Purchaser Document to which it is a party
do not contain any untrue statement of a material fact or omit any material fact
necessary in order to make the statements and information contained herein or
therein, as applicable, not misleading.
ARTICLE VII
CERTAIN COVENANTS AND OTHER MATTERS
7.1. Confidentiality Agreement. Each party hereto shall and shall cause
-------------------------
its counsel, accountants, financial advisors and lenders to: (a) keep all
Confidential Information confidential and not to disclose or reveal any
Confidential Information to any Person other than its officers, directors,
partners, affiliates, employees, attorneys, accountants, other agents and
representatives, including engineers, financial advisors, current and
prospective lenders and debt securities underwriters who are participating in
the evaluation of the Company and the Contemplated Transactions or who otherwise
need to know the Confidential Information in connection with any investigation
of the Company or the negotiation, preparation or performance of this Agreement
or any document to be delivered hereunder or for the purpose of evaluating the
Company and/or the Contemplated Transactions; and (b) not to use the
Confidential Information for any purpose other than (i) in connection with the
evaluation and/or consummation of the Contemplated Transactions, (ii) to the
extent necessary to obtain the termination of the waiting period under the HSR
Act or to obtain any other Governmental Consent or the approval of the Principal
Stock Exchange, or (iii) to enforce such party's rights and remedies under this
Agreement. The obligations of each party hereto under this Section 7.1 shall
terminate two years from the date of this Agreement. If the Initial Closing is
not consummated, each party upon the request of the other party shall destroy or
return to such party all Confidential Information which is in writing or can
otherwise be destroyed or returned and will so certify to the parties hereto.
7.2. Restriction on Certain Discussions and Actions. Until the earliest
----------------------------------------------
of (a) the Required Approval being obtained, (b) the termination of this
Agreement in accordance with its terms, or (c) July 31, 2000, the Company will
refrain, and will cause any of its Affiliates, and each of the respective
officers, directors, employees, attorneys, accountants and other agents and
representatives, to refrain, from taking any action, directly or indirectly, to
solicit, encourage, initiate or participate in any way in discussions or
negotiations with, or furnish any information with respect to the Company to any
Person (other than the Purchaser and its representatives) in connection with any
possible or proposed sale of a substantial portion of the capital stock, a sale
of a substantial portion of the assets, a merger or other business combination
involving the Company, or the acquisition of a substantial equity interest in
the Company, or any
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<PAGE>
similar transaction involving the Company, or any other transaction (including
any recapitalization, refinancing or reorganization) which could impair the
ability of the Company to consummate the Contemplated Transactions ("Alternative
Transaction"). The Company will cease and cause to be terminated any existing
activities, discussions or negotiations with any other Person conducted
heretofore with respect to any Alternative Transaction and will promptly notify
the Purchasers, following receipt of any request by any Person (other than a
Purchaser or its representatives) relating to any possible Alternative
Transaction of information concerning the business, properties, assets,
liabilities, financial condition, results of operations, cash flow or prospects
of the Company. Notwithstanding the foregoing, after the Initial Closing, the
Company may provide information with respect to the Company to a Person who
makes a proposal in writing to effect a Superior Alternative Transaction (as
defined below), which proposal was not solicited, encouraged or initiated in
violation of this Section 7.2, and the Company may have discussions with such
Person and engage in negotiations with such Person with respect to effecting
such Superior Alternative Transactions so long as the Person making such
proposal enters into a customary confidentiality and standstill agreement. As
used herein, "Superior Alternative Transaction" means an Alternative Transaction
which HLHZ advises the Board of Directors in writing is, in the long-term,
superior from a financial point of view to the holders of Common Stock as
compared to the Contemplated Transactions taking into account, among other
things, the status of the financing for such Alternative Transaction. The
Company shall keep the Purchasers fully informed of all material developments
relating to any such proposal and any discussions or negotiations relating
thereto.
7.3. Conduct of Business Prior to the Initial Closing Date. During the
-----------------------------------------------------
period from the date of this Agreement to the Initial Closing Date or earlier if
this Agreement is terminated in accordance with its terms:
(a) the Company and each of its subsidiaries will conduct the
Business, operations, activities and practices in the usual and ordinary course,
consistent with its past practices;
(b) neither the Company nor any of its subsidiaries will take or
suffer or permit any action which would render untrue any of the representations
or warranties of the Company herein contained, and neither Company nor any of
its subsidiaries will omit to take any action the omission of which would render
untrue any such representation or warranty;
(c) except as expressly permitted by this Agreement, neither the
Company nor any of its subsidiaries will cause or permit any of the events,
facts or circumstances described in Section 5.15 to occur;
(d) neither the Company nor any of its subsidiaries will grant or
otherwise make, or agree to grant or otherwise make, any increase in the
compensation payable or to become payable by it to any employees (including
executive officers) of the Company or any of its subsidiaries;
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<PAGE>
(e) neither the Company nor any of its subsidiaries will sell or
dispose of any of its material assets used or useful in the operation of the
Business (otherwise than in the ordinary course of business consistent with past
practice);
(f) except as expressly permitted by this Agreement, neither the
Company nor any of its subsidiaries will enter into any material agreement,
contract, arrangement or understanding and neither the Company nor any of its
subsidiaries will amend or modify any of its material agreements, contracts,
arrangements or understandings (including any agreement with the Lender); and
(g) except as expressly permitted by this Agreement and in
connection with any Outstanding Derivative Securities, neither the Company nor
any of its subsidiaries will not make or authorize any sale, transfer or
issuance of any capital stock, equity security or debt security of the Company
or any option, warrant, right or commitment or agreement entered into requiring
or permitting any such sale, transfer or issuance.
7.4. Conversion of Class B Common Stock. On the date hereof, Quilvest
----------------------------------
has caused to be delivered to the Company irrevocable notices of Conversion from
the holders of at least 1,400,000 shares of Class B Common Stock, other than
from Quilvest, Terbem or the members of TCR Management, to convert the shares of
Class B Common Stock beneficially owned by them into shares of Class A Common
Stock effective as of the Initial Closing Date. In no event shall Quilvest
permit shares of Class B Common Stock to be converted prior to the receipt of
the Required Approval such that, when measured after any such conversion, the
number of outstanding shares of Series B Common Stock shall be less than 10% of
the number of outstanding shares of both the Series A Common Stock and the
Series B Common Stock in the aggregate then outstanding. In no event shall
Quilvest permit the conversion of any shares of Class B Common Stock
beneficially owned by it, Terbem or members of TCR Management until after the
Required Approval is obtained. The Company hereby agrees to cooperate in all
respects with Quilvest in connection with this Section 7.4.
7.5. Board of Directors. The Company shall take all steps necessary so
------------------
that on the Initial Closing Date, upon consummation of the Contemplated
Transactions at the Initial Closing, a majority of the members of the Board of
Directors shall consist of nominees of Littlejohn. In furtherance thereof, on
the date hereof, the Company shall cause to be filed with the Commission and
mailed to each of its shareholders a Schedule 14f-1 in form and substance
satisfactory to Littlejohn and the Company (the "Schedule 14f-1"). The Company
represents and warrants to the Purchasers that the Schedule 14f-1 will comply as
to form in all material respects with the applicable provisions of the Exchange
Act and that the Schedule 14f-1 will not contain, at the time of mailing thereof
and as of the date which is 10 days thereafter (the "Effective Date"), an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, no
representation or warranty is deemed made by the Company to the Purchasers with
respect to information to be supplied to the Company by Littlejohn or its
director nominees in writing expressly for use by the Company in the Schedule
14f-1 (the "Littlejohn Information"). Littlejohn hereby represents and warrants
to the Company and Quilvest that the Littlejohn Information to be supplied will
not contain, at the
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time of the mailing of the Schedule 14f-1 and on the Effective Date, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company will
provide the Purchasers with a reasonable opportunity to review and comment on
any amendment or supplement to the Schedule 14f-1 prior to filing such with the
Commission, will provide the Purchasers with a copy of all such filings made
with the Commission and will notify the Purchasers as promptly as practicable
after the receipt of any comments or any request for additional information from
the Commission or its staff, and upon request of the Purchasers, will supply the
Purchasers and their legal counsel with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the Commission, its
staff or any state securities administrators, on the other hand, with respect to
the Schedule 14f-1. No amendment or supplement to the Littlejohn information
shall be made without the prior written approval of Littlejohn, which approval
shall not be unreasonably withheld or delayed. If any event relating to a
Purchaser or the Company, or any of their respective Affiliates, officers or
directors, is discovered by a Purchaser or the Company, as the case may be, that
is required by the Exchange Act to be set forth in a supplement to the
Schedule14f-1, such Purchaser or the Company, as the case may be, will as
promptly as practicable inform the other, and such amendment or supplement will
be promptly filed with the Commission and disseminated to the shareholders of
the Company to the extent required by applicable securities laws.
7.6. Required Approval. In order to satisfy the requirements of its
-----------------
Principal Stock Exchange, the Company will take all action in accordance with
applicable law, its Articles of Incorporation and By-laws, to convene a meeting
of its shareholders (the "Shareholders Meeting") as soon as reasonably
practicable in order that its shareholders may consider and vote upon (i) the
convertibility of any Preferred Stock issued or to be issued pursuant to this
Agreement into shares of Class A Common Stock, and (ii) the ability of the
holders of any Preferred Stock issued or to be issued pursuant to this Agreement
to vote such shares, together with the Series A Common Stock as a single class,
as if such shares of Preferred Stock had been converted. As soon as practicable
and, in any event, within 14 days following the date hereof, the Company shall,
in cooperation with the Purchasers, prepare and file with the Commission
preliminary proxy materials in order to enable the Company's shareholders to
consider and vote upon, at the Shareholders Meeting, the foregoing matters and a
reverse stock split (such proxy statement and any amendments or supplements
thereto, the "Proxy Statement"). The record date for those shareholders of the
Company entitled to vote at the shareholders Meeting shall be after the Initial
Closing Date. The Company represents and warrants that the Proxy Statement shall
comply as to form in all material respects with the applicable provisions of the
Exchange Act and represents and warrants that the Proxy Statement, at the time
it is mailed to its Shareholders and at the date of the Shareholders Meeting,
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, no representation or warranty is deemed made by
the Company to the Purchasers with respect to information supplied to the
Company by any of the Purchasers in writing and expressly for use by the Company
in the Proxy Statement (the "Purchaser Information"). Each Purchaser, severally
and not jointly, hereby represents and warrants to the Company and the other
Purchaser that none of the Purchaser Information supplied or to be supplied by
it for
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<PAGE>
inclusion in the Proxy Statement, at the time of mailing thereof to the
Company's shareholders and at the time of the Shareholders Meeting will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company will
provide the Purchasers with a reasonable opportunity to review and comment on
any amendment or supplement to the Proxy Statement prior to filing such with the
Commission, will provide the Purchasers with a copy of all such filings made
with the Commission and will notify the Purchasers as promptly as practicable
after the receipt of any comments or any request for additional information from
the Commission or its staff, and upon request of the Purchasers, will supply the
Purchasers and their legal counsel with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the Commission, its
staff or any state securities administrators, on the other hand, with respect to
the Proxy Statement. No amendment or supplement to the Purchaser Information
shall be made without the approval of such Purchaser, which approval shall not
be unreasonably withheld or delayed. If any event relating to a Purchaser or the
Company, or any of their respective Affiliates, officers or directors, is
discovered by a Purchaser or the Company, as the case may be, that is required
by the Exchange Act to be set forth in a supplement to the Proxy Statement, such
Purchaser or the Company, as the case may be, will as promptly as practicable
inform the other, and such amendment or supplement will be promptly filed with
the Commission and disseminated to the stockholders of the Company to the extent
required by applicable securities laws.
7.7. HSR. To the extent legally required, promptly after the filing of
---
the Proxy Statement, the parties shall file with the Federal Trade Commission
and the Department of Justice, to permit the issuance of any Additional
Preferred Shares or the exercise of the Warrants, the notifications and reports
required to be filed pursuant to the HSR Act and shall file any supplemental
information which may be reasonably be requested in connection therewith, which
notifications and reports and filing of supplemental information will comply in
all material respects with the requirements of HSR Act. The Company shall be
responsible for payment of the filing fees required to be made in connection
with such notification. Each party shall furnish to the other party such
information as such other party may reasonably request to assist it to make such
filings as it may be legally required to make under the HSR Act. As promptly as
practicable after the date of this Agreement, the parties shall each further
prepare and file all other filings required under any foreign, federal, state or
local laws relating to the transactions contemplated hereby and shall promptly
respond to any request for additional information with respect thereof.
7.8. Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Series A Preferred Shares, the Warrants and the Series A Preferred
Shares issued upon exercise of the Warrants, to repay outstanding debt under
Existing Credit Facilities, and thereafter, to the extent permitted by the terms
of such credit facility, to repay outstanding trade payables and for general
working capital. The Company shall use the net proceeds from the sale of any
Additional Preferred Shares for acquisitions, capital expenditures and working
capital programs designed for the future growth of the Company, each as approved
by the Board of Directors.
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<PAGE>
7.9. Cooperation; Access to Books and Records. The Company will
----------------------------------------
cooperate generally with the Purchasers in connection with the Contemplated
Transactions and, until the Initial Closing Date or earlier if this Agreement is
terminated in accordance with its terms or in connection with any Additional
Closing, shall afford to each Purchaser, its agents, attorneys, accountants and
other authorized representatives, including engineers, financial advisors,
current and prospective lenders and debt underwriters, reasonable access to all
of the properties, assets, financial condition, operations, books, records,
files, correspondence, computer output, data, files, log books, technical and
operating manuals and other materials of the Company (including those in the
possession or control or their accountants, attorneys and any other third party)
for the purpose of permitting each Purchaser to make such due diligence
investigation and examination of the business, assets, properties and Books and
Records of the Company as such Purchaser in its discretion, shall deem to be
reasonably necessary or appropriate. Any such investigation, access and
examination shall be conducted during regular business hours and upon reasonable
prior notice under the circumstances and will be conducted in a manner that will
not materially disrupt the operation of the Business. The Company will cause its
counsel, accountants and representatives, and the Company's directors, officers
and employees, to cooperate fully with the employees and representatives of each
Purchaser in connection with such investigation, access and examination. The
results of such investigation and examination shall not relieve the Company from
its obligations with respect to the representations and warranties made in this
Agreement or reduce the Purchaser's right to pursue such remedies at Law or
hereunder, as it would otherwise have in the absence of having conducted such
investigation. Neither Purchaser will contact any employee, customer or supplier
of the Company without the prior consent of the Company, which consent will not
be unreasonably withheld, delayed or conditioned. Each Purchaser agrees to treat
all of the information learned in connection with any examination performed by
it pursuant to this Section 7.7 as Confidential Information for purposes of
Section 7.1 hereof.
7.10. Commercially Reasonable Efforts. Upon the terms and subject to
-------------------------------
the conditions set forth in this Agreement, the parties shall use their good
faith commercially reasonable efforts to take, or cause to be taken, without any
party being obligated to make any payment or payments to any third party or
parties which, individually or in the aggregate, is material and is not
otherwise due, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, each Closing, and the other Contemplated Transactions, including
(a) if legally required to consummate any of the Contemplated Transactions,
obtaining the termination of the waiting period under the HSR Act and all other
Governmental Consents, (b) complying with applicable provisions under the
Securities Act, Exchange Act or any stock exchange on which the Company's
securities are listed, (c) defending any Legal Proceeding or Claims challenging
this Agreement or the consummation of any of the Contemplated Transactions,
including, if the circumstances warrant, seeking to have any stay or temporary
restraining Order vacated or reversed, and (d) the execution and delivery of any
additional documents, agreements and instruments (in form and substance
reasonably satisfactory to the parties) necessary to consummate the Contemplated
Transactions by, and to fully carry out the purposes of, this Agreement.
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<PAGE>
7.11. Amendment to Articles of Incorporation. The Company shall take
--------------------------------------
all action necessary, in accordance with applicable law and its Articles of
Incorporation and By-laws, to effect the Company Articles Amendment and any
other amendment to the Articles of Incorporation to permit the issuance of
Additional Preferred Shares. At any time, and from time to time, as any holder
of a series of Preferred Stock shall reasonably request, the Company shall cause
an amendment to the applicable certificate of designation for a particular
series of Preferred Stock to be filed so as to increase the number of authorized
shares in such series of Preferred Stock to (a) take into consideration the
accrual of dividends thereon which are payable in additional shares of such
series of Preferred Stock (the "PIK Dividends"), and (b) to permit the issuance
of additional shares of such series of Preferred Stock which may be issued
pursuant to the exercise of Warrants to purchase shares of such series of
Preferred Stock to be issued in connection with the PIK Dividends. If the
Company consummates an acquisition from and after the Initial Closing, then
Littlejohn and the Company will in good faith appropriately adjust the targeted
earnings before interest, taxes, depreciation and amortization ("EBITDA
Targets") set forth in section 3(a)(i) of the Series A Preferred Designation,
and the Company shall promptly file an amendment thereto to reflect the adjusted
EBITDA Targets as agreed to by the Company and Littlejohn.
7.12. Restrictive Legends. The Company shall cause any Series A Preferred
-------------------
Shares, Additional Preferred Shares or Warrants issued in connection with this
Agreement to bear legends in substantially the following form, to the extent
such restriction is applicable to a particular Purchaser:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER
STATE OR FEDERAL SECURITIES STATUTE. NO REOFFER, SALE, TRANSFER, PLEDGE OR
OTHER DISPOSITION THEREOF MAY BE MADE UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT AND ANY OTHER APPLICABLE SECURITIES STATUTE, OR AN EXEMPTION
FROM SUCH REGISTRATION REQUIREMENTS IS APPLICABLE TO SUCH TRANSACTION.
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE SOLD, EXCHANGED
OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS
AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT, AND (II) ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT AND THE IRREVOCABLE
PROXY REFERRED TO THEREIN, EACH DATED AS OF FEBRUARY __, 2000, AS SUCH
AGREEMENT MAY BE AMENDED FROM TIME TO TIME, AND COPIES OF WHICH ARE ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
7.13. Reservation of Shares. For so long as any of the Series A Preferred
---------------------
Shares, Additional Preferred Shares or Warrants are outstanding, the Company
shall keep
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<PAGE>
reserved for issuance a sufficient number of shares of Common Stock to satisfy
its conversion obligations under the Series A Designation, and the Additional
Preferred Share Designations.
7.14. Listing of Common Stock. Prior to each Closing Date (other than
-----------------------
the Initial Closing), the Company shall take all steps necessary to list for
trading on its Principal Stock Exchange a sufficient number of shares of Class A
Common Stock to enable the conversion of all Series A Preferred Shares,
(including Series A Preferred Shares which will be obtained upon exercise of the
Warrants) and all Additional Preferred Shares to be outstanding immediately
after a particular Closing. After the Required Approval, the Company shall
promptly list on the Principal Stock Exchange a sufficient number of shares of
Class A Common Stock to enable the conversion of all Series A Preferred Shares.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1. Conditions to Obligations of the Purchasers - Initial Closing. The
-------------------------------------------------------------
obligation of each Purchaser to consummate the Contemplated Transactions to be
consummated on the Initial Closing Date is subject to the satisfaction, on or
prior to the Initial Closing Date and as of the Initial Closing Date of the
following conditions, any of which may be waived in writing by such Purchasers:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
on and as of the Initial Closing Date, as if made on the Initial Closing Date
(except to the extent a representation or warranty is expressly made as of a
particular date), except to the extent such inaccuracies or omissions,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect (it being understood that for purposes of determining
whether this condition has been satisfied, references to "material" and
"Material Adverse Effect" in a particular representation or warranty shall be
disregarded).
(b) Performance of Covenants. The Company shall have performed and
------------------------
complied with the covenants and provisions of this Agreement required to be
performed or complied with by it on or prior to the Initial Closing Date.
(c) Effectiveness of Certain Agreements and Instruments. The
---------------------------------------------------
Shareholders Agreement, each of the Voting Agreements, the Registration Rights
Agreement and each of the Irrevocable Proxies shall all become effective and be
in full force without any Default thereunder simultaneous with the completion of
the Initial Closing.
(d) Senior Debt. The Senior Debt shall be in full force and effect
-----------
and shall have funded on the Initial Closing Date, and there shall not be any
Default thereunder.
(e) Subordinated Debt. The Subordinated Debt shall be in full force
-----------------
and effect and shall have funded on the Initial Closing Date, and there shall
not be any Default thereunder.
(f) Intentionally Omitted.
---------------------
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<PAGE>
(g) Delivery of Documents, etc. All documents, agreements,
---------------------------
instruments and other items required to have been delivered at the Initial
Closing shall have been duly and properly delivered.
(h) Directors' and Officers' Liability Insurance. The Company shall
--------------------------------------------
have in full force and effect as of the Initial Closing Date, directors' and
officers' liability insurance in form and substance reasonably acceptable to
Littlejohn covering those persons who were nominated by Littlejohn to serve as
members of the Board of Directors, and the premium for the one-year period
commencing on the Initial Closing Date shall have been paid in full.
(i) Other Conditions Precedent to the Purchasers' Obligations.
---------------------------------------------------------
(i) The Company shall have paid all of the out-of-pocket fees
and expenses of the Purchasers (including the fees and disbursements of (A)
Littlejohn's outside counsel, including Pepper Hamilton LLP, (B) Quilvest's
outside counsel, including Paul, Weiss, Rifkind, Wharton, Garrison, (C) the
Purchaser Financial Advisor (to the extent set forth on Schedule 8.1(i) attached
hereto), (D) accountants and (E) other advisors) related to the Contemplated
Transactions incurred through the Initial Closing Date.
(ii) There shall not have been any action taken or threatened,
or any Law or Order, promulgated, enacted, entered, enforced or deemed
applicable to this Agreement or the Contemplated Transactions, by or before any
Governmental Body that could reasonably be expected to prohibit consummation of
the Contemplated Transactions or the appointment of Littlejohn's nominees to the
Board of Directors, and Littlejohn's nominees shall have been appointed to serve
as directors of the Company until the next annual meeting of shareholders or
until their successors are elected and qualify.
(iii) Littlejohn shall have determined reasonably and in good
faith that no objections to the rights, preferences and privileges of the Series
A Preferred Shares, the Additional Preferred Shares or the Warrants or otherwise
to the terms and conditions of this Agreement and the Contemplated Transactions,
shall have been raised by the Principal Stock Exchange which have not been
remedied to the reasonable satisfaction of Littlejohn.
(iv) Holders of Class B Common Stock shall have converted their
respective shares of Class B Common Stock as described in Section 7.4 hereof.
(v) That certain advisory agreement between the Company and
Three Cities Research, Inc. dated March 1, 1997 shall have been terminated
without any payments thereunder except for those due and payable in accordance
with the terms thereof in effect on January 1, 2000.
8.2. Conditions to Obligations of the Purchasers - Additional Closings.
------------------------------------------------------------------
The obligation of each Purchaser to consummate the Contemplated Transactions to
the consummated at a particular Additional Closing is subject to the
satisfaction on or prior to such Additional Closing Date and as of such
Additional Closing Date, of the following conditions, any of which may be waived
in writing by such Purchaser:
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<PAGE>
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained herein shall be true and correct on and as
of the applicable Additional Closing Date with the same force and effect as
though the same had been made on and as of the applicable Additional Closing
Date (except to the extent a particular representation or warranty is expressly
made as of a particular date), except to the extent such inaccuracies or
omissions, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect (it being understood that for purposes of
determining whether this condition has been satisfied, references to "material"
and "Material Adverse Effect" in a particular representation or warranty shall
be disregarded).
(b) Performance of Covenants. The Company shall have performed and
------------------------
complied with the covenants and provisions of this Agreement required to be
performed or complied with by it from and after the Initial Closing Date to and
including the applicable Additional Closing Date.
(c) Intentionally Omitted.
---------------------
(d) Additional Issue Event. An Additional Issue Event shall have
----------------------
occurred and there shall be no revocation or termination thereof.
(e) Senior Debt. No Default shall have occurred and be continuing
-----------
with respect to the Senior Debt.
(f) Subordinated Debt. No Default shall have occurred and be
-----------------
continuing with respect to the Subordinated Debt.
(g) Governmental Consents. All Governmental Consents shall have
---------------------
been obtained and shall be in full force and effect as of such Additional
Closing Date.
(h) Delivery of Documents, etc. All documents, agreements,
---------------------------
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(i) Other Conditions Precedent to the Purchasers' Obligations.
---------------------------------------------------------
(i) There shall not have been any action taken or threatened,
or any Law or Order, promulgated, enacted, entered, enforced or deemed
applicable to this Agreement or the Contemplated Transactions, by or before any
Governmental Body, that could reasonably be expected to prohibit consummation of
the Contemplated Transactions to be consummated at such Additional Closing.
(ii) The Additional Preferred Share Designation shall have been
approved and duly adopted and shall have been duly filed with the Secretary of
State of Georgia.
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<PAGE>
(iii) The shares of Class A Common Stock issuable upon
conversion of the Additional Preferred Shares to be issued at such Additional
Closing shall have been approved for listing by the Principal Stock Exchange,
subject to notice of issuance.
(iv) Persons nominated by Littlejohn shall constitute a
majority of the members of the Board of Directors and no action shall be pending
to seek the removal of any such Person as directors of the Company.
(v) All proceedings to be taken and all the Company Documents
in connection with the consummation of the Contemplated Transactions at the
applicable Additional Closing shall be reasonably satisfactory in form and
substance to the Purchasers and their counsel.
8.3. Conditions to the Obligations of the Company - Initial Closing. The
--------------------------------------------------------------
obligation of the Company to consummate the Contemplated Transactions to be
consummated on the Initial Closing Date is subject to the satisfaction, on or
prior to the Initial Closing Date and as of the Initial Closing Date of the
following conditions which may be waived in writing by the Company:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Purchasers contained herein shall be true and correct on and
as of the Initial Closing Date with the same force and effect as though the same
had been made on and as of the Initial Closing Date (except to the extent a
particular representation or warranty is expressly made as of a particular
date), except to the extent such inaccuracies or omissions, individually or in
the aggregate, could not reasonably be expected to result in a material adverse
effect on the ability of such Purchaser to consummate the Contemplated
Transactions to be consummated at the Initial Closing (it being understood that
for purposes of determining whether this condition has been satisfied,
references to "material" and "material adverse effect" in a particular
representation or warranty shall be disregarded).
(b) Performance of Obligations. The Purchasers shall have performed
--------------------------
and complied with the covenants and provisions of this Agreement required to be
performed or complied with by it on or prior to the Initial Closing.
(c) Delivery of Documents, etc. All documents, agreements,
---------------------------
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(d) Orders and Laws. There shall not be any action taken or
---------------
threatened, or any Law or Order, promulgated, enacted, entered, enforced or
deemed applicable to this Agreement or the Contemplated Transactions, by or
before any Governmental Body that could reasonably be expected to prohibit
consummation of the Contemplated.
8.4. Conditions to Obligations of the Company - Additional Closings.
--------------------------------------------------------------
The obligation of the Company to consummate the Contemplated Transactions on any
Additional Closing Date is subject to the satisfaction, on or prior to the
applicable Additional Closing Date
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<PAGE>
and as of the applicable Additional Closing Date of the following conditions,
any of which may be waived in writing by the Company:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Purchasers contained herein shall be true and correct on and
as of such Additional Closing Date with the same force and effect as though the
same had been made on and as of the applicable Additional Closing Date (except
to the extent a particular representation or warranty is expressly made as of a
particular date), except to the extent such inaccuracies or omissions,
individually or in the aggregate, could not reasonably be expected to result in
a material adverse effect on the ability of such Purchaser to consummate the
Contemplated Transactions to be consummated at the applicable Additional Closing
(it being understood that for purposes of determining whether this condition has
been satisfied, references to "material" and "Material Adverse Effect" in a
particular representation or warranty shall be disregarded).
(b) Performance of Obligations. The Purchasers shall have performed
--------------------------
and complied with the covenants and provisions of this Agreement required to be
performed or complied with by them from and after the Initial Closing to the
applicable Additional Closing Date.
(c) Delivery of Documents, etc. All documents, agreements,
---------------------------
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(d) Governmental Consents. All Governmental consents shall have
---------------------
been obtained and shall be in full force and effect as of such Additional
Closing Date.
(e) Orders and Laws. There shall not have been any action taken or
---------------
threatened, or any Law or Order proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to this Agreement or the Contemplated
Transactions, by or before any Governmental Body, that could reasonably be
expected to prohibit consummation of the Contemplated Transactions to be
consummated at such Additional Closing.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
9.1. By the Company. Subject to the provisions of this Article IX, from
--------------
and after the Initial Closing, the Company agrees to indemnify, defend and hold
each Purchaser harmless from and against all Losses, Claims, and Investigatory
and Legal Costs resulting from or arising out of:
(a) any misstatement in or omission from any of the representations
or warranties of the Company contained in this Agreement or in any Company
Document; and
(b) the failure of the Company to perform any of its obligations
under or comply with any of its respective covenants contained in this Agreement
or in any Company Document.
-42-
<PAGE>
9.2. By the Purchaser. Subject to the provisions of this Article IX,
----------------
from and after the Initial Closing, each Purchaser, severally and not jointly,
agrees to indemnify, defend and hold the Company harmless from and against all
Losses, Claims, and Investigatory and Legal Costs resulting from or arising out
of:
(a) any misstatement in or omission from any of the representations
and warranties made by such Purchaser to the Company contained in this Agreement
or in any Purchase Document executed by such Purchaser; and
(b) the failure of such Purchaser to perform any of its obligations
under or to comply with any of the covenants to be performed or complied by it
contained in this Agreement or in any Purchaser Document executed by such
Purchaser.
9.3. Survival of Representations, Warranties and Covenants; Limitation
-----------------------------------------------------------------
on Indemnification. The parties hereto agree that the representations and
- ------------------
warranties made in this Agreement shall survive for a period ending on the
earlier of (a) the second anniversary of the Closing Date or (b) 30 days after
the Company has delivered to the Purchasers a copy of its audited financial
statements for the fiscal year ended February 28, 2001 accompanied by an
executed opinion of the Company's independent auditors. Notwithstanding anything
to the contrary contained herein, indemnification under Sections 9.1(a) or under
Section 9.2(a), may be brought or maintained unless and until the aggregate
dollar amount of all Losses, Claims and Investigatory and Legal Costs sought to
be indemnified against under such aforesaid Sections exceeds $300,000 (the
"Threshold Amount"), and then for the full amount of such Losses, Claims and
Investigatory and Legal Costs, including the Threshold Amount, up to, but not
exceeding, the aggregate purchase price for all Series A Preferred Shares,
Additional Preferred Shares and Warrants purchased pursuant to this Agreement
(the "Maximum Amount").
9.4. Notice of Indemnification. In the event any Legal Proceeding shall
-------------------------
be threatened or instituted or any Claim or demand shall be asserted by any
Person in respect of which payment may be sought by one party hereto from the
other party, the party seeking indemnification (the "Indemnitee") shall promptly
cause written notice of the commencement of such Legal Proceeding or the
assertion of any such Claim, of which it has knowledge and which is covered by
this indemnity, to be forwarded to the other party (the "Indemnitor"); provided,
however, that failure of the Indemnitee to give the Indemnitor notice promptly
as provided in this Section shall not relieve the Indemnitor of its obligations
hereunder except to the extent that the Indemnitor shall have been prejudiced by
such failure. In all events, notice must be received by the Indemnitor prior to
the expiration of the survival terms of the underlying representations and
warranties as described in Section 9.3 above.
9.5. Indemnification Procedure for Third-Party Claims. Except as
------------------------------------------------
otherwise provided herein, in the event of the initiation of any Legal
Proceeding against an Indemnitee by a third party, the Indemnitor shall be
entitled to assume the defense thereof, at the Indemnitor's sole expense. If the
Indemnitor assumes the defense of any Legal Proceeding, it will not settle the
Legal Proceeding without the prior written consent of the Indemnitee (which
shall not be unreasonably withheld or delayed). The Indemnitee shall cooperate
in all reasonable respects with the Indemnitor and its attorneys in the
investigation, trial and defense of any Legal
-43-
<PAGE>
Proceeding and any appeal arising therefrom (including the filing in the
Indemnitee's name of appropriate cross claims and counterclaims). The Indemnitee
may, at its own cost, participate in any investigation, trial and defense of
such Legal Proceeding controlled by the Indemnitor and any appeal arising
therefrom. If after receipt of a written notice pursuant to Section 9.4 hereof,
the Indemnitor does not undertake to defend any such Legal Proceeding, the
Indemnitee may, but shall have no obligation to, contest or defend against any
Legal Proceeding and the Indemnitor shall be bound by the result obtained with
respect thereto by the Indemnitee (including, without limitation, the settlement
thereof without the consent of the Indemnitor). If there are one or more legal
defenses available to the Indemnitee that conflict with those available to the
Indemnitor, the Indemnitee shall have the right to assume the defense of the
Legal Proceeding at the expense of the Indemnitor with counsel reasonably
acceptable to the Indemnitor; provided, however, that the Indemnitee may not
settle such Legal Proceeding without the consent of the Indemnitor, which
consent shall not be unreasonably withheld or delayed.
9.6. Payment of Indemnification Amounts. Amounts determined to be owing
----------------------------------
under Sections 9.1 or 9.2 hereof by an Indemnitor to an Indemnitee in respect of
any Third Party Claim shall be payable by the Indemnitor as incurred by the
Indemnitee. All other amounts owed under Sections 9.1 or 9.2 by an Indemnitor to
an Indemnitee shall be paid upon admission or other final determination of
liability under such Sections. All amounts paid pursuant to this Article IX
shall be deemed to be an adjustment to the purchase price paid for securities
issued pursuant to this Agreement.
ARTICLE X
TERMINATION
10.1. Termination Prior to Initial Closing. This Agreement may be
------------------------------------
terminated prior to the Initial Closing as follows:
(a) by mutual written consent of the Company and Littlejohn;
(b) by Littlejohn or the Company if the Initial Closing has not
occurred by 11:59 p.m. New York time on February 28, 2000.
10.2. Termination After Initial Closing. This Agreement may be terminated
---------------------------------
after the Initial Closing occurs, as follows:
(a) by either Purchaser or the Company if, without violating the
provisions of Section 7.2 hereof, prior to the receipt of the Required Approval
the Company enters into a definitive agreement with respect to an unsolicited
Superior Alternative Transaction, but only after having received the written
opinion of outside counsel that approval, acceptance and recommendation of such
Superior Alternative Proposal is required in order for the Board of Directors to
properly discharge its fiduciary obligations to the Company's stockholders under
applicable Law;
(b) by mutual written consent of the Company and the Purchasers;
-44-
<PAGE>
(c) by the Company, so long as the Company has not breached any of
its obligations hereunder, if Littlejohn (i) fails to perform any covenant or
agreement required to be performed by it pursuant to this Agreement when
performance thereof is due or (ii) breached any of its representations or
warranties, and, in either case, does not cure such failure within 20 business
days after the Company delivers written notice thereof to Purchaser;
(d) by Littlejohn so long as it has not breached any of its
obligations hereunder, if the Company (i) fails to perform any covenant or
agreement required to be performed by it pursuant to in this Agreement when
performance thereof is due or (ii) breached any of its representations or
warranties, and, in either case, does not cure the failure within 20 business
days after Littlejohn delivers written notice thereof to the Company; or
(e) by Littlejohn or the Company, upon a Change of Control (as
defined in the Series A Designation).
10.3. Effect of Termination Under 10.1. If this Agreement is terminated
--------------------------------
pursuant to Section 10.1, all rights and obligations of the parties hereunder
shall terminate, except for the confidentiality covenants referenced in Section
7.1 and the provisions set forth in Article XI hereof; provided, however, if
such termination results from any breach by any party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, then the non-breaching party shall continue to have all rights and
remedies under applicable Law available to it as a result of such breach.
10.4. Effect of Termination Under 10.2. If this Agreement terminates
--------------------------------
pursuant to Section 10.2, all rights and obligations of the parties hereunder
shall terminate, except for the confidentiality covenants referenced in Section
7.1, the indemnification provisions set forth in Article IX hereof and the
provisions set forth in Article XI hereof; provided, however, if such
termination results from the breach by any party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, then the non-
breaching party shall continue to have all rights and remedies under applicable
Law available to it as a result of such breach.
ARTICLE XI
MISCELLANEOUS
11.1. Entire Agreement. This Agreement (with its Schedules and Exhibits)
----------------
contains, and is intended as, a complete statement of all of the terms and the
arrangements between the parties hereto with respect to the matters provided for
herein, and supersedes any and all previous agreements and understandings
between the parties hereto with respect to those matters.
11.2. Specific Performance. The parties hereto agree that, in the event
--------------------
of any such breach of any covenant or agreement contained herein or in the
Company Documents or the Purchaser Documents, the non-breaching parties will be
entitled to seek a decree of specific performance, mandamus or any other
appropriate remedy to enforce such provisions without any requirement that a
bond be posted.
-45-
<PAGE>
11.3. Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of New York without regard to the
application of the principles of conflicts or choice of laws.
11.4. Expenses. The Company shall pay and be responsible for the payment
--------
of all fees, costs and expenses (including, without limitation, fees and
disbursements of counsel, accountants, financial advisors, lenders and experts)
that it, Littlejohn and Quilvest have incurred or will incur in connection with
the preparation, negotiation, execution, delivery, performance and enforcement
of this Agreement, each of the Company Documents or the Purchaser Documents, and
all amendments and modifications to any such documents, agreements or
instruments. Notwithstanding the foregoing, if the Initial Closing shall not
occur for any reason other than solely as a result of a breach by Littlejohn of
its representations, warranties, covenants or agreements contained in this
Agreement, then the Company's obligation to reimburse Littlejohn for fees, costs
and expenses shall be limited to $250,000, plus all fees, costs and expenses
(including, without limitation, fees and disbursements of counsel, accountants,
financial advisors, lenders and experts) incurred by Littlejohn in connection
with the preparation and filing of the Schedule 14f-1, the Proxy Statement, and
the negotiation, preparation, execution and delivery of the Senior Debt and the
Subordinated Debt.
11.5. Public Announcements. Except for the initial press release which
--------------------
will be made promptly after the execution of this Agreement, the text of which
shall be reasonably acceptable to both parties, no party shall make any public
announcement relating to this Agreement or the Contemplated Transactions without
the prior written consent of the other party; provided, however, any party shall
be permitted (a) to make announcements to the extent it is advised in writing by
its counsel that such announcement is required to be made by applicable Law or
Order and the other parties are afforded a reasonable opportunity to comment on
the content of such announcement prior to it being made, and (b) to make filings
with the Commission (including filings pursuant to Section 13(d) of the Exchange
Act) and any stock exchanges so long as it is advised by its counsel that such
filing is required to be made by applicable Law or Order and, subject to any
requirements of law, the other parties are afforded a reasonable opportunity to
comment on the content of any such filing prior to it being filed.
11.6. Intentionally Omitted.
---------------------
11.7. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be given to the Person either by hand delivery by facsimile
transmission, by United States express mail, postage prepaid, or by overnight
courier services guaranteeing next business day delivery, charges prepaid, to:
-46-
<PAGE>
If to the Company, to:
Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Facsimile: 770-798-7141
Telephone: 770-798-0700
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: E. David Robertson, Esquire
Facsimile: 212-504-6666
Telephone: 212-504-6000
If to Littlejohn, to:
Littlejohn & Co., LLC
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Angus C. Littlejohn, Jr.
Facsimile: 203-861-4009
Telephone: 203-861-4005
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: James D. Epstein, Esquire
Facsimile: 215-981-4750
Telephone: 215-981-4000
If to Quilvest, to:
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Mr. Willem F.P. De Vogel
Facsimile: 212-980-1142
Telephone: 212-838-9660
-47-
<PAGE>
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6046
Attention: Richard Borisoff, Esquire
Facsimile: 212-757-3990
Telephone: 212-373-3000
If the notice is sent by United States express mail or by overnight courier
services, it shall be deemed to have been given to the Person entitled thereto
one business day after deposited with the post office or the courier service for
delivery to that Person or, in the case of a notice given by hand delivery or
telecopier, when received. Notice of any change in any such address shall also
be given in the manner set forth above. Whenever the giving of notice is
required, the giving of such notice may be waived by the party entitled to
receive such notice.
11.8. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
11.9. Binding Effect; Successors and Assigns. Nothing in this Agreement,
--------------------------------------
express or implied, is intended, except as set forth herein, to confer upon any
third party any rights, remedies, obligations or liabilities. No party can
assign its interests herein to any third party without the prior written consent
of the other parties, except that either Purchaser may assign its rights to
acquire securities pursuant to this Agreement to an Affiliate so long as it
guarantees the obligations of its assignee. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
11.10. Interpretation. Unless the context of this Agreement otherwise
--------------
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation thereof. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.11. Amendments and Warranties. The provisions of this Agreement,
-------------------------
including the provisions of this sentence, may not be amended, modified or
supplemented except
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<PAGE>
in a writing signed by all of the parties hereto, and waivers or consents to
departures from the provisions hereof may not be given without the written
consent of party so waiving or consenting.
11.12. Counterparts and Facsimile Signatures. This Agreement may be
-------------------------------------
executed, including by facsimile signature, in one or more counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the date and year first above written.
PAMECO CORPORATION
By: /s/ Mark Sellers
-------------------------------------
Name: Mark Sellers
Title: Vice Chairman and Chief Financial Officer
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, LLC,
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
--------------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ Willem F.P. de Vogel
--------------------------------------
Name: Willem F.P. de Vogel
Title: Attorney-in-Fact
-49-
<PAGE>
EXHIBIT 10.36
SHAREHOLDERS AGREEMENT
by and among
PAMECO CORPORATION
LITTLEJOHN FUND II, L.P.
QUILVEST AMERICAN EQUITY, LTD.
and
Willem F. P. de Vogel
dated as of
February 18, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Certain Defined Terms...................................................... 1
2. Agreements to Vote; Irrevocable Proxy...................................... 4
3. Transfers of Securities.................................................... 6
4. Participation Rights....................................................... 8
5. Joinder Requirements....................................................... 9
6. Composition, Nomination and Election of Board.............................. 9
7. Stock Splits............................................................... 11
8. Representations and Warranties of Littlejohn............................... 11
9. Representations and Warranties of Quilvest and de Vogel.................... 12
10. Representations and Warranties of the Company.............................. 13
11. Termination; Securities Free from Agreement................................ 14
12. Expenses................................................................... 14
13. Fees....................................................................... 14
14. Certain Covenants of Quilvest and de Vogel................................. 15
15. Financial Reports and Information.......................................... 16
16. Transaction with Affiliates................................................ 16
17. Legend and Stop Transfer Instructions...................................... 16
18. Survival of Representations and Warranties................................. 17
19. Notices.................................................................... 17
20. Entire Agreement; Amendment................................................ 18
21. Successors and Assigns..................................................... 18
22. Governing Law; Consent to Jurisdiction..................................... 18
23. Injunctive Relief.......................................................... 19
24. Counterparts; Facsimile Signatures......................................... 19
25. Severability............................................................... 19
26. Further Assurances......................................................... 19
27. No Third Party Beneficiaries; No Partnership or Fiduciary Relationship..... 19
28. Legal Expenses............................................................. 19
29. Interpretation............................................................. 19
30. Effectiveness.............................................................. 20
</TABLE>
-i-
<PAGE>
SHAREHOLDERS AGREEMENT
----------------------
SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of February 18,
2000, by and among Littlejohn Fund II, L.P., a Delaware limited partnership
("Littlejohn"), Quilvest American Equity, Ltd., a British Virgin Islands
international business company ("Quilvest"), Willem F.P. de Vogel, a resident of
the State of New York ("de Vogel"; and together with Littlejohn and Quilvest,
the "Shareholders"), and Pameco Corporation, a Georgia corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, as of the Effective Time (as defined in Section 1 below) each
of the Shareholders owns such number of shares of Common Stock, par value $.01
per share (the "Common Stock"), such number of shares of Series A Preferred
Shares (as defined in Section 1 hereof) and such number of warrants to purchase
Series A Preferred Shares (the "Warrants"), in each case indicated next to his
or its name on Schedule 1 attached hereto;
WHEREAS, the Company and the Shareholders have agreed to provide for
certain restrictions with respect to the ownership and transfer of Securities
(as defined in Section 1 hereof) owned by the Shareholders and certain other
rights incident to the ownership of such Securities pursuant to this Agreement;
and
WHEREAS, this Agreement is being entered into in order to induce
Littlejohn to enter into the Purchase Agreement (as defined in Section 1 hereof)
and to consummate the Contemplated Transactions (as defined in Section 1
hereof).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other, good and valuable consideration, and
intending to be legally bound hereby, the parties hereto, hereby agree, as of
the Effective Time, as follows:
1. Certain Defined Terms.
---------------------
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Additional Closing" has the meaning set forth in the Purchase
Agreement.
"Affiliate" of a Person shall mean any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to elect
a majority of the board of directors (or other governing body) or to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise and, in any
event and without limiting the generality of the foregoing, any Person owning
10% or more of the voting securities of another Person shall be deemed to
control that Person.
<PAGE>
"Aggregate Proceeds" shall be determined as of the date of an
applicable Participation Notice and shall equal the gross proceeds received as
of the date of determination by Littlejohn or Littlejohn Permitted Transferees
from sales, if any, of shares of Common Stock or Preferred Stock to any Person
who is not a Littlejohn Permitted Transferee (a) pursuant to an effective
registration statement, (b) pursuant to Rule 144 under the Securities Act or (c)
in transactions otherwise exempt from the registration requirements of the
Securities Act.
"Applicable Percentage" has the meaning set forth in the Purchase
Agreement.
"Articles of Incorporation" means the Articles of Incorporation of the
Company, as they may hereafter be amended or modified.
"Beneficial Owner" and "beneficial ownership" shall be determined in
accordance with Rule 13d-3 promulgated under the Exchange Act.
"Board" has the meaning set forth in Section 2.1(c) hereof.
"Business Day" has the meaning set forth in the Purchase Agreement.
"By-laws" means the By-laws of the Company, as they may hereafter be
amended or modified.
"Class A Common Stock" means the Class A Common Stock of the Company,
par value $0.01 per share.
"Class B Common Stock" means the Class B Common Stock of the Company,
par value $0.01 per share.
"Commission" means the United States Securities and Exchange
Commission, or any successor thereto.
"Common Stock" means the Class A Common Stock and Class B Common Stock
of the Company.
"Contemplated Transactions" has the meaning set forth in the Purchase
Agreement.
"Credit Agreement" has the meaning set forth in Section 13(a) hereof.
"Effective Time" shall mean the time when the Initial Closing is
completed.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
"Family Trust" means with respect to any Shareholder who is a natural
person, a trust for the benefit of a member of such Shareholder's Immediate
Family.
"GBCC" means the Georgia Business Corporation Code, as amended.
-2-
<PAGE>
"Immediate Family" means with respect to any Shareholder who is a
natural person, such Shareholder's parents, children, siblings, grandparents,
grandchildren, nieces and nephews.
"Initial Closing" has the meaning set forth in the Purchase Agreement.
"Initiating Holder" has the meaning set forth in Section 5.1 hereof.
"Irrevocable Proxy" has the meaning set forth in Section 2.3 hereof.
"Lenders" shall have the meaning set forth in the Credit Agreement.
"Littlejohn" means Littlejohn Fund II, L.P., a Delaware limited
partnership.
"Littlejohn Permitted Transferee" means (a) any Affiliate of
Littlejohn, or (b) any Immediate Family Member, or Family Trust established by
an Immediate Family Member, of an Affiliate of Littlejohn who is a natural
person.
"Management Fee" has the meaning set forth in Section 13(a) hereof.
"Offered Securities" has the meaning set forth in Section 4.1 hereof.
"Option Period" has the meaning set forth in Section 4.3 hereof.
"Overadvance Fee" has the meaning set forth in Section 13(b) hereof.
"Participation Notice" has the meaning set forth in Section 4.1
hereof.
"Participation Right" has the meaning set forth in Section 4.3 hereof.
"Participating Shareholder" has the meaning set forth in Section 4.2
hereof.
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company or partnership, association, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Preferred Stock" means any series of preferred stock, par value $1.00
per share, of the Company, including the Series A Preferred Shares.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of February 18, 2000, by and among the Company, Quilvest and
Littlejohn, as amended from time to time.
"Purchaser" has the meaning set forth in Section 4.1 hereof.
"Quilvest" means Quilvest American Equity, Ltd., a British Virgin
Islands international company.
-3-
<PAGE>
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means that certain registration rights
agreement, dated today's date, among the Company, Littlejohn and Quilvest, as
the same may be amended or modified from time to time.
"Required Approval" has the meaning set forth in the Purchase
Agreement.
"Return Amount" has the meaning set forth in Section 4.5 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Shareholder" has the meaning set forth in Section 4.1 hereof.
"Securities" means and include (a) all shares of the Common Stock and
Preferred Stock of the Company, (b) all options, warrants or rights to acquire
shares of Common Stock or Preferred Stock, (c) all securities which are
convertible into or exchangeable or exercisable for, Common Stock or Preferred
Stock, and (d) all other securities of the Company which may be issued in
exchange for or in respect of shares of Common Stock or Preferred Stock (whether
by way of stock split, stock dividend, combination, reclassification,
reorganization or any other means).
"Series A Preferred Shares" means the Series A Cumulative Pay-in-Kind
Preferred Stock of the Company, as the same may be amended or modified from time
to time.
"Subsequent Preferred Shares" has the meaning set forth in the
Certificate of Designation for the Series A Preferred Shares.
"Third Party Offer Terms" has the meaning set forth in Section 4.1
hereof.
"Transfer" means any transfer of Securities, whether by sale,
assignment, gift, will, devise, bequest, operation of the laws of descent and
distribution, or in trust, pledge, hypothecation, mortgage, encumbrance or other
disposition. The verb to "transfer" shall mean to sell, assign, give, dispose,
transfer (including by gift, will, devise, bequest, or operation of laws of
descent and distribution, or in trust), pledge, hypothecate, mortgage, or
encumber.
"Voting Securities" has the meaning set forth in Section 2.1(a)
hereof.
"Warrants" has the meaning set forth in the preamble hereof.
2. Agreements to Vote; Irrevocable Proxy.
-------------------------------------
2.1. Voting for Matters to be Considered. Each of the Shareholders
-----------------------------------
hereby agrees that, until the Required Approval is obtained or the Company's
shareholders vote to reject the matters contemplated to be voted on pursuant to
Section 7.6 of the Purchase
-4-
<PAGE>
Agreement (the "Matters to be Considered"), whichever shall occur first, at any
meeting of the shareholders, however called, such Shareholder shall:
(a) vote all Securities which are entitled by the GBCC, the Articles
of Incorporation or the By-laws to be voted ("Voting Securities") and which are
beneficially owned by it, in favor of the Matters to be Considered;
(b) vote all Voting Securities beneficially owned by him or it against
any action or agreement that would result, to its or his knowledge, in a breach
of any covenant, obligation or agreement or any representation or warranty of
the Company or Quilvest under or pursuant to the Purchase Agreement;
(c) vote all Voting Securities beneficially owned by him or it against
any action or agreement that would impede, interfere with, delay, postpone or
attempt to discourage obtaining the Required Approval, including (i) any
corporate transaction not entered into in the ordinary course of business,
including a merger, other business combination, reorganization, consolidation,
recapitalization, dissolution or liquidation involving the Company, (ii) a sale
or transfer of a material amount of assets of Company, (iii) any change in the
board of directors of Company (the "Board"), except in accordance with the
Purchase Agreement, (iv) any change in the capitalization of the Company, except
in accordance with the Purchase Agreement, (v) any change in the Articles of
Incorporation, By-laws or other organizational or constitutive documents of the
Company, except in accordance with the Purchase Agreement, or (vi) any other
material change in the corporate structure or business of the Company. Each
Shareholder acknowledges receipt and review of a copy of the Purchase Agreement.
2.2. Agreement to Vote on All Other Matters. Quilvest and de vogel
--------------------------------------
hereby agree that, so long as the Purchase Agreement has not been terminated in
accordance with its terms, at any meeting of the shareholders, however called,
such Shareholder shall vote all Voting Securities which are beneficially owned
by him or it in accordance with written instructions which such Shareholder
reasonably believes in good faith after reasonable inquiry were signed by an
authorized officer of Littlejohn. In the absence of receipt of such written
instructions as to how such Voting Securities should be voted with respect to a
particular meeting, Quilvest and de Vogel shall refrain from voting such Voting
Securities on such particular matter. Notwithstanding anything to the contrary,
Littlejohn shall be entitled to exercise the voting rights attributable to such
Voting Securities at any time pursuant to the Irrevocable Proxy without notice
to Quilvest or de Vogel. Nothing contained in this Section 2.2 shall require
Quilvest or de Vogel, or shall permit Littlejohn through the exercise of the
Irrevocable Proxy, to vote the Voting Securities beneficially owned by Quilvest
or de Vogel, in the case of the election of members of the Board, in
contravention of the provision of Section 6 hereof.
2.3. Irrevocable Proxy. Contemporaneously with the execution of
-----------------
this Agreement: (a) Quilvest and de Vogel shall deliver to Littlejohn a proxy
in the form attached hereto as Exhibit A, which shall become effective as of the
Effective Time and shall be irrevocable to the fullest extent permitted by law
(the "Irrevocable Proxy"), with respect to all Voting Securities owned of record
by each of them as of the Effective Time; and (b) Quilvest and de Vogel shall
cause to be delivered to Littlejohn additional Irrevocable Proxies executed on
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<PAGE>
behalf of each record owner of any Voting Securities owned beneficially (but not
owned of record) by him or it. From time to time after the date of this
Agreement: (i) if Quilvest or de Vogel shall become the record owner of
additional Voting Securities, it shall immediately deliver to Littlejohn an
Irrevocable Proxy with respect to such additional Voting Securities; and (ii) if
Quilvest or de Vogel shall become the beneficial owner (but not the record
owner) of additional Voting Securities, it shall immediately cause to be
delivered to Littlejohn an Irrevocable Proxy with respect to such additional
Voting Securities from the record holder of such additional Voting Securities.
The terms of any Irrevocable Proxy executed and delivered by de Vogel shall
automatically terminate and be of no further force or effect at and after the
earlier of (x) such time as he no longer beneficially owns any shares of Class B
Common Stock or (y) he is no longer a member of the Board. The terms of any
Irrevocable Proxy executed and delivered by a record owner of Voting Securities
which are beneficially owned by de Vogel shall automatically terminate and be of
no further force or effect at and after the earlier of (x) such time as de Vogel
no longer beneficially owns any shares of Class B Common Stock or (y) de Vogel
is no longer a member of the Board.
2.4. Written Consents. The provisions of this Article 2 shall be
----------------
equally applicable to any action taken or proposed to be taken by the Company's
shareholders without a meeting, including any such action taken or proposed to
be taken by written consent pursuant to Section 14-2-704 of the GBCC.
2.5. General. The Company agrees to use its best efforts to cause
-------
the Matters to be Considered to be presented for a vote of the Company's
shareholders as soon as practicable. Quilvest and de Vogel hereby confirm each
and every action to be taken by Littlejohn pursuant to the Irrevocable Proxy (so
long as such action was taken when the Irrevocable Proxy was in effect) as if it
were its own and waives any right to make any claim against Littlejohn that may
arise, directly or indirectly, as a result of Littlejohn's voting of any of the
Voting Securities pursuant to the Irrevocable Proxy. Each of Quilvest and de
Vogel hereby agrees, severally and not jointly, to defend, indemnity and hold
Littlejohn harmless from and against any Losses and Investigatory and Defense
Costs (as such terms are defined in the Purchase Agreement) that Littlejohn may
sustain, suffer or incur, directly or indirectly, as a result of a breach by it
of any of its representations, warranties, covenants or agreements contained in
this Agreement.
3. Transfers of Securities.
-----------------------
3.1. Except as expressly permitted by the terms of this
Agreement, each of de Vogel and Quilvest hereby agrees that he or it shall not
Transfer, or permit the Transfer of, all or any of the Securities beneficially
owned by him or it. Littlejohn agrees that it will not transfer any Securities
if such Transfer is prohibited by the terms and conditions of this Agreement.
As a condition to any Transfer to a Littlejohn Permitted Transferee, such
Littlejohn Permitted Transferee shall execute a counterpart agreeing to be bound
by the terms and conditions of this Agreement to the same extent as its
transferor. No Transfer shall be effective and the Company shall not, and shall
not be compelled to, recognize any Transfer or record any Transfer on its books
if such Transfer is prohibited by this Agreement, or issue any certificate
representing any Securities to any Person who has received such Securities in a
Transfer made in contravention of the terms of this Agreement, and only if such
Person has delivered to the
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<PAGE>
Company and Littlejohn an executed counterpart where one is required to be
delivered hereunder.
3.2. Each of Quilvest and de Vogel shall be permitted to Transfer
Securities beneficially owned by it to any Affiliate of such Shareholder, and de
Vogel shall be permitted to transfer Securities beneficially owned by him to a
member of his Immediate Family or to a Family Trust, provided that, in any such
case, any such transferee shall, as a condition to such Transfer, execute a
counterpart, and deliver such counterpart to the Company and Littlejohn,
providing that such transferee shall be bound by the terms and provisions of
this Agreement to the same extent as the transferor was bound.
3.3. In the case of a proposed Transfer of Securities by Quilvest
or de Vogel to someone other than one of its Affiliates, or, in the case of de
Vogel, to a member of his Immediate Family or to a Family Trust, then Quilvest
or de Vogel shall provide Littlejohn with written notice at least 20 days prior
to the anticipated Transfer. Such notice shall contain (a) the identity of the
proposed transferor and (b) the proposed number of Securities to be transferred.
Within 15 days of receipt of written notice of a proposed Transfer, Littlejohn
shall provide either (i) written consent to the proposed Transfer, which consent
may be denied for any reason or for no reason, and which may be given or denied
in Littlejohn's sole and absolute discretion, (ii) written notice specifying an
alternate number of shares to be transferred to which it would be prepared to
provide consent, or (iii) written notice to the applicable Shareholder of
Littlejohn's decision not to consent to the proposed Transfer. If Littlejohn
shall fail to respond, it shall be deemed not to have consented to such
Transfer. The proposed transferor shall provide Littlejohn with such other
information as Littlejohn shall reasonably request, including the terms and
conditions of the Transfer and information concerning the proposed transferee.
Upon receipt of the written consent of Littlejohn, if at all, the transferring
Shareholder may consummate the proposed Transfer. Such Shareholder may also
consummate a transfer of the number of Securities set forth in the alternate
proposal of Littlejohn, provided, however, that such Shareholder shall notify
Littlejohn of its decision to accept the Littlejohn alternate proposed number of
Securities to be transferred not less than 10 days after receipt of the same
from Littlejohn, if at all. No Transfer may be effected pursuant to this
Section 3.3 until after receipt of the Required Approval.
3.4. Except as otherwise consented to in writing by Littlejohn,
which consent may be denied for any reason or for no reason, and which may be
given or denied in Littlejohn's sole and absolute discretion, in no event shall
any Transfer by Quilvest or de Vogel of its or his Class B Common Stock be
permitted under Section 3.3 if such Transfer would result in a conversion of the
Class B Common Stock into shares of Class A Common Stock.
3.5. Notwithstanding the provisions of Sections 3.3 and 3.4
hereof, commencing on the date which is five years after the date hereof, and
from time to time thereafter, so long as Littlejohn beneficially owns and is
entitled to the economic benefits of greater than 50% of the then outstanding
Common Stock and Preferred Stock (determined after giving effect to any Transfer
contemplated by this Section 3.5), Quilvest and de Vogel may sell Securities
pursuant to Rule 144 promulgated under the Securities Act and in private
transactions exempt from the Securities Act; provided, however, the amount of
Securities sold in all such
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<PAGE>
transactions shall not exceed, in the aggregate for any three-month period, the
volume limitation set forth in Rule 144, regardless if such rule or limitation
is applicable to the sale.
3.6. Notwithstanding the provisions of Sections 3.3 and 3.4
hereof, Quilvest and de Vogel shall be entitled to sell Registrable Securities
pursuant to and in accordance with the terms and conditions of the Registration
Rights Agreement.
3.7. The parties agree that the transfer restrictions set forth
in this Article 3 are not manifestly unreasonable.
4. Participation Rights.
--------------------
4.1. If Littlejohn or a Littlejohn Permitted Transferee (for
purposes of this section, a "Selling Shareholder") proposes to sell a portion of
the Securities beneficially owned by it ("Offered Securities") in a transaction
which is exempt from the registration requirements of the Securities Act and the
proposed transferee is not a Littlejohn Permitted Transferee (the "Purchaser"),
it shall give written notice ("Participation Notice") to Quilvest and de Vogel
hereunder and comply with this Section 4 before making such sale. The
Participation Notice shall identify the third party purchaser and the material
terms (including the proposed closing date) of the proposed sale of the Offered
Securities (the "Third Party Offer Terms").
4.2. Quilvest or de Vogel may elect to participate (such
Shareholder so electing being herein a "Participating Shareholder") in the
Selling Shareholder's sale of Offered Securities to the Purchaser in accordance
with this Section 4.
4.3. For a period of 15 days after receipt of the Participation
Notice (the "Option Period"), any such Participating Shareholder shall have the
right ("Participation Right") to Transfer to the Purchaser, on the same terms
and conditions as the Selling Shareholder, part or all of the Offered Securities
to be sold to the Purchaser.
4.4. The Participation Right shall be exercised, if at all, by
any Participating Shareholder giving written notice of exercise of the
Participation Right, including the number of Securities it desires to sell, to
the Selling Shareholder before the expiration of the Option Period.
4.5. The number of Offered Securities to be sold by the
Shareholders in a transaction governed by this Section 4 shall be determined as
follows: (a) until Littlejohn and the Littlejohn Permitted Transferees shall
have received Aggregate Proceeds equal to the amount invested by Littlejohn and
its Affiliates to purchase Securities, plus the amount of accrued and unpaid
dividends, if any, thereon (whether or not declared), in each case through the
date of the particular Participation Notice (the "Return Amount"), the Offered
Securities shall be allocated (without priority between the two groups described
below), between Littlejohn and the Littlejohn Permitted Affiliates, on the one
hand, and Quilvest, de Vogel and their respective permitted transferees who are
party to this Agreement, on the other hand, such that Littlejohn and the
Littlejohn Permitted Transferees will be permitted to sell up to Littlejohn's
Applicable Percentage of the Offered Securities, allocated among them as they
shall so determine, and Quilvest, de Vogel and their respective permitted
transferees who are party to this Agreement will be permitted to sell up to
Quilvest's Applicable Percentage of the Offered Securities,
-8-
<PAGE>
allocated among them as they shall so determine; and (b) after Littlejohn shall
have received the Return Amount, the Offered Securities shall be allocated among
Littlejohn, Quilvest, de Vogel and their respective permitted transferees who
are party to this Agreement pro rata based upon the number of shares of Common
Stock beneficially owned by them. If this Section 4 shall have terminated as to
de Vogel pursuant to Section 11.3 hereof, this Section 4.5 shall be construed to
exclude de Vogel and his permitted transferees from all aspects hereof.
4.6. Notwithstanding anything to the contrary contained in this
Section 4, any sale of Securities in connection with an effective registration
statement, or pursuant to the provisions of Rule 144 of the Securities Act,
shall not be restricted by Section 4 or 5 of this Agreement.
5. Joinder Requirements.
--------------------
5.1. If at any time Littlejohn (for purposes of this section, the
"Initiating Holder") proposes to sell at least 90% of the Securities
beneficially owned by it to a prospective purchaser which is not an Affiliate of
Littlejohn, and the purchaser of such Securities requires as a condition of the
sale that it acquire the same percentage of the Securities beneficially owned by
Quilvest and de Vogel, then Quilvest and de Vogel shall be required to sell the
same percentage of its respective Securities to the purchaser as Littlejohn is
selling to the purchaser on terms providing Quilvest and de Vogel with
substantially the same economic benefit as was provided to the Initiating
Holder, after taking into consideration the relative rights, preferences and
privileges of the various Securities to be purchased and sold, and otherwise on
the same terms and conditions as those offered to the Initiating Holder. Each
of Quilvest and de Vogel agrees to execute an irrevocable proxy in favor of the
purchaser under this Section 5 if the purchaser so requires it in order to
retain voting control of the Company, which proxy shall be in substantially the
form of Exhibit A attached hereto.
5.2. Any sale of Securities pursuant to this Section 5 shall not
be subject to the provisions of Sections 3 and 4 of this Agreement. Nothing
contained in this Section 5 shall apply to sales made pursuant to Rule 144 under
the Securities Act or pursuant to an effective registration statement.
6. Composition, Nomination and Election of Board.
---------------------------------------------
(a) The Board shall at all times have nine directors.
(b) So long as there shall be any shares of Class B Common Stock
outstanding, the Board shall be comprised of two persons elected by the holders
of the Class A Common Stock (the "Class A Directors") and seven persons elected
by the holders of the Class B Common Stock (the "Class B Directors"). The Class
A Directors, neither of whom shall be Affiliates or Associates (as defined for
purposes of the Securities Act or the GBCC) of Littlejohn or Quilvest, shall be
nominated in accordance with the requirements of the GBCC, and the rules and
regulations of the Commission and the New York Stock Exchange. Littlejohn shall
nominate five persons to stand for election to serve as Class B Directors,
Quilvest shall nominate one person to stand for election to serve as a Class B
Director and the directors then in office, acting by a majority, shall nominate
one person to stand for election to serve as a Class B Director, which nominee
shall not be an Affiliate or Associate of Littlejohn. Each of the Shareholders
shall vote their Voting Securities, to the extent entitled to vote for the
election of
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<PAGE>
Class B Directors, in favor of the seven persons nominated as provided above in
this Section 6. If there shall occur a vacancy for any reason, whether by
resignation, removal or otherwise, in the position of any Class B Director, then
the Shareholder who originally nominated such Class B Director, or the Board,
acting by a majority of the Directors then in office, if such Class B director
was nominated by the Board, shall be entitled to nominate such Class B
Director's successor, and the Shareholders shall promptly take such action,
including causing such Shareholder's nominee(s) for Class B Director(s), if any,
to take such action, so as to cause the successor Class B Director to be duly
and properly elected or appointed. No Shareholder shall take any action, or
permit any Class B Director nominated by it to take any action, to remove a
Class B Director which was nominated by another Shareholder without the consent
of such other Shareholder. Any person nominated to serve as a Class B Director
by a Shareholder may be removed from such position, with or without cause, only
by the Shareholder nominating such Class B Director, and the other Shareholders
shall promptly take such action, including causing such Shareholder's nominee(s)
for Class B Director(s), if any, to take such action, as may be requested by the
Shareholder who nominated the Class B Director sought to be removed, to duly and
properly effect the removal of such Class B Director from such position. If
there shall occur a vacancy for any reason, whether by resignation, removal or
otherwise, in the position of any Class A Director, then the remaining Class A
Director, if there shall be one, shall be entitled to nominate an individual
(who shall be qualified to serve as a director by reason of his experience) to
fill the vacancy, and the other directors and the Shareholders shall promptly
take such action, including causing such Shareholder's nominee(s) for Class B
Director(s), if any, to take such action, so as to cause the proposed successor
Class A Director to be duly and properly elected or appointed. If there shall be
no Class A Directors, then the vacancies in such directorships shall be filled
by the Class B Directors with persons who are not Affiliates or Associates of
Littlejohn or Quilvest.
(c) From and after the time that there are no longer any shares of
Class B Common Stock outstanding, Littlejohn shall nominate five persons to
stand for election to serve as directors, Quilvest shall nominate one person to
stand for election to serve as a director, and three persons, neither of whom
shall be Affiliates or Associates of Littlejohn or Quilvest, shall be nominated
in accordance with the requirements of the GBCC and the rules and regulations of
the Commission and the New York Stock Exchange. Each of the Shareholders shall
vote their Voting Securities in favor of the nine persons nominated as provided
above in this Section 6(c). If there shall occur a vacancy for any reason,
whether by resignation, removal or otherwise, in the position of any director
who was nominated by a particular Shareholder pursuant to this Agreement, then
the Shareholder who originally nominated such director, shall be entitled to
nominate such director's successor, and the Shareholders shall promptly take
such action, including causing such Shareholder's nominee(s) for director(s), if
any, to take such action, so as to cause the successor director to be duly and
properly elected or appointed. No Shareholder shall take any action, or permit
any director nominated by it to take any action, to remove a director which was
nominated by another Shareholder without the consent of such other Shareholder.
Any person nominated to serve as a director by a Shareholder pursuant to this
Agreement may be removed from such position, with or without cause, only by the
Shareholder nominating such director, and the other Shareholders shall promptly
take such action, including causing such Shareholder's nominee(s) for
director(s), if any, to take such action, as may be requested by the Shareholder
who nominated the director sought to be removed, to duly and properly effect the
removal of such director from such position. If there shall occur a vacancy
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<PAGE>
for any reason, whether by resignation, removal or otherwise, in the position of
any director who was not nominated by a particular Shareholder pursuant to this
Agreement, then the successor to any such director (who shall be qualified to
serve as a director by reason of his experience and who shall not be an
Affiliate or Associate of Littlejohn or Quilvest) shall be nominated by the
remaining directors, if any, who were not themselves nominated by any
Shareholder pursuant to this Agreement, and the other directors and the
Shareholders shall promptly take such action, including by causing the director
nominee(s), to cause the successor director to be duly and properly elected or
appointed. If there shall be no directors in office who were not nominated by a
Shareholder pursuant to this Agreement, then the vacancies in such directorships
shall be filled by the remaining directors then in office with persons who are
not Affiliates or Associates of Littlejohn or Quilvest.
(d) Notwithstanding the foregoing, the provisions of
subsections (b) and (c) shall remain in full force and effect, in the case of
Littlejohn, so long as it beneficially owns at least 25% of the Class A Common
Stock then outstanding on a fully-diluted basis; and the provisions of
subsections (b) and (c) shall remain in full force and effect, in the case of
Quilvest, so long as it beneficially owns at least 5% of Class A Common Stock
then outstanding on a fully-diluted basis and Littlejohn beneficially owns at
least 25% of the Class A Common Stock then outstanding on a fully-diluted basis.
After such time, if any, that either Littlejohn or Quilvest shall no longer be
entitled to nominate persons to stand for election to serve as a director in
accordance with clause (i) or clause (ii) above, upon the expiration of the
term, resignation or removal of any director nominated by such Purchaser which
is no longer entitled to nominate persons to stand for election to serve as a
director, the successor to such director(s) shall be designated or nominated in
accordance with the requirements of the GBCC and the rules and regulation of the
Commission and the principal national securities exchange or trading market on
which shares of the Class A Common Stock are then listed.
(e) Quilvest's initial director nominee shall be de Vogel.
Notwithstanding anything to the contrary, if, from and after the Effective Time
de Vogel ceases to serve as a member of the Board for any reason, he may not be
renominated or reappointed by Quilvest without the consent of Littlejohn.
(f) Each Shareholder shall vote their Voting Securities
against any proposal brought before the Company's Shareholders, including a
proposal to amend the Articles of Incorporation or the By-laws, which, if
adopted, would frustrate the provisions of this Section 6.
7. Stock Splits. If there shall be any change in the Securities of
------------
the Company as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination, exchange or otherwise,
the provisions of this Agreement shall apply with equal force to additional
and/or substitute Securities, if any, received by each Shareholder in exchange
for or by virtue of its ownership of Securities.
8. Representations and Warranties of Littlejohn. Littlejohn
--------------------------------------------
represents and warrants to Quilvest, de Vogel and the Company as follows:
8.1. Ownership of Shares. The Securities listed by its name on
-------------------
Schedule 1 are all of the Securities beneficially owned by Littlejohn.
Littlejohn has with respect
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<PAGE>
to the Securities listed by its name on Schedule 1 as of the consummation of the
Initial Closing, good, valid and marketable title, free and clear of all liens,
encumbrances, restrictions, options, warrants, rights to purchase, voting
agreements or voting trusts, and claims of every kind (other than the
encumbrances created by this Agreement and other than restrictions on transfer
under applicable Federal and State securities laws).
8.2. Power; Non-Contravention; Binding Agreement. Littlejohn has
-------------------------------------------
the full power and authority to enter into this Agreement and perform all of its
obligations herewith. Neither the execution, delivery nor performance by
Littlejohn will violate its charter, by-laws or other organizational or
constitutive documents, or any other agreement, contract or arrangement to which
it is a party or is bound, including any voting agreement, shareholders
agreement or voting trust. This Agreement has been duly executed and delivered
by Littlejohn and constitutes a legal, valid and binding agreement of
Littlejohn, enforceable in accordance with its terms. Neither the execution or
delivery of this Agreement nor the consummation by Littlejohn of the
transactions contemplated hereby will (a) require any consent or approval of or
filing with any governmental or other regulatory body, other than filings
required under the federal or state securities laws, or (b) constitute a
violation of, conflict with or constitute a default under (i) any law, rule or
regulation applicable to Littlejohn, or (ii) any order, judgment or decree to
which Littlejohn is bound.
8.3. Finder's Fees. No person is, or will be, entitled to any
-------------
commission or finder's fees from Littlejohn in connection with this Agreement or
the transactions contemplated hereby exclusive of any commission or finder's
fees referred to in the Purchase Agreement.
9. Representations and Warranties of Quilvest and de Vogel. Each
-------------------------------------------------------
of Quilvest and de Vogel represents and warrants, as to itself, to Littlejohn,
each other and the Company, as follows:
9.1. Ownership of Securities. The Securities listed by his or
-----------------------
its name on Schedule 1 are all of the Securities beneficially owned by him or it
as of the consummation of the Initial Closing. Such Shareholder does not have
any rights to acquire any additional Securities other than, in the case of
Quilvest, pursuant to (a) the Warrants issued in connection with the Initial
Closing, (b) Securities to be issued in the future pursuant to the Purchase
Agreement, and (c) pursuant to the terms of, or upon the exercise or conversion
of, or any of the Securities described in clauses (a) or (b). It has with
respect to the Securities listed by his, her or its name on Schedule 1 good,
valid and marketable title, free and clear of all liens, encumbrances,
restrictions, options, warrants, rights to purchase, voting agreements or voting
trusts, and claims of every kind (other than the encumbrances created by this
Agreement and other than restrictions on transfer under applicable Federal and
State securities laws). Neither the execution, delivery or performance of this
Agreement nor the consummation of the Contemplated Transactions will result in
or otherwise trigger an automatic conversion of the Class B Common Stock owned
by Quilvest or de Vogel into shares of Class A Common Stock, except as expressly
set forth in Section 14.2 hereof.
9.2. Power; Non-Contravention; Binding Agreement. Each of
-------------------------------------------
Quilvest and de Vogel has the full, right, power and authority (and in the case
of de Vogel, legal capacity)
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<PAGE>
to enter into this Agreement and perform all of its obligations hereunder.
Neither the execution, delivery nor performance of this Agreement by such
Shareholder will, in the case of Quilvest, violate the charter, by-laws or other
organizational or constitutive documents of Quilvest, or, in the case of either
Quilvest or de Vogel, any other agreement, contract or arrangement to which each
such Shareholder is a party or is bound, including any voting agreement,
shareholders agreement or voting trust. This Agreement has been duly executed
and delivered by each such Shareholder and constitutes a legal, valid and
binding agreement of such Shareholder, enforceable in accordance with its terms.
Neither the execution or delivery of this Agreement nor the consummation by such
Shareholder of the transactions contemplated hereby will (a) require any consent
or approval of or filing with any governmental or other regulatory body, other
than filings required under the federal or state securities laws, or (b)
constitute a violation of, conflict with or constitute a default under (i) any
law, rule or regulation applicable to any such Shareholder, or (ii) any order,
judgment or decree to which any such Shareholder is bound.
9.3. Finder's Fees. No person is, or will be, entitled to any
-------------
commission or finder's fees from Quilvest or de Vogel in connection with this
Agreement or the transactions contemplated hereby.
Quilvest hereby represents and warrants to Littlejohn that the issuance of the
shares of Common Stock issued to Tinvest Limited pursuant to that certain merger
of Pameco Holdings Inc. with and into the Company on June 3, 1997 was approved
by the Board, and such merger was approved by the Board and, accordingly, the
transaction which resulted in Tinvest Limited, an Affiliate of Quilvest,
becoming an "interested shareholder" as defined in GBCC section 14-2-1110 was
approved by the Board.
10. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to each Shareholder as follows:
10.1. Power Authority; Non-Contravention; Binding Agreement. The
-----------------------------------------------------
Company has full right, power and authority to enter into and perform all of its
obligations under this Agreement. Neither the execution, delivery nor
performance of this Agreement by the Company will violate the charter, by-laws
or other organizational or constitutive documents of the Company or any of its
Subsidiaries, or any other agreement, contract or arrangement to which the
Company or any of its Subsidiaries is a party or is bound. This Agreement has
been duly executed and delivered by the Company and constitutes a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
Neither the execution of this Agreement nor the consummation by the Company of
the transactions contemplated hereby will (a) require any consent or approval of
or filing with any governmental or other regulatory body other than filings
required under federal or state securities laws, or (b) constitute a violation
of, conflict with or constitute a default under (i) any law, rule or regulation
applicable to the Company or any of its Subsidiaries, or (ii) any order,
judgment or decree to which the Company or any of its Subsidiaries is bound.
10.2. Finder's Fees. No person is, or will be, entitled to any
-------------
commission or finder's fee from the Company in connection with this Agreement or
the transactions contemplated hereby exclusive of any commission or finder's
fees referred to in the Purchase Agreement.
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<PAGE>
11. Termination; Securities Free from Agreement.
-------------------------------------------
11.1. This Agreement (other than the provisions of the second and
third sentences of Section 2.5, and the provisions of Section 12 and Sections 18
through 30 which shall survive any termination of this Agreement), shall
terminate on the earliest of (i) 10 years from the date hereof, (ii) the mutual
agreement of the Shareholders which beneficially own a majority of the Class A
Common Stock issued or issuable upon conversion of the Series A Preferred Shares
or the Subsequent Preferred Shares or upon the exercise of the Warrants, in each
case which are subject to this Agreement, and (iii) the sale of 90% or more of
the Securities described in clause (ii) to a Person which is not a Littlejohn
Permitted Transferee or a permitted transferee of either Quilvest or de Vogel
who becomes party to this Agreement.
11.2. Securities which are sold by a Shareholder pursuant to and
in accordance with the provisions of Section 3.5, Article IV or Article V
hereof, or Registrable Securities which are sold pursuant to and in accordance
with the terms and conditions of the Registration Rights Agreement, shall be
deemed sold, upon the consummation of such sale in accordance therewith, free
and clear of this Agreement and the Irrevocable Proxy granted to Littlejohn.
11.3. From and after such time as de Vogel is no longer a member
of the Board, the provisions of Sections 3, 4 and 5 hereof will no longer be
applicable to him.
12. Expenses. Except as provided in Section 28, each party hereto
--------
will pay all of its expenses in connection with the transactions contemplated by
this Agreement, including, without limitation, the fees and expenses of its
counsel and other advisors.
13. Fees.
----
(a) Commencing August 31, 2001, the Company shall pay to
Littlejohn & Co., LLC and Quilvest or its designees, pro rata based upon their
respective Applicable Percentages, a management fee in such amount, not to
exceed $500,000 for each annual period ended on August 31st, determined by
Littlejohn and the Company (the "Management Fee"), payable on the last Business
Day in February and August of each year, or on such dates as the parties shall
otherwise agree. The foregoing fee shall continue as long as Littlejohn has the
right to elect a majority of the members of the Board, whether through the
ownership of securities, by contract or otherwise. Notwithstanding the
foregoing, the Management Fee shall not be paid (and shall not accrue), if (i)
at the time of the payment of the Management Fee the Company would not be, in
violation of the financial covenants contained in the Loan and Security
Agreement between the Company, Fleet Bank, as agent, and the lenders named
therein), or (ii) the Board determines that the payment of the Management Fee is
reasonably likely to result in the Company not being able to achieve its
budgeted earnings before interest, takes, depreciation and amortization
(determined in accordance with generally accepted accounting principles) for
such fiscal year.
(b) To induce Littlejohn to enter into an agreement to
purchase or guarantee from the Lender any funds lent to the Company pursuant to
any overadvance under the Credit Agreement, up to $5 million,
-14-
<PAGE>
the Company agrees to pay Littlejohn a fee calculated at a rate of 8% per annum
of the actual amount of such overadvance outstanding from time to time (the
"Overadvance Fee") which Littlejohn is then so required to guarantee or
purchase. The Overadvance Fee shall be payable quarterly in arrears commencing
three months after the first day in which there is an overadvance pursuant to
the Credit Agreement and only with respect to such days in which there is an
overadvance. Notwithstanding the foregoing, the Company shall not be required to
pay an Overadvance Fee to the extent that, at the time of the payment thereof,
or after giving effect to the payment thereof, the Company is, or would be in
violation of the financial covenants contained in the Credit Agreement, in which
case any such Overadvance Fee would accrue and be payable as soon as possible.
14. Certain Covenants of Quilvest and de Vogel.
------------------------------------------
14.1. Except in accordance with the provisions of this Agreement
and the Purchase Agreement, each of Quilvest and de Vogel agree not to, directly
or indirectly:
(a) grant any proxies, deposit any Securities into a voting
trust or enter into a voting agreement with respect to any Securities; or
(b) except in connection with a Transfer permitted by and
made in accordance with Section 3.3, 3.5 or 3.6 or Article 4 or Article 5
hereof, and except as required in accordance with Section 14.2 below, convert
any shares of Class B Common Stock beneficially owned by it into shares of Class
A Common Stock or take any action or omit to take any action which could
reasonably be expected to result in the conversion of any Class B Common Stock
beneficially owned by it into shares of Class A Common Stock.
14.2. Immediately after the Required Approval is obtained, each
Shareholder shall take such action pursuant to the Articles of Incorporation and
otherwise to cause any Class B Common Stock beneficially owned by it to be
converted into shares of Class A Common Stock as soon as possible thereafter.
14.3. Each Shareholder agrees, while this Agreement is in effect
and to the extent disclosure would be required under the Exchange Act, to notify
the Company, as soon as practicable, of the number of any Voting Securities,
beneficial ownership of which is acquired by such Shareholder after the date
hereof, and to prepare and file with the Commission an amendment to its Schedule
13D, as and when required to be filed, which amendment shall comply as to form
in all material respects with the applicable provisions of the Exchange Act.
Such Shareholder represents and warrants that any such Schedule 13D amendment,
at the time it is filed with the Commission, will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, no
representation or warranty is deemed made by such Shareholder with respect to
information supplied by any other Shareholder for use in preparing the Schedule
13D or any such Schedule 13D amendment. Such Shareholder will provide the other
Shareholders who are members of the "group" (within the meaning of the Exchange
Act) filing such Schedule 13D with a reasonable opportunity to review and
comment on any proposed Schedule 13D amendment prior to filing such with the
Commission (subject to any requirements of law to file promptly), will provide
-15-
<PAGE>
such other Shareholders with a copy of all such filings made with the Commission
and will notify such other shareholders as promptly as practicable after the
receipt of any comments or any request for additional information from the
Commission or its staff and, upon request of any such other Shareholder, will
supply each of them and their legal counsel with copies of all correspondence
between it or any of its representatives, on the one hand, and the Commission,
its staff or any state securities administrators, on the other hand.
14.4. In the event the Company determines to raise additional
monies through the sale of additional Securities and Littlejohn is afforded the
opportunity to purchase from the Company such additional Securities then, from
time to time after the date hereof, subject to applicable law, Littlejohn shall
permit Quilvest to purchase from the Company such additional securities offered
for sale to Littlejohn in proportion with Littlejohn pro rata based upon their
respective Applicable Percentages. Notwithstanding the foregoing, the
provisions of this Section 14.4 shall not be applicable to any additional
issuances of securities set forth in or contemplated by the Purchase Agreement.
14.5. Quilvest shall deliver to Littlejohn, as a condition to the
effectiveness of this Agreement and the Initial Closing under the Purchase
Agreement, (a) an opinion of Paul Weiss Rifkind Wharton & Garrison to
Littlejohn, (b) an opinion of Harney, Westwood & Riegels and (c) an opinion of
Smith, Gambrell & Russell LLP. in substantially the form as set forth in Exhibit
B, C and D, respectively.
15. Financial Reports and Information. If the Company is not required
---------------------------------
to file periodic reports under the Exchange Act, it will furnish to each
Shareholder financial statements (including accompanying notes) similar in form
and substance to those which would be required to be filed by it in any annual
or quarterly report filed under the Exchange Act if the Company were subject to
such Exchange Act. Such reports will be furnished within 45 days after the end
of the first, second and third fiscal quarters of each year, and within 90 days
after the end of each fiscal year.
16. Transaction with Affiliates. The Company hereby agrees that it
---------------------------
shall not enter into any transaction with an Affiliate except upon fair and
reasonable terms that are no less favorable to it than it reasonably believes it
could obtain in a comparable arm's length transaction with a Person not its
Affiliate.
17. Legend and Stop Transfer Instructions. Immediately after the
-------------------------------------
execution of this Agreement (and from time to time prior to the termination of
this Agreement), each Shareholder, if the particular restriction is applicable
to it, shall request the Company to provide that each certificate representing
Securities beneficially owned by it will bear a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT, AND (II)
ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT
DATED AS OF FEBRUARY __, 2000, AND THE IRREVOCABLE PROXY REFERRED
-16-
<PAGE>
TO THEREIN, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, AND
COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
Immediately after the execution of this Agreement (and from time to time prior
to the termination of this Agreement), each Shareholder shall request the
Company to require that the transfer agent for its Securities shall make a
notation in its records prohibiting the transfer of any of the Securities owned
of record by such Shareholder, except in accordance with the terms and
conditions of this Agreement. Each Shareholder agrees to surrender to the
Company each certificate representing Securities in order to effectuate the
provisions of this Section 17.
18. Survival of Representations and Warranties. Except as expressly
------------------------------------------
set forth herein, the representations, warranties, covenants and agreements made
by the Shareholders, or the Company in this Agreement shall survive the Initial
Closing.
19. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing, shall be given by hand delivery, U.S.
Express Mail (return receipt requested), overnight courier guaranteeing next
business day delivery, or facsimile, and shall be deemed duly given when
received, addressed as follows:
If to the Company, to:
Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Facsimile: 770-798-7141
Telephone: 770-798-0700
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: E. David Robertson, Esquire
Facsimile: 212-504-6666
Telephone: 212-504-6000
If to Littlejohn, to:
Littlejohn & Co., LLC
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Angus C. Littlejohn, Jr.
Facsimile: 203-861-4009
Telephone: 203-861-4005
-17-
<PAGE>
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: James D. Epstein, Esquire
Facsimile: 215-981-4750
Telephone: 215-981-4000
If to Quilvest or de Vogel, to:
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Mr. Willem F. P. de Vogel
Facsimile: 212-980-1142
Telephone: 212-605-3213
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6046
Attention: Richard Borisoff, Esquire
Facsimile: 212-757-3990
Telephone: 212-373-3000
20. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings among the parties with respect
to such subject matter (including any agreements between Quilvest and the
Company regarding shareholder rights.) This Agreement may not be modified,
amended, altered or supplemented except by an agreement in writing executed by
the party against whom such modification, amendment, alteration or supplement is
sought to be enforced.
21. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors, and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
22. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of Georgia
without regard to the application of the principles of conflicts or choice of
laws. Each party hereto submits to the jurisdiction of the courts of the State
of Georgia in Fulton County and to the jurisdiction of the United States
District Court for the Northern District of Georgia, and hereby agrees that
service
-18-
<PAGE>
of process may be effected in accordance with the delivery methods described in
Section 19 hereof.
23. Injunctive Relief. The parties agree that in the event of a
-----------------
breach of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party shall be entitled
to obtain in any court of competent jurisdiction a decree of specific
performance or to enjoin the continuing breach of such provision, in each case
without the requirement that a bond be posted, as well as to obtain damages for
breach of this Agreement. By seeking or obtaining such relief, the aggrieved
party will not be precluded from seeking or obtaining any other relief to which
it may be entitled.
24. Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts (including by facsimile signature), each
of which shall be deemed to be an original and all of which together shall
constitute one and the same documents.
25. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
26. Further Assurances. Each party hereto shall execute and deliver
------------------
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
27. No Third Party Beneficiaries; No Partnership or Fiduciary
---------------------------------------------------------
Relationship. Nothing in this Agreement, expressed or implied, shall be
- ------------
construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under or by reason of this Agreement or any
provision contained herein. Nothing in this Agreement shall create, or is
intended to create, a fiduciary relationship among Quilvest, de Vogel and
Littlejohn or a partnership or similar relationship among Quilvest, de Vogel and
Littlejohn.
28. Legal Expenses. In the event any legal proceeding is commenced by
--------------
any party to this Agreement to enforce, or recover damages for any breach of,
the provisions hereof, the prevailing party in such legal proceeding shall be
entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees and disbursements.
29. Interpretation. Unless the context of this Agreement otherwise
--------------
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby and derivative or
similar words refer to this entire Agreement; (iv) the term "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation
-19-
<PAGE>
thereof. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
30. Effectiveness. This Agreement shall become effective as of the
-------------
Effective Time, and only if the Initial Closing actually occurs.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
PAMECO CORPORATION
By: /s/ Richard Martin
---------------------------------------
Name: Richard Martin
Title: Vice President
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, L.L.C.
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
----------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ J. Willem Uhrig
---------------------------------------
Name: J. Willem Uhrig
Title: Attorney-in-Fact
/s/ Willem F. P. de Vogel
-------------------------------------------
Willem F. P. de Vogel
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<PAGE>
EXHIBIT 10.37
REGISTRATION RIGHTS AGREEMENT
among
PAMECO CORPORATION
LITTLEJOHN FUND II, L.P.
and
QUILVEST AMERICAN EQUITY, LTD.
and
INTERNATIONAL COMFORT PRODUCTS CORPORATION (USA)
Dated as of February 18, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions........................................... 1
2. Demand Registrations.................................. 4
3. Piggyback Registrations............................... 5
4. Registration Pursuant to Rule 415..................... 6
5. Obligations of the Company............................ 7
6. Furnish Information................................... 10
7. Suspension of Disposition of Registrable Securities... 10
8. Expenses of Registration.............................. 10
9. Underwriting Requirements; Priorities................. 11
10. Rule 144.............................................. 14
11. Lockup Agreement...................................... 14
12. Transfer of Registration Rights....................... 15
13. Indemnification and Contribution...................... 15
14. Remedies.............................................. 18
15. Amendments and Waivers................................ 18
16. Filing Notices and Copies............................. 18
17. Notices............................................... 18
18. Counterparts and Facsimile Signatures................. 21
19. Interpretation........................................ 21
20. Governing Law; Consent to Jurisdiction................ 22
21. Severability.......................................... 22
22. Entire Agreement; Other Registration Rights........... 22
23. No Third Parties Benefited............................ 22
24. Successors and Assigns................................ 22
25. Effectiveness......................................... 22
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of the 18th
day of February, 2000, by and among Pameco Corporation, a company organized
under the laws of the State of Georgia, Littlejohn Fund II, L.P., a Delaware
limited partnership ("Littlejohn"), Quilvest American Equity Ltd., a British
Virgin Islands international company ("Quilvest"), and International Comfort
Products Corporation (USA) ("ICPC").
BACKGROUND
----------
WHEREAS, pursuant to the terms of that certain Securities Purchase
Agreement (the "Purchase Agreement") dated as of February 18, 2000, each of
Littlejohn and Quilvest have purchased shares of Series A Preferred Shares (as
defined herein);
WHEREAS, each of Littlejohn and Quilvest have entered into a shareholders
agreement dated today's date in connection with the Series A Preferred Shares,
Additional Preferred Shares (as defined herein) and the Common Stock (as defined
herein) underlying them, which sets forth certain rights and obligations of the
shareholders (the "Shareholders Agreement");
WHEREAS, pursuant to a Warrant Agreement dated as of February 16, 2000 (the
"ICPC Warrant Agreement"), the Company has agreed to issue to ICPC certain
warrants to purchase Class A Common Stock (as defined herein); and
WHEREAS, the Company (as defined herein) has agreed to provide certain
registration rights to each of Littlejohn, Quilvest and ICPC, in each case in
accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
(a) "Act" means the Securities Act of 1933, as amended, or any
similar federal statute enacted hereafter, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
(b) "Additional Preferred Shares" means (i) any series of
preferred stock issued pursuant to the Purchase Agreement, as the same may be
amended or modified from time to time, other than the Series A Preferred Shares,
and (ii) any other securities into which or for which any of the securities
described in clause (i) above may be converted or exchanged pursuant to or
arising from a plan of recapitalization, merger, sale of assets or otherwise.
(c) "Affiliate" has the meaning set forth in the Purchase
Agreement.
<PAGE>
(d) "Applicable Percentage" has the meaning set forth in the
Purchase Agreement.
(e) "Class A Common Stock" means (i) the Class A Common Stock,
par value $0.01 per share, of the Company and (ii) securities which were issued
or received in respect of, or in exchange or substitution for the securities
described in clause (i) above, including, but not limited to, those arising from
a stock dividend, distribution, stock split, reclassification, reorganization,
merger, consolidation, sale or transfer of assets or other exchange of
securities (including the conversion of Series A Preferred Shares or Class B
Common Stock into shares of Class A Common Stock).
(f) "Class B Common Stock" means (i) the Class B Common Stock,
par value $0.01 per share, of the Company and (ii) securities which were issued
or received in respect of, or in exchange or substitution for any of the
foregoing, including, but not limited to, those arising from a stock dividend,
distribution, stock split, reclassification, reorganization, merger,
consolidation, sale or transfer of assets or other exchange of securities.
(g) "Commission" means the Securities and Exchange Commission,
or any other federal agency at the time administering the Act.
(h) "Common Stock" means collectively the Class A Common Stock
and the Class B Common Stock.
(i) "Company" means Pameco Corporation, or any successor by
merger, consolidation or other transaction, and shall include any subsidiaries
thereof.
(j) "Counterpart" means a counterpart to this Agreement in the
form of Exhibit A hereto, pursuant to the execution of which a Person shall
become bound by all of the terms and conditions of this Agreement; it being
understood that any Person who shall become a Holder shall be required to
execute and become bound by all of the terms and conditions to this Agreement to
the same extent as its transferor.
(k) "Holder" means each of Littlejohn, Quilvest and ICPC to the
extent it holds Registrable Securities, and any other Person holding Registrable
Securities to whom registration rights granted under and pursuant to this
Agreement have been transferred pursuant to Section 12 hereof.
(l) "ICPC Warrants" means the warrants to be issued pursuant to
the ICPC Warrant Agreement to purchase Class A Common Stock.
(m) "Person" means an individual, a sole proprietorship, a
company, a partnership, a limited liability company, a limited liability
partnership, a joint venture, an association, a trust, or any other entity or
organization, including a government or a political subdivision, agency or
instrumentality thereof.
(n) "Preferred Stock" means (i) the preferred stock, par value
$1.00 per share, of the Company, and (ii) securities which were issued or
received in respect of, or in exchange or substitution for the securities
described in clause (i) above, including, but not
-2-
<PAGE>
limited to, those arising from a stock dividend, distribution, stock split,
reclassification, reorganization, merger, consolidation, sale or transfer of
assets or other exchange of securities.
(o) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement
("Registration Statement") in compliance with the Act and the declaration or
ordering of effectiveness of such Registration Statement by the Commission.
(p) "Registered Holder" means, with respect to a particular
Registration Statement, each Holder which is including or has included
Registrable Securities in such Registration Statement.
(q) "Registered Securities" means, the Registrable Securities
included in a particular Registration Statement which has been declared
effective by the Commission and which has remained effective for the minimum
period required under and pursuant to the terms and conditions of this
Agreement.
(r) "Registrable Securities" means (i) any shares of Class A
Common Stock beneficially owned (which, for purposes of this Agreement, shall be
determined in accordance with Rule 13d-3 of the 1934 Act) by any Holder
including, those to be received upon conversion of Series A Preferred Shares,
Additional Preferred Shares or Class B Common Stock, to the extent such
securities are from time to time hereafter convertible into Class A Common Stock
and those to be received upon exercise of the ICPC Warrants, and (ii) securities
which were issued or received in respect of, or in exchange or in substitution
for any of the foregoing, including, but not limited to, those arising from a
stock dividend, distribution, stock split, reclassification, reorganization,
merger, consolidation, sale or transfer of assets or other exchange of
securities; it being understood that, as to any particular Registrable
Securities, once issued, such securities shall cease to be Registrable
Securities when (x) a Registration Statement with respect to the sale of such
securities shall have become effective under the Act and such securities shall
have been disposed of in accordance with such Registration Statement, (y) such
securities shall have ceased to be outstanding or (z) such securities shall have
been transferred as permitted by, and in compliance with, Rule 144 (or any
successor provision) promulgated under the Act.
(s) "Required Approval" has the meaning set forth in the
Purchase Agreement.
(t) "Series A Preferred Shares" means Series A Cumulative
Pay-in-Kind Preferred Stock of the Company, par value $1.00 per share, as the
same may be amended or modified from time to time, and (ii) any other securities
into which or for which any of the securities described in clause (i) above may
be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(u) "1934 Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute enacted hereafter, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect
from time to time.
-3-
<PAGE>
(v) "Warrants" has the meaning set forth in the Purchase
Agreement.
2. Demand Registrations.
--------------------
(a) At any time after the Required Approval is received, and
from time to time thereafter, upon the receipt of a written request from the
Holders of a majority of the Registrable Securities beneficially owned by
Littlejohn and its Affiliates that the Company file a Registration Statement
under the Act covering the registration for the offer and sale of all or part of
such Littlejohn's Registrable Securities (a "Littlejohn Demand Registration"),
as soon as practicable, the Company shall give written notice to all other
Holders of such Littlejohn Demand Registration and shall cause all such
Registrable Securities that Littlejohn and such other Holders have requested,
which written request must be received by the Company no later than 30 days
after the Company shall have given the aforesaid notice, to be registered under
the Act, subject to and in accordance with the terms, conditions, procedures and
limitations contained in this Agreement, including as set forth in Section 9
below. Three Littlejohn Demand Registrations are entitled to be effected
pursuant to this Section 2 and a registration requested pursuant to this Section
2 shall not be deemed to have been effected unless a Registration Statement with
respect thereto has become effective, and remained continuously effective
without interruption in accordance with the provisions of Section 5(a) hereof,
or not withdrawn as permitted in accordance with the terms and conditions of
this Agreement. The Holders initiating a Littlejohn Demand Registration may
terminate such Littlejohn Demand Registration prior to the filing of a
Registration Statement relating thereto, or require the Company to withdraw
promptly any Registration Statement which has been filed pursuant to this
Section 2 but which has not become effective under the Act, and such
registration shall not be deemed to be a Littlejohn Demand Registration if
either (i) the Holders of the Registrable Securities sought to be included in
such registration agree to pay the costs and expenses of such registration as
set forth in Section 8 below, pro rata in accordance with the number of
Registrable Securities sought to be sold by each of them in such registration,
subject to the provisions of Section 9 below, or (ii) such withdrawal is
accompanied by notice from Littlejohn that, in the good faith exercise of its
reasonable judgment, there has occurred either (A) a material adverse change in
the business, results of operations, financial condition or prospects of the
Company or (B) a misstatement or omission in any preliminary prospectus (other
than with respect to such information supplied in writing by or on behalf of
such Holder expressly for use in such preliminary prospectus) which makes it
inadvisable to proceed with the registration.
(b) At any time and from time to time after the date which is
five years after the date hereof, upon the receipt of a written request from the
Holders of a majority of the Registrable Securities beneficially owned by
Quilvest and its Affiliates that the Company file a Registration Statement under
the Act covering the registration for the offer and sale of all or part of such
Registrable Securities (the "Quilvest Demand Registration"), as soon as
practicable, the Company shall give written notice to all other Holders of such
Quilvest Demand Registration and shall cause all such Registrable Securities
that Quilvest and such other Holders have requested, which written request must
be received by the Company no later than 30 days after the Company shall have
given the aforesaid notice, to be registered under the Act, subject to and in
accordance with the terms, conditions, procedures and limitations contained in
this Agreement, including as set forth in Section 9 below. One Quilvest Demand
Registration is entitled to be effected pursuant to this Section 2 and a
registration requested pursuant to this
-4-
<PAGE>
Section 2 shall not be deemed to have been effected unless a Registration
Statement with respect thereto has become effective, remained continuously
effective without interruption in accordance with the provisions of Section 5(a)
hereof, or not withdrawn as permitted in accordance with the terms and
conditions of this Agreement. The Holders initiating a Quilvest Demand
Registration may terminate its Quilvest Demand Registration prior to the filing
of a Registration Statement relating thereto, or require the Company to withdraw
promptly any Registration Statement which has been filed pursuant to this
Section 2 but which has not become effective under the Act, and such
registration shall not be deemed to be a Quilvest Demand Registration if either
(i) the Holders of the Registrable Securities sought to be included in such
registration agree to pay the costs and expenses of such registration as set
forth in Section 8 below, pro rata in accordance with the number of Registrable
Securities sought to be sold by each of them in such registration, subject to
the provisions of Section 9 below, or (ii) such withdrawal is accompanied by
notice from Quilvest that, in the good faith exercise of its reasonable
judgment, there has occurred either (A) a material adverse change in the
business, results of operations, financial condition or prospects of the
Company, or (B) a misstatement or omission in any preliminary prospectus (other
than with respect to such information supplied in writing by or on behalf of
such Holder expressly for use in such preliminary prospectus) which makes it
inadvisable to proceed with the registration.
(c) If at the time of any request to register Registrable
Securities pursuant to this Section 2, the Company is preparing or within 30
days thereafter engages a managing underwriter and commences to prepare a
Registration Statement for a public offering (other than a registration effected
solely to implement an employee benefit plan) which in fact is filed and becomes
effective within 120 days after the date the Holders initiating a Demand
Registration notify the Company of its intention to effect a Demand
Registration, respectively (any of which is herein a "Demand Registration"), or
is engaged in any material acquisition or divestiture or other business
transaction with a third party which would be adversely affected by the Demand
Registration to the material detriment of the Company, then the Company may at
its option direct that such request for a Demand Registration be delayed for a
period not in excess of 120 days from the date of such request, such right to
delay a request pursuant to this Section 2(c) or in Section 4 below to be
exercised by the Company not more than once in any one year period.
3. Piggyback Registrations.
-----------------------
(a) If at any time after the Required Approval is received, and
from time to time thereafter, the Company proposes to register its Common Stock
under the Act, either for its own account or for the account of others
(including and to the extent any such registrations are effected pursuant to
Section 2 hereof), in connection with the public offering of such Common Stock
solely for cash, on a registration form that would also permit the registration
of Registrable Securities (other than registration statement on Form S-8 or any
successor form, or a registration on Form S-4 for the purpose of offering such
securities to another business entity or the shareholders of such entity in
connection with the acquisition of assets or shares of capital stock,
respectively, of such entity), the Company shall, each such time, promptly give
each Holder written notice of such proposal (a "Piggyback Registration Notice").
Within 30 days after the Piggyback Registration Notice is given, the Holders may
give notice as to the number of shares of Registrable Securities, if any, which
such Holders request to be registered simultaneously with such registration by
the Company ("Piggyback Registration").
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<PAGE>
The Company shall include any Registrable Securities in such Registration
Statement (or in a separate Registration Statement concurrently filed) which the
Holders thereof request to be registered under the Act, subject to and in
accordance with the terms, conditions, procedures and limitations contained in
this Agreement, including the provisions of Section 9 below.
(b) Notwithstanding the foregoing, if the Piggyback Registration
was initiated by the Company to effect a primary public offering of its
securities and, if at any time the Company decides after giving written notice
of its intention to so register securities and before the effectiveness of the
Registration Statement filed in connection with such registration, the Company
determines for any reason either not to effect such registration or to delay
such registration, the Company may, at its election, by prior written notice to
each Holder, (i) in the case of a determination not to effect such registration,
relieve itself of its obligation to register the Registrable Securities in
connection with such registration or (ii) in the case of a determination to
delay registration, delay the registration of such Registrable Securities for
the same period as the delay in the registration of such other securities. Each
Holder requesting inclusion in a registration pursuant to this Section 3 may, at
any time before the effective date of the Registration Statement relating to
such registration, revoke such request by written notice of such revocation to
the Company, in which case the Company shall cause such Holder's Registrable
Securities to be withdrawn from such Registration Statement.
4. Registration Pursuant to Rule 415. At such time as the Company
---------------------------------
shall have qualified for the use of Form S-3 or any similar form promulgated by
the Commission, Littlejohn shall have the right to require, subject to the last
sentence of this Section 4, on one occasion during each calendar year that the
Company file a Registration Statement on Form S-3 pursuant to Rule 415 under the
Act (a "Rule 415 Request"). Notwithstanding the foregoing, the Company shall not
be obligated to effect the filing of a registration pursuant to this Section 4
if, at the time of any request to register Registrable Securities pursuant to
Section 4, the Company is preparing, or within 30 days thereafter engages a
managing underwriter and commences to prepare, a Registration Statement for a
public offering (other than a registration effected solely to implement an
employee benefit plan) which in fact is filed and becomes effective within 120
days after the date Littlejohn makes the Rule 415 Request, or is engaged in any
material acquisition or divestiture or other business transaction with a third
party which would be adversely affected by the Rule 415 Request to the material
detriment of the Company, then the Company may at its option direct that such
Rule 415 Request be delayed for a period not in excess of 120 days from the date
of such request, such right to delay a request pursuant to this Section 4 or in
Section 2(c) above to be exercised by the Company not more than once in any one
year period. Upon receipt of a Rule 415 Request, as soon as practicable, the
Company shall give written notice thereof to all other Holders and shall cause
all such Registrable Securities that Littlejohn and such other Holders have
requested to be registered, no later than 30 days after the Company shall have
given the aforesaid notice, to be registered under the Act, subject to and in
accordance with the terms, conditions, procedures and limitations contained in
this Agreement, including as set forth in Section 9 below. No registration
pursuant to this Section 4 shall count as a Demand Registration pursuant to
Section 2. Three registrations are entitled to be effected pursuant to this
Section 4 and a registration requested pursuant to this Section 4 shall not be
deemed to have been effected unless a Registration Statement with respect
thereto has become effective, and remained continuously effective without
interruption in accordance with the provisions of Section 5(a) hereof, or not
withdrawn as permitted in accordance with the terms
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<PAGE>
and conditions of this Agreement.
5. Obligations of the Company. Whenever required under this
--------------------------
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the Commission a Registration
Statement covering such Registrable Securities and use its best efforts to cause
such Registration Statement to be declared effective by the Commission, and keep
such registration effective, until the date when all Registrable Securities
covered by the Registration Statement have been sold; provided, however, unless
the Company and the Holders of a majority of the Registrable Securities covered
by a particular Registration Statement otherwise agree, the foregoing
effectiveness period shall not exceed, (x) in the case of registration under
Section 2 or 3 hereof, 180 days after the effective date of the Registration
Statement or any amendments thereto, and (y) in the case of a registration under
Section 4 hereof, 365 days after the effective date of the Registration
Statement, or any amendments thereto.
(b) furnish to each Holder of Registrable Securities covered by
such Registration Statement and the underwriters, if any, within a reasonable
period of time prior to the making of any filing thereof, copies of all such
documents proposed to be filed (excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be subject to the review of
each Holder and the underwriters, and the Company will not file such
Registration Statement or any amendment thereto or any prospectus or any
supplement thereto including any documents incorporated by reference therein)
with the Commission if (i) the Holders of a majority of the Registrable
Securities covered by such Registration Statement or the underwriters, if any,
shall reasonably object to such filing or (ii) information in such Registration
Statement or prospectus concerning a particular Registered Holder is inaccurate;
(c) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be necessary to
keep such Registration Statement effective until the applicable date referred to
in Section 5(a) hereof and to comply with the provisions of the Act with respect
to the disposition of all securities covered by such Registration Statement, and
cause the prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to Rule 424
under the Act;
(d) furnish to the Registered Holders such number of copies of
such Registration Statement, each amendment thereto, the prospectus included in
such Registration Statement (including each preliminary prospectus), each
supplement thereto and such other documents, as they may reasonably request in
order to facilitate the disposition of Registered Securities owned by them;
(e) use its best efforts to register and qualify the Registered
Securities under such other securities laws of such jurisdictions as shall be
reasonably requested by any Registered Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable each Registered
Holder to consummate the disposition of the Registered Securities owned by such
Holder in such jurisdictions; provided, however, the Company shall
-7-
<PAGE>
not be required in connection therewith or as a condition thereto to qualify
generally to transact business in any such states or jurisdictions;
(f) promptly notify each Registered Holder at any time when a
prospectus is required to be delivered under the Act of the happening of any
event (including a reasonably detailed description of such event) as a result of
which the prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading and, at the request of any such Holder, the Company will
promptly prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registered Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(g) make available for inspection by any Registered Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Registered Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the officers,
directors, employees and independent accountants of the Company to supply all
information reasonably requested by any such Registered Holder, underwriter,
attorney, accountant or agent in connection with such Registration Statement;
(h) promptly notify the Registered Holders and the underwriters,
if any, of the following events and, if requested by any such Person, confirm
such notification in writing and provide copies of any relevant documents
relating to: (i) the filing of the prospectus or any prospectus supplement and
the Registration Statement and any amendment or post-effective amendment thereto
and, with respect to the Registration Statement and any amendment or post-
effective amendment thereto, the declaration of the effectiveness of such
documents, (ii) any comment letters from or requests by the Commission for
amendments or supplements to the Registration Statement or the prospectus or for
additional information, (iii) the issuance or threat of issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, and (iv) the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registered Securities for sale in any jurisdiction or the
initiation or threat of initiation of any proceeding for such purpose;
(i) use its best efforts to prevent the entry of any order
suspending the effectiveness of the Registration Statement, or the
qualification, or exemption from qualification, of such securities included
therein for sales in any jurisdiction, and to obtain the withdrawal of any such
order, if entered;
(j) if reasonably requested by any underwriter or a Registered
Holder in connection with any underwritten offering, incorporate in a prospectus
supplement or post-effective amendment such information as the underwriters and
the Holders of a majority of the Registrable Securities covered by the
particular Registration Statement agree should be included therein relating to
the sale of such Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the
-8-
<PAGE>
underwritten offering of such Registrable Securities to be sold in such
offering, and make all required filings of such prospectus supplement or post-
effective amendment after being notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment;
(k) cooperate with the Registered Holders and the underwriters,
if any, to facilitate the timely preparation and delivery of certificates
evidencing Registered Securities and not bearing any restrictive legends, and
enable such Registered Securities to be in such lots and registered in such
names as the underwriters may request at least two business days prior to any
delivery of Registered Securities to the underwriters;
(l) provide a transfer agent, registrar and CUSIP number for all
Registrable Securities not later than the effective date of the Registration
Statement;
(m) prior to the effectiveness of the Registration Statement and
any post-effective amendment thereto and at each closing of any underwritten
offering, (i) make such representations and warranties to the Registered Holders
and the underwriters, if any, with respect to the Registered Securities and the
Registration Statement as are customarily made by issuers to underwriters in
primary underwritten public offerings and such other matters as may be
reasonably requested by such Registered Holders and underwriters or their
counsel, (ii) obtain opinions of counsel to the Company and updates thereof
(which opinions shall be reasonably satisfactory to the underwriters, if any,
and to the Holders of a majority of the Registered Securities) addressed to each
Registered Holder and the underwriters, if any, covering the matters customarily
covered in opinions requested in primary underwritten public offerings of
securities and such other matters as may be reasonably requested by such Holders
and underwriters or their counsel, (iii) obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to the Company's board of Directors, each Registered Holder and the
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters required by
underwriters in connection with primary underwritten public offerings of
securities (iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registered Securities being sold
and by the underwriters, if any, to evidence compliance with clause (i) above
and with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company;
(n) enter into such agreements and take all such other
reasonable actions in connection therewith in order to expedite or facilitate
the disposition of such Registered Securities and in such connection, in the
case of an underwritten offering, enter into an underwriting agreement or other
similar agreement in form, scope and substance as is customary in primary
underwritten public offerings which underwriting agreement shall set forth in
full the indemnification provisions and procedures of Section 13 hereof with
respect to all parties to be indemnified pursuant to said Section; it being
understood that the foregoing shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
(o) use its best efforts to cause all Registered Securities
included in such Registration Statement to be listed, by the date of first sale
of Registered Securities pursuant to such registration statement, on the New
York Stock Exchange and on each other securities
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<PAGE>
exchange on which shares of Common Stock are then listed or proposed by the
Company to be listed, if any.
(p) provide such reasonable assistance in the marketing of the
Registered Securities as is customary of issuers in primary underwritten public
offerings (including participation by its senior management in "road shows");
and
(q) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders earnings statements satisfying the provisions of Section 11(a)
of the Act no later than 45 days after the end of any 12-month period (i)
commencing at the end of any fiscal quarter in which Registered Securities are
sold to underwriters in a firm or best efforts underwritten offering or (ii) if
not sold to underwriters in such an offering, beginning with the first day of
the first fiscal quarter of the Company commencing after the effective date of
the Registration Statement, which earnings statement will cover such 12-month
period.
6. Furnish Information. The Registered Holders shall furnish to the
-------------------
Company such information regarding them, the Registrable Securities held by
them, and the intended method of disposition by them of such Registrable
Securities as is customarily provided by selling security holders and as any
underwriters shall reasonably request.
7. Suspension of Disposition of Registrable Securities. Each
---------------------------------------------------
Registered Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(f) or 5(h)(3) or
(4) hereof, such Registered Holder will forthwith discontinue disposition of
Registered Securities until such Registered Holder's receipt of copies of a
supplemented or amended prospectus contemplated by Section 5(f) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the prospectus, and,
if so directed by the Company, such Registered Holder will deliver to the
Company (at the expense of the Company) all copies, other than permanent file
copies then in such Registered Holder's possession, of the prospectus covering
such Registered Securities at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period mentioned in Section
5(a) hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(f) or
5(h)(3) or (4) hereof to and including the date when each Registered Holder
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 5(f) hereof or the Advice.
8. Expenses of Registration.
------------------------
(a) Except as provided in Section 8(b) through 8(d) hereof, all
expenses incurred in connection with a registration pursuant to this Agreement,
whether or not a registration is consummated, including expenses, fees and taxes
in connection with (i) the preparation and filing of any Registration Statement,
each preliminary prospectus, the final prospectus, and any amendments or
supplements thereto, and the printing and furnishing of copies of each thereof
to any underwriters and to dealers (including costs of mailing and shipment),
(ii) the preparation, issuance and delivery of the certificates for the
Registrable
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<PAGE>
Securities to offered and sold hereunder, including any stock or other transfer
taxes or duties payable upon the sale thereof, (iii) the printing of any
underwriting agreement and any dealer agreements and furnishing of copies of
each to the underwriters and to dealers (including costs of mailing and
shipment) participating in any registration, (iv) the qualification of the
Registrable Securities for offering and sale under state laws (including the
legal fees and filing fees and other disbursements of counsel in connection
therewith) and the printing and furnishing of copies of any blue sky surveys or
legal investment surveys to the Underwriters and to dealers, (v) the filing for
listing or approval for quotation of the Registrable Securities on the New York
Stock Exchange and on any national securities exchange (including the legal fees
and filing fees and other disbursements of counsel in connection therewith),
(vi) filing for review of the public offering of the Registrable Securities by
the National Association of Securities Dealers, Inc. (including the legal fees
and filing fees and other disbursements of counsel in connection therewith),
(vii) the fees and expenses of any transfer agent or registrar for the
Registrable Securities, (viii) making road show presentations with respect to
the offering of the Registrable Securities, (ix) the legal fees and
disbursements charged by counsel to the Company and by counsel to the
underwriters, if any, (x) the fees and disbursements charged by the accountants
to the Company, and (xi) fees and disbursements charged by one counsel either
(A) chosen by Littlejohn in the case of a Littlejohn Demand Registration, (B)
chosen by Quilvest in a Quilvest Demand Registration, or (C) chosen by the
Holders of a majority of the Registrable Securities being offered and sold in
any other registration pursuant to which Registrable Securities are being
offered.
(b) Each Holder agrees to pay all underwriting discounts and
commissions and the fees and disbursements of any legal counsel retained by it,
other than the legal counsel referred to in clause (xi) of Section 8(a) above.
Additionally, the Company agrees to use its best efforts to cause its transfer
agent or its counsel to serve as a custodian, to the extent any underwriters
participating in any such registration shall require the participation of a
custodian for any selling security holders and, in such event, the Company shall
be responsible for the fees and disbursements of its transfer agent or its
counsel acting in such custodial capacity.
(c) All expenses incurred in connection with a registration
which are, under this Section 8, to be borne by Registered Holders shall be
borne pro rata by the Registered Holders on the basis of the number of such
Holder's Registered Securities (or Registrable Securities proposed to be
registered, as the case may be); provided, however, that if any such cost or
expense is attributable solely to one Registered Holder and does not constitute
a normal cost or expense of such a registration, such cost or expense shall be
allocated to and borne by that Registered Holder.
9. Underwriting Requirements; Priorities.
-------------------------------------
(a) With respect to a Littlejohn Demand Registration pursuant to
Section 2, the investment banker(s), book runner(s) and managing underwriter(s)
to administer such registration shall be selected by the Holders of Registrable
Securities initiating such Littlejohn Demand Registration, subject to the
approval of the Company, which approval will not be unreasonably withheld,
delayed or conditioned. With respect to a Quilvest Demand Registration pursuant
to Section 2, the investment banker(s) book runner(s) and managing
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<PAGE>
underwriter(s) to administer such registration shall be selected by the Holders
of Registrable Securities initiating such Quilvest Demand Registration, subject
to the approval of the Company, which approval will not be unreasonably
withheld, delayed or conditioned. The Company will have the right to select the
investment banker(s), book runners(s) and manager(s), if any, to administer any
offering which is initiated by the Company.
(b) (i) If a registration under Section 2 hereof is an
underwritten offering and the managing underwriters advise the Company that in
their opinion the number of Registrable Securities and shares of Common Stock
requested to be registered exceeds the number of shares which can be sold in
such offering without materially and adversely affecting the marketability of
the offering, then the Company will include in such registration, such
Registrable Securities and other shares of Common Stock, until Littlejohn shall
have received Aggregate Proceeds (as determined pursuant to subsection (h)
below) equal to the amount invested by Littlejohn and its Affiliates to purchase
Series A Preferred Shares, Additional Preferred Shares and Warrants, plus the
amount of accrued and unpaid dividends thereon, in each case, through the date
of the filing of the applicable Registration Statement (determined from time to
time, the "Return Amount"), determined as follows: first, Registrable Securities
owned by Littlejohn (and its Affiliates), on the one hand, and Quilvest (and its
Affiliates), on the other hand, allocated between the two groups pro rata based
upon the Applicable Percentages of Littlejohn and Quilvest, respectively;
second, to any other Persons having a contractual right to cause the Company to
register shares of Common Stock, pro rata among them based upon the number of
shares of Common Stock which they have requested be registered; and thereafter,
to the Company.
(ii) If a registration under Section 2 hereof is an
underwritten offering and the managing underwriters advise the Company that in
their opinion the number of Registrable Securities and shares of Common Stock
requested to be registered exceeds the number of shares which can be sold in
such offering without materially and adversely affecting the marketability of
the offering, then the Company will include in such registration, such
Registrable Securities and other shares of Common Stock, after Littlejohn shall
have received the Return Amount, determined as follows: first, Registrable
Securities owned by Littlejohn (and its Affiliates), on the one hand, and
Quilvest (and its Affiliates), on the other hand, allocated between the two
groups pro rata based upon the number of Registrable Securities which they have
requested be registered; second, to any other Persons having a contractual right
to cause the Company to register shares of Common Stock, pro rata among them
based upon the number of shares of Common Stock which they have requested be
registered; and thereafter, to the Company.
(c) If a registration under Section 3 hereof is an underwritten
offering initiated by the Company and the managing underwriters advise the
Company that in their opinion the number of Registrable Securities and shares of
Common Stock requested to be included in such registration exceeds the number of
shares which can be sold in such offering without materially and adversely
affecting the marketability of the offering, then the Company will include in
such registration, such Registrable Securities and other shares of Common Stock
based on the allocations set forth in subsection (b) above, except that the
Company shall be permitted to include all shares of Common Stock proposed to be
registered and sold by it for its
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<PAGE>
own account before any Registrable Securities or shares of Common Stock are
included by any other Person, including Littlejohn, Quilvest, and their
respective Affiliates.
(d) If a registration under Section 3 hereof is an underwritten
offering initiated pursuant to contractual rights of shareholders of the Company
not party to this Agreement (the "Other Shareholders") and the managing
underwriters advise the Company that in their opinion the number of Registrable
Securities and shares of Common Stock requested to be included in such
registration exceeds the number of shares which can be sold in such offering
without materially and adversely affecting the marketability of the offering,
then the Company will include in such registration, such Registrable Securities
and other shares of Common Stock based on the allocations set forth in
subsection (b) above, except that the Other Shareholders shall be permitted to
include all shares of Common Stock proposed to be registered and sold by them
for their own account before any Registrable Securities or shares of Common
Stock are included by any other Person, including the Company, Littlejohn,
Quilvest, and their respective Affiliates.
(e) Notwithstanding anything to the contrary herein, in
connection with any registration as to which this Agreement applies, Littlejohn
(and its Affiliates), on the one hand, and Quilvest (and its Affiliates), on the
other hand, shall allocate between the two groups all Registrable Securities to
be sold by them as follows: until Littlejohn shall have received the Return
Amount, pro rata based upon the Applicable Percentages of Littlejohn and
Quilvest, respectively; and after Littlejohn has received the Return Amount, pro
rata based upon the number of shares of Common Stock which they have requested
be registered.
(f) No Holder may participate in any underwritten registration
hereunder unless such Holder (i) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
(g) The Company shall not grant registration rights to any
Person which impair in any way the priorities for inclusion in a registration
set forth in this Section 9, including, without limitation, by providing any
such Person with higher priority than or equal priority to that provided to the
parties herein with regard to any Registration Statement filed by be Company,
whether upon such Person's demand or otherwise.
(h) For purposes of this Agreement, "Aggregate Proceeds" shall
be determined as of the original date of the filing of a particular Registration
Statement, and shall equal the gross proceeds received as of the date of
determination by Littlejohn or its Affiliates from sales, if any, of Registered
Securities, or from sales of Series A Preferred Shares, Additional Preferred
Shares or Common Stock in transactions which are otherwise exempt from the
registration requirements of the Act.
(i) The Company represents and warrants to the Holders that, as
of the date hereof, it is not a party to any binding agreement or understanding,
whether written or oral,
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<PAGE>
which provides for an obligation on the part of the Company to register any of
its Securities under or pursuant to the Securities Act.
10. Rule 144. The Company will timely file the reports required to be
--------
filed by it under the Act and the 1934 Act and the rules and regulations adopted
by the Commission thereunder, and will use its best efforts to take such further
action as any Holder of Registrable Securities may reasonably deem to be
necessary, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Act within the
limitation of the exemptions provided by (i) Rule 144 under the Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such information and requirements.
11. Lockup Agreement.
----------------
(a) Each Holder agrees that, upon the request of and to the
extent required by the managing underwriter(s) or book runner(s) for a
registration of the Common Stock at the time of which such Holder is either a
Restricted Holder (as defined in Section 11(a) hereof) or participating in such
registration as a selling shareholder, such Holder will not sell, make any short
sale of, pledge, grant any option for the purchase of or otherwise dispose of
any Registrable Securities (other than those included in the registration or in
any Registration Statement previously declared effective) without the prior
written consent of the Company or such underwriters, as the case may be, or
unless the Company is permitted to sell under Section 11(b) hereof, during the
seven days prior to, and during the 180-day period beginning on, the effective
date of such registration. Each Holder described in the immediately preceding
sentence agrees to confirm the substance and intent of this Section 11(a) in
writing directly to the managing underwriter(s) and book runner(s) in such form
as they shall reasonably request. "Restricted Holder" shall mean any Holder who
beneficially owns (as defined in Rule 13d-3 under the Exchange Act) 2% or more
of the then outstanding Common Stock, any director or executive officer of the
Company (without regard to his or her level of ownership of Common Stock), or
any Holder whose Registrable Securities are being included in the registration
(without regard to the amount of Registrable Securities being registered).
(b) The Company agrees (i) not to effect any public or private
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, or otherwise grant any
option for the purchase of its equity securities (other than options issued by
the Company pursuant to any stock option plan or other employee benefit plan),
during the seven days prior to and during the 180-day period beginning on the
effective date of any Registration Statement related to a registered
underwritten public offering pursuant to which Registrable Securities are to be
sold (other than registration statement on Form S-8 or any successor form, or a
registration on Form S-4 for the purpose of offering such securities to another
business entity or the shareholders of such entity in connection with the
acquisition of assets or shares of capital stock, respectively, of such entity),
unless the underwriters managing the registered public offering otherwise agree
and (ii) not to issue securities to any Person if, after giving effect to such
issuance, to the knowledge of the Company, such Person would be the beneficial
owner of in excess of 2% of the Common Stock
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<PAGE>
unless such Person agrees, in the context of a registration contemplated hereby,
not to effect any sale or distribution of any such securities during the period
referred to above (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
12. Transfer of Registration Rights. Provided that the Company is
-------------------------------
given written notice by the Holder at the time of such transfer stating the name
and address of the transferee and identifying the securities with respect to
which the rights under this Agreement are being assigned, the registration
rights under this Agreement may be transferred in whole or in part in connection
with the transfer of Registrable Securities. Notwithstanding the foregoing, if
such transfer is subject to covenants, agreements or other undertakings
restricting transferability thereof the registration rights under this Agreement
shall not be transferred in connection with such transfer unless such transfer
complies with all such covenants, agreements and other undertakings. In all
cases, such registration rights shall not be transferred unless the transferee
thereof executes a Counterpart.
13. Indemnification and Contribution.
--------------------------------
(a) To the full extent permitted by law, the Company will and
hereby does (i) indemnify and hold harmless each Holder, each director, officer,
partner, employee, affiliate, or agent of or for such Holder, any underwriter
(as defined in the Act), and each Person, if any, who controls such Holder or
underwriter within the meaning of the Act, against any losses, claims, damages,
costs or liabilities, joint or several, to which they may become subject insofar
as such losses, claims, damages, costs or liabilities (or actions in respect
thereof) arise out of, are caused by, or are based on any untrue or alleged
untrue statement of any material fact contained in such Registration Statement,
including any amendments or supplements thereto, or (A) arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading , (B) arise out of, are caused by, or are based on any untrue or
alleged untrue statement of any material fact contained in any preliminary
prospectus or final prospectus contained in such Registration Statement,
including any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, or (C) arise out of, or are caused by, any violation by the
Company of any securities law, rule or regulation applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration; and (ii) will reimburse each such Person or entity for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, costs, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 13(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld,
delayed or conditioned) nor shall the Company be liable to a Holder, underwriter
or controlling person in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or an alleged untrue statement or omission or alleged omission
made in connection with such Registration Statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by or on
-15-
<PAGE>
behalf of any such Holder, underwriter or controlling person. This indemnity
shall be in addition to other indemnification arrangements to which the Company
and any Holders may otherwise be party.
(b) To the full extent permitted by law, each Holder whose
Registrable Securities are included for offer and sale in a registration under
this Agreement, severally and not jointly, will and hereby does (i) indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, each Person, if any, who controls the
Company within the meaning of the Act, and any underwriter (as defined in the
Act), each other Holder and each Person, if any, who controls such underwriter
or other Holder within the meaning of Section 15 of the Act, against any losses,
claims, damages or liabilities, joint or several, to which the Company or any
such director, officer, controlling person, other Holder or underwriter may
become subject, under the Act and applicable state securities laws, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) (A)
arise out of, are caused by, or are based on any untrue or alleged untrue
statement of any material fact contained in such Registration Statement,
including any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
arise out of, are caused by, or are based on any untrue or alleged untrue
statement of any material fact contained in any preliminary prospectus or final
prospectus contained in such Registration Statement, including any amendments or
supplements thereto, or arise out of or are based on the omission or alleged
omission to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, in each of
clauses (A) and (B) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement, preliminary or final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in such Registration
Statement; and (ii) will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, other Holder, controlling
person or underwriter attributable to investigating or defending any loss,
claim, damage, liability or action indemnified by such Holder pursuant to clause
(i); provided, however, that the indemnity agreement contained in this Section
13(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld, delayed or
conditioned). In no event shall the liability of any Registered Holder be
greater than the dollar amount of the proceeds (net of payment of all expenses)
received by such Registered Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under this
Section 13 of notice of the commencement of any action or knowledge of a claim
that would, if asserted, give rise to a claim for indemnity hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 13, notify the indemnifying party in
writing of the commencement thereof or knowledge thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. If prejudicial to any material extent to his
ability to defend such action, the failure to notify an indemnifying party
promptly of the
-16-
<PAGE>
commencement of any such action or of the knowledge of any such claim, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 13 to the extent so prejudiced, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section 13. Each indemnified party
shall have the right to employ separate counsel in such action, claim or
proceeding and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of each indemnified party unless: (i) such
indemnifying party has agreed to pay such expenses, (ii) such indemnifying party
has failed promptly to assume the defense and employ counsel reasonably
satisfactory to such indemnified party or (iii) such indemnified party shall
have been advised in writing by counsel that either there may be one or more
legal defenses available to it which are different from or in addition to those
available to such indemnifying party or such affiliate or controlling person or
a conflict of interest may exist if such counsel represents such indemnified
party and such indemnifying party or its affiliate or controlling person;
provided, however, that such indemnifying party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be responsible hereunder for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel), which counsel shall be designated by such indemnified party.
(d) The indemnifying party's liability to any such indemnified
party hereunder shall not be extinguished solely because any other indemnified
party is not entitled to indemnity hereunder. The indemnification provided for
under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person of such indemnified party, and will survive the
transfer of securities. No Person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the Act shall be entitled to indemnification
from any Person who was not guilty of such fraudulent misrepresentation.
(e) If the indemnification provided for in this Section 13 is
for any reason, other than pursuant to the terms thereof, held to be unavailable
or insufficient to an indemnified party in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnifying and indemnified parties in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative fault but
also the relative benefits received by the indemnifying and indemnified parties
from the offering of Registrable Securities. The relative benefits received by a
party shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by such party bears to the
total proceeds from the offering received by all parties. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by
the Company or a Holder and the parties' relative intent, knowledge, access to
information and opportunity to
-17-
<PAGE>
correct or prevent such statement or omission. The Company and the Holders agree
that it would not be just and equitable if contribution pursuant to this
subsection (e) were determined by pro rata allocation or by any other method of
allocation taking into account the equitable considerations referred to above in
this subsection (e). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (e) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No Person
guilty of fraudulent misrepresentation within the meaning of Section 11(f) of
the Act shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation. Notwithstanding anything to the contrary, no
Holder shall be required to contribute pursuant to this subsection (e) any
amount in excess of the proceeds received by such Holder (net of all expenses of
such registration paid by such Holder).
14. Remedies. In addition to being entitled to exercise all rights
--------
provided in this Agreement as well as all rights granted by law, including
recovery of damages, each Holder of Registrable Securities will be entitled to
specific performance of its rights under this Agreement without the requirement
that a bond be posted. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees not to raise the defense in any
action for specific performance that a remedy at law would be adequate.
15. Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has agreed in writing thereto and has
obtained the written consent of both the Holders of (i) a majority of the
Registrable Securities and (ii) Littlejohn (if Littlejohn is then a Holder of at
least 10% of the Registrable Securities then governed by this Agreement).
16. Filing Notices and Copies. The Company shall provide to each
-------------------------
Holder of Registrable Securities such number of copies of any Registration
Statement, amendment thereto (including post-effective amendments) or other
report, document or notice that is filed with the Commission or other authority
under the securities laws, as may be reasonably requested by such Holder of
Registrable Securities. In addition, the Company shall provide prior notice to
any Holder of Registrable Securities of any such filing of a Registration
Statement or amendment thereto, provided that the foregoing notice provision
shall not shorten any other advance notice provision contained in this
Agreement.
17. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be given to the Person either by hand delivery or by United
States express mail, postage prepaid, or by overnight courier services
guaranteeing next business day delivery, charges prepaid, or by telecopier, to:
If to the Company, to:
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<PAGE>
Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Facsimile: 770-798-7141
Telephone: 770-798-0700
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<PAGE>
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: E. David Robertson, Esquire
Facsimile: 212-504-6666
Telephone: 212-504-6000
If to Littlejohn, to:
Littlejohn & Co., LLC
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Angus C. Littlejohn, Jr.
Facsimile: 203-861-4009
Telephone: 203-861-4005
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: James D. Epstein, Esquire
Facsimile: 215-981-4750
Telephone: 215-981-4000
If to Quilvest, to:
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Mr. Willem F.P. De Vogel
Facsimile: 212-980-1142
Telephone: 212-838-9660
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<PAGE>
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6046
Attention: Richard Borisoff, Esquire
Facsimile: 212-757-3990
Telephone: 212-373-3000
If to ICPC to:
International Comfort Products Corporation (USA)
650 Heil-Quaker Avenue
P.O. Box 128
Lewisburg, Tn 37091
Attention: __________________
Facsimile: 931-270-4166
Telephone: _________________
with a copy to:
Bingham Dana LLP
1 State Street
Harford, CT 16103-3178
Attention: Daniel Papermaster, Esquire
Facsimile: 860-240-2700
Telephone: 860-240-2800
If the notice is sent by United States express mail or by overnight courier
services, it shall be deemed to have been given to the Person entitled thereto
one business day after deposited with the post office or the courier service for
delivery to that Person or, in the case of a notice given by hand delivery or
telecopy, when received. Notice of any change in any such address shall also be
given in the manner set forth above. Whenever the giving of notice is required,
the giving of such notice may be waived by the party entitled to receive such
notice.
18. Counterparts and Facsimile Signatures. This Agreement may be
-------------------------------------
executed, including by facsimile signature, in one or more counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
19. Interpretation. Unless the context of this Agreement otherwise
--------------
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation
-21-
<PAGE>
thereof. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless business days are specified. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
20. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of New York
without regard to the application of the principles of conflicts or choice of
laws. Each party hereto submits to the jurisdiction of the courts of the State
of New York in New York County and to the jurisdiction of the United States
District Court for the Southern District of New York, and hereby agrees that
service of process may be effected in accordance with the delivery methods
described in Section 17 above.
21. Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
22. Entire Agreement; Other Registration Rights. This Agreement is
-------------------------------------------
intended by the parties as a final expression of their agreement with regard to
the subject matter hereof and intended to be a complete and exclusive statement
of the agreement and matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the rights granted by the Company with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter
(including and any prior arrangements and understandings between the Company, on
the one hand, and either Littlejohn, Quilvest, or their respective Affiliates,
on the other hand, relating to the registration of any securities under the
Act). The Company represents and warrants to Littlejohn and Quilvest that it is
not a party to any other contract, agreement or arrangement which provides for
the registration of its securities under the Act.
23. No Third Parties Benefited. Nothing in this Agreement, express or
--------------------------
implied, is intended, except as set forth herein, to confer upon any third party
any rights, remedies, obligations or liabilities.
24. Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns including, without limitation,
subsequent Holders of Registrable Securities agreeing to be bound by all and the
terms and conditions of this Agreement.
25. Effectiveness. This Agreement shall become effective upon the
-------------
completion of the Initial Closing (as such term is defined in the Purchase
Agreement), and only if the Initial Closing actually occurs.
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<PAGE>
IN WITNESS WHEREOF, this Registration Rights Agreement has been executed as
of the date and year first above written.
COMPANY:
PAMECO CORPORATION
By: /s/ Richard Martin
---------------------------------------------------
Name: Richard Martin
Title: Vice Presidet
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, L.L.C., its General Partner
By: /s/ Angus C. Littlejohn, Jr.
-------------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ Willem F.P. de Vogel
-------------------------------------
Name: Willem F.P. de Vogel
Title: Attorney-in-Fact
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By:_____________________________________
Name:
Title:
-23-
<PAGE>
EXHIBIT 10.38
VOTING AGREEMENT
by and among
LITTLEJOHN FUND II, L.P.,
PAMECO CORPORATION
and
TERBEM LIMITED
dated as of
February 18, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Agreements to Vote; Irrevocable Proxy.................................... 1
2. Restrictions on Transfers of Securities.................................. 3
3. Stock Splits............................................................. 3
4. Representations and Warranties of the Shareholder........................ 3
5. Termination.............................................................. 4
6. Certain Covenants of the Shareholder..................................... 4
7. Stop Transfer Instructions............................................... 4
8. Survival of Representations and Warranties............................... 4
9. Certain Definitions...................................................... 5
10. Entire Agreement; Amendment.............................................. 5
11. Successors and Assigns................................................... 5
12. Governing Law; Consent to Jurisdiction................................... 5
13. Injunctive Relief........................................................ 5
14. Counterparts; Facsimile Signatures....................................... 6
15. Severability............................................................. 6
16. Further Assurances....................................................... 6
17. No Third Party Beneficiaries; No Partnership or Fiduciary Relationship... 6
18. Legal Expenses........................................................... 6
19. Interpretation........................................................... 6
20. Effectiveness............................................................ 7
</TABLE>
<PAGE>
VOTING AGREEMENT
----------------
VOTING AGREEMENT (this "Agreement"), dated as of February, 15, 2000,
by and among Littlejohn Fund II, L.P., a Delaware limited partnership
("Littlejohn"), Terbem Limited, a British Virgin Islands international business
company (the "Shareholder"), and Pameco Corporation, a Georgia corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, as of the time this Agreement becomes effective in accordance
with Section 20 hereof, the Shareholder owns such number of shares of Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), indicated
next to its name on Schedule 1 attached hereto;
WHEREAS, the Company, Littlejohn and the Shareholder have agreed to
provide for certain agreement with respect to the voting and transfer of
Securities (as defined below) owned by the Shareholder pursuant to this
Agreement; and
WHEREAS, this Agreement is being entered into in order to induce
Littlejohn to enter into the Securities Purchase Agreement, dated February 16,
2000 by and among the Company, Quilvest and Littlejohn ("the Purchase
Agreement"), and to consummate the Contemplated Transactions (as defined in the
Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other, good and valuable consideration, and
intending to be legally bound hereby, the parties hereto hereby agree, as of the
Effective Time, as follows:
1. Agreements to Vote; Irrevocable Proxy.
-------------------------------------
1.1. Voting for the Matters to be Considered. The Shareholder
---------------------------------------
hereby agrees that, until the Required Approval (as defined in the Purchase
Agreement) is obtained or the Company's shareholders vote to reject the matters
contemplated to be voted on pursuant to Section 7.6 of the Purchase Agreement
(the "Matters to be Considered"), whichever shall occur first (the "Termination
Date"), at any meeting of the shareholders, however called, it shall:
(a) vote all Securities which are entitled by the GBCC, the
Articles of Incorporation or the By-laws to be voted ("Voting Securities") and
which are beneficially owned (as defined in the Securities Exchange Act of 1934)
by it, in favor of the Matters to be Considered;
(b) vote all Voting Securities beneficially owned by it
against any action or agreement that, to its knowledge, would result in a breach
of any covenant, obligation or agreement or any representation or warranty of
the Company or Quilvest under or pursuant to the Purchase Agreement;
<PAGE>
(c) vote all Voting Securities beneficially owned by it
against any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage obtaining the Required Approval, including (i)
any corporate transaction not entered into in the ordinary course of business,
including a merger, other business combination, reorganization, consolidation,
recapitalization, dissolution or liquidation involving the Company, (ii) a sale
or transfer of a material amount of assets of Company, (iii) any change in the
board of directors of Company, except in accordance with the Purchase Agreement,
(iv) any change in the capitalization of the Company (except in accordance with
the Purchase Agreement), (v) any change in the Articles of Incorporation, By-
laws or other organizational or constitutive documents of the Company, except in
accordance with the Purchase Agreement, or (vi) any other material change in the
corporate structure or business of the Company; the Shareholder acknowledges
receipt and review of a copy of the Purchase Agreement; and
(d) vote all Voting Securities beneficially owned by it for
those nominees to serve as directors of the Company as set forth in Section 6 of
Shareholders Agreement, and otherwise comply with the provision of Section 6 of
the Shareholders Agreement; the Shareholder acknowledges receipt and review of
a copy of the Shareholders Agreement.
1.2. Irrevocable Proxy. Contemporaneously with the execution of
-----------------
this Agreement: (a) the Shareholder shall deliver to Littlejohn a proxy in the
form attached hereto as Exhibit A, which shall become effective as of the
Effective Time and shall be irrevocable to the fullest extent permitted by law
(the "Irrevocable Proxy"), with respect to all Voting Securities owned of record
by it; and (b) the Shareholder shall cause to be delivered to Littlejohn
additional Irrevocable Proxies executed on behalf of each record owner of any
Voting Securities owned beneficially (but not owned of record) by it. From time
to time after the date of this Agreement: (i) if it shall become the record
owner of additional Voting Securities, the Shareholder shall immediately deliver
to Littlejohn an Irrevocable Proxy with respect to such additional Voting
Securities; and (ii) if it shall become the beneficial owner (but not the record
owner) of additional Voting Securities, the Shareholder shall immediately cause
to be delivered to Littlejohn an Irrevocable Proxy with respect to such
additional voting securities from the record holder of such additional Voting
Securities.
1.3. Written Consents. The provisions of this Article 2 shall be
----------------
equally applicable to any action taken or proposed to be taken by the Company's
shareholders without a meeting, including any such action taken or proposed to
be taken by written consent pursuant to Section 14-2-704 of the Georgia Business
Corporation Code (the "GBCC").
1.4. General. The Company agrees to use its best efforts to
--------
cause the Matters to be Considered to be presented for a vote of the Company's
Shareholders as soon as practicable. The Shareholder hereby confirms each and
every action to be taken by Littlejohn pursuant to the Irrevocable Proxy as if
it were its own and waives any right to make any claim against Littlejohn that
may arise, directly or indirectly, as a result of Littlejohn's voting of any of
the Securities pursuant to the Irrevocable Proxy. The Shareholder hereby agrees
to defend, indemnify and hold harmless Littlejohn from and against any claims,
actions, losses, suits, judgments, damages, penalties, fines and expenses
(including reasonable attorneys fees and
-2-
<PAGE>
costs) arising, directly or indirectly, from a breach by the Shareholder of its
representations, warranties, covenants, agreements or obligations under this
Agreement.
2. Restrictions on Transfers of Securities. Prior to the Termination
---------------------------------------
Date, the Shareholder hereby agrees that it shall not Transfer, or permit the
Transfer of, all or any of the Securities beneficially owned by it without the
prior written consent of Littlejohn which may be given or denied in its sole
discretion for any reason or for no reason. No Transfer shall be effective and
the Company shall not, and shall not be compelled to, recognize any Transfer or
record any Transfer on its books if such Transfer is prohibited by this
Agreement, or issue any certificate representing any Securities to any Person
who has received such Securities in a Transfer made in contravention of the
terms of this Agreement. The parties agree that the restrictions on Transfer set
forth in this Agreement are not manifestly unreasonable.
3. Stock Splits. If there shall be any change in the Securities of
------------
the Company as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination, exchange or otherwise,
the provisions of this Agreement shall apply with equal force to additional
and/or substitute Securities, if any, received by the Shareholder in exchange
for or by virtue of its ownership of Securities.
4. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder represents and warrants to Littlejohn, as follows.
4.1. Ownership of Securities. The Securities listed by its name
-----------------------
on Schedule 1 are all of the Securities beneficially owned by it as of the date
of this Agreement. It does not have any rights to acquire any additional
Securities other than upon the conversion of the Securities listed on Schedule
1. It has with respect to the Securities listed by its name on Schedule 1 good,
valid and marketable title, free and clear of all liens, encumbrances,
restrictions, options, warrants, rights to purchase, voting agreements or voting
trusts, and claims of every kind (other than the encumbrances created by this
Agreement and other than restrictions on transfer under applicable Federal and
State securities laws). Neither the execution, delivery or performance of this
Agreement nor the consummation of the Contemplated Transactions will result in
or otherwise trigger the conversion of the Class B Common Stock owned by the
Shareholder into shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), other than as required by Section 6.2 hereof.
4.2. Power; Non-Contravention; Binding Agreement. The
-------------------------------------------
Shareholder has the full, right, power and authority or, in the case of a
Shareholder who is a natural person, the legal capacity) to enter into this
Agreement and perform all of its obligations hereunder. Neither the execution,
delivery nor performance of this Agreement by the Shareholder will violate the
charter, by-laws or other organizational or constitutive documents of the
Shareholder (if the Shareholder is not a natural person), or any other
agreement, contract or arrangement to which the Shareholder is a party or is
bound, including any voting agreement, shareholders agreement or voting trust.
This Agreement has been duly executed and delivered by the Shareholder and
constitutes a legal, valid and binding agreement of the Shareholder, enforceable
in accordance with its terms. Neither the execution or delivery of this
Agreement nor the consummation by the Shareholder of the transactions
contemplated hereby will (a) require any consent or approval of or filing with
any governmental or other regulatory body, other than
-3-
<PAGE>
filings required under the federal or state securities laws, or (b) constitute a
violation of, conflict with or constitute a default under (i) any law, rule or
regulation applicable to the Shareholder, or (ii) any order, judgment or decree
to which the Shareholder is bound.
5. Termination. This Agreement (other than the provisions of the
-----------
second and third sentences of Section 1.4, and the provisions of Section 6.2
(but only if the Required Approval is received) and Sections 8 through 20 which
shall survive any termination of this Agreement), shall terminate on the earlier
of (i) the Termination Date, (ii) the mutual agreement of the Shareholder and
Littlejohn, and (iii) ten (10) years from the date hereof.
6. Certain Covenants of the Shareholder.
------------------------------------
6.1. Except in accordance with the express provisions of this
Agreement, the Shareholder agrees not to, directly or indirectly:
(a) grant any proxies, deposit any Securities into a voting
trust or enter into a voting agreement with respect to any Securities; or
(b) convert any shares of Class B Common Stock beneficially
owned by it into shares of Class A Common Stock or take any action or omit to
take any action which could reasonably be expected to result in the conversion
of any Class B Common Stock beneficially owned by it into shares of Class A
Common Stock.
6.2. Immediately after the Required Approval is obtained, the
Shareholder shall take such action pursuant to the Articles of Incorporation and
otherwise to cause the Class B Common Stock beneficially owned by it to be
converted into shares of Class A Common Stock as soon as possible thereafter.
6.3. As a condition to the effectiveness of this Agreement and
the Initial Closing under the Purchase Agreement, Shareholder shall deliver to
Littlejohn (i) an opinion of Paul, Weiss, Rifkind, Wharton and Garrison, (ii) an
opinion of Harney, Westwood & Riegels and (iii) an opinion of Smith, Gambrell &
Russell LLP in substantially the forms of Exhibits 6.3(a), (b) and (c).
7. Stop Transfer Instructions. Immediately after the execution of
--------------------------
this Agreement (and from time to time prior to the termination of this
Agreement), the Company shall require that the transfer agent for its Securities
shall make a notation in its records prohibiting the transfer of any of the
Securities owned of record by the Shareholder, except in accordance with the
terms and conditions of this Agreement.
8. Survival of Representations and Warranties. Except as expressly
------------------------------------------
set forth herein, the representations, warranties, covenants and agreements made
by the Shareholder, or the Company in this Agreement shall survive the date
hereof.
-4-
<PAGE>
9. Certain Definitions. "Person" means any individual, corporation,
-------------------
partnership, firm, joint venture, limited liability company or partnership,
association, joint-stock company, trust, unincorporated organization or
Governmental Body; "Required Approval" has the meaning set forth in the Purchase
Agreement; "Securities" means and include (a) all shares of the common stock and
preferred stock of the Company, (b) all options, warrants or rights to acquire
shares of common stock or preferred stock, (c) all securities which are
convertible into or exchangeable or exercisable for, common stock or preferred
stock, and (d) all other securities of the Company which may be issued in
exchange for or in respect of shares of common stock or preferred stock (whether
by way of stock split, stock dividend, combination, reclassification,
reorganization or any other means); "Series A Designation" means the Certificate
of Designation for the Series A Cumulative Pay-in-Kind Preferred Stock, par
value $1.00 per share, of the Company; "Shareholders Agreement" means that
certain shareholders agreement contemplated by the Purchase Agreement; and
"Transfer" means any transfer of Securities, whether by sale, assignment, gift,
will, devise, bequest, operation of the laws of descent and distribution, or in
trust, pledge, hypothecation, mortgage, encumbrance or other disposition (the
verb to "transfer" shall mean to sell, assign, give, dispose, transfer
(including by gift, will, devise, bequest, or operation of laws of descent and
distribution, or in trust), pledge, hypothecate, mortgage, or encumber0.
10. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings among the parties with respect
to such subject matter (including any agreements between the Shareholder and the
Company regarding the voting of Securities.) This Agreement may not be modified,
amended, altered or supplemented except by an agreement in writing executed by
the party against whom such modification, amendment, alteration or supplement is
sought to be enforced.
11. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors, and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
12. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of Georgia
without regard to the application of the principles of conflicts or choice of
laws. Each party hereto submits to the jurisdiction of the courts of the State
of Georgia in Fulton County and to the jurisdiction of the United States
District Court for the Northern District of Georgia, and hereby agrees that
service of process may be effected by mail, hand delivery or overnight courier
service.
13. Injunctive Relief. The parties agree that in the event of a
-----------------
breach of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party shall be entitled
to obtain in any court of competent jurisdiction a decree of
-5-
<PAGE>
specific performance or to enjoin the continuing breach of such provision, in
each case without the requirement that a bond be posted, as well as to obtain
damages for breach of this Agreement. By seeking or obtaining such relief, the
aggrieved party will not be precluded from seeking or obtaining any other relief
to which it may be entitled.
14. Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts (including by facsimile signature), each
of which shall be deemed to be an original and all of which together shall
constitute one and the same documents.
15. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
16. Further Assurances. Each party hereto shall execute and deliver
------------------
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
17. No Third Party Beneficiaries; No Partnership or Fiduciary
---------------------------------------------------------
Relationship. Nothing in this Agreement, expressed or implied, shall be
- ------------
construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under or by reason of this Agreement or any
provision contained herein. Nothing in this Agreement shall create, or is
intended to create, a fiduciary relationship between the Shareholder and
Littlejohn or a partnership or similar arrangement between the Shareholder and
Littlejohn.
18. Legal Expenses. In the event any legal proceeding is commenced by
--------------
any party to this Agreement to enforce, or recover damages for any breach of,
the provisions hereof, the prevailing party in such legal proceeding shall be
entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees and disbursements.
19. Interpretation. Unless the context of this Agreement otherwise
--------------
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the term "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation thereof. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
-6-
<PAGE>
20. Effectiveness. This Agreement shall become effective as of the
-------------
closing of the transaction contemplated by the Purchase Agreement to be
consummated at the Initial Closing (as defined in the Purchase Agreement), and
only if the Initial Closing actually occurs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
PAMECO CORPORATION
By: /s/ Mark S. Sellers
--------------------------------------
Name: Mark S. Sellers
Title: Vice Chairman and
Chief Financial Officer
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, L.L.C.
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
---------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
TERBEM LIMITED
By: /s/ J. Willem Uhrig
--------------------------------------
Name: J. Willem Uhrig
Title: Attorney-in-Fact
-7-
<PAGE>
EXHIBIT 10.39
VOTING AGREEMENT
by and among
LITTLEJOHN FUND II, L.P.,
PAMECO CORPORATION
and
J. WILLIAM UHRIG
dated as of
February 18, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Agreements to Vote; Irrevocable Proxy.................................... 1
2. Restrictions on Transfers of Securities.................................. 3
3. Stock Splits............................................................. 3
4. Representations and Warranties of the Shareholder........................ 3
5. Termination.............................................................. 4
6. Certain Covenants of the Shareholder..................................... 4
7. Stop Transfer Instructions............................................... 4
8. Survival of Representations and Warranties............................... 4
9. Certain Definitions...................................................... 4
10. Entire Agreement; Amendment.............................................. 5
11. Successors and Assigns................................................... 5
12. Governing Law; Consent to Jurisdiction................................... 5
13. Injunctive Relief........................................................ 5
14. Counterparts; Facsimile Signatures....................................... 6
15. Severability............................................................. 6
16. Further Assurances....................................................... 6
17. No Third Party Beneficiaries; No Partnership or Fiduciary Relationship... 6
18. Legal Expenses........................................................... 6
19. Interpretation........................................................... 6
20. Effectiveness............................................................ 6
</TABLE>
<PAGE>
VOTING AGREEMENT
----------------
VOTING AGREEMENT (this "Agreement"), dated as of February, 18, 2000,
by and among Littlejohn Fund II, L.P., a Delaware limited partnership
("Littlejohn"), J. William Uhrig (the "Shareholder"), and Pameco Corporation, a
Georgia corporation (the "Company").
W I T N E S S E T H:
-------------------
WHEREAS, as of the time this Agreement becomes effective in accordance
with Section 20 hereof, the Shareholder owns such number of shares of Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), indicated
next to its name on Schedule 1 attached hereto;
WHEREAS, the Company, Littlejohn and the Shareholder have agreed to
provide for certain agreement with respect to the voting and transfer of
Securities (as defined below) owned by the Shareholder pursuant to this
Agreement; and
WHEREAS, this Agreement is being entered into in order to induce
Littlejohn to enter into the Securities Purchase Agreement, dated February 18,
2000 by and among the Company, Quilvest and Littlejohn ("the Purchase
Agreement"), and to consummate the Contemplated Transactions (as defined in the
Purchase Agreement).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other, good and valuable consideration, and
intending to be legally bound hereby, the parties hereto hereby agree, as of the
Effective Time, as follows:
1. Agreements to Vote; Irrevocable Proxy.
-------------------------------------
1.1. Voting for the Matters to be Considered. The Shareholder
---------------------------------------
hereby agrees that, until the Required Approval (as defined in the Purchase
Agreement) is obtained or the Company's shareholders vote to reject the matters
contemplated to be voted on pursuant to Section 7.6 of the Purchase Agreement
(the "Matters to be Considered"), whichever shall occur first (the "Termination
Date"), at any meeting of the shareholders, however called, it shall:
(a) vote all Securities which are entitled by the GBCC, the
Articles of Incorporation or the By-laws to be voted ("Voting Securities") and
which are beneficially owned (as defined in the Securities Exchange Act of 1934)
by it, in favor of the Matters to be Considered;
(b) vote all Voting Securities beneficially owned by it
against any action or agreement that, to its knowledge, would result in a breach
of any covenant, obligation or agreement or any representation or warranty of
the Company or Quilvest under or pursuant to the Purchase Agreement;
(c) vote all Voting Securities beneficially owned by it
against any action or agreement that would impede, interfere with, delay,
postpone or attempt to
<PAGE>
discourage obtaining the Required Approval, including (i) any corporate
transaction not entered into in the ordinary course of business, including a
merger, other business combination, reorganization, consolidation,
recapitalization, dissolution or liquidation involving the Company, (ii) a sale
or transfer of a material amount of assets of Company, (iii) any change in the
board of directors of Company, except in accordance with the Purchase Agreement,
(iv) any change in the capitalization of the Company (except in accordance with
the Purchase Agreement), (v) any change in the Articles of Incorporation, By-
laws or other organizational or constitutive documents of the Company, except in
accordance with the Purchase Agreement, or (vi) any other material change in the
corporate structure or business of the Company; the Shareholder acknowledges
receipt and review of a copy of the Purchase Agreement; and
(d) vote all Voting Securities beneficially owned by it for
those nominees to serve as directors of the Company as set forth in Section 6 of
Shareholders Agreement, and otherwise comply with the provision of Section 6 of
the Shareholders Agreeement; the Shareholder acknowledges receipt and review of
a copy of the Shareholders Agreement.
1.2. Irrevocable Proxy. Contemporaneously with the execution of
-----------------
this Agreement: (a) the Shareholder shall deliver to Littlejohn a proxy in the
form attached hereto as Exhibit A, which shall become effective as of the
Effective Time and shall be irrevocable to the fullest extent permitted by law
(the "Irrevocable Proxy"), with respect to all Voting Securities owned of record
by it; and (b) the Shareholder shall cause to be delivered to Littlejohn
additional Irrevocable Proxies executed on behalf of each record owner of any
Voting Securities owned beneficially (but not owned of record) by it. From time
to time after the date of this Agreement: (i) if it shall become the record
owner of additional Voting Securities, the Shareholder shall immediately deliver
to Littlejohn an Irrevocable Proxy with respect to such additional Voting
Securities; and (ii) if it shall become the beneficial owner (but not the record
owner) of additional Voting Securities, the Shareholder shall immediately cause
to be delivered to Littlejohn an Irrevocable Proxy with respect to such
additional voting securities from the record holder of such additional Voting
Securities.
1.3. Written Consents. The provisions of this Article 2 shall be
----------------
equally applicable to any action taken or proposed to be taken by the Company's
shareholders without a meeting, including any such action taken or proposed to
be taken by written consent pursuant to Section 14-2-704 of the Georgia Business
Corporation Code (the "GBCC").
1.4. General. The Company agrees to use its best efforts to
-------
cause the Matters to be Considered to be presented for a vote of the Company's
Shareholders as soon as practicable. The Shareholder hereby confirms each and
every action to be taken by Littlejohn pursuant to the Irrevocable Proxy as if
it were its own and waives any right to make any claim against Littlejohn that
may arise, directly or indirectly, as a result of Littlejohn's voting of any of
the Securities pursuant to the Irrevocable Proxy. The Shareholder hereby agrees
to defend, indemnify and hold harmless Littlejohn from and against any claims,
actions, losses, suits, judgments, damages, penalties, fines and expenses
(including reasonable attorneys fees and costs) arising, directly or indirectly,
from a breach by the Shareholder of its representations, warranties, covenants,
agreements or obligations under this Agreement.
-2-
<PAGE>
2. Restrictions on Transfers of Securities. Prior to the Termination
---------------------------------------
Date, the Shareholder hereby agrees that it shall not Transfer, or permit the
Transfer of, all or any of the Securities beneficially owned by it without the
prior written consent of Littlejohn which may be given or denied in its sole
discretion for any reason or for no reason. No Transfer shall be effective and
the Company shall not, and shall not be compelled to, recognize any Transfer or
record any Transfer on its books if such Transfer is prohibited by this
Agreement, or issue any certificate representing any Securities to any Person
who has received such Securities in a Transfer made in contravention of the
terms of this Agreement. The parties agree that the restrictions on Transfer set
forth in this Agreement are not manifestly unreasonable.
3. Stock Splits. If there shall be any change in the Securities of
------------
the Company as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination, exchange or otherwise,
the provisions of this Agreement shall apply with equal force to additional
and/or substitute Securities, if any, received by the Shareholder in exchange
for or by virtue of its ownership of Securities.
4. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder represents and warrants to Littlejohn, as follows.
4.1. Ownership of Securities. The Securities listed by its name
-----------------------
on Schedule 1 are all of the Securities beneficially owned by it as of the date
of this Agreement. It does not have any rights to acquire any additional
Securities other than upon the conversion of the Securities listed on Schedule
1. It has with respect to the Securities listed by its name on Schedule 1 good,
valid and marketable title, free and clear of all liens, encumbrances,
restrictions, options, warrants, rights to purchase, voting agreements or voting
trusts, and claims of every kind (other than the encumbrances created by this
Agreement and other than restrictions on transfer under applicable Federal and
State securities laws). Neither the execution, delivery or performance of this
Agreement nor the consummation of the Contemplated Transactions will result in
or otherwise trigger the conversion of the Class B Common Stock owned by the
Shareholder into shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), other than as required by Section 6.2 hereof.
4.2. Power; Non-Contravention; Binding Agreement. The
-------------------------------------------
Shareholder has the full, right, power and authority or, in the case of a
Shareholder who is a natural person, the legal capacity) to enter into this
Agreement and perform all of its obligations hereunder. Neither the execution,
delivery nor performance of this Agreement by the Shareholder will violate the
charter, by-laws or other organizational or constitutive documents of the
Shareholder (if the Shareholder is not a natural person), or any other
agreement, contract or arrangement to which the Shareholder is a party or is
bound, including any voting agreement, shareholders agreement or voting trust.
This Agreement has been duly executed and delivered by the Shareholder and
constitutes a legal, valid and binding agreement of the Shareholder, enforceable
in accordance with its terms. Neither the execution or delivery of this
Agreement nor the consummation by the Shareholder of the transactions
contemplated hereby will (a) require any consent or approval of or filing with
any governmental or other regulatory body, other than filings required under the
federal or state securities laws, or (b) constitute a violation of, conflict
-3-
<PAGE>
with or constitute a default under (i) any law, rule or regulation applicable to
the Shareholder, or (ii) any order, judgment or decree to which the Shareholder
is bound.
5. Termination. This Agreement (other than the provisions of the
------------
second and third sentences of Section 1.4, and the provisions of Section 6.2
(but only if the Required Approval is received) and Sections 8 through 20 which
shall survive any termination of this Agreement), shall terminate on the earlier
of (i) the Termination Date, (ii) the mutual agreement of the Shareholder and
Littlejohn, and (iii) ten (10) years from the date hereof.
6. Certain Covenants of the Shareholder.
------------------------------------
6.1. Except in accordance with the express provisions of this
Agreement, the Shareholder agrees not to, directly or indirectly:
(a) grant any proxies, deposit any Securities into a voting
trust or enter into a voting agreement with respect to any Securities; or
(b) convert any shares of Class B Common Stock beneficially
owned by it into shares of Class A Common Stock or take any action or omit to
take any action which could reasonably be expected to result in the conversion
of any Class B Common Stock beneficially owned by it into shares of Class A
Common Stock.
6.2. Immediately after the Required Approval is obtained, the
Shareholder shall take such action pursuant to the Articles of Incorporation and
otherwise to cause the Class B Common Stock beneficially owned by it to be
converted into shares of Class A Common Stock as soon as possible thereafter.
6.3. As a condition to the effectiveness of this Agreement and
the Initial Closing under the Purchase Agreement, Shareholder shall deliver to
Littlejohn (i) an opinion of Paul, Weiss, Rifkind, Wharton and Garrison, (ii) an
opinion of Harney, Westwood & Riegels and (iii) an opinion of Smith, Gambrell &
Russell LLP in substantially the forms of Exhibits 6.3(a), (b) and (c).
7. Stop Transfer Instructions. Immediately after the execution of
--------------------------
this Agreement (and from time to time prior to the termination of this
Agreement), the Company shall require that the transfer agent for its Securities
shall make a notation in its records prohibiting the transfer of any of the
Securities owned of record by the Shareholder, except in accordance with the
terms and conditions of this Agreement.
8. Survival of Representations and Warranties. Except as expressly
------------------------------------------
set forth herein, the representations, warranties, covenants and agreements made
by the Shareholder, or the Company in this Agreement shall survive the date
hereof.
9. Certain Definitions.
-------------------
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company or partnership, association, joint-stock
company, trust, unincorporated
-4-
<PAGE>
organization or Governmental Body; "Required Approval" has the meaning set forth
in the Purchase Agreement; "Securities" means and include (a) all shares of the
common stock and preferred stock of the Company, (b) all options, warrants or
rights to acquire shares of common stock or preferred stock, (c) all securities
which are convertible into or exchangeable or exercisable for, common stock or
preferred stock, and (d) all other securities of the Company which may be issued
in exchange for or in respect of shares of common stock or preferred stock
(whether by way of stock split, stock dividend, combination, reclassification,
reorganization or any other means); "Series A Designation" means the Certificate
of Designation for the Series A Cumulative Pay-in-Kind Preferred Stock, par
value $1.00 per share, of the Company; "Shareholders Agreement" means that
certain shareholders agreement contemplated by the Purchase Agreement; and
"Transfer" means any transfer of Securities, whether by sale, assignment, gift,
will, devise, bequest, operation of the laws of descent and distribution, or in
trust, pledge, hypothecation, mortgage, encumbrance or other disposition (the
verb to "transfer" shall mean to sell, assign, give, dispose, transfer
(including by gift, will, devise, bequest, or operation of laws of descent and
distribution, or in trust), pledge, hypothecate, mortgage, or encumber0.
10. Entire Agreement; Amendment. This Agreement, together with the
---------------------------
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings among the parties with respect
to such subject matter (including any agreements between the Shareholder and the
Company regarding the voting of Securities.) This Agreement may not be modified,
amended, altered or supplemented except by an agreement in writing executed by
the party against whom such modification, amendment, alteration or supplement is
sought to be enforced.
11. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors, and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
12. Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
construed and enforced in accordance with the laws of the State of Georgia
without regard to the application of the principles of conflicts or choice of
laws. Each party hereto submits to the jurisdiction of the courts of the State
of Georgia in Fulton County and to the jurisdiction of the United States
District Court for the Northern District of Georgia, and hereby agrees that
service of process may be effected by mail, hand delivery or overnight courier
service.
13. Injunctive Relief. The parties agree that in the event of a
-----------------
breach of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party shall be entitled
to obtain in any court of competent jurisdiction a decree of specific
performance or to enjoin the continuing breach of such provision, in each case
without the requirement that a bond be posted, as well as to obtain damages for
breach of this Agreement. By seeking or obtaining such relief, the aggrieved
party will not be precluded from seeking or obtaining any other relief to which
it may be entitled.
-5-
<PAGE>
14. Counterparts; Facsimile Signatures. This Agreement may be
----------------------------------
executed in any number of counterparts (including by facsimile signature), each
of which shall be deemed to be an original and all of which together shall
constitute one and the same documents.
15. Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
16. Further Assurances. Each party hereto shall execute and deliver
------------------
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
17. No Third Party Beneficiaries; No Partnership or Fiduciary
---------------------------------------------------------
Relationship. Nothing in this Agreement, expressed or implied, shall be
- ------------
construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under or by reason of this Agreement or any
provision contained herein. Nothing in this Agreement shall create, or is
intended to create, a fiduciary relationship between the Shareholder and
Littlejohn or a partnership or similar arrangement between the Shareholder and
Littlejohn.
18. Legal Expenses. In the event any legal proceeding is commenced by
--------------
any party to this Agreement to enforce, or recover damages for any breach of,
the provisions hereof, the prevailing party in such legal proceeding shall be
entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees and disbursements.
19. Interpretation. Unless the context of this Agreement otherwise
--------------
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the term "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation thereof. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
20. Effectiveness. This Agreement shall become effective as of the
-------------
closing of the transaction contemplated by the Purchase Agreement to be
consummated at the Initial Closing (as defined in the Purchase Agreement), and
only if the Initial Closing actually occurs.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
PAMECO CORPORATION
By: /s/ Mark S. Sellers
----------------------------------
Name: Mark S. Sellers
Title: Vice Chairman and Chief Financial
Officer
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, L.L.C.
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
-----------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
/s/ J. William Uhrig
---------------------------
J. William Uhrig
-7-
<PAGE>
EXHIBIT 10.40
IRREVOCABLE PROXY
The undersigned shareholder of Pameco Corporation, a Georgia
corporation (the "Company"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes Littlejohn Fund II, L.P., a Delaware limited
partnership ("Littlejohn"), the attorney and proxy of the undersigned with full
power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the issued and outstanding shares of
voting Securities of the Company, whether common stock, preferred stock or
otherwise, owned of record by the undersigned as of the date of this proxy,
which Securities are specified on the final page of this proxy and (ii) any and
all other Securities of the Company as to which the undersigned may acquire
record ownership after the date hereof (the Securities of the Company referred
to in (clauses (i) and (ii) of the immediately preceding sentence are
collectively referred to as the "Subject Shares"). As of the Effective Time,
all prior proxies given by the undersigned with respect to any of the Subject
Shares are hereby revoked, and no subsequent proxies will be given with respect
to any of the Subject Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with a Shareholders Agreement, dated as of the date hereof,
between the Company, Littlejohn and the undersigned, a copy of which is attached
hereto and made a part hereof (as hereafter amended from time to time, the
"Shareholders Agreement"), and is granted in consideration of Littlejohn
entering into the Securities Purchase Agreement, dated as of the date hereof,
among Littlejohn, Quilvest American Equity, Ltd. ("Quilvest") and the Company
(as hereafter amended from time to time, the "Purchase Agreement"). Capitalized
terms used but not otherwise defined in this proxy have the meanings ascribed to
such terms in the Purchase Agreement.
The attorney and proxy named above will be empowered, and may exercise
this proxy, to vote the Subject Shares, at any time and from time to time, in
its sole and absolute discretion (subject only to the terms and conditions of
the Shareholders Agreement), at any meeting of the shareholders of the Company,
however called, or in any written action by consent of shareholders of the
Company, with respect to:
(a) the Matters to be Considered;
(b) any action or agreement that would result in a breach of any
covenant, obligation or agreement or any representation or warranty of the
Company or Quilvest under or pursuant to the Purchase Agreement;
(c) any action or agreement that would impede, interfere with,
delay, postpone or attempt to discourage obtaining the Required Approval (as
defined in the Purchase Agreement), including (i) any corporate transaction not
entered into in the ordinary course of business, including a merger, other
business combination, reorganization, consolidation, recapitalization,
dissolution or liquidation involving the Company, (ii) a sale or transfer of a
material amount of assets of Company, (iii) any election of members to the board
of directors of Company, (iv) any change in the capitalization of the Company,
except in accordance with the Purchase Agreement,
<PAGE>
(v) any change in the Articles of Incorporation, By-laws or other organizational
or constitutive documents of the Company, except in accordance with the Purchase
Agreement, or (vi) any other material change in the corporate structure or
business of the Company; and
(d) so long as the Purchase Agreement has not been terminated in
accordance with its terms, on all other matters brought before a vote of the
shareholders, including a vote for the election of directors; provided, that
nothing contained in this proxy shall permit Littlejohn to vote the Subject
Shares in contravention of the provision of the Shareholders Agreement.
This proxy shall be binding upon the heirs, successors and assigns of
the undersigned (including any transferee of any of the Subject Shares in
accordance with the Shareholders Agreement).
The undersigned hereby confirms each and every action to be taken by
Littlejohn pursuant to this proxy as if it were its own and waives any right to
make any claim against Littlejohn that may arise, directly or indirectly, as a
result of Littlejohn's voting of any of the Subject Shares by virtue of this
proxy.
Any term or provision of this proxy which is invalid or unenforceable,
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this proxy or affecting the
validity or enforceability of any of the terms or provisions of this proxy in
any other jurisdiction. If any provision of this proxy is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Notwithstanding anything to the contrary, this proxy shall become
effective only as of, and subject to, the occurrence of the Effective Time, and
shall terminate immediately upon the termination of the Shareholders Agreement
pursuant to Section 11 thereof and shall terminate earlier as to particular
Subject Shares to the extent set forth in Section 11 of the Shareholders
Agreement.
Dated: February 18, 2000
/s/ Willem de Vogel
- ----------------------------
Willem de Vogel
Number of shares of Class A Common Stock,
$.01 par value per share, of the Company
owned of record as of the date of this proxy: ______
-2-
<PAGE>
Number of shares of Class B Common Stock,
$.01 par value per share, of the Company
owned of record as of the date of this proxy: 122,379
-------
Number of shares of Series A Cumulative Convertible
Pay-in-Kind Preferred Stock, $1.00 par value per share, of the Company
owned of record as of the date of this proxy: ___________
-3-
<PAGE>
_________________________________________________________________
PAMECO CORPORATION,
as Borrower
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
LOAN AND SECURITY AGREEMENT
Dated: February 17, 2000
$130,000,000.00
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
THE FINANCIAL INSTITUTIONS
PARTY HERETO FROM TIME TO TIME, as Lenders, and
FLEET CAPITAL CORPORATION, as Agent
______________________________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <S> <C>
SECTION 1. CREDIT FACILITIES............................................ 1
1.1. Revolver Commitments.............................................. 1
1.2. LC Facility....................................................... 3
SECTION 2. INTEREST, FEES AND CHARGES................................. 8
2.1. Interest.......................................................... 8
2.2. Fees.............................................................. 11
2.3. Computation of Interest and Fees.................................. 12
2.4. Reimbursement Obligations......................................... 12
2.5. Bank Charges...................................................... 13
2.6. Illegality........................................................ 13
2.7. Increased Costs................................................... 13
2.8. Capital Adequacy.................................................. 15
2.9. Funding Losses.................................................... 15
2.10. Maximum Interest.................................................. 16
SECTION 3. LOAN ADMINISTRATION........................................... 17
3.1. Manner of Borrowing and Funding Revolver Loans.................... 17
3.2. Defaulting Lender................................................. 21
3.3. Special Provisions Governing LIBOR Loans.......................... 22
3.4. All Revolver Loans to Constitute One Obligation................... 23
SECTION 4. PAYMENTS...................................................... 23
4.1. General Payment Provisions........................................ 23
4.2. Repayment of Revolver Loans....................................... 23
4.3. Payment of Other Obligations...................................... 25
4.4. Marshaling; Payments Set Aside.................................... 25
4.5. Agent's Allocation of Payments and Collections.................... 25
4.6. Application of Payments and Collateral Proceeds................... 26
4.7. Loan Account...................................................... 26
4.8. Gross Up for Taxes................................................ 27
4.9. Withholding Tax Exemption......................................... 27
SECTION 5. TERM AND TERMINATION.......................................... 28
5.1. Term of Revolver Commitments...................................... 28
5.2. Termination....................................................... 28
SECTION 6. COLLATERAL.................................................... 29
6.1. Grant of Security Interest........................................ 29
6.2. Lien on Deposit Accounts.......................................... 30
6.3. Other Collateral.................................................. 30
6.4. Lien Perfection; Further Assurances............................... 30
SECTION 7. COLLATERAL ADMINISTRATION..................................... 31
7.1. General Provisions................................................ 31
7.2. Administration of Accounts........................................ 32
7.3. Administration of Inventory....................................... 34
7.4. Administration of Equipment....................................... 34
7.5. Borrowing Base Certificates....................................... 35
SECTION 8. REPRESENTATIONS AND WARRANTIES................................ 35
8.1. General Representations and Warranties............................ 35
8.2. Reaffirmation of Representations and Warranties................... 41
8.3. Survival of Representations and Warranties........................ 41
SECTION 9. COVENANTS AND CONTINUING AGREEMENTS........................... 41
9.1. Affirmative Covenants............................................. 41
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
9.1.12. Dividends of Subsidiaries After Default......................... 45
9.2. Negative Covenants................................................ 45
9.3. Financial Covenants............................................... 50
SECTION 10. CONDITIONS PRECEDENT.......................................... 51
10.1. Conditions Precedent to Initial Credit Extensions................. 51
10.2. Conditions Precedent to All Credit Extensions..................... 54
10.2.5. Borrowing Base Certificate....................................... 54
10.4. Limited Waiver of Conditions Precedent............................ 54
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT............. 55
11.1. Events of Default................................................. 55
11.2. Acceleration of Obligations; Termination of Revolver Commitments.. 57
11.3. Other Remedies.................................................... 58
11.4. Setoff............................................................ 59
11.5. Remedies Cumulative; No Waiver.................................... 60
SECTION 12. AGENT 61
12.1. Appointment, Authority and Duties of Agent........................ 61
12.2. Agreements Regarding Collateral................................... 63
12.3. Reliance By Agent................................................. 63
12.4. Action Upon Default............................................... 63
12.5. Ratable Sharing................................................... 64
12.6. Indemnification of Agent Indemnitees.............................. 64
12.7. Limitation on Responsibilities of Agent........................... 66
12.8. Successor Agent and Co-Agents..................................... 66
12.10. Due Diligence and Non-Reliance.................................... 69
12.11. Representations and Warranties of Lenders......................... 70
12.12. The Required Lenders.............................................. 70
12.13. Several Obligations............................................... 70
12.14. Agent in its Individual Capacity.................................. 70
12.15. No Third Party Beneficiaries...................................... 71
12.16. Notice of Transfer................................................ 71
12.17. Replacement of Certain Lenders.................................... 71
12.18. Remittance of Payments and Collections............................ 72
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS.......... 72
13.1. Successors and Assigns............................................ 72
13.2. Participations.................................................... 73
13.3. Assignments....................................................... 74
13.4. Tax Treatment..................................................... 75
SECTION 14. MISCELLANEOUS................................................. 75
14.1. Power of Attorney................................................. 75
14.2. General Indemnity................................................. 76
14.3. Survival of All Indemnities....................................... 76
14.4. Modification of Agreement......................................... 77
14.5. Severability...................................................... 77
14.6. Cumulative Effect; Conflict of Terms.............................. 77
14.7. Execution in Counterparts......................................... 77
14.8. Consent........................................................... 77
14.9. Notices........................................................... 78
14.10. Performance of Borrower's Obligations............................. 78
14.11. Credit Inquiries.................................................. 78
14.12. Time of Essence................................................... 78
14.13. Entire Agreement; Appendix A, Exhibits and Schedules.............. 78
14.14. Interpretation.................................................... 79
14.15. Obligations Several............................................... 79
14.16. Confidentiality................................................... 79
14.17. Governing Law; Consent to Forum................................... 80
14.18. Waivers by Borrower............................................... 80
</TABLE>
ii
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A Revolver Note
Exhibit A-1 Settlement Note
Exhibit B Notice of Conversion/Continuation
Exhibit C Notice of Borrowing
Exhibit D Compliance Certificate
Exhibit E Opinion Contents
Exhibit F Assignment and Acceptance
Exhibit G Notice
Exhibit H Credit Procurement Request
Exhibit I Subsidiary Guaranty
Exhibit J Littlejohn Guaranty
Exhibit K Debt Subordination Agreement
Exhibit L Lien Subordination Agreement
Schedule 7.1.1 Borrower's Business Locations
Schedule 8.1.1 Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Schedule 8.1.4C Capital Structure of Borrower
Schedule 8.1.5 Corporate Names
Schedule 8.1.12 Surety Obligations
Schedule 8.1.13 Tax Identification Numbers of Borrower and Subsidiaries
Schedule 8.1.14 Brokers
Schedule 8.1.15 Patents, Trademarks, Copyrights and Licenses
Schedule 8.1.18 Contracts Restricting Borrower's Right to Incur Debts; Surety
Obligations
Schedule 8.1.19 Litigation
Schedule 8.1.21 Capitalized and Operating Leases
Schedule 8.1.22 Pension Plans
iv
<PAGE>
Schedule 8.1.23 Labor Contracts
Schedule 9.2.5 Permitted Liens
Schedule 9.2.8 Restrictions on Upstream Payments
v
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made on February 17, 2000, by and
among PAMECO CORPORATION, a Georgia corporation with its chief executive office
and principal place of business at 1000 Center Place, Norcross, Georgia 30093
("Borrower"); the various financial institutions listed on the signature pages
hereof and their respective successors and permitted assigns which become
"Lenders" as provided herein; and FLEET CAPITAL CORPORATION, a Rhode Island
corporation with an office at 300 Galleria Parkway, N.W., Suite 800, Atlanta,
Georgia 30339 ("Fleet"), in its capacity as collateral and administrative agent
for the Lenders pursuant to Section 12 hereof (together with its successors in
such capacity, "Agent"). Capitalized terms used in this Agreement have the
meanings assigned to them in Appendix A, General Definitions.
Recitals:
Borrower has requested that Fleet provide a revolving credit and letter of
credit facility to Borrower in an aggregate principal amount of $130,000,000.
Agent and Lenders are willing to provide the requested financial
accommodations to Borrower, subject to the terms and conditions contained
herein.
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in hand
paid and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. CREDIT FACILITIES
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders severally agree to the extent and in the manner hereinafter
set forth to make their respective Pro Rata shares of the Revolver Commitments
available to Borrower, in an aggregate amount up to $130,000,000, as follows:
1.1. Revolver Commitments.
1.1.1. Revolver Loans. Each Lender agrees, severally to the extent
of its Revolver Commitment and not jointly with the other Lenders, upon the
terms and subject to the conditions set forth herein, to make Revolver Loans to
Borrower on any Business Day during the period from the date hereof through the
Business Day before the last day of the Term, not to exceed in aggregate
principal amount outstanding at any time such Lender's Revolver Commitment at
such time, which Revolver Loans may be repaid and reborrowed in accordance with
the provisions of this Agreement; provided, however, that Lenders shall have no
obligation
1
<PAGE>
to Borrower whatsoever to make any Revolver Loan on or after the Commitment
Termination Date or if at the time of the proposed funding thereof the aggregate
principal amount of all of the Revolver Loans and Pending Revolver Loans then
outstanding exceeds, or would exceed after the funding of such Revolver Loan,
the Borrowing Base. Each Borrowing of Revolver Loans shall be funded by Lenders
on a Pro Rata basis in accordance with their respective Revolver Commitments
(except for Fleet with respect to Settlement Loans). The Revolver Loans shall
bear interest as set forth in Section 2.1. hereof. Each Revolver Loan shall, at
the option of Borrower, be made or continued as, or converted into, part of one
or more Borrowings that, unless specifically provided herein, shall consist
entirely of Base Rate Loans or LIBOR Loans.
1.1.2. Out-of-Formula Loans. If the unpaid balance of Revolver
Loans outstanding at any time should exceed the Borrowing Base at such time (an
"Out-of-Formula Condition"), such Revolver Loans shall nevertheless constitute
Obligations that are secured by the Collateral and entitled to all of the
benefits of the Loan Documents. Lenders may, in their sole and absolute
discretion, make Out-of-Formula Loans to Borrower from time to time; provided,
however, that, if and so long as each of the following conditions (collectively,
the "Out-of-Formula Facility Conditions") is satisfied, Lenders shall be
obligated to honor Borrower's request for Revolver Loans notwithstanding the
existence or creation of an Out-of-Formula Condition: (i) the Littlejohn
Guaranty has been duly executed and delivered and is in full force and effect,
and Agent has not received from Littlejohn any notice of attempted revocation or
termination thereof; (ii) the Out-of-Formula Fix Date has not occurred; (iii)
Littlejohn is Solvent and, on the date of any request for such a Revolver Loan,
Littlejohn has the right (and, if so requested by Agent, confirms in writing
that it has the right) to make capital calls on its partners in an amount that
is $5,000,000 in excess of any existing capital calls on such date; (iv) both
prior to and after giving effect to any requested Revolver Loan, the Out-of-
Formula Condition is not and will not be greater than $5,000,000 (with the
understanding that Agent's determination of the existence and amount of any Out-
of-Formula Condition shall be conclusive and binding upon all parties) and the
aggregate amount of all Revolver Loans and LC Outstandings do not and would not
exceed the Revolver Commitments; and (v) no Default or Event of Default exists
or would result from the funding of such Revolver Loan and all of the other
conditions set forth in Section 10 are satisfied. All Out-of-Formula Loans
shall bear interest as provided in Section 2.1 hereof, shall be secured by all
of the Collateral and shall be repaid in accordance with Section 4.2.1(iii)
hereof.
1.1.3. Use of Proceeds. The proceeds of the Revolver Loans shall be
used by Borrower solely for one or more of the following purposes: (i) to
satisfy any Debt owing on the Closing Date to Prior Lenders; (ii) to pay the
fees and transaction expenses associated with the closing of the transactions
described herein; (iii) to pay any of the Obligations; and (iv) to make
expenditures for other general corporate purposes of Borrower to the extent such
expenditures are not prohibited by this Agreement or Applicable Law. In no
event may any Revolver Loan proceeds be used by Borrower to make a contribution
to the equity of any Subsidiary that is not a Subsidiary Guarantor or a Co-
Borrower, to purchase or to carry, or to reduce, retire or refinance any Debt
incurred to purchase or carry, any Margin Stock or for any related purpose that
violates the provisions of Regulations T, U or X of the Board of Governors.
2
<PAGE>
1.1.4. Revolver Notes. The Revolver Loans made by each Lender and
interest accruing thereon shall be evidenced by the records of Agent and such
Lender and by the Revolver Note payable to such Lender (or the assignee of such
Lender), which shall be executed by Borrower, completed in conformity with this
Agreement and delivered to such Lender. All outstanding principal amounts and
accrued interest under the Revolver Notes shall be due and payable as set forth
in Section 4.2 hereof.
1.1.5. Voluntary Reductions of Revolver Commitments. Borrower shall
have the right to reduce permanently the amount of the Revolver Commitments, on
a Pro Rata basis for each Lender, at any time and from time to time upon 3
Business Days prior written notice to Agent, which notice shall specify the
amount of such reduction (which shall be in a minimum amount of $200,000 and
increments of $50,000), shall be irrevocable once given, and shall be effective
only upon Agent's receipt thereof. Agent shall promptly transmit such notice to
each Lender. The effective date of any optional reduction of the Revolver
Commitments shall be the first day of a month following the month in which such
notice is received by Agent. If on the effective date of any such reduction in
the Revolver Commitments and after giving effect thereto an Out-of-Formula
Condition exists, then the provisions of Section 4.2.1(iii) hereof shall apply,
except that such repayment shall be due immediately upon such effective date
without further notice to or demand upon Borrower. If the Revolver Commitments
are reduced to zero, then such reduction shall be deemed a termination of the
Revolver Commitments by Borrower pursuant to Section 5.2.2 hereof. The Revolver
Commitments once reduced may not be reinstated without the written consent of
all Lenders.
1.2. LC Facility.
1.2.1. Procurement of Letters of Credit. During the period from the
date hereof to (but excluding) the 30th day prior to the last day of the Term,
and provided no Default or Event of Default exists, Fleet agrees to establish
the LC Facility pursuant to which Fleet shall procure from Bank one or more
Letters of Credit on Borrower's request therefor from time to time, subject to
the following terms and conditions:
(i) Borrower acknowledges that Bank's willingness to issue any
Letter of Credit is conditioned upon Bank's receipt of (A) the LC Support
duly executed and delivered to Bank by Fleet, (B) an LC Application with
respect to the requested Letter of Credit and (C) such other instruments
and agreements as Bank may customarily require for the issuance of a letter
of credit of equivalent type and amount as the requested Letter of Credit.
Fleet shall have no obligation to execute any LC Support or to join with
Borrower in executing an LC Application unless (x) Fleet receives an LC
Request from Borrower at least 5 Business Days prior to the date on which
Borrower desires to submit such LC Application to Bank and (y) each of the
LC Conditions is satisfied on the date of Fleet's receipt of the LC Request
and at the time of the requested execution of the LC Application. In no
event shall Fleet or any other Lender have any liability or obligation to
Borrower or any Subsidiary for any error of Bank in issuing any Letter of
Credit.
(ii) Letters of Credit may be requested by Borrower only if they
are to be used (a) to support obligations of Borrower (or obligations of a
Subsidiary of
3
<PAGE>
Borrower that is either a Subsidiary Guarantor or a Co-Borrower) that are
incurred in the Ordinary Course of Business of Borrower (or such
Subsidiary) or (b) for such other purposes as Agent and Lenders may approve
from time to time in writing.
(iii) Borrower shall comply with all of the terms and conditions
imposed on Borrower by Bank, whether such terms and conditions are
contained in an LC Application or in any agreement with respect thereto,
and subject to the rights of Bank, Fleet shall have the same rights and
remedies that Bank has under any agreements that Borrower may have with
Bank in addition to any rights and remedies contained in any of the Loan
Documents. Borrower agrees to reimburse Bank for any draw under any Letter
of Credit as hereinafter provided, and to pay Bank the amount of all other
liabilities and obligations payable to Bank under or in connection with any
Letter of Credit immediately when due, irrespective of any claim, setoff,
defense or other right that Borrower may have at any time against Bank or
any other Person. If Fleet shall pay any amount under a LC Support with
respect to any Letter of Credit, then Borrower shall pay to Fleet, in
Dollars on the first Business Day following the date on which payment was
made by Fleet under such LC Support (the "Reimbursement Date"), an amount
equal to the amount paid by Fleet under such LC Support together with
interest from and after the Reimbursement Date until payment in full is
made by Borrower at the Default Rate for Revolver Loans constituting Base
Rate Loans. Until Fleet has received payment from Borrower in accordance
with the foregoing provisions of this clause (iii), Fleet, in addition to
all of its other rights and remedies under this Agreement, shall be fully
subrogated to (A) the rights and remedies of Bank as issuer of the Letter
of Credit under any agreement with Borrower relating to the issuance of
such Letter of Credit, and (B) the rights and remedies of each beneficiary
under such Letter of Credit whose claims against Borrower has been
discharged with the proceeds of such Letter of Credit. Whether or not
Borrower submits any Notice of Borrowing to Agent, Borrower shall be deemed
to have requested from Lenders a Borrowing of Base Rate Loans in an amount
necessary to pay to Fleet all amounts due Fleet on any Reimbursement Date
and each Lender agrees to fund its Pro Rata share of such Borrowing whether
or not any Default or Event of Default has occurred or exists, the Revolver
Commitments have been terminated, the funding of the Borrowing deemed
requested by Borrower would result in, or increase the amount of, any Out-
of-Formula Condition, or any of the conditions set forth in Section 10
hereof are not satisfied.
(iv) Borrower assumes all risks of the acts, omissions or misuses
of any Letter of Credit by the beneficiary thereof. The obligation of
Borrower to reimburse Fleet for any payment made by Fleet under the LC
Support shall be absolute, unconditional and irrevocable and shall be paid
without regard to any lack of validity or enforceability of any Letter of
Credit, the existence of any claim, setoff, defense or other right which
Borrower may have at any time against a beneficiary of any Letter of
Credit, or improper honor by Bank of any draw request under a Letter of
Credit. If presentation of a demand, draft, certificate or other document
does not comply with the terms of a Letter of Credit and Borrower contends
that, as a consequence of such noncompliance it has no obligation to
reimburse Bank for any payment made with respect thereto, Borrower shall
nevertheless be obligated to reimburse Fleet for any payment made under
4
<PAGE>
the LC Support with respect to such Letter of Credit, but without waiving
any claim Borrower may have against Bank in connection therewith. All
disputes regarding any Letter of Credit shall be resolved by Borrower
directly with Bank.
(v) No Letter of Credit shall be extended or amended in any
respect that is not solely ministerial, unless all of the LC Conditions are
met as though a new Letter of Credit were being requested and issued.
(vi) Borrower hereby authorizes and directs Bank to deliver to
Fleet all instruments, documents and other writings and Property received
by Bank pursuant to or in connection with any Letter of Credit and to
accept and rely upon Fleet's instructions and agreements with respect to
all matters arising in connection with such Letter of Credit and the
related LC Application.
1.2.2. Participations.
(i) Immediately upon the issuance by Bank of any Letter of
Credit, each Lender (other than Fleet) shall be deemed to have irrevocably
and unconditionally purchased and received from Fleet, without recourse or
warranty, an undivided interest and participation equal to the Pro Rata
share of such Lender (a "Participating Lender") in all LC Outstandings
arising in connection with such Letter of Credit and any security therefor
or guaranty pertaining thereto, but in no event greater than an amount
which, when added to such Lender's Pro Rata share of all Revolver Loans and
LC Outstandings then outstanding, exceeds such Lender's Revolver
Commitment.
(ii) If Fleet makes any payment under an LC Support and Borrower
does not repay or cause to be repaid the amount of such payment on the
Reimbursement Date, Fleet shall promptly notify Agent, which shall promptly
notify each Participating Lender, of such payment and each Participating
Lender shall promptly (and in any event within 1 Business Day after its
receipt of notice from Agent) and unconditionally pay to Agent, for the
account of Fleet, in immediately available funds, the amount of such
Participating Lender's Pro Rata share of such payment, and Agent shall
promptly pay such amounts to Fleet. If a Participating Lender does not
make its Pro Rata share of the amount of such payment available to Agent on
a timely basis as herein provided, such Participating Lender agrees to pay
to Agent for the account of Fleet, forthwith on demand, such amount
together with interest thereon at the Federal Funds Rate until paid. The
failure of any Participating Lender to make available to Agent for the
account of Fleet such Participating Lender's Pro Rata share of the LC
Outstandings shall not relieve any other Participating Lender of its
obligation hereunder to make available to Agent its Pro Rata share of the
LC Outstandings, but no Participating Lender shall be responsible for the
failure of any other Participating Lender to make available to Agent its
Pro Rata share of the LC Outstandings on the date such payment is to be
made.
(iii) Whenever Fleet receives a payment on account of the LC
Outstandings, including any interest thereon, as to which Agent has
previously received payments from any Lender for the account of Fleet,
Fleet shall promptly pay to each
5
<PAGE>
Participating Lender which has funded its participating interest therein,
in immediately available funds, an amount equal to such Participating
Lender's Pro Rata share thereof.
(iv) The obligation of each Participating Lender to make payments
to Agent for the account of Fleet in connection with Fleet's payment under
a LC Support shall be absolute, unconditional and irrevocable, not subject
to any counterclaim, setoff, qualification or exception whatsoever (other
than for Fleet's gross negligence or willful misconduct), and shall be made
in accordance with the terms and conditions of this Agreement under all
circumstances and irrespective of whether or not Borrower may assert or
have any claim for any lack of validity or unenforceability of this
Agreement or any of the other Loan Documents; the existence of any Default
or Event of Default; any draft, certificate or other document presented
under a Letter of Credit having been determined to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; the existence of any setoff or defense
any Obligor may have with respect to any of the Obligations; or the
termination of the Revolver Commitments.
(v) Neither Fleet nor any of its officers, directors, employees
or agents shall be liable to any Participating Lender for any action taken
or omitted to be taken under or in connection with any of the LC Documents
except as a result of actual gross negligence or willful misconduct on the
part of Fleet. Fleet does not assume any responsibility for any failure or
delay in performance or breach by Borrower or any other Person of any of
its obligations under any of the LC Documents. Fleet does not make to
Participating Lenders any express or implied warranty, representation or
guaranty with respect to the Collateral, the LC Documents, or any Obligor.
Fleet shall not be responsible to any Participating Lender for any
recitals, statements, information, representations or warranties contained
in, or for the execution, validity, genuineness, effectiveness or
enforceability of or any of the LC Documents; the validity, genuineness,
enforceability, collectibility, value or sufficiency of any of the
Collateral or the perfection of any Lien therein; or the assets,
liabilities, financial condition, results of operations, business,
creditworthiness or legal status of Borrower or any other Obligor or any
Account Debtor. In connection with its administration of and enforcement
of rights or remedies under any of the LC Documents, Fleet shall be
entitled to act, and shall be fully protected in acting upon, any
certification, notice or other communication in whatever form believed by
Fleet, in good faith, to be genuine and correct and to have been signed,
sent or made by a proper Person. Fleet may consult with and employ legal
counsel, accountants and other experts and to advise it concerning its
rights, powers and privileges under the LC Documents and shall be entitled
to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by such experts. Fleet may employ
agents and attorneys-in-fact in connection with any matter relating to the
LC Documents and shall not be liable for the negligence, default or
misconduct of any such agents or attorneys-in-fact selected by Fleet with
reasonable care. Fleet shall not have any liability to any Participating
Lender by reason of Fleet's refraining to take any action under any of the
LC Documents without having first received written instructions from the
Required Lenders to take such action.
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(vi) Upon the request of any Participating Lender, Fleet shall
furnish to such Participating Lender copies (to the extent then available
to Fleet) of each outstanding Letter of Credit and related LC Application
and all other documentation pertaining to such Letter of Credit as may be
in the possession of Fleet and reasonably requested from time to time by
such Participating Lender.
1.2.3. Cash Collateral Account. If any LC Outstandings, whether or
not then due or payable, shall for any reason be outstanding (i) at any time
when an Event of Default has occurred and is continuing, (ii) on any date that
Availability is less than zero, or (iii) on or at any time after the Commitment
Termination Date, then Borrower shall, on Fleet's or Agent's request, forthwith
deposit with Agent, in cash, an amount equal to the aggregate amount of LC
Outstandings. If Borrower fails to make such deposit on the first Business Day
following Agent's or Fleet's demand therefor, Lenders may (and shall upon
direction of the Required Lenders) advance such amount as Revolver Loans
(whether or not an Out-of-Formula Condition is created thereby). Such cash
(together with any interest accrued thereon) shall be held by Agent in the Cash
Collateral Account and may be invested, in Agent's discretion, in Cash
Equivalents. Borrower hereby pledges to Agent and grants to Agent a security
interest in, for the benefit of Agent in such capacity and for the Pro Rata
benefit of Lenders, all Cash Collateral held in the Cash Collateral Account from
time to time and all proceeds thereof, as security for the payment of all
Obligations, whether or not then due or payable. From time to time after cash
is deposited in the Cash Collateral Account, Agent may apply Cash Collateral
then held in the Cash Collateral Account to the payment of any amounts, in such
order as Agent may elect, as shall be or shall become due and payable by
Borrower to Agent or any Lender with respect to the LC Outstandings that may be
then outstanding. Neither Borrower nor any other Person claiming by, through or
under or on behalf of Borrower shall have any right to withdraw any of the Cash
Collateral held in the Cash Collateral Account, including any accrued interest,
provided that upon termination or expiration of all Letters of Credit and the
payment and satisfaction of all of the LC Outstandings, any Cash Collateral
remaining in the Cash Collateral Account shall be returned to Borrower unless an
Event of Default then exists (in which event Agent may apply such Cash
Collateral to the payment of any other Obligations outstanding, with any surplus
to be turned over to Borrower).
1.2.4. Indemnifications.
(i) In addition to any other indemnity which Borrower may have to
Agent or any Lender under any of the other Loan Documents and without
limiting such other indemnification provisions, Borrower hereby agrees to
indemnify and defend each of the Agent Indemnitees and Lender Indemnitees
and to hold each of the Agent Indemnitees and Lender Indemnitees harmless
from and against any and all Claims which any of the Agent Indemnitees or
any of the Lender Indemnitees may (other than as the actual result of their
own gross negligence or willful misconduct) incur or be subject to as a
consequence, directly or indirectly, of (a) the issuance of, payment or
failure to pay or any performance or failure to perform under any Letter of
Credit or LC Support or (b) any suit, investigation or proceeding as to
which Agent or any Lender is or may become a party to as a consequence,
directly or indirectly, of the issuance of any Letter of Credit or any LC
Support or the payment or failure to pay thereunder.
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<PAGE>
(ii) Each Participating Lender agrees to indemnify and defend
each of the Fleet Indemnitees (to the extent the Fleet Indemnitees are not
reimbursed by Borrower or any other Obligor, but without limiting the
indemnification obligations of Borrower under this Agreement), on a Pro
Rata basis, from and against any and all Claims which may be imposed on,
incurred by or asserted against any of the Fleet Indemnitees in any way
related to or arising out of Fleet's administration or enforcement of
rights or remedies under any of the LC Documents or any of the transactions
contemplated thereby (including costs and expenses which Borrower is
obligated to pay under Section 14.2 hereof), provided that no Participating
Lender shall be liable to any of the Fleet Indemnitees for any of the
foregoing to the extent that they result solely from the willful misconduct
or gross negligence of such Fleet Indemnitees.
SECTION 2. INTEREST, FEES AND CHARGES
2.1. Interest.
2.1.1. Rates of Interest. Borrower agrees to pay interest in respect
of all unpaid principal amounts of the Revolver Loans from the respective dates
such principal amounts are advanced until paid (whether at stated maturity, on
acceleration or otherwise) at a rate per annum equal to the applicable rate
indicated below:
(i) for Revolver Loans made or outstanding as Base Rate Loans,
the Applicable Margin plus the Base Rate in effect from time to time; or
(ii) for Revolver Loans made or outstanding as LIBOR Loans, the
Applicable Margin plus the relevant Adjusted LIBOR Rate for the applicable
Interest Period selected by Borrower in conformity with this Agreement.
Upon determining the Adjusted LIBOR Rate for any Interest Period
requested by Borrower, Agent shall promptly notify Borrower thereof by telephone
and, if so requested by Borrower, confirm the same in writing (which shall be
deemed to include electronic mail or telecopier). Such determination shall,
absent manifest error, be final, conclusive and binding on all parties and for
all purposes. The applicable rate of interest for all Revolver Loans (or
portions thereof) bearing interest based upon the Base Rate shall be increased
or decreased, as the case may be, by an amount equal to any increase or decrease
in the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
Interest on each Revolver Loan shall accrue from and including the date on which
such Revolver Loan is made, converted to a Revolver Loan of another Type or
continued as a LIBOR Loan to (but excluding) the date of any repayment thereof;
provided, however, that, if a Revolver Loan is repaid on the same day made, one
day's interest shall be paid on such Revolver Loan. The Base Rate on the date
hereof is 8.75% per annum and, therefore, the rate of interest in effect
hereunder on the date hereof, expressed in simple interest terms, is 9.50% per
annum with respect to any portion of the Revolver Loans bearing interest as a
Base Rate Loan.
2.1.2 Conversions and Continuations.
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(i) Borrower may on any Business Day, subject to the giving of a
proper Notice of Conversion/Continuation as hereinafter described, elect
(A) to continue all or any part of a LIBOR Loan by selecting a new Interest
Period therefor, to commence on the last day of the immediately preceding
Interest Period, or (B) to convert all or any part of a Revolver Loan of
one Type into a Revolver Loan of another Type; provided, however, that no
outstanding Revolver Loans may be converted into or continued as LIBOR
Loans when any Default or Event of Default exists. Any conversion of a
LIBOR Loan into a Base Rate Loan shall be made on the last day of the
Interest Period for such LIBOR Loan. Any conversion or continuation made
with respect to less than the entire outstanding balance of the Revolver
Loans, must be allocated among Lenders on a Pro Rata basis, and the
Interest Period for Revolver Loans converted into or continued as LIBOR
Loans shall be coterminous for each Lender.
(ii) Whenever Borrower desires to convert or continue Revolver
Loans under Section 2.1.2(i), Borrower shall give Agent written notice (or
telephonic notice promptly confirmed in writing, which shall be deemed to
include electronic mail or telecopier) substantially in the form of Exhibit
B, signed by an authorized officer of Borrower, before 12:00 noon on the
requested conversion date, in the case of a conversion into Base Rate
Loans, and at least 3 Business Days before the requested conversion or
continuation date, in the case of a conversion into or continuation of
LIBOR Loans. Promptly after receipt of a Notice of
Conversion/Continuation, Agent shall notify each Lender in writing of the
proposed conversion or continuation. Each such Notice of
Conversion/Continuation shall be irrevocable and shall specify the
aggregate principal amount of the Revolver Loans to be converted or
continued, the date of such conversion or continuation (which shall be a
Business Day) and whether the Revolver Loans are being converted into or
continued as LIBOR Loans (and, if so, the duration of the Interest Period
to be applicable thereto) or Base Rate Loans. If, upon the expiration of
any Interest Period in respect of any LIBOR Loans, Borrower shall have
failed to deliver the Notice of Conversion/Continuation, Borrower shall be
deemed to have elected to convert such LIBOR Loans to Base Rate Loans.
2.1.3. Interest Periods. In connection with the making or
continuation of, or conversion into, each Borrowing of LIBOR Loans, Borrower
shall select an interest period (each an "Interest Period") to be applicable to
such LIBOR Loan, which interest period shall commence on the date such LIBOR
Loan is made and shall end on a numerically corresponding day in the first,
second, third or sixth month thereafter; provided, however, that:
(i) the initial Interest Period for a LIBOR Loan shall commence
on the date of such Borrowing (including the date of any conversion from a
Revolver Loan of another Type) and each Interest Period occurring
thereafter in respect of such Revolver Loan shall commence on the date on
which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect of
LIBOR Loans would otherwise expire
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<PAGE>
on a day which is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(iii) any Interest Period that begins on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period shall expire on the last Business Day of such calendar
month; and
(iv) no Interest Period shall extend beyond the last day of the
Term.
2.1.4. Interest Rate Not Ascertainable. If Agent shall determine
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties) that on any date for determining the Adjusted LIBOR
Rate for any Interest Period, by reason of any changes arising after the date of
this Agreement affecting the London interbank market or any Lender's or Bank's
position in such market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Adjusted LIBOR Rate, then, and in any such event, Agent shall forthwith give
notice (by telephone confirmed in writing) to Borrower of such determination.
Until Agent notifies Borrower that the circumstances giving rise to the
suspension described herein no longer exist, the obligation of Lenders to make
LIBOR Loans shall be suspended, and such affected Revolver Loans then
outstanding shall, at the end of the then applicable Interest Period or at such
earlier time as may be required by Applicable Law, bear the same interest as
Base Rate Loans.
2.1.5. Default Rate of Interest. Borrower shall pay interest (before
as well as after entry of judgment thereon, to the extent permitted by
Applicable Law) at a rate per annum equal to the Default Rate (i) with respect
to the principal amount of any portion of the Obligations (and, to the extent
permitted by Applicable Law, all past due interest) that is not paid on the due
date thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise) until paid in full; (ii) with respect to the principal amount of all
of the Obligations (and, to the extent permitted by Applicable Law, all past due
interest) upon the earlier to occur of (x) Borrower's receipt of notice from
Agent of the Required Lenders' election to charge the Default Rate based upon
the existence of any Event of Default (which notice Agent shall send only with
the consent or at the direction of the Required Lenders), whether or not
acceleration or demand for payment of the Obligations has been made, or (y) the
commencement by or against Borrower of an Insolvency Proceeding whether or not
under the circumstances described in clauses (i) or (ii) hereof Agent elects to
accelerate the maturity or demand payment of any of the Obligations; and (iii)
with respect to the principal amount of any Out-of-Formula Loans, whether or not
demand for payment thereof has been made by Agent. To the fullest extent
permitted by Applicable Law, the Default Rate shall apply and accrue on any
judgment entered with respect to any of the Obligations and to the unpaid
principal amount of the Obligations during any Insolvency Proceeding of
Borrower. Borrower acknowledges that the cost and expense to Agent and each
Lender attendant upon the occurrence of an Event of Default are difficult to
ascertain or estimate and that the Default Rate is a fair and reasonable
estimate to compensate Agent and Lenders for such added cost and expense.
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2.2. Fees. In consideration of Lenders' establishment of the Revolver
Commitments in favor of Borrower and Agent's agreement to serve as collateral
and administrative agent hereunder, Borrower agrees to pay the following fees:
2.2.1. Closing Fee. Borrower shall pay to Initial Lender a closing
fee in the amount set forth in the Fee Letter, which fee shall be paid
concurrently with the initial Revolver Loan hereunder.
2.2.2. Unused Line Fee. Borrower shall pay to Agent for the Pro Rata
benefit of Lenders a fee (the "Unused Line Fee") equal to the Applicable Margin
for the Unused Line Fee multiplied by the amount by which the Average Revolver
Loan Balance for any Fiscal Quarter (or portion thereof that the Revolver
Commitments are in effect) is less than the aggregate amount of the Revolver
Commitments at the beginning of such Fiscal Quarter, such fee to be paid in
arrears on the first day of the following Fiscal Quarter; but if the Revolver
Commitments are terminated on a day other than the first day of a Fiscal Quarter
then any such fee payable for the Fiscal Quarter in which termination shall
occur, prorated for the portion of such Fiscal Quarter prior to such
termination, shall be paid on the effective date of such termination.
2.2.3 LC Facility Fees. Borrower shall pay (i) to Agent, through its
Treasury and International Services Group, for the ratable account of each
Lender for Letters of Credit, the Applicable Margin in effect for LIBOR Loans on
a per annum basis based on the average amount available to be drawn under all
Letters of Credit outstanding, payable monthly, in arrears, on the first
Business Day of the following month, and (ii) to Agent, through its Treasury and
International Services Group, for its own account a Letter of Credit processing
fee of 0.25% per annum based on the average amount available to be drawn under
all of such Letters of Credit outstanding, payable monthly, in arrears, on the
first Business Day of the following month, and (iii) to Bank for its own account
all normal and customary charges associated with the issuance, amending,
negotiating, processing and administration of Letters of Credit.
2.2.4. Audit and Appraisal Fees. Borrower shall reimburse Agent and
Lenders for all reasonable costs and expenses incurred by Agent and Lenders in
connection with audits and appraisals of any Obligor's books and records and
such other matters pertaining to any Obligor or any Collateral as Agent or the
Required Lenders shall deem appropriate and shall pay to Agent $650 per day for
each day that an employee or agent of Agent shall be engaged in an examination
or review of Borrower's books and records; provided, however, that so long as no
Event of Default exists, Borrower shall not be obligated to reimburse Agent and
Lenders for more than 2 audits per calender year. On the Closing Date, Borrower
shall pay to Fleet all out-of-pocket expenses incurred by Fleet in connection
with the audit and appraisal of Borrower's business and Properties prior to the
Closing Date.
2.2.5. Agency Fee. In consideration of Fleet's service as Agent
hereunder, Borrower shall pay to Fleet an agency fee in the amount and on the
dates specified in the Fee Letter.
2.2.6. General Provisions. All fees shall be fully earned by the
identified recipient thereof pursuant to the foregoing provisions of this
Agreement and the Fee Letter on
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the due date thereof (and, in the case of Letters of Credit, upon each issuance,
renewal or extension of such Letter of Credit) and, except as otherwise set
forth herein or required by Applicable Law, shall not be subject to rebate,
refund or proration. All fees provided for in Section 2.2 are and shall be
deemed to be compensation for services and are not, and shall not be deemed to
be, interest or any other charge for the use, forbearance or detention of money.
2.3. Computation of Interest and Fees. All fees and other charges provided
for in this Agreement that are calculated as a per annum percentage of any
amount and all interest shall be calculated daily and shall be computed on the
actual number of days elapsed over a year of 360 days. For purposes of computing
interest and other charges hereunder, all Payment Items and other forms of
payment received by Agent shall be deemed applied by Agent on account of the
Obligations (subject to final payment of such items) on the Business Day that
Agent receives such items in immediately available funds in the Payment Account,
and Agent shall be deemed to have received such Payment Item on the date
specified in Section 4.7 hereof.
2.4. Reimbursement Obligations.
2.4.1. Borrower shall reimburse Agent and, during any period that an
Event of Default then exists, each Lender, for all reasonable legal fees
actually incurred and all accounting, appraisal and other reasonable fees and
expenses incurred by Agent or any Lender in connection with (i) the negotiation
and preparation of any of the Loan Documents, any amendment or modification
thereto, any waiver of any Default or Event of Default thereunder, or any
restructuring or forbearance with respect thereto; (ii) the administration of
the Loan Documents and the transactions contemplated thereby, to the extent that
such fees and expenses are expressly provided for in this Agreement or any of
the other Loan Documents; (iii) action taken to perfect or maintain the
perfection or priority of any of Agent's Liens with respect to any of the
Collateral; (iv) any inspection of or audits conducted with respect to any of
Borrower's books and records or any of the Collateral; (v) any effort to verify,
protect, preserve, or restore any of the Collateral or to collect, sell,
liquidate or otherwise dispose of or realize upon any of the Collateral; (vi)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by or against Agent, any Lender, any Obligor or any other Person) in any way
arising out of or relating to any of the Collateral (or the validity, perfection
or priority of any of Agent's Liens thereon), any of the Loan Documents or the
validity, allowance or amount of any of the Obligations; (vii) the protection or
enforcement or any rights or remedies of Agent or any Lender in any Insolvency
Proceeding; and (viii) any other action taken by Agent or any Lender to enforce
any of the rights or remedies of Agent or such Lender against any Obligor or any
Account Debtors to enforce collection of any of the Obligations or payments with
respect to any of the Collateral. All amounts chargeable to Borrower under this
Section 2.4 shall constitute Obligations that are secured by all of the
Collateral and shall be payable on demand to Agent. Borrower shall also
reimburse Agent for expenses incurred by Agent in its administration of any of
the Collateral to the extent and in the manner provided in Section 7 hereof or
in any of the other Loan Documents. The foregoing shall be in addition to, and
shall not be construed to limit, any other provision of any of the Loan
Documents regarding the reimbursement by Borrower of costs, expenses or
liabilities suffered or incurred by Agent or any Lender.
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2.4.2. Any indemnity, guaranty or other assurance of payment or
performance provided by Agent or (with the consent of Agent) any Lender to Bank
or any other Person with respect to Cash Management Agreements, Interest Rate
Contracts or Letters of Credit, together with any payment made or liability
incurred by Agent or any Lender in connection therewith, shall constitute
Obligations that are secured by the Collateral and Borrower shall repay, on
demand, any amount so paid or any liability incurred by Agent or any Lender in
connection with any such indemnity, guaranty or assurance. Nothing herein shall
be construed to impose upon Agent or any Lender any obligation to provide any
such indemnity, guaranty or assurance.
2.5. Bank Charges. Borrower shall pay to Agent, on demand, any and
all fees, costs or expenses which Agent or any Lender pays to a bank or other
similar institution (including any fees paid by Agent or any Lender to any
Participant) arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower by Agent or any Lender of proceeds of
Revolver Loans made by Lenders to Borrower pursuant to this Agreement and (ii)
the depositing for collection by Agent or any Lender of any Payment Item
received or delivered to Agent or any Lender on account of the Obligations.
Borrower acknowledges and agrees that Agent may charge such costs, fees and
expenses to Borrower based upon Agent's good faith estimate of such costs, fees
and expenses as they are incurred by Agent or any Lender.
2.6. Illegality. Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if (i) any change in any law or regulation or in
the interpretation thereof by any Governmental Authority charged with the
administration thereof shall make it unlawful for a Lender to make or maintain a
LIBOR Loan or to give effect to its obligations as contemplated hereby with
respect to a LIBOR Loan or (ii) at any time such Lender determines that the
making or continuance of any LIBOR Loan has become impracticable as a result of
a contingency occurring after the date hereof which adversely affects the London
interbank market or the position of such Lender in such market, then such Lender
shall give after such determination Agent and Borrower notice thereof and may
thereafter (1) declare that LIBOR Loans will not thereafter be made by such
Lender, whereupon any request by a Borrower for a LIBOR Loan shall be deemed a
request for a Base Rate Loan unless such Lender's declaration shall be
subsequently withdrawn (which declaration shall be withdrawn promptly after the
cessation of the circumstances described in clause (i) or (ii) above); and (2)
require that all outstanding LIBOR Loans made by such Lender be converted to
Base Rate Loans, under the circumstances of clause (i) or (ii) of this Section
2.6 insofar as such Lender determines the continuance of LIBOR Loans to be
impracticable, in which event all such LIBOR Loans shall be converted
automatically to Base Rate Loans as of the date of Borrower's receipt of the
aforesaid notice from such Lender.
2.7. Increased Costs. If, by reason of (a) the introduction after the
date hereof of or any change (including any change by way of imposition or
increase of Statutory Reserves or other reserve requirements) in or in the
interpretation of any law or regulation, or (b) the compliance with any
guideline or request from any central bank or other Governmental Authority or
quasi-Governmental Authority exercising control over banks or financial
institutions generally (whether or not having the force of law):
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(i) any Lender shall be subject after the date hereof to any
Taxes, duty or other charge with respect to any LIBOR Loan or its
obligation to make LIBOR Loans, or a change shall result in the basis of
taxation of payment to any Lender of the principal of or interest on its
LIBOR Loans or its obligation to make LIBOR Loans (except for changes in
the rate of Tax on the overall net income of such Lender imposed by the
jurisdiction in which such Lender's principal executive office or
applicable lending office is located); or
(ii) any reserve (including any imposed by the Board of
Governors), special deposits or similar requirement against assets of,
deposits with or for the account of, or credit extended by, Lender shall be
imposed or deemed applicable or any other condition affecting its LIBOR
Loans or its obligation to make LIBOR Loans shall be imposed on such Lender
or the London interbank market;
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining LIBOR Loans (except to the
extent already included in the determination of the applicable Adjusted LIBOR
Rate for LIBOR Loans), or there shall be a reduction in the amount received or
receivable by such Lender, then such Lender shall, promptly after determining
the existence or amount of any such increased costs for which such Lender seeks
payment hereunder, give Borrower notice thereof and Borrower shall from time to
time, upon written notice from and demand by such Lender (with a copy of such
notice and demand to Agent), pay to Agent for the account of such Lender, within
5 Business Days after the date specified in such notice and demand, an
additional amount sufficient to indemnify such Lender against such increased
costs, to the extent that such increased costs arose, were incurred or
attributable to such Lender or such Lender received notice of such increased
costs during the 90-day period immediately preceding Borrower's receipt of such
notice. A certificate as to the amount of such increased cost, submitted to
Borrower by such Lender, shall be final, conclusive and binding for all
purposes, absent manifest error.
If any Lender shall advise Agent at any time that, because of the
circumstances described hereinabove in this Section 2.7 or any other
circumstances arising after the date of this Agreement affecting such Lender or
the London interbank market or such Lender's or Bank's position in such market,
the Adjusted LIBOR Rate, as determined by Agent, will not adequately and fairly
reflect the cost to such Lender of funding LIBOR Loans, then, and in any such
event:
(i) Agent shall forthwith give notice (by telephone confirmed in
writing) to Borrower and Lenders of such event;
(ii) Borrower's right to request and such Lender's obligation to
make LIBOR Loans shall be immediately suspended and Borrower's right to
continue a LIBOR Loan as such beyond the then applicable Interest Period
shall also be suspended, until each condition giving rise to such
suspension no longer exists; and
(iii) such Lender shall make a Base Rate Loan as part of the
requested Borrowing of LIBOR Loans, which Base Rate Loan shall, for all
purposes, be considered part of such Borrowing.
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For purposes of this Section 2.7, all references to a Lender shall be
deemed to include any bank holding company or bank parent of such Lender.
2.8. Capital Adequacy. If any Lender determines that after the date
hereof (a) the adoption of any Applicable Law regarding capital requirements for
banks or bank holding companies or the subsidiaries thereof, (b) any change in
the interpretation or administration of any such Applicable Law by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or (c) compliance by such Lender or
its holding company with any request or directive of any such Governmental
Authority, central bank or comparable agency regarding capital adequacy (whether
or not having the force of law), has the effect of reducing the return on such
Lender's capital to a level below that which such Lender could have achieved
(taking into consideration such Lender's and its holding company's policies with
respect to capital adequacy immediately before such adoption, change or
compliance and assuming that such Lender's capital was fully utilized prior to
such adoption, change or compliance) but for such adoption, change or compliance
as a consequence of such Lender's commitment to make the Revolver Loans pursuant
hereto by any amount deemed by such Lender to be material:
(i) Agent shall promptly, after its receipt of a certificate from
such Lender setting forth such Lender's determination of such occurrence,
give notice thereof to Borrower and Lenders; and
(ii) Borrower shall pay to Agent, for the account of such Lender,
as an additional fee from time to time, on demand, such amount as such
Lender certifies to be the amount reasonably calculated to compensate such
Lender for such reduction, to the extent that such reduction occurred or
was attributable to such Lender, or such Lender received notice of, during
the 90-day period immediately preceding Borrower's receipt of such notice
from Agent.
A certificate of such Lender claiming entitlement to compensation as set
forth above will be conclusive in the absence of manifest error. Such
certificate will set forth the nature of the occurrence giving rise to such
compensation, the additional amount or amounts to be paid to such Lender
(including the basis for such Lender's determination of such amount), and the
method by which such amounts were determined. In determining such amount, such
Lender may use any reasonable averaging and attribution method. For purposes of
this Section 2.8 all references to a Lender shall be deemed to include any bank
holding company or bank parent of such Lender.
2.9. Funding Losses. If for any reason (other than due to a default
by a Lender or as a result of a Lender's refusal to honor a LIBOR Loan request
due to circumstances described in Section 2.6 or 2.7 hereof) a Borrowing of, or
conversion to or continuation of, LIBOR Loans does not occur on the date
specified therefor in a Notice of Borrowing or Notice of Conversion/
Continuation (whether or not withdrawn), or if any repayment (including any
conversions pursuant to Section 2.1.2 hereof) of any of its LIBOR Loans occurs
on a date that is not the last day of an Interest Period applicable thereto, or
if for any reason Borrower defaults in its
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obligation to repay LIBOR Loans when required by the terms of this Agreement,
then Borrower shall pay to Agent, for the ratable benefit of the affected
Lenders, within 10 days after Agent's or an affected Lender's demand therefor,
an amount (if a positive number) computed pursuant to the following formula:
L= [R-A]xPxD
---------
360
where
L= amount payable
R= interest rate applicable to the LIBOR Loan unborrowed
or prepaid
A= Adjusted LIBOR Rate for an Interest Period maturing on
or nearest the last day of the then applicable or
requested Interest Period for such LIBOR Loan and in
approximately the same amount as such LIBOR Loan
P= the amount of principal paid or the amount of the LIBOR
Loan requested or to have been continued or converted
D= the number of days remaining in the Interest Period as
of the date of such prepayment or the number of days in
the requested Interest Period
Borrower shall pay such amount upon presentation by Agent of a statement setting
forth the amount and Agent's calculation thereof pursuant hereto, which
statement shall be deemed true and correct absent manifest error. For purposes
of this Section 2.9, all references to a Lender shall be deemed to include any
bank holding company or bank parent of such Lender.
2.10. Maximum Interest. Regardless of any provision contained in any
of the Loan Documents, in no contingency or event whatsoever shall the aggregate
of all amounts that are contracted for, charged or received by Agent and Lenders
pursuant to the terms of this Agreement or any of the other Loan Documents and
that are deemed interest under Applicable Law exceed the highest rate
permissible under any Applicable Law. No agreements, conditions, provisions or
stipulations contained in this Agreement or any of the other Loan Documents or
the exercise by Agent of the right to accelerate the payment or the maturity of
all or any portion of the Obligations, or the exercise of any option whatsoever
contained in any of the Loan Documents, or the prepayment by Borrower of any of
the Obligations, or the occurrence of any contingency whatsoever, shall entitle
Agent or any Lender to charge or receive in any event, interest or any charges,
amounts, premiums or fees deemed interest by Applicable Law (such interest,
charges, amounts, premiums and fees referred to herein collectively as
"Interest") in excess of the Maximum Rate and in no event shall Borrower be
obligated to pay Interest exceeding such Maximum Rate, and all agreements,
conditions or stipulations, if any, which may in any event or contingency
whatsoever operate to bind, obligate or compel Borrower to pay Interest
exceeding the Maximum Rate shall be without binding force or effect, at law or
in equity, to the extent only of the excess of Interest over such Maximum Rate.
If any Interest is charged or received in excess of the Maximum Rate ("Excess"),
Borrower acknowledges and stipulates that any such charge or receipt shall be
the result of an accident and bona fide error,
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and such Excess, to the extent received, shall be applied first to reduce the
principal Obligations and the balance, if any, returned to Borrower, it being
the intent of the parties hereto not to enter into a usurious or otherwise
illegal relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate any Interest that has not
otherwise accrued on the date of such acceleration, and Agent and Lenders do not
intend to collect any unearned Interest in the event of any such acceleration.
Borrower recognizes that, with fluctuations in the rates of interest set forth
in Section 2.1.1 of this Agreement, and the Maximum Rate, such an unintentional
result could inadvertently occur. All monies paid to Agent or any Lender
hereunder or under any of the other Loan Documents, whether at maturity or by
prepayment, shall be subject to any rebate of unearned Interest as and to the
extent required by Applicable Law. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the
acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Agent or any Lender, based
in whole or in part upon contracting for, charging or receiving any Interest in
excess of the Maximum Rate. For the purpose of determining whether or not any
Excess has been contracted for, charged or received by Agent or any Lender, all
Interest at any time contracted for, charged or received from Borrower in
connection with any of the Loan Documents shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread in equal parts
throughout the full term of the Obligations. Borrower, Agent and Lenders shall,
to the maximum extent permitted under Applicable Law, (i) characterize any non-
principal payment as an expense, fee or premium rather than as Interest and (ii)
exclude voluntary prepayments and the effects thereof. The provisions of this
Section 2.10 shall be deemed to be incorporated into every Loan Document
(whether or not any provision of this Section is referred to therein). All such
Loan Documents and communications relating to any Interest owed by Borrower and
all figures set forth therein shall, for the sole purpose of computing the
extent of Obligations, be automatically recomputed by Borrower, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section 2.10.
SECTION 3. LOAN ADMINISTRATION
3.1. Manner of Borrowing and Funding Revolver Loans. Borrowings under
the Revolver Commitments established pursuant to Section 1.1 hereof shall be
made and funded as follows:
3.1.1. Notice of Borrowing.
(i) Whenever Borrower desires to make a Borrowing under Section
1.1 of this Agreement (other than a Borrowing resulting from a conversion
or continuation pursuant to Section 2.1.2), Borrower shall give Agent prior
written notice (or telephonic notice promptly confirmed in writing) of such
Borrowing request (a "Notice of Borrowing"), which shall be in the form of
Exhibit C annexed hereto and signed by an authorized officer of Borrower.
Such Notice of Borrowing shall be given by Borrower no later than 12:00
noon at the office of Agent designated by Agent from time to time (a) by
12:00 noon on the Business Day of the requested funding date of such
Borrowing, in the case of Base Rate Loans, and (b) at least 3 Business Days
prior to the requested funding date of such Borrowing, in the case of LIBOR
Loans. Notices
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received after 12:00 noon shall be deemed received on the next Business
Day. The Revolver Loans made by each Lender on the Closing Date shall be in
excess of $250,000 and shall be made as Base Rate Loans and thereafter may
be made or continued as or converted into Base Rate Loans or LIBOR Loans.
Each Notice of Borrowing (or telephonic notice thereof) shall be
irrevocable and shall specify (a) the principal amount of the Borrowing,
(b) the date of Borrowing (which shall be a Business Day), (c) whether the
Borrowing is to consist of Base Rate Loans or LIBOR Loans, (d) in the case
of LIBOR Loans, the duration of the Interest Period to be applicable
thereto, and (e) the account of Borrower to which the proceeds of such
Borrowing are to be disbursed. Borrower may not request any LIBOR Loans if
a Default or Event of Default exists. The requirement that a Notice of
Borrowing be in writing (or confirmed in writing) shall be deemed satisfied
if Borrower gives or confirms such Notice of Borrowing via electronic
transmission, which shall be deemed to include electronic mail or
telecopier.
(ii) Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or any
of the other Loan Documents with respect to the Obligations (whether as
principal, accrued interest, fees or other charges, including the repayment
of any LC Outstandings) shall be deemed irrevocably to be a request
(without any requirement for the submission of a Notice of Borrowing) for
Revolver Loans on the due date of, and in an aggregate amount required to
pay, such Obligations, and the proceeds of such Revolver Loans may be
disbursed by way of direct payment of the relevant Obligation and shall
bear interest as Base Rate Loans, and Agent shall use reasonable efforts to
give Borrower notice promptly after (and in any event not later than the
next monthly statement from Agent to Borrower) any Borrowing under this
clause (ii) that is used to pay any expenses due under this Agreement.
Neither Agent nor any Lender shall have any obligation to Borrower to honor
any deemed request for a Revolver Loan after the Commitment Termination
Date, when an Out-of-Formula Condition exists or would result therefrom, or
when any condition precedent set forth in Section 10 hereof is not
satisfied, but may do so in their discretion and without regard to the
existence of, and without being deemed to have waived, any Default or Event
of Default and regardless of whether such Revolver Loan is funded after the
Commitment Termination Date.
(iii) If Borrower elects to establish a Controlled Disbursement
Account with Bank or any Affiliate of Bank, then the presentation for
payment by Bank of any check or other item of payment drawn on the
Controlled Disbursement Account at a time when there are insufficient funds
in such account to cover such check shall be deemed irrevocably to be a
request (without any requirement for the submission of a Notice of
Borrowing) for Revolver Loans on the date of such presentation and in any
amount equal to the aggregate amount of the items presented for payment,
and the proceeds of such Revolver Loans may be disbursed to the Controlled
Disbursement Account and shall bear interest as Base Rate Loans. Neither
Agent nor any Lender shall have any obligation to honor any deemed request
for a Revolver Loan after the Commitment Termination Date or when an Out-
of-Formula Condition exists or would result therefrom or when any condition
precedent in Section 10 hereof is not satisfied, but may do so in its
discretion and without regard to the existence of, and without being deemed
to have waived, any
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Default or Event of Default and regardless of whether such Revolver Loan is
funded after the Commitment Termination Date.
(iv) As an accommodation to Borrower, Agent and Lenders may
permit telephonic requests for Borrowings and electronic transmittal of
instructions, authorizations, agreements or reports to Agent by Borrower;
provided, however, that Borrower shall confirm each such telephonic request
for a Borrowing of LIBOR Loans by delivery of the required Notice of
Borrowing to Agent by facsimile transmission promptly, but in no event
later than 5:00 p.m. on the same day. Neither Agent nor any Lender shall
have any liability to Borrower for any loss or damage suffered by Borrower
as a result of Agent's or any Lender's honoring of any requests, execution
of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting
to have been sent to Agent or Lenders by Borrower and neither Agent nor any
Lender shall have any duty to verify the origin of any such communication
or the identity or authority of the Person sending it.
3.1.2. Fundings by Lenders. Subject to its receipt of notice from
Agent of a Notice of Borrowing as provided in Section 3.1.1(i) (except in the
case of a deemed request by Borrower for a Revolver Loan as provided in Sections
3.1.1(ii) or (iii) or 3.1.3(ii) hereof, in which event no Notice of Borrowing
need be submitted), each Lender shall timely honor its Revolver Commitment by
funding its Pro Rata share of each Borrowing of Revolver Loans that is properly
requested by Borrower and that Borrower is entitled to receive under the Loan
Agreement. Agent shall endeavor to notify Lenders of each Notice of Borrowing
(or deemed request for a Borrowing pursuant to Section 3.1.1(ii) or (iii)
hereof), by 12:00 noon on the proposed funding date (in the case of Base Rate
Loans) or by 3:00 p.m. at least 2 Business Days before the proposed funding date
(in the case of LIBOR Loans). Each Lender shall deposit with Agent an amount
equal to its Pro Rata share of the Borrowing requested or deemed requested by
Borrower at Agent's designated bank in immediately available funds not later
than 2:00 p.m. on the date of funding of such Borrowing, unless Agent's notice
to Lenders is received after 12:00 noon on the proposed funding date of a Base
Rate Loan, in which event Lenders shall deposit with Agent their respective Pro
Rata shares of the requested Borrowing on or before 11:00 a.m. of the next
Business Day. Subject to its receipt of such amounts from Lenders, Agent shall
make the proceeds of the Revolver Loans received by it available to Borrower by
disbursing such proceeds in accordance with Borrower's disbursement instructions
set forth in the applicable Notice of Borrowing. Unless Agent shall have been
notified in writing by a Lender prior to the proposed time of funding that such
Lender does not intend to deposit with Agent an amount equal such Lender's Pro
Rata share of the requested Borrowing (or deemed request for a Borrowing
pursuant to Section 3.1.1(ii) or (iii) hereof), Agent may assume that such
Lender has deposited or promptly will deposit its share with Agent and Agent may
in its discretion disburse a corresponding amount to Borrower on the applicable
funding date. If a Lender's Pro Rata share of such Borrowing is not in fact
deposited with Agent, then, if Agent has disbursed to Borrower an amount
corresponding to such share, then such Lender agrees to pay, and in addition
Borrower agrees to repay, to Agent forthwith on demand such corresponding
amount, together with interest thereon, for each day from the date such amount
is disbursed by Agent to or for the benefit of Borrower until the date such
amount is paid or repaid to Agent, (a) in the case of Borrower, at the interest
rate applicable to such Borrowing and (b) in the case of
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such Lender, at the Federal Funds Rate. If such Lender repays to Agent such
corresponding amount, such amount so repaid shall constitute a Revolver Loan,
and if both such Lender and Borrower shall have repaid such corresponding
amount, Agent shall promptly return to Borrower such corresponding amount in
same day funds. A notice of Agent submitted to any Lender with respect to
amounts owing under this Section 3.1.2 shall be conclusive, absent manifest
error.
3.1.3. Settlement and Settlement Loans.
(i) In order to facilitate the administration of the Revolver
Loans under this Agreement, Lenders agree (which agreement shall not be for
the benefit of or enforceable by Borrower) that settlement among them with
respect to the Revolver Loans may take place on a periodic basis on dates
determined from time to time by Agent (each a "Settlement Date"), which may
occur before or after the occurrence or during the continuance of a Default
or Event of Default and whether or not all of the conditions set forth in
Section 10 of this Agreement have been met. On each Settlement Date,
payment shall be made by or to each Lender in the manner provided herein
and in accordance with the Settlement Report delivered by Agent to Lenders
with respect to such Settlement Date so that, as of each Settlement Date
and after giving effect to the transaction to take place on such Settlement
Date, each Lender shall hold its Pro Rata share of all Revolver Loans and
participations in LC Outstandings then outstanding. Agent shall request
settlement with the Lenders on a basis not less frequently than once every
5 Business Days.
(ii) Between Settlement Dates, Agent may request Fleet to
advance, and Fleet may, but shall in no event be obligated to, advance to
Borrower out of Fleet's own funds the entire principal amount of any
Borrowing of Revolver Loans that are Base Rate Loans requested or deemed
requested pursuant to this Agreement (any such Revolver Loan funded
exclusively by Fleet being referred to as a "Settlement Loan"). Each
Settlement Loan shall constitute a Revolver Loan hereunder and shall be
subject to all of the terms, conditions and security applicable to other
Revolver Loans, except that all payments thereon shall be payable to Fleet
solely for its own account. The obligation of Borrower to repay such
Settlement Loans to Fleet shall be evidenced by the Settlement Note. Agent
shall not request Fleet to make any Settlement Loan if (A) Agent shall have
received written notice from any Lender that one or more of the applicable
conditions precedent set forth in Section 10 hereof will not be satisfied
on the requested funding date for the applicable Borrowing or (B) the
requested Borrowing would exceed the amount of Availability on the funding
date or would cause the then outstanding principal balance of all
Settlement Loans to exceed $7,500,000. Fleet shall not be required to
determine whether the applicable conditions precedent set forth in Section
10 hereof have been satisfied or the requested Borrowing would exceed the
amount of Availability on the funding date applicable thereto prior to
making, in its sole discretion, any Settlement Loan. On each Settlement
Date, or, if earlier, upon demand by Agent for payment thereof, the then
outstanding Settlement Loans shall be immediately due and payable. As
provided in Section 3.1.1(ii), Borrower shall be deemed to have requested
(without the necessity of submitting any Notice of Borrowing) Revolver
Loans to be made on each Settlement Date in the amount of all outstanding
Settlement Loans and to have
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Agent cause the proceeds of such Revolver Loans to be applied to the
repayment of such Settlement Loans and interest accrued thereon. Agent
shall notify the Lenders of the outstanding balance of Revolver Loans prior
to 12:00 noon on each Settlement Date and each Lender (other than Fleet)
shall deposit with Agent (without setoff, counterclaim or reduction of any
kind) an amount equal to its Pro Rata share of the amount of Revolver Loans
deemed requested in immediately available funds not later than 2:00 p.m. on
such Settlement Date, and without regard to whether any of the conditions
precedent set forth in Section 10 hereof are satisfied or the Commitment
Termination Date has occurred. If as the result of the commencement by or
against Borrower of any Insolvency Proceeding or otherwise any Settlement
Loan may not be repaid by the funding by Lenders of Revolver Loans, then
each Lender (other than Fleet) shall be deemed to have purchased a
participating interest in any unpaid Settlement Loan in an amount equal to
such Lender's Pro Rata share of such Settlement Loan and shall transfer to
Fleet, in immediately available funds not later than the 2nd Business Day
after Fleet's request therefor, the amount of such Lender's participation.
The proceeds of Settlement Loans may be used solely for purposes for which
Revolver Loans generally may be used in accordance with Section 1.1.3
hereof. If any amounts received by Fleet in respect of any Settlement Loans
are later required to be returned or repaid by Fleet to Borrower or any
other Obligor or their respective representatives or successors-in-
interest, whether by court order, settlement or otherwise, the other
Lenders shall, upon demand by Fleet with notice to Agent, pay to Agent for
the account of Fleet, an amount equal to each other Lender's Pro Rata share
of all such amounts required to be returned by Fleet.
3.1.4. Disbursement Authorization. Borrower hereby irrevocably
authorizes Agent to disburse the proceeds of each Revolver Loan requested, or
deemed to be requested pursuant to Section 3.1.1 or Section 3.1.3(ii), as
follows: (i) the proceeds of each Revolver Loan requested under Section
3.1.1(i) shall be disbursed by Agent in accordance with the terms of the written
disbursement letter from Borrower in the case of the initial Borrowing, and, in
the case of each subsequent Borrowing, by wire transfer to such bank account as
may be agreed upon by Borrower and Agent from time to time or elsewhere if
pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolver Loan requested under Section 3.1.1(ii) or Section 3.1.3(ii) shall be
disbursed by Agent by way of direct payment of the relevant interest or other
Obligation.
3.2. Defaulting Lender. If any Lender shall, at any time, fail to make
any payment to Agent or Fleet that is required hereunder, Agent may, but shall
not be required to, retain payments that would otherwise be made to such
defaulting Lender hereunder and apply such payments to such defaulting Lender's
defaulted obligations hereunder, at such time, and in such order, as Agent may
elect in its sole discretion. With respect to the payment of any funds from
Agent to a Lender or from a Lender to Agent, the party failing to make the full
payment when due pursuant to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on such amount at the Federal
Funds Rate. The failure of any Lender to fund its portion of any Revolver Loan
or payment in respect of an LC Obligation shall not relieve any other Lender of
its obligation, if any, to fund its portion of the Revolver Loan or payment in
respect of an LC Obligation on the date of Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make any Revolver Loan or
payment in respect
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of an LC Obligation to be made by such Lender on the date of any Borrowing.
Solely as among the Lenders and solely for purposes of voting or consenting to
matters with respect to any of the Loan Documents, Collateral or any Obligations
and determining a defaulting Lender's Pro Rata share of payments and proceeds of
Collateral pending such defaulting Lender's cure of its defaults hereunder, a
defaulting Lender shall not be deemed to be a "Lender" and such Lender's
Revolver Commitment shall be deemed to be zero (0). The provisions of this
Section 3.2 shall be solely for the benefit of Agent and Lenders and may not be
enforced by Borrower.
3.3. Special Provisions Governing LIBOR Loans.
3.3.1. Number of LIBOR Loans. In no event may the number of
Borrowings of LIBOR Loans outstanding at any time to any Lender exceed 6.
3.3.2 Minimum Amounts. Each Borrowing of LIBOR Loans pursuant to
Section 3.1.1(i), and each continuation of or conversion to LIBOR Loans pursuant
to Section 2.1.2 hereof, shall be in a minimum amount of $1,000,000 and integral
multiples of $250,000 in excess of that amount.
3.3.3 LIBOR Lending Office. Each Lender's initial LIBOR Lending
Office is set forth opposite its name on the signature pages hereof. Each
Lender shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate as such Lender's LIBOR Lending
Office, and to transfer any outstanding LIBOR Loans to such LIBOR Lending
Office. No such designation or transfer shall result in any liability on the
part of Borrower for increased costs or expenses resulting solely from such
designation or transfer. Increased costs for expenses resulting from a change
in Applicable Law occurring subsequent to any such designation or transfer shall
be deemed not to result solely from such designation or transfer. If any Lender
requests compensation under Section 2.7, or if Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 4.8, then such Lender shall use reasonable
efforts to designate a different LIBOR Lending Office for funding or booking its
Revolver Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or Affiliates if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.7 or 4.8, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
3.3.4 Funding of LIBOR Loans. Each Lender may, if it so elects,
fulfill its obligation to make, continue or convert LIBOR Loans hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by such Lender) to make or maintain such LIBOR Loans; provided,
however, that such LIBOR Loans shall nonetheless be deemed to have been made and
to be held by such Lender, and the obligation of Borrower to repay such LIBOR
Loans shall nevertheless be to such Lender for the account of such foreign
branch, Affiliate or international banking facility. The calculation of all
amounts payable to Lender under Section 2.7 and 2.9 shall be made as if each
Lender had actually funded or committed to fund its LIBOR Loan through the
purchase of an underlying deposit in an amount
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equal to the amount of such LIBOR Loan and having a maturity comparable to the
relevant Interest Period for such LIBOR Loans; provided, however, each Lender
may fund its LIBOR Loans in any manner it deems fit and the foregoing
presumption shall be utilized only for the calculation of amounts payable under
Section 2.7 and Section 2.9.
3.4. All Revolver Loans to Constitute One Obligation. The Revolver
Loans shall constitute one general Obligation of Borrower and (unless otherwise
expressly provided in the Security Documents) shall be secured by Agent's Lien
upon all of the Collateral; provided, however, that Agent and each Lender shall
be deemed to be a creditor of Borrower and the holder of a separate claim
against Borrower to the extent of any Obligations owed by Borrower to Agent or
such Lender.
SECTION 4. PAYMENTS
4.1. General Payment Provisions. All payments (including all prepayments)
of principal of and interest on the Revolver Loans, LC Outstandings and other
Obligations that are payable to Agent or any Lender shall be made to Agent in
Dollars without any offset or counterclaim and free and clear of (and without
deduction for, subject to the provisions of Section 4.8 and 4.9), any present or
future Taxes, and, with respect to payments made other than by application of
balances in the Payment Account, in immediately available funds not later than
12:00 noon on the due date (and payment made after such time on the due date to
be deemed to have been made on the next succeeding Business Day). All payments
received by Agent shall be distributed by Agent in accordance with Section 4.6
hereof, subject to the rights of offset that Agent may have as to amounts
otherwise to be remitted to a particular Lender by reason of amounts due Agent
from such Lender under any of the Loan Documents.
4.2. Repayment of Revolver Loans.
4.2.1. Payment of Principal. The outstanding principal amount of the
Revolver Loans shall be repaid as follows:
(i) Any portion of the Revolver Loans consisting of Base Rate
Loans shall be paid by Borrower to Agent, for the Pro Rata benefit of
Lenders (or, in the case of Settlement Loans, for the sole benefit of
Fleet) unless timely converted to a LIBOR Loan in accordance with this
Agreement, immediately upon (a) each receipt by Agent, any Lender or
Borrower of any proceeds of any of the Collateral, to the extent of such
proceeds, (b) the Commitment Termination Date, and (c) in the case of
Settlement Loans, the earlier of Fleet's demand for payment or on each
Settlement Date with respect to all Settlement Loans outstanding on such
date.
(ii) Any portion of the Revolver Loans consisting of LIBOR Loans
shall be paid by Borrower to Agent, for the Pro Rata benefit of Lenders,
unless converted to a Base Rate Loan or continued as a LIBOR Loan in
accordance with the terms of this Agreement, immediately upon (a) the last
day of the Interest Period applicable thereto and (b) the Commitment
Termination Date. In no event shall Borrower be authorized to make a
voluntary prepayment with respect to any Revolver Loan outstanding as a
LIBOR
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Loan prior to the last day of the Interest Period applicable thereto
unless (x) otherwise agreed in writing by Agent or Borrower is otherwise
expressly authorized or required by any other provision of this Agreement
to pay any LIBOR Loan outstanding on a date other than the last day of the
Interest Period applicable thereto, and (y) Borrower pays to Agent, for the
Pro Rata benefit of Lenders, concurrently with any prepayment of a LIBOR
Loan, any amount due Agent and Lenders under Section 2.9 hereof as a
consequence of such prepayment.
(iii) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if an Out-of-Formula Condition shall exist,
Borrower shall, on the sooner to occur of Agent's demand or the first
Business Day after Borrower has obtained knowledge of such Out-of-Formula
Condition, repay the outstanding Revolver Loans that are Base Rate Loans in
an amount sufficient to reduce the aggregate unpaid principal amount of all
Revolver Loans by an amount equal to such excess; and, if such payment of
Base Rate Loans is not sufficient to eliminate the Out-of-Formula
Condition, then Borrower shall immediately either (a) deposit with Agent,
for the Pro Rata benefit of Lenders, for application to any outstanding
Revolver Loans bearing interest as LIBOR Loans as the same become due and
payable (whether at the end of the applicable Interest Periods or on the
Commitment Termination Date) cash in an amount sufficient to eliminate such
Out-of-Formula Condition, to be held by Agent pending disbursement of same
to Lenders, but subject to Agent's Lien thereon and rights of offset with
respect thereto, or (b) pay the Revolver Loans outstanding as LIBOR Loans
to the extent necessary to eliminate such Out-of-Formula Condition and also
pay to Agent for the Pro Rata benefit of Lenders any and all amounts
required by Section 2.9 hereof to be paid by reason of the prepayment of a
LIBOR Loan prior to the last day of the Interest Period applicable thereto.
Notwithstanding the foregoing, if and for so long as each of the Out-of-
Formula Facility Conditions is satisfied, Borrower shall not be required to
eliminate the Out-of-Formula Condition until the Out-of-Formula Fix Date.
4.2.2. Payment of Interest. Interest accrued on the Revolver Loans
shall be due and payable on (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, with respect to any Revolver Loan that constitutes a Base Rate
Loan and (ii) the last day of the applicable Interest Period in the case of a
LIBOR Loan and, with respect to LIBOR Loans that have an Interest Period of 3
months or more, on the 90th day after the beginning of such Interest Period and
at the end of such Interest Period. Accrued interest shall also be paid by
Borrower on the Commitment Termination Date. With respect to any Base Rate Loan
converted into a LIBOR Loan pursuant to Section 2.1.2 on a day when interest
would not otherwise have been payable with respect to such Base Rate Loan,
accrued interest to the date of such conversion on the amount of such Base Rate
Loan so converted shall be paid on the conversion date.
4.3. Payment of Other Obligations. The balance of the Obligations
requiring the payment of money, including the LC Outstandings and Extraordinary
Expenses incurred by Agent or any Lender, shall be repaid by Borrower to Agent
for allocation among Agent and Lenders as provided in the Loan Documents, or, if
no date of payment is otherwise specified in the Loan Documents, within 10 days
after Agent's demand therefor.
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4.4. Marshaling; Payments Set Aside. None of Agent or any Lender shall
be under any obligation to marshall any assets in favor of Borrower or any other
Obligor or against or in payment of any or all of the Obligations. To the
extent that Borrower makes a payment or payments to Agent or Lenders or any of
such Persons receives payment from the proceeds of any Collateral or exercises
its right of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other Person, then, to the extent of any loss by Agent
or Lenders, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment or proceeds had not been made or
received and any such enforcement or setoff had not occurred. The provisions of
the immediately preceding sentence of this Section 4.4 shall survive any
termination of the Revolver Commitments and payment in full of the Obligations.
4.5. Agent's Allocation of Payments and Collections.
4.5.1. Allocation of Payments. All monies to be applied to the
Obligations, whether such monies represent voluntary payments by one or more
Obligors or are received pursuant to demand for payment or realized from any
disposition of Collateral, shall be allocated among Agent and such of the
Lenders as are entitled thereto (and, with respect to monies allocated to
Lenders, on a Pro Rata basis unless otherwise provided herein): (i) first, to
Agent to pay principal and accrued interest on any portion of the Revolver Loans
which Agent may have advanced on behalf of any Lender and for which Agent has
not been reimbursed by such Lender or Borrower; (ii) second, to Fleet to pay the
principal and accrued interest on any portion of the Settlement Loans
outstanding, to be shared with Lenders that have acquired a participating
interest in such Settlement Loans; (iii) third, to the extent that Fleet has not
received from any Participating Lender a payment as required by Section 1.2.2
hereof, to Fleet to pay all amounts owing to Fleet pursuant to Section 1.2.2(ii)
hereof; (iv) fourth, to Agent to pay the amount of Extraordinary Expenses and
amounts owing to Agent pursuant to Section 14.10 hereof that have not been
reimbursed to Agent by Borrower or Lenders, together with interest accrued
thereon at the rate applicable to Revolver Loans that are Base Rate Loans; (v)
fifth, to Agent to pay any Indemnified Amount that has not been paid to Agent by
Obligors or Lenders, together with interest accrued thereon at the rate
applicable to Revolver Loans that are Base Rate Loans; (vi) sixth, to Agent to
pay any fees due and payable to Agent; (vii) seventh, to Lenders for any
Indemnified Amount that they have paid to Agent and any Extraordinary Expenses
that they have reimbursed to Agent or themselves incurred, to the extent that
Lenders have not been reimbursed by Obligors therefor; (viii) eighth, to Fleet
to pay principal and interest with respect to LC Outstandings (or to the extent
any of the LC Outstandings are contingent and an Event of Default then exists,
deposited in the Cash Collateral Account to provide security for the payment of
the LC Outstandings), which payment shall be shared with the Participating
Lenders in accordance with Section 1.2.2(iii) hereof; and (ix) ninth, to Lenders
in payment of the unpaid principal and accrued interest in respect of the
Revolver Loans and any other Obligations then outstanding to be shared among
Lenders on a Pro Rata basis, or on such other basis as may be agreed upon in
writing by Lenders (which agreement or agreements may be entered into without
notice to or the consent or approval of Borrower). The allocations set forth in
this Section 4.5
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are solely to determine the rights and priorities of Agent and
Lenders as among themselves and may be changed by Agent and Lenders without
notice to or the consent or approval of Borrower or any other Person.
4.5.2. Erroneous Allocation. Agent shall not be liable for any
allocation or distribution of payments made by it in good faith and, if any such
allocation or distribution is subsequently determined to have been made in
error, the sole recourse of any Lender to whom payment was due but not made
shall be to recover from the other Lenders any payment in excess of the amount
to which such other Lenders are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments
received by them).
4.6. Application of Payments and Collateral Proceeds. All Payment Items
received by Agent by 12:00 noon on any Business Day shall be deemed received on
that Business Day. All Payment Items received by Agent after 12:00 noon on any
Business Day shall be deemed received on the following Business Day. Borrower
irrevocably waives the right to direct the application of any and all payments
and Collateral proceeds at any time or times hereafter received by Agent or any
Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree
that Agent shall have the continuing exclusive right to apply and reapply any
and all such payments and Collateral proceeds received at any time or times
hereafter by Agent or its agent against the Obligations, in such manner as Agent
may deem advisable, notwithstanding any entry by Agent upon any of its books and
records. If as the result of Agent's collection of proceeds of Accounts and
other Collateral as authorized by Section 7.2.6 a credit balance exists, such
credit balance shall not accrue interest in favor of Borrower, but shall be
available to Borrower at any time or times for so long as no Default or Event of
Default exists.
4.7. Loan Account; the Register; Account Stated.
4.7.1. Loan Accounts. Each Lender shall maintain in accordance with
its usual and customary practices an account or accounts (a "Loan Account")
evidencing the Debt of Borrower to such Lender resulting from each Revolver Loan
owing to such Lender from time to time, including the amount of principal and
interest payable to such Lender from time to time hereunder and under each Note
payable to such Lender. Any failure of a Lender to record in the Loan Account,
or any error in doing so, shall not limit or otherwise affect the obligation of
Borrower hereunder (or under any Note) to pay any amount owing hereunder to such
Lender.
4.7.2. The Register. Agent shall maintain a register (the
"Register") which shall include a master account and a subsidiary account for
each Lender and in which accounts (taken together) shall be recorded (i) the
date and amount of each Borrowing made hereunder, the Type of each Revolver Loan
comprising such Borrowing and any Interest Period applicable thereto, (ii) the
effective date and amount of each Assignment and Acceptance delivered to and
accepted by it and the parties thereto, (iii) the amount of any principal or
interest due and payable or to become due and payable from Borrower to each
Lender hereunder or under the Notes, and (iv) the amount of any sum received by
Agent from Borrower or any other Obligor and each Lender's share thereof. The
Register shall be available for inspection by Borrower or any Lender at the
offices of Agent at any reasonable time and from time to time upon reasonable
prior notice. Any
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failure of Agent to record in the Register, or any error in doing so, shall not
limit or otherwise affect the obligation of Borrower hereunder (or under any
Note) to pay any amount owing with respect to the Revolver Loans or provide the
basis for any claim against Agent.
4.7.3. Entries Binding. The entries made in the Register and each
Loan Account shall constitute rebuttably presumptive evidence of the information
contained therein; provided, however, that if a copy of information contained in
the Register or any Loan Account is provided to any Person, or any Person
inspects the Register or any Loan Account, at any time or from time to time,
then the information contained in the Register or the Loan Account, as
applicable shall be conclusive and binding on such Person for all purposes
absent manifest error, unless such Person notifies Agent in writing within 30
days after such Person's receipt of such copy or such Person's inspection of the
Register or Loan Account of its intention to dispute the information contained
therein.
4.8. Gross Up for Taxes. If Borrower shall be required by Applicable
Law to withhold or deduct any Taxes from or in respect of any sum payable under
this Agreement or any of the other Loan Documents, (a) so long as any Lender to
which Section 4.9 is applicable has satisfied the terms of Section 4.9, the sum
payable to Agent or such Lender shall be increased as may be necessary so that,
after making all required withholding or deductions, Agent or such Lender (as
the case may be) receives an amount equal to the sum it would have received had
no such withholding or deductions been made, (b) Borrower shall make such
withholding or deductions, and (c) Borrower shall pay the full amount withheld
or deducted to the relevant taxation authority or other authority in accordance
with Applicable Law.
4.9. Withholding Tax Exemption. At least 5 Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States or any state thereof agrees that it will deliver to Borrower and Agent 2
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Lender is entitled to receive payment
under this Agreement and its Note without deduction or withholding of any United
States federal income taxes. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to Borrower and Agent 2 additional copies of such
form (or a successor form) on or before the date that such form expires
(currently, 3 successive calendar years for Form 1001 and one calendar year for
Form 4224) or becomes obsolete or after the occurrence of any event requiring a
change in the most form so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by Borrower or
Agent, in each case, certifying that such Lender is entitled to receive payments
under this Agreement and its Notes without deduction or withholding of any
United States federal income taxes, unless an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required that renders all such forms inapplicable or
that would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender advises Borrower and Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income taxes.
SECTION 5. TERM AND TERMINATION OF COMMITMENTS
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5.1. Term of Revolver Commitments. Subject to each Lender's right to
cease making Revolver Loans and other extensions of credit to Borrower when any
Default or Event of Default exists or upon termination of the Revolver
Commitments as provided in Section 5.2 hereof, the Revolver Commitments shall be
in effect for a period of 5 years from the date hereof, through the close of
business on February 17, 2005 (the "Term").
5.2. Termination.
5.2.1. Termination by Agent. Agent may (and upon the direction of
the Required Lenders, shall) terminate the Revolver Commitments without notice
if an Event of Default exists; provided, however, that the Revolver Commitments
shall automatically terminate as provided in Section 11.2 hereof.
5.2.2. Termination by Borrower. Upon at least 30 days prior written
notice to Agent, Borrower may, at its option, terminate the Revolver
Commitments; provided, however, no such termination by Borrower shall be
effective until Borrower has satisfied all of the Obligations and executed in
favor of and delivered to Agent and Lenders a general release of all Claims that
Borrower may have against Agent or any Lender. Any notice of termination given
by Borrower shall be irrevocable unless Agent otherwise agrees in writing.
Borrower may elect to terminate the Revolver Commitments in their entirety only,
but nothing contained herein shall affect Borrower's right to voluntarily reduce
the Revolver Commitments as provided in Section 1.1.5 of this Agreement. No
section of this Agreement, Type of Revolver Loan available hereunder or Revolver
Commitment may be terminated by Borrower singly.
5.2.3. Reserved.
5.2.4. Effect of Termination. On the effective date of termination
of the Revolver Commitments by Agent or by Borrower, all of the Obligations
shall be immediately due and payable and Lenders shall have no obligation to
make any Revolver Loans and Fleet shall have no obligation to procure any
Letters of Credit. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Agent shall retain its Liens in the Collateral and all of
its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has satisfied the Obligations to Agent and Lenders,
in full. For purposes of this Agreement, the Obligations shall not be deemed to
have been satisfied until all Obligations for the payment of money have been
paid to Agent in same day funds and all Obligations that are at the time in
question contingent (including, all LC Outstandings that exist by virtue of an
outstanding Letter of Credit) have been fully cash collateralized in favor and
to the satisfaction of Agent or Agent has received as beneficiary a direct pay
letter of credit in form and from an issuing bank acceptable to Agent and
providing for direct payment to Agent of all such contingent Obligations at the
time they become fixed (including reimbursement of all sums paid by Agent under
any LC Support). Notwithstanding the payment in full of the Obligations, Agent
shall not be required to terminate its security interests in any of the
Collateral unless, with respect to any loss or damage Agent may incur as a
result of the dishonor or return of any Payment Items applied to the
Obligations, Agent shall have received either (i) a written agreement, executed
by Borrower and any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the
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Obligations, indemnifying Agent and Lenders from any such loss or damage; or
(ii) such monetary reserves and Liens on the Collateral for such period of time
as Agent, in its reasonable discretion, may deem necessary to protect Agent from
any such loss or damage. The provisions of Sections 2.4, 2.7, 2.8, 2.9, 4.4, 4.9
and this Section 5.2.4 and all obligations of Borrower to indemnify Agent or any
Lender pursuant to this Agreement or any of the other Loan Documents, shall in
all events survive any termination of the Revolver Commitments.
SECTION 6. COLLATERAL
6.1. Grant of Security Interest. To secure the prompt payment and
performance of all of the Obligations, Borrower hereby grants to Agent, for the
benefit of itself as Agent and for the Pro Rata benefit of Lenders, a continuing
security interest in and Lien upon all of the following Property and interests
in Property of Borrower, whether now owned or existing or hereafter created,
acquired or arising and wheresoever located:
(i) All Accounts;
(ii) All Inventory;
(iii) All Equipment;
(iv) All Instruments;
(v) All Chattel Paper;
(vi) All Documents;
(vii) All General Intangibles;
(viii) All Deposit Accounts;
(ix) All Investment Property (but excluding any portion thereof
that constitutes Margin Stock unless otherwise expressly provided in any
Security Documents);
(x) All monies now or at any time or times hereafter in the
possession or under the control of Agent or a Lender or a bailee or
Affiliate of Agent or a Lender, including any Cash Collateral in the Cash
Collateral Account;
(xi) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (x) above, including
proceeds of and unearned premiums with respect to insurance policies
insuring any of the Collateral and claims against any Person for loss of,
damage to or destruction of any of the Collateral; and
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(xii) All books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through (xi)
above;
6.2. Lien on Deposit Accounts. As additional security for the payment
and performance of the Obligations, Borrower hereby grants to Agent, for the
benefit of itself as Agent and for the Pro Rata benefit of Lenders, a continuing
security interest in and Lien upon, and hereby collaterally assigns to Agent,
all of Borrower's right, title and interest in and to each Deposit Account of
Borrower and in and to any deposits or other sums at any time credited to each
such Deposit Account, including any sums in any blocked account or any special
lockbox account and in the accounts in which sums are deposited. In connection
with the foregoing, Borrower hereby authorizes and directs each such bank or
other depository to pay or deliver to Agent upon its written demand therefor
made at any time upon the occurrence and during the continuation of an Event of
Default and without further notice to Borrower (such notice being hereby
expressly waived), all balances in each Deposit Account maintained by Borrower
with such depository for application to the Obligations then outstanding, and
the rights given Agent in this Section shall be cumulative with and in addition
to Agent's other rights and remedies in regard to the foregoing Property as
proceeds of Collateral. Borrower hereby irrevocably appoints Agent as
Borrower's attorney-in-fact to collect any and all such balances to the extent
any such payment is not made to Agent by such bank or other depository after
demand thereon is made by Agent pursuant hereto.
6.3. Other Collateral. In addition to the items of Property referred to
in Section 6.1 above, the Obligations shall also be secured by the Cash
Collateral to the extent provided herein and all of the other items of Property
from time to time described in any of the Security Documents as security for any
of the Obligations.
6.4. Lien Perfection; Further Assurances. Within 5 Business Days after
Agent's request therefor, Borrower shall execute or cause to be executed and
deliver to Agent such instruments, assignments, title certificates or other
documents as are necessary under the UCC or other Applicable Law (including any
motor vehicle certificates of title act) to perfect (or continue the perfection
of) Agent's Lien upon the Collateral, and shall take such other action as may be
requested by Agent to give effect to or carry out the intent and purposes of
this Agreement. Unless prohibited by Applicable Law, Borrower hereby authorizes
Agent to execute and file any such financing statement on Borrower's behalf.
Unless prohibited by Applicable Law, the parties agree that a carbon,
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
SECTION 7. COLLATERAL ADMINISTRATION
7.1. General Provisions.
7.1.1. Location of Collateral. All tangible items of Collateral,
other than Inventory in transit, shall at all times be kept by Borrower at one
or more of the business locations of Borrower set forth in Schedule 7.1.1 hereto
and shall not be moved therefrom,
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without the prior written approval of Agent, except that in the absence of an
Event of Default and acceleration of the maturity of the Obligations in
consequence thereof, Borrower may (i) make sales or other dispositions of any
Collateral to the extent authorized by Section 9.2.10 hereof and (ii) move
Inventory or Equipment or any record relating to any Collateral to a location in
the United States other than those shown on Schedule 7.1.1 hereto so long as
Borrower has given Agent at least 15 Business Days prior written notice of such
new location and prior to moving any Inventory or Equipment to such location
Borrower has executed and delivered to Agent UCC-1 financing statements and any
other appropriate documentation to perfect or continue the perfection of Agent's
Liens with respect to such Inventory or Equipment. Notwithstanding anything to
the contrary contained in this Agreement, Borrower shall not be permitted to
keep, store or otherwise maintain any Collateral at any location (including any
location described in Section 7.1.1), unless (i) Borrower is the owner of such
location, (ii) Borrower leases such location and, if requested by Agent, the
landlord has executed in favor of Agent a Landlord Waiver, or (iii) the
Collateral consists of Inventory placed with a warehouseman, bailee or
processor, and if, requested by Agent, Agent has received from such
warehouseman, bailee or processor an acceptable Lien waiver agreement and an
appropriate UCC-1 financing statement has been filed with the appropriate
Governmental Authority in the jurisdiction where such warehouseman, bailee or
processor is located in order to perfect, or to maintain the uninterrupted
perfection of, Agent's security interest in such Inventory.
7.1.2. Insurance of Collateral; Condemnation Proceeds. Borrower
shall maintain and pay for insurance upon all Collateral, wherever located,
covering casualty, hazard, public liability, theft, malicious mischief, and such
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Agent. All proceeds payable under each such policy shall be
payable to Agent for application to the Obligations. Borrower shall deliver the
originals or certified copies of such policies to Agent with satisfactory
lender's loss payable endorsements reasonably satisfactory to Agent naming Agent
as sole loss payee, assignee or additional insured, as appropriate. Each policy
of insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days prior written notice to Agent in the event of cancellation
of the policy for any reason whatsoever and a clause specifying that the
interest of Agent shall not be impaired or invalidated by any act or neglect of
Borrower or the owner of the Property or by the occupation of the premises for
purposes more hazardous than are permitted by said policy. If Borrower fails to
provide and pay for such insurance, Agent may, at its option, but shall not be
required to, procure the same and charge Borrower therefor. Borrower agrees to
deliver to Agent, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies. For so long as no Event of Default
exists, Borrower shall have the right to settle, adjust and compromise any claim
with respect to any insurance maintained by Borrower provided that all proceeds
thereof are applied in the manner specified in this Agreement, and Agent agrees
promptly to provide any necessary endorsement to any checks or drafts issued in
payment of any such claim. At any time that an Event of Default exists, only
Agent shall be authorized to settle, adjust and compromise such claims, Agent
shall have all rights and remedies with respect to such policies of insurance as
are provided for in this Agreement and the other Loan Documents.
7.1.3. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes imposed under any
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Applicable Law on any of the Collateral or in respect of the sale thereof, and
all other payments required to be made by Agent to any Person to realize upon
any Collateral shall be borne and paid by Borrower. Agent shall not be liable or
responsible in any way for the safekeeping of any of the Collateral or for any
loss or damage thereto (except for reasonable care in the custody thereof while
any Collateral is in Agent's actual possession) or for any diminution in the
value thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other Person whomsoever, but the same shall be at
Borrower's sole risk.
7.1.4. Defense of Title to Collateral. Borrower shall at all
times defend Borrower's title to the Collateral and Agent's Liens therein
against all Persons and all claims and demands whatsoever other than Permitted
Liens.
7.2. Administration of Accounts.
7.2.1. Records and Schedules of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Agent on such periodic basis as Agent shall request
a sales and collections report for the preceding period, in form satisfactory to
Agent. Borrower shall also provide to Agent on or before the 25th day of each
month, a detailed aged trial balance of all Accounts existing as of the last day
of the preceding month, specifying the names, addresses, face value, dates of
invoices and due dates for each Account Debtor obligated on an Account so listed
("Schedule of Accounts"), and, upon Agent's request therefor, copies of proof of
delivery and a copy of all documents, including repayment histories and present
status reports relating to the Accounts so scheduled and such other matters and
information relating to the status of then existing Accounts as Agent shall
reasonably request. At Agent's request, Borrower shall deliver to Agent copies
of invoices or invoice registers related to all of its Accounts.
7.2.2. Discounts, Disputes and Returns. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be to Agent as part of the next required Schedule of
Accounts. Upon and after the occurrence of an Event of Default, Agent shall
have the right to settle or adjust all disputes and claims directly with the
Account Debtor and to compromise the amount or extend the time for payment of
any Accounts comprising a part of the Collateral upon such terms and conditions
as Agent may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorneys' fees, to Borrower.
7.2.3. Taxes. If an Account of Borrower includes a charge for any
Taxes payable to any governmental taxing authority, Agent is authorized, in its
sole discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrower and to charge Borrower therefor; provided, however, that
neither Agent nor Lenders shall be liable for any Taxes that may be due by
Borrower.
7.2.4. Account Verification. Whether or not a Default or an Event
of Default exists, Agent shall have the right at any time, in the name of Agent,
any designee of Agent or Borrower to verify the validity, amount or any other
matter relating to any Accounts of Borrower
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by mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Agent in an effort to facilitate and promptly conclude any such verification
process.
7.2.5. Maintenance of Dominion Account. Borrower shall maintain a
Dominion Account pursuant to a lockbox or other arrangement acceptable to Agent
and, in the case of such Dominion Account and lockbox arrangement, with such
bank as may be selected by Borrower and be acceptable to Agent. Borrower shall
issue to each such lockbox bank an irrevocable letter of instruction directing
such bank to deposit all payments or other remittances received in the lockbox
to the Dominion Account. Borrower shall enter into agreements, in form
satisfactory to Agent, with each bank at which a Dominion Account is maintained
by which such bank shall immediately transfer to the Payment Account all monies
deposited to the Dominion Account. All funds deposited in each Dominion Account
shall be subject to Agent's Lien. Borrower shall obtain the agreement (in favor
of and in form and content satisfactory to Agent) by each bank at which a
Dominion Account is maintained to waive any offset rights against the funds
deposited into such Dominion Account, except offset rights in respect of charges
incurred in the administration of such Dominion Account. Neither Agent nor
Lenders assume any responsibility to Borrower for such lockbox arrangement or
Dominion Account, including any claim of accord and satisfaction or release with
respect to deposits accepted by any bank thereunder.
7.2.6. Collection of Accounts and Proceeds of Collateral. To
expedite collection, Borrower shall endeavor in the first instance to make
collection of Borrower's Accounts for Agent and Lenders. All Payment Items
received by Borrower in respect of its Accounts, together with the proceeds of
any other Collateral, shall be held by Borrower as trustee of an express trust
for Agent's benefit and Borrower shall immediately deposit same in kind in the
Dominion Account. Agent retains the right at all times when a Default or an
Event of Default exists to notify Account Debtors of Borrower that Accounts have
been assigned to Agent and to collect Accounts directly in its own name and to
charge to Borrower the collection costs and expenses, incurred by Agent or
Lenders, including reasonable attorneys' fees.
7.3. Administration of Inventory.
7.3.1. Records and Reports of Inventory. Borrower shall keep
accurate and complete records of its Inventory and shall furnish Agent and
Lenders inventory reports respecting such Inventory in form and detail
satisfactory to Agent and Lenders at such times as Agent and Lenders may
request, but so long as no Default or Event of Default exists, no more
frequently than once each week. Borrower shall conduct a physical inventory no
less frequently than annually and shall provide to Agent and Lenders a report
based on each such physical inventory promptly thereafter, together with such
supporting information as Agent shall request.
7.3.2. Returns of Inventory. Borrower shall not return any of its
Inventory to a supplier or vendor thereof, or any other Person, whether for
cash, credit against future purchases or then existing payables, or otherwise,
unless (i) such return is in the Ordinary Course of Business of Borrower and
such Person; (ii) no Default or Event of Default exists or would result
therefrom; (iii) the return of such Inventory will not result in an Out-of-
Formula Condition; and (iv) any payments received by Borrower in connection with
any such return are promptly turned over to Agent for application to the
Obligations.
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7.4. Administration of Equipment.
7.4.1. Records and Schedules of Equipment. Borrower shall keep
accurate records itemizing and describing the kind, type, quality, quantity and
cost of its Equipment and all dispositions made in accordance with Section 7.4.2
hereof.
7.4.2. Dispositions of Equipment. Borrower will not sell, lease
or otherwise dispose of or transfer any of the Equipment or any part thereof
without the prior written consent of Agent; provided, however, that the
foregoing restriction shall not apply, for so long as no Default or Event of
Default exists, to (i) dispositions of Equipment expressly authorized by Section
9.2.10 of this Agreement; (ii) dispositions of Equipment which, in the aggregate
during any consecutive 12-month period, has a fair market value or book value,
whichever is more, of $1,000,000 or less, provided that all Net Proceeds thereof
are remitted to Agent for application to the Obligations; or (iii) any
replacement of Equipment that is substantially worn, damaged or obsolete with
Equipment of like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with any disposition of the
Equipment that is to be replaced, the replacement Equipment shall be free and
clear of Liens other than Permitted Liens that are not Purchase Money Liens, and
Borrower shall have given Agent at least 10 days prior written notice of such
disposition.
7.4.3. Condition of Equipment. The Equipment is in good operating
condition and repair, and all necessary replacements of and repairs thereto
shall be made so that the value and operating efficiency of the Equipment shall
be maintained and preserved, reasonable wear and tear excepted.
7.5. Borrowing Base Certificates. On the Closing Date and on or before
the third Business Day of each week after the Closing Date, Borrower shall
deliver to Agent a Borrowing Base Certificate prepared as of the close of
business of the previous week, and at such other times as Agent may request;
provided, however, that if Consolidated EBITDA in any month is $25,000,000 or
more as determined pursuant to Section 9.3.2 of this Agreement, then, during the
next succeeding month, Borrower shall not be required to deliver more than one
Borrowing Base Certificate (which shall be delivered on or before the 15th day
of such next succeeding month) unless a Default or Event of Default exists or
Agent determines, in its sole discretion, that more frequent Borrowing Base
Certificates are necessary to protect Agent and Lenders against changes in the
composition or quality of the Collateral. All calculations of Availability in
connection with any Borrowing Base Certificate shall originally be made by
Borrower and certified by a Senior Officer to Agent, provided that Agent shall
have the right to review and adjust, in the exercise of its reasonable credit
judgment, any such calculation (i) to reflect its reasonable estimate of
declines in value of any of the Collateral described therein and (ii) to the
extent that such calculation is not in accordance with this Agreement or does
not accurately reflect the amount of the Availability Reserve.
SECTION 8. REPRESENTATIONS AND WARRANTIES
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8.1. General Representations and Warranties. To induce Agent and
Lenders to enter into this Agreement and to make available the Revolver
Commitments, Borrower warrants and represents to Agent and Lenders that:
8.1.1. Organization and Qualification. Each of Borrower and its
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each of Borrower and
its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each state or jurisdiction listed on
Schedule 8.1.1 hereto and in all other states and jurisdictions in which the
failure of Borrower or any of such Subsidiaries to be so qualified would have a
Material Adverse Effect.
8.1.2. Power and Authority. Each of Borrower and its Subsidiaries
is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary action and do not and will
not (i) require any consent or approval of any of the holders of the Equity
Interests of Borrower or any Subsidiary; (ii) contravene Borrower's or any
Subsidiary's Organization Documents; (iii) violate, or cause Borrower or any
Subsidiary to be in default under, any provision of any Applicable Law, order,
writ, judgment, injunction, decree, determination or award in effect having
applicability to Borrower or any Subsidiary; (iv) result in a breach of or
constitute a default under any Material Contract; or (v) result in, or require,
the creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the Properties now owned or hereafter acquired by Borrower or
any Subsidiary.
8.1.3. Legally Enforceable Agreement. This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of each of Borrower and its Subsidiaries
signatories thereto enforceable against them in accordance with the respective
terms of such Loan Documents, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights.
8.1.4. Capital Structure. As of the date hereof, Schedule 8.1.4
hereto states (i) the correct name of each Subsidiary, its jurisdiction of
incorporation and the percentage of its Equity Interests having voting powers
owned by each Person, (ii) the name of each of Borrower's corporate Affiliates
and the nature of the affiliation and (iii) the number of authorized and issued
Equity Interests (and treasury shares) of Borrower that are owned by Affiliates,
directors or employees of Borrower and the number of authorized and issued
Equity Interests (including treasury shares) of each Subsidiary. Borrower has
good title to all of the shares it purports to own of the Equity Interests of
each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such Equity Interests have been duly issued and are fully
paid and non-assessable. Except as disclosed on Schedule 8.1.4 hereto, since
the date of the financial statements of Borrower referred to in Section 8.1.9
hereof, Borrower has not made, or obligated itself to make, any Distribution
except those permitted under Section 9.2.7 of this Agreement. Except as set
forth on Schedule 8.1.4 hereto, there are no outstanding options to purchase, or
any rights or warrants to subscribe for, or any commitments or agreements to
issue or sell, or any Equity Interests or obligations convertible into, or any
powers of attorney relating to, shares of
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the capital stock of Borrower or any of its Subsidiaries. Except as set forth on
Schedule 8.1.4 hereto, there are no outstanding agreements or instruments
binding upon the holders of any Borrower's Equity Interests relating to the
ownership of its Equity Interests.
8.1.5. Corporate Names. During the 5-year period preceding the
date of this Agreement, neither Borrower nor any Subsidiary has been known as or
used any corporate, fictitious or trade names except those listed on Schedule
8.1.5 hereto. Except as set forth on Schedule 8.1.5, neither Borrower nor any
Subsidiary has been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person.
8.1.6. Business Locations; Consigned Inventory. As of the date
hereof, the chief executive office and other places of business of Borrower and
each Subsidiary are as listed on Schedule 7.1.1 hereto. Since July 1997,
neither Borrower nor any Subsidiary has had an office, place of business or
agent for service of process other than as listed on Schedule 7.1.1. Except as
shown on Schedule 7.1.1 on the date hereof, no Inventory of Borrower or any
Subsidiary is stored with a bailee, warehouseman or similar Person, nor is any
Inventory consigned to any Person other than consignments permitted under
Section 9.2.10 hereof. As of the date hereof, the Persons listed on Schedule
7.1.1 have consigned inventory to Borrower in the amounts referenced therein and
at Agent's request, Borrower shall certify to Agent from time to time on the
next Borrowing Base Certificate that is to be delivered to Agent by Borrower
under this Agreement after any such request, the amount, type and the name of
the owner of any consigned inventory.
8.1.7. Title to Properties; Priority of Liens. Borrower and each
Subsidiary has good and marketable title to and fee simple ownership of, or
valid and subsisting leasehold interests in, all of its real Property, and good
title to all of its personal Property, including all Property reflected in the
financial statements referred to in Section 8.1.9 or delivered pursuant to
Section 9.1.3, in each case free and clear of all Liens except Permitted Liens.
Borrower has paid or discharged, and has caused each Subsidiary to pay and
discharge, all lawful claims which, if unpaid, might become a Lien against any
Properties of Borrower or such Subsidiary that is not a Permitted Lien. The
Liens granted to Agent pursuant to this Agreement and the other Security
Documents are first priority Liens, subject only to those Permitted Liens which
are expressly permitted by the terms of this Agreement to have priority over the
Liens of Agent.
8.1.8. Accounts. Agent may rely, in determining which Accounts
are Eligible Accounts, on all statements and representations made by Borrower
with respect to any Account. Unless otherwise indicated in writing to Agent or
excluded by Borrower in its calculation of the Borrowing Base in any Borrowing
Base Certificate, with respect to each Account, Borrower warrants that:
(i) It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of
goods by Borrower in the ordinary course of its business and substantially
in accordance with the terms and conditions of all purchase orders,
contracts or other documents relating thereto and forming a part of the
contract between Borrower and the Account Debtor;
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(iii) It is for a sum certain maturing as stated in the duplicate
invoice covering such sale or rendition of services, a copy of which has
been furnished or is available to Agent on request;
(iv) Such Account, and Agent's security interest therein, is not, and
will not (by voluntary act or omission of Borrower) be in the future,
subject to any offset, Lien, deduction, defense, dispute, counterclaim or
any other adverse condition except for disputes resulting in returned goods
where the amount in controversy is immaterial, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for
any reason;
(v) The contract under which such Account arose does not condition or
restrict Borrower's right to assign to Agent the right to payment
thereunder unless Borrower has obtained the Account Debtor's consent to
such collateral assignment or complied with any conditions to such
assignment;
(vi) Borrower has not made any agreement with any Account Debtor
thereunder for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances which are
granted by Borrower in the Ordinary Course of Business and which are reflected
in the calculation of the net amount of each respective invoice related thereto
and are reflected in the Schedules of Accounts submitted to Agent pursuant to
Section 7.2.1 hereof;
(vii) To the best of Borrower's knowledge, there are no facts,
events or occurrences which are reasonably likely to impair the validity or
enforceability of any of its Accounts or reduce the amount payable
thereunder from the face amount of the invoice and statements delivered to
Agent with respect thereto;
(viii) To the best of Borrower's knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) such Account
Debtor is Solvent; and
(ix) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor
thereunder and which are reasonably likely to result in any material
adverse change in such Account Debtor's financial condition or the
collectibility of such Account.
8.1.9. Financial Statements; Fiscal Year. The Consolidated
balance sheets of Borrower and such other Persons described therein (including
the accounts of all Subsidiaries of Borrower for the respective periods during
which a Subsidiary relationship existed) as of December 31, 1999, and the
related statements of income, changes in stockholder's equity, and changes in
financial position for the periods ended on such dates, have been prepared in
accordance with GAAP, and present fairly the financial positions of Borrower and
such Persons at such dates and the results of Borrower's operations for such
periods. Since December 31, 1999, there has been no material change in the
condition, financial or otherwise, of Borrower and
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such other Persons as shown on the Consolidated balance sheet as of such date
and no material change in the aggregate value of Equipment and real Property
owned by Borrower or such other Persons.
8.1.10. Full Disclosure. The financial statements referred to in
Section 8.1.9 hereof do not contain any untrue statement of a material fact and
neither this Agreement nor any other written statement contains or omits any
material fact necessary to make the statements contained herein or therein not
materially misleading. There is no fact or circumstances in existence on the
date hereof which Borrower has failed to disclose to Agent in writing that may
reasonably be expected to have a Material Adverse Effect.
8.1.11. Solvent Financial Condition. Each of Borrower and its
Subsidiaries, after giving effect to the Revolver Loans to be made hereunder,
the Letters of Credit to be issued in connection herewith and the consummation
of the other transactions described in the Loan Documents, is Solvent.
8.1.12. Surety Obligations. Except as set forth on Schedule
8.1.12 hereto on the date hereof, neither Borrower nor any of its Subsidiaries
is obligated as surety or indemnitor under any surety or similar bond or other
contract issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
8.1.13. Taxes. The FEIN of each of Borrower and the Subsidiaries
is as shown on Schedule 8.1.13 hereto. Borrower and each Subsidiary has filed
all federal, state and local tax returns and other reports it is required by law
to file and has paid, or made provision for the payment of, all Taxes upon it,
its income and Properties as and when such Taxes are due and payable, except to
the extent being Properly Contested. The provision for Taxes on the books of
Borrower and each Subsidiary are adequate for all years not closed by applicable
statutes, and for its current Fiscal Year.
8.1.14. Brokers. Except as set forth on Schedule 8.1.14 hereto,
there are no claims against Borrower for brokerage commissions, finder's fees or
investment banking fees in connection with the transactions contemplated by this
Agreement or any of the other Loan Documents.
8.1.15. Intellectual Property. Borrower and its Subsidiaries each
owns or has the lawful right to use all Intellectual Property necessary for the
present and planned future conduct of its business without any conflict with the
rights of others; there is no objection to, or pending (or, to Borrower's
knowledge, threatened) Intellectual Property Claim with respect to, Borrower's
or any Subsidiary's right to use any such Intellectual Property which could
reasonably be expected to have a Material Adverse Effect, and Borrower is not
aware of any grounds for challenge or objection thereto; and, except as may be
disclosed on Schedule 8.1.15, neither Borrower nor any Subsidiary pays any
royalty or other compensation to any Person for the right to use any
Intellectual Property. All such patents, trademarks, service marks, tradenames,
copyrights, licenses (other than off-the-shelf software) and other similar
rights are listed on Schedule 8.1.15 hereto, to the extent they are registered
under any Applicable Law or are otherwise material to Borrower's or any
Subsidiary's business.
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8.1.16. Governmental Approvals. Each of Borrower and its
Subsidiaries has, and is in good standing with respect to, Governmental Approval
necessary to continue to conduct its business as heretofore or proposed to be
conducted by it and to own or lease and operate its Properties as now owned or
leased by it if the failure to obtain such Governmental Approval could
reasonably be expected to have a Material Adverse Effect.
8.1.17. Compliance with Laws. Each of Borrower and its
Subsidiaries has duly complied with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the provisions of
all Applicable Law (except to the extent that any such noncompliance with
Applicable Law could not reasonably be expected to have a Material Adverse
Effect) and there have been no citations, notices or orders of noncompliance
issued to Borrower or any of the Subsidiaries under any such law, rule or
regulation. No Inventory has been produced in violation of the Fair Labor
Standards Act (29 U.S.C. (S) 201 et seq.).
8.1.18. Restrictions. Neither Borrower nor any of the
Subsidiaries is a party or subject to any contract, agreement, or charter or
other corporate restriction, which has or could be reasonably expected to have a
Material Adverse Effect. Neither Borrower nor any of the Subsidiaries is a
party or subject to any Restrictive Agreements, except as set forth on Schedule
8.1.18 hereto, none of which prohibit the execution or delivery of any of the
Loan Documents by any Obligor or the performance by any Obligor of its
obligations under any of the Loan Documents to which it is a party, in
accordance with the terms of such Loan Documents.
8.1.19. Litigation. Except as set forth on Schedule 8.1.19
hereto, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Borrower, threatened on the date hereof against or affecting
Borrower or any of the Subsidiaries, or the business, operations, Properties,
prospects, profits or condition of Borrower or any of the Subsidiaries, (i)
which relate to any of the Loan Documents or any of the transactions
contemplated thereby or (ii) which, if determined adversely to Borrower or any
Subsidiary, would reasonably be expected to have a Material Adverse Effect. To
the knowledge of Borrower, neither Borrower nor any of its Subsidiaries is in
default on the date hereof with respect to any order, writ, injunction,
judgment, decree or rule of any court, Governmental Authority or arbitration
board or tribunal.
8.1.20. No Defaults. No event has occurred and no condition
exists which would, upon or after the execution and delivery of this Agreement
or Borrower's performance hereunder, constitute a Default or an Event of
Default. Neither Borrower nor any of the Subsidiaries is in default, and no
event has occurred and no condition exists which constitutes or which with the
passage of time or the giving of notice or both would constitute a default,
under any Material Contract or in the payment of any Debt for Money Borrowed in
excess of $250,000 of Borrower or a Subsidiary to any Person.
8.1.21. Leases. Schedule 8.1.21 hereto is a complete listing of
all material capitalized and operating leases of Borrower and its Subsidiaries
on the date hereof. Each of Borrower and its Subsidiaries is in substantial
compliance with all of the terms of each of its
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respective capitalized and operating leases and there is no basis upon which the
lessors under any such leases could terminate same or declare Borrower or any of
its Subsidiaries in default thereunder.
8.1.22. Pension Plans. Except as disclosed on Schedule 8.1.22
hereto, neither Borrower nor any of the Subsidiaries has any Plan on the date
hereof. Borrower and each of its Subsidiaries is in substantial compliance with
the requirements of ERISA and the regulations promulgated thereunder with
respect to each Plan. No fact or situation that is reasonably likely to result
in a material adverse change in the financial condition of Borrower or any of
the Subsidiaries exists in connection with any Plan. Except as disclosed on
Schedule 8.1.22, neither Borrower nor any of its Subsidiaries has any withdrawal
liability in connection with a Multi-employer Plan.
8.1.23. Labor Relations. Except as described on Schedule 8.1.23
hereto, neither Borrower nor any of the Subsidiaries is a party to any
collective bargaining agreement on the date hereof. On the date hereof, there
are no material grievances, disputes or controversies with any union or any
other organization of Borrower's or any Subsidiary's employees, or, to
Borrower's knowledge, any threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
8.1.24. Not a Regulated Entity. No Obligor is (i) an "investment
company" or a "person directly or indirectly controlled by or acting on behalf
of an investment company" within the meaning of the Investment Company Act of
1940; (ii) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935; or (iii) subject to regulation under the Federal Power Act, the
Interstate Commerce Act, any public utilities code or any other Applicable Law
regarding its authority to incur Debt.
8.1.25. Margin Stock. Neither Borrower nor any of the Subsidiaries
is engaged, principally or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any Margin Stock.
8.2. Reaffirmation of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be deemed to be reaffirmed by Borrower on each day that any
Obligations are outstanding or that Borrower requests or is deemed to have
requested an extension of credit hereunder, except for changes in the nature of
a Borrower's or, if applicable, any of its Subsidiaries' business or operations
that may occur after the date hereof in the Ordinary Course of Business so long
as Agent has consented to such changes or such changes are not violative of any
provision of this Agreement. Notwithstanding the foregoing, representations and
warranties which by their terms are applicable only to a specific date shall be
deemed made only at and as of such date.
8.3. Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent,
Lenders and the parties thereto and the closing of the transactions described
therein or related thereto.
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SECTION 9. COVENANTS AND CONTINUING AGREEMENTS
9.1. Affirmative Covenants. For so long as there are any Revolver
Commitments outstanding and thereafter until payment in full of the Obligations,
Borrower covenants that, unless the Required Lenders have otherwise consented in
writing, it shall and shall cause each Subsidiary to:
9.1.1. Visits and Inspections. Permit representatives of Agent,
from time to time, as often as may be reasonably requested, but only during
normal business hours and (except when a Default or Event of Default exists)
upon reasonable prior notice to Borrower, to visit and inspect the Properties of
Borrower and each Subsidiary, inspect, audit and make extracts from Borrower's
and each Subsidiary's books and records, and discuss with its officers, its
employees and its independent accountants, Borrower's and each Subsidiary's
business, financial condition, business prospects and results of operations.
Representatives of each Lender shall be authorized to accompany Agent on each
such visit and inspection and to participate with Agent therein, but at their
own expense, unless a Default or Event of Default exists. Neither Agent nor any
Lender shall have any duty to make any such inspection and shall not incur any
liability by reason of its failure to conduct or delay in conducting any such
inspection.
9.1.2. Notices.
(a) Notify Agent and Lenders in writing, promptly after Borrower's
obtaining knowledge thereof, (i) of the commencement of any litigation affecting
any Obligor or any of its Properties, whether or not the claims asserted in such
litigation are considered by Borrower to be covered by insurance, and of the
institution of any administrative proceeding, to the extent that such litigation
or proceeding, if determined adversely to such Obligor, would reasonably be
expected to have a Material Adverse Effect; (ii) of any material labor dispute
to which any Obligor may become a party, any strikes or walkouts relating to any
of its plants or other facilities, and the expiration of any labor contract to
which it is a party or by which it is bound; (iii) of any material default by
any Obligor under, or termination of, any Material Contract or any note,
indenture, loan agreement, mortgage, lease, deed, guaranty or other similar
agreement relating to any Debt of such Obligor exceeding $500,000; (iv) of the
existence of any Default or Event of Default; (v) of any default by any Person
under any note or other evidence of Debt payable to an Obligor in an amount
exceeding $500,000; (vi) of any judgment against any Obligor in an amount
exceeding $500,000; (vii) of the assertion by any Person of any Intellectual
Property Claim, the adverse resolution of which could reasonably be expected to
have a Material Adverse Effect; (viii) of any violation or asserted violation by
Borrower of any Applicable Law (including ERISA, OSHA, FLSA or any Environmental
Laws), the adverse resolution of which would reasonably be expected to have a
Material Adverse Effect; and (ix) of any Environmental Release by an Obligor or
on any Property owned or occupied by an Obligor.
(b) Notify Agent in writing at least 30 days prior to any Obligor's
opening of any new office or place of business.
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(c) Notify Agent at least 30 days prior to any proposed change of
name of Borrower or any Subsidiary Guarantor and deliver or cause to be
delivered to Agent (i) at least 10 Business Days prior thereto all financing
statements, amendments to financing statements and other Lien Perfection
Documents required by Agent in response to such name change to insure the
uninterrupted perfection of Agent's Liens upon the Collateral and upon any
assets of a Subsidiary Guarantor; and (ii) within 5 Business Days after the
effective date of such name change, written notice of the effective date of such
name change and an identification of any state in which such name change is not
effective.
9.1.3. Financial and Other Information. Keep adequate records and
books of account with respect to its business activities in which proper entries
are made in accordance with GAAP reflecting all its financial transactions; and
cause to be prepared and to be furnished to Agent and Lenders the following (all
to be prepared in accordance with GAAP applied on a consistent basis, unless
Borrower's certified public accountants concur in any change therein, such
change is disclosed to Agent and is consistent with GAAP):
(i) as soon as available, and in any event within 90 days (or to the
extent that a filing extension is granted by the SEC, within 150 days)
after the close of each Fiscal Year, unqualified audited balance sheets of
Borrower and its Subsidiaries as of the end of such Fiscal Year and the
related statements of income, shareholders' equity and cash flow, on a
Consolidated basis, certified without material qualification by a firm of
independent certified public accountants of recognized national standing
selected by Borrower but reasonably acceptable to Agent (except for a
qualification for a change in accounting principles with which the
accountant concurs), and setting forth in each case in comparative form the
corresponding Consolidated figures for the preceding Fiscal Year;
(ii) as soon as available, and in any event within 30 days after the
end of each month hereafter (other than the last month of any Fiscal
Quarter or any Fiscal Year), unaudited balance sheets of Borrower and its
Subsidiaries as of the end of such month and the related unaudited
Consolidated statements of income and cash flow for such month and for the
portion of Borrower's financial year then elapsed, on a Consolidated basis,
setting forth in comparative form the corresponding figures for the
preceding Fiscal Year and certified by the principal financial officer of
Borrower as prepared in accordance with GAAP and fairly presenting the
Consolidated financial position and results of operations of Borrower and
its Subsidiaries for such month and period subject only to changes from
audit and year-end adjustments and except that such statements need not
contain notes;
(iii) as soon as available, and in any event within 50 days after
the end of each Fiscal Quarter hereafter, including the last Fiscal Quarter
of Borrower's Fiscal Year, unaudited balance sheets of Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and the related unaudited
Consolidated statements of income and cash flow for such Fiscal Quarter and
for the portion of Borrower's financial year then elapsed, on a
Consolidated basis, setting forth in comparative form the corresponding
figures for the preceding Fiscal Year and certified by the principal
financial officer of Borrower as
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prepared in accordance with GAAP and fairly presenting the Consolidated
financial position and results of operations of Borrower and its
Subsidiaries for such Fiscal Quarter and period subject only to changes
from audit and year-end adjustments and except that such statements need
not contain notes;
(iv) as soon as available, and in any event within 30 days after the
end of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal
Year), a financial highlight report that contains sales and gross margins
of Borrower and its Subsidiaries for the immediately preceding month, in
form and substance satisfactory to Agent, and that is certified by the
principal financial officer of Borrower;
(v) as soon as available, and in any event within 60 days after the
end of each Fiscal Year, drafts of the financial statements referenced in
Section 9.1.3(i) above;
(vi) not later than 25 days after each month, a listing of all of
Borrower's trade payables as of the last Business Day of such month,
specifying the name of and balance due each trade creditor, and, at Agent's
request, monthly detailed trade payable agings in form acceptable to Agent;
and
(vii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports
which Borrower has made generally available to its shareholders and copies
of any regular, periodic and special reports or registration statements
which Borrower files with the SEC or any Governmental Authority which may
be substituted therefor, or any national securities exchange.
Concurrently with the delivery of the financial statements described in
clause (i) of this Section 9.1.3, Borrower shall deliver to Agent and Lenders a
copy of the accountants' letter to Borrower's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall deliver to Agent and Lenders a certificate of the aforesaid certified
public accountants stating to Agent and Lenders that, based upon such
accountants' audit of the Consolidated financial statements of Borrower and its
Subsidiaries performed in connection with their examination of said financial
statements, nothing came to their attention that caused them to believe that
Borrower was not in compliance with Sections 9.2.16 or 9.3 hereof, or, if they
are aware of such noncompliance, specifying the nature thereof. Concurrently
with the delivery of the financial statements described in clauses (i) and (ii)
of this Section 9.1.3, or more frequently if requested by Agent or any Lender
during any period that a Default or Event of Default exists, Borrower shall
cause to be prepared and furnished to Agent and Lenders a Compliance Certificate
executed by the chief financial officer of Borrower.
Promptly after the sending or filing thereof, Borrower shall also provide
to Agent copies of any annual report to be filed in accordance with ERISA in
connection with each Plan (other than the annual report of any Multi-Employer
Plan) and such other data and information (financial and otherwise) as Agent,
from time to time, may reasonably request, bearing upon or related to the
Collateral or Borrower's and each of its Subsidiaries' financial condition or
results of operations.
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9.1.4. Landlord and Storage Agreements. At Agent's request,
provide Agent with copies of all existing and future agreements between Borrower
and any landlord, warehouseman or bailee which owns any premises at which any
Collateral may, from time to time, be kept.
9.1.5. Projections. No later than 30 days prior to the end of
each Fiscal Year of Borrower, deliver to Agent and Lenders the Projections of
Borrower for the forthcoming 3 Fiscal Years, year by year, and for the
forthcoming Fiscal Year, month by month.
9.1.6. Taxes. Pay and discharge all Taxes prior to the date on
which such Taxes become delinquent or penalties attach thereto, except and to
the extent only that such Taxes are being Properly Contested.
9.1.7. Compliance with Laws. Comply with all Applicable Law,
including ERISA, all Environmental Laws, OSHA, FLSA and all laws, statutes,
regulations and ordinances regarding the collection, payment and deposit of
Taxes, and obtain and keep in force any and all Governmental Approvals necessary
to the ownership of its Properties or to the conduct of its business, to the
extent that any such failure to comply, obtain or keep in force could be
reasonably expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, if any Environmental Release shall occur at or on
any of the Properties of Borrower or any Subsidiary, Borrower shall, or shall
cause the applicable Subsidiary to, act promptly and diligently to investigate
and report to Agent and all appropriate Governmental Authorities the extent of,
and to make appropriate remedial action to eliminate, such Environmental Release
all in accordance with applicable Environmental Laws.
9.1.8. Insurance. In addition to the insurance required herein
with respect to the Collateral, maintain with financially sound and reputable
insurers, (i) insurance with respect to its Properties and business against such
casualties and contingencies of such type (including product liability, workers'
compensation, larceny, embezzlement, or other criminal misappropriation
insurance) and in such amounts as is customary in the business of Borrower or
such Subsidiary and (ii) business interruption insurance in an amount not less
than $15,000,000.
9.1.9. Year 2000 Compatibility. Take all action necessary to
assure that Borrower's computer based systems are (and remain) able to operate
and effectively process data (including dates) after January 1, 2000.
9.1.10. Intellectual Property. Promptly after applying for or
otherwise acquiring any Intellectual Property, deliver to Lender, in form and
substance acceptable to Lender and in recordable form, all documents necessary
for Lender to perfect its Lien on such Intellectual Property.
9.1.11. License Agreements. Keep each License Agreement in full
force and effect for so long as Borrower has any Eligible Inventory, the
manufacture, sale or distribution of which is in any manner governed by or
subject to such License Agreement.
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9.1.12. Dividends of Subsidiaries After Default. Promptly (but
in no case more than 5 Business Days) after the occurrence of an Event of
Default, cause each Subsidiary to declare and pay cash Distributions on, or to
make payments or Distributions on account of, the shares of all classes of
Equity Interests of such Subsidiary in an amount equal to the maximum amount
permitted by Applicable Law at such time to such Subsidiary for the payment of
Distributions, and promptly turn over all such Distributions to Agent for
application to the Obligations.
9.1.13. Pledged Shares. Pledge to Agent, for the benefit itself and
Lenders, 100% of the Equity Interests of each of their respective Domestic
Subsidiaries and 65% of the Equity Interests of each of their respective Foreign
Subsidiaries pursuant to a Pledge Agreement.
9.2. Negative Covenants. For so long as there are any Revolver
Commitments outstanding and thereafter until payment in full of the Obligations,
Borrower covenants that, unless the Required Lenders have otherwise consented in
writing, it shall not and shall not permit any Subsidiary to:
9.2.1. Fundamental Changes. Merge, reorganize, consolidate or
amalgamate with any Person, or liquidate, wind up its affairs or dissolve
itself, except for mergers or consolidations of (i) any Subsidiary with another
Subsidiary or (ii) subject to 10 Business Days notice to Agent a Subsidiary into
Borrower if no Default or Event of Default exists at the time of or would result
from any such consolidation or merger; conduct business under any new fictitious
name except in the event a Subsidiary is acquired in connection with a Permitted
Acquisition and the name of such Subsidiary in use at the time of such Permitted
Acquisition is retained; or change Borrower's FEIN.
9.2.2. Revolver Loans. Make any loans or other advances of money
to any Person other than (i) to an officer or employee of Borrower or a
Subsidiary for salary, travel advances, advances against commissions and other
similar advances in the Ordinary Course of Business; (ii) to an officer or
employee of Borrower in the Ordinary Course of Business, provided that the total
of such loans to officers or employees of Borrower under this clause (ii) shall
not exceed $500,000 in the aggregate at any time; and (iii) for so long as no
Default or Event of Default exists, loans to a Subsidiary that is either a
Subsidiary Guarantor or a Co-Borrower.
9.2.3. Permitted Debt. Create, incur, assume, guarantee or suffer
to exist any Debt, except:
(i) the Obligations;
(ii) Subordinated Debt existing on the Closing Date, including Debt
evidenced by the Vendor Notes;
(iii) accounts payable by Borrower or a Subsidiary to trade
creditors in the Ordinary Course of Business;
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(iv) Permitted Purchase Money Debt;
(v) Debt for accrued payroll, Taxes and other operating expenses
(other than for Money Borrowed) incurred in the Ordinary Course of Business
of Borrower or such Subsidiary, so long as payment thereof is not past due
and payable unless, in the case of Taxes only, such Taxes are being
Properly Contested;
(vi) Debt for Money Borrowed by Borrower (other than the
Obligations), but only to the extent that such Debt is outstanding on the
date of this Agreement and is not to be satisfied on or about the Closing
Date from the proceeds of the initial Revolver Loans;
(vii) Permitted Contingent Obligations;
(viii) Debt that is not included in any of the preceding clauses
of this Section 9.2.3, is not secured by a Lien (unless such Lien is a
Permitted Lien) and does not exceed at any time, in the aggregate, the sum
of $100,000 as to Borrower and all of its Subsidiaries;
(ix) Refinancing Debt so long as each of the Refinancing Conditions
is met; and
(x) Debt owing by a Subsidiary to Borrower for loans permitted
under Section 9.2.2(iii) of this Agreement.
9.2.4. Affiliate Transactions. Enter into, or be a party to any
transaction with any Affiliate, except: (i) the transactions contemplated by
the Loan Documents; (ii) payment of reasonable compensation to officers and
employees for services actually rendered to Borrower or its Subsidiaries; (iii)
payment of customary directors' fees and indemnities; (iv) transactions with
Affiliates that were consummated prior to the date hereof and have been
disclosed to Agent prior to the Closing Date; (v) transactions with Affiliates
in the Ordinary Course of Business and pursuant to the reasonable requirements
of Borrower's or such Subsidiary's business and upon fair and reasonable terms
that are fully disclosed to Agent and are no less favorable to Borrower or such
Subsidiary than Borrower or such Subsidiary would obtain in a comparable arm's
length transaction with a Person not an Affiliate of Borrower or such
Subsidiary; (vi) transactions contemplated by the Securities Purchase Agreement
and Shareholder Agreement; (vii) provided no Event of Default exists at the time
of or after giving effect thereto, payment of management fees to Littlejohn &
Co. LLC and Quilvest on such terms and conditions as are first disclosed in
writing to Agent; and (viii) Distributions to the extent permitted by Section
9.2.7 of this Agreement.
9.2.5. Limitation on Liens. Create or suffer to exist any Lien
upon any of its Property, income or profits, whether now owned or hereafter
acquired, except the following (collectively, "Permitted Liens"):
(i) Liens at any time granted in favor of Agent;
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(ii) Liens for Taxes (excluding any Lien imposed pursuant to any of
the provisions of ERISA) not yet due or being Properly Contested;
(iii) statutory Liens (excluding any Lien imposed pursuant to any
of the provisions of ERISA) arising in the Ordinary Course of Business of
Borrower or a Subsidiary, but only if and for so long as (x) payment in
respect of any such Lien is not at the time required or the Debt secured by
any such Liens is being Properly Contested and (y) such Liens do not
materially detract from the value of the Property of Borrower or such
Subsidiary and do not materially impair the use thereof in the operation of
Borrower's or such Subsidiary's business;
(iv) Purchase Money Liens securing Permitted Purchase Money Debt;
(v) Liens securing Debt of a Subsidiary of Borrower to Borrower or
to another such Subsidiary;
(vi) Liens arising by virtue of the rendition, entry or issuance
against Borrower or any Subsidiary, or any Property of Borrower or any
Subsidiary, of any judgment, writ, order, or decree for so long as each
such Lien (a) is in existence for less than 20 consecutive days after it
first arises or is being Properly Contested and (b) is at all times junior
in priority to any Liens in favor of Agent;
(vii) Liens incurred or deposits made in the Ordinary Course of
Business to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Money Borrowed), statutory obligations and
other similar obligations or arising as a result of progress payments under
government contracts, provided that, to the extent any such Liens attach to
any of the Collateral, such Liens are at all times subordinate and junior
to the Liens upon the Collateral in favor of Agent;
(viii) easements, rights-of-way, restrictions, covenants or other
agreements of record and other similar charges or encumbrances on real
Property of Borrower or a Subsidiary that do not interfere with the
ordinary conduct of the business of Borrower or such Subsidiary;
(ix) normal and customary rights of setoff upon deposits of cash in
favor of banks and other depository institutions and Liens of a collection
bank arising under the UCC on Payment Items in the course of collection;
(x) Liens in existence immediately prior to the Closing Date that
are satisfied in full and released on the Closing Date as a result of the
application of Borrower's cash on hand at the Closing Date or the proceeds
of Revolver Loans to be made on the Closing Date;
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(xi) Liens in favor of the Vendor Agent that are neither obtained
nor enforced in violation of the Vendor Lien Subordination or the Vendor
Debt Subordination;
(xii) such other Liens as appear on Schedule 9.2.5 hereto, to the
extent provided therein; and
(xiii) such other Liens as Agent in its sole discretion may
hereafter approve in writing.
9.2.6. Subordinated Debt. Make any payment of all or any part of
any Subordinated Debt or take any other action or omit to take any other action
in respect of any Subordinated Debt, except in accordance with the subordination
agreement relative thereto; or amend or modify the terms of any agreement
applicable to any Subordinated Debt, other than to extend the time of payment
thereof or to reduce the rate of interest payable in connection therewith. To
the extent that any payment is permitted to be made with respect to any
Subordinated Debt pursuant to the provisions of the subordination agreement
relative thereto, as a condition precedent to Borrower's authorization make any
such payment, Borrower shall provide to Agent at least 5 Business Days prior to
the scheduled payment, a certificate from a Senior Officer of Borrower stating
that no Default or Event of Default is in existence as of the date of the
certificate or will be in existence as of the date of such payment (both with
and without giving effect to the making of such payment), and specifying the
amount of principal and interest to be paid.
9.2.7. Distributions. Declare or make any Distributions, except
(i) for Upstream Payments, (ii) as otherwise provided in Section 9.1.13, (iii)
dividends paid by the issuance of (A) any Series A Preferred Shares (as defined
in the Securities Purchase Agreement as in effect on the date hereof) or
warrants to purchase Series A Preferred Shares in respect of the Series A
Preferred Shares issued pursuant to the Securities Purchase Agreement or the
Series A Designation (as defined in the Securities Purchase Agreement as in
effect on the date hereof) and (B) any Additional Preferred Shares (as defined
in the Securities Purchase Agreement as in effect on the date hereof) issued
pursuant to the Securities Purchase Agreement or an Additional Preferred Share
Designation (as defined in the Securities Purchase Agreement as in effect on the
date hereof) and (iv) after February 16, 2003, so long as no Default or Event of
Default exists or would result therefrom, cash dividends payable under Section
3(a)(ii) of either the Series A Designation or any Additional Preferred Share
Designation (as defined in the Securities Purchase Agreement as in effect on the
date hereof).
9.2.8. Upstream Payments. Create or suffer to exist any
encumbrance or restriction on the ability of a Subsidiary to make any Upstream
Payment, except for encumbrances or restrictions (i) pursuant to the Loan
Documents, (ii) existing under Applicable Law and (iii) identified and fully
disclosed in Schedule 9.2.8.
9.2.9. Capital Expenditures. Make Capital Expenditures (including
expenditures by way of capitalized leases) which in the aggregate, as to
Borrower and its Subsidiaries, exceed $6,000,000 during the period from the date
of this Agreement through February 28, 2001 or $8,000,000 during any Fiscal Year
after February 28, 2001.
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9.2.10. Disposition of Assets. Sell, assign, lease, consign or
otherwise dispose of any of its Properties or any interest therein, including
any disposition of Property as part of a sale and leaseback transaction, to or
in favor of any Person, except (i) sales of Inventory in the Ordinary Course of
Business; (ii) consignments of Inventory to the extent such consignments were
made on or before the Closing Date and are described on Schedule 7.1.1 hereto
(all of which consigned Inventory Borrower warrants does not exceed in Value
$900,000); (iii) dispositions of Equipment to the extent authorized by Section
7.4.2 hereof; (iv) a transfer of Property to Borrower by a Subsidiary; (v)
dispositions of Equipment, Inventory or leasehold interests in connection with
the closing of any business location of Borrower so long as (a) such
dispositions occur in the Ordinary Course of Business, (b) Borrower gives Agent
written notice of such closure in the next Compliance Certificate to be
delivered to Agent after such closure, and (c) all proceeds from such
disposition are promptly delivered to Agent for application to the Obligations;
and (vi) other dispositions expressly authorized by other provisions of the Loan
Documents.
9.2.11. Equity Interests of Subsidiaries. Form or acquire any
Subsidiary after the Closing Date (except in connection with a Permitted
Acquisition) or permit any existing Subsidiary to issue any additional Equity
Interests except director's qualifying shares.
9.2.12. Bill-and-Hold Sales, Etc. On or after the Closing Date,
make any sale to any customer on a bill-and-hold, guaranteed sale, sale and
return, sale on approval or consignment basis, or any sale on a repurchase or
return basis.
9.2.13. Restricted Investments. Make or have any Restricted
Investment.
9.2.14. Tax Consolidation. File or consent to the filing of any
consolidated income tax return with any Person other than a Subsidiary.
9.2.15. Accounting Changes. Make any significant change in
accounting treatment or reporting practices, except as may be required by GAAP,
or establish a fiscal year different from the Fiscal Year.
9.2.16. Organization Documents. Amend, modify or otherwise change
any of the terms or provisions in any of its Organization Documents as in effect
on the date hereof, except for changes that do not affect in any way Borrower's
or such Subsidiary's rights and obligations to enter into and perform the Loan
Documents to which it is a party and to pay all of the Obligations and that do
not otherwise have a Material Adverse Effect.
9.2.17. Restrictive Agreements. Enter into or become party to any
Restrictive Agreement other than those disclosed in Schedule 8.1.18 hereto,
provided that none of such disclosed agreements shall be amended without prior
notice to and the consent of Agent.
9.2.18. Conduct of Business. Engage in any business other than
the business engaged in by it on the Closing Date and any business or activities
which are substantially similar, related or incidental thereto.
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9.2.19. Vendor Subordinated Note Documents. Amend, restate,
modify or replace any of the Vendor Subordinated Note Documents.
9.3. Financial Covenants. For so long as there are any Revolver
Commitments outstanding and thereafter until payment in full of the Obligations,
Borrower covenants that, unless otherwise consented to by the Required Lenders
in writing, it shall:
9.3.1. Consolidated Net Worth. Maintain a Consolidated Net Worth of
at least $54,000,000, tested as of the last day of each month; provided,
however, that the foregoing amount shall be increased as of the last day of the
second month following the end of each Fiscal Quarter, commencing with the
Fiscal Quarter ending May 31, 2001, by an amount equal to 50% of Consolidated
Net Income during each such Fiscal Quarter, but no reduction in the foregoing
amount shall be made if Consolidated Net Income in any Fiscal Quarter is a
negative number.
9.3.2. Consolidated EBITDA. Achieve Consolidated EBITDA of at least
the amount shown below for the period corresponding thereto:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
February 29, 2000 through March 31, 2000 $(7,000,000)
February 29, 2000 through April 30, 2000 $(7,000,000)
February 29, 2000 through May 31, 2000 $(5,000,000)
February 29, 2000 through June 30, 2000 $ 0
February 29, 2000 through July 31, 2000 $ 4,500,000
February 29, 2000 through August 31, 2000 $ 8,000,000
February 29, 2000 through September 30, 2000 $10,000,000
February 29, 2000 through October 31, 2000 $11,500,000
February 29, 2000 through November 30, 2000 $11,500,000
February 29, 2000 through December 31, 2000 $11,500,000
February 29, 2000 through January 30, 2001 $11,500,000
February 29, 2000 through February 28, 2001 $12,000,000
</TABLE>
Commencing on March 1, 2001, Borrower shall achieve Consolidated
EBITDA each month of at least the amount shown below for the period
corresponding thereto, based upon the immediately preceding 12-month
period:
<TABLE>
<CAPTION>
<S> <C>
Each month during the period from
March through April 2001 $12,000,000
Each month during the period from
May through July 2001 $16,000,000
Each month during the period from
August 2001 through January 2002 $18,000,000
The month ending February 28, 2002 $19,000,000
</TABLE>
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9.3.3. Consolidated Fixed Charge Coverage Ratio. Achieve a
Consolidated Fixed Charge Coverage Ratio of at least the ratio shown below for
the period corresponding thereto:
Fiscal Quarter ended 5/31/02 1.30 to 1.00
Each Fiscal Quarter thereafter 1.40 to 1.00
SECTION 10. CONDITIONS PRECEDENT
10.1. Conditions Precedent to Initial Credit Extensions. Initial
Lenders shall not be required to fund any Revolver Loan requested by Borrower,
procure any Letter of Credit, or otherwise extend credit to Borrower, unless, on
or before February 29, 2000, each of the following conditions has been
satisfied:
10.1.1. Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered to Agent by each of the signatories thereto (and,
with the exception of the Notes, in sufficient counterparts for each Lender) and
accepted by Agent and Initial Lenders and each Obligor shall be in compliance
with all of the terms thereof.
10.1.2. Availability. Agent shall have determined, and Initial
Lenders shall be satisfied that, immediately after Initial Lenders have made the
initial Revolver Loans to be made on the Closing Date, Bank has issued the
Letters of Credit to be issued on the Closing Date, and Borrower has paid (or
made provision for payment of) all closing costs incurred in connection with the
Revolver Commitments, and after giving effect to the other transactions to occur
on the Closing Date (including those described in Section 10.1.16 and 10.1.17),
Availability is not less than $10,000,000.
10.1.3. Evidence of Perfection and Priority of Liens. Agent shall
have received copies of all filing receipts or acknowledgments issued by any
Governmental Authority to evidence any filing or recordation necessary to
perfect the Liens of Agent in the Collateral and evidence in form satisfactory
to Agent and Initial Lenders that such Liens constitute valid and perfected
security interests and Liens, and that there are no other Liens upon any
Collateral except for Permitted Liens.
10.1.4. Organization Documents. Agent shall have received copies of
the Organization Documents of each Obligor, and all amendments thereto,
certified by the Secretary of State or other appropriate officials of the
jurisdiction of Borrower's and each Obligor's states of organization.
10.1.5. Good Standing Certificates. Agent shall have received good
standing certificates for each Obligor, issued by the Secretary of State or
other appropriate official of such Obligor's jurisdiction of organization and
each jurisdiction where the conduct of such Obligor's business activities or
ownership of its Property necessitates qualification.
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10.1.6. Opinion Letters. Agent shall have received a favorable,
written opinion of Kilpatrick Stockton LP and the respective local counsel to
Borrower and Agent, covering, to Agent's satisfaction, the matters set forth on
Exhibit E attached hereto, and shall have received from Littlejohn's counsel a
favorable, written opinion regarding the due authorization, due execution,
validity and enforceability of the Littlejohn Guaranty.
10.1.7. Insurance. Agent shall have received certified copies of the
property and casualty insurance policies, insurance certificates regarding such
insurance with respect to the Collateral, together with loss payable
endorsements on Agent's standard form of loss payee endorsement naming Agent as
loss payee with respect to each such policy and certified copies of Borrower's
liability insurance policies, including product liability policies, together
with endorsements naming Agent as an additional insured, all as required by the
Loan Documents.
10.1.8. Lockbox and Dominion Accounts. Agent shall have received the
duly executed agreements establishing the Lockbox and each Dominion Account, in
each case with a financial institution acceptable to Agent for the collection or
servicing of the Accounts.
10.1.9. Solvency Certificates. Agent and Initial Lenders shall have
received certificates satisfactory to them from one or more knowledgeable Senior
Officers of Borrower that, after giving effect to the financing under this
Agreement and the issuance of the Letters of Credit, Borrower is Solvent.
10.1.10. No Labor Disputes. Agent shall have received assurances
satisfactory to it that there are no threats of strikes or work stoppages by any
employees, or organization of employees, of any Obligor which Agent reasonably
determines may have a Material Adverse Effect.
10.1.11. Compliance with Laws and Other Agreements. Agent shall have
determined that none of the Loan Documents or any of the transactions
contemplated thereby violate any Applicable Law, court order or agreement
binding upon any Obligor.
10.1.12. No Material Adverse Change. No material adverse change in
the financial condition of any Obligor or in the quality, quantity or value of
any Collateral shall have occurred since November 30, 1999.
10.1.13. Vendor Arrangements. Agent shall have reviewed and found
acceptable Borrower's accounts payable and vendor arrangements.
10.1.14. Payment of Fees. Borrower shall have paid, or made provision
for the payment on the Closing Date of, all fees and expenses to be paid
hereunder to Agent and Lenders on the Closing Date.
10.1.15. LC Conditions. With respect to the procurement of any
Letter of Credit on the Closing Date, each of the LC Conditions shall have been
satisfied.
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10.1.16. Capital Contributions. Agent shall have received evidence
satisfactory to it that (i) on or within 5 days prior to the Closing Date,
Borrower received capital contributions of not less than $35,000,000 in the
aggregate in cash, $28,000,000 of which shall have been contributed by
Littlejohn and $7,000,000 of which shall have been contributed by Quilvest; and
(ii) the Schedule 14(f)(1), in the form delivered to Agent prior to the Closing
Date, has been filed with the SEC and mailed to all shareholders of record of
Borrower and not less than 10 days has elapsed since the date of the filing of
such Schedule.
10.1.17. Vendor Subordinated Debt. Borrower shall have received from
Vendors at least $20,000,000 in proceeds from the issuance of the Vendor Notes,
the terms of which shall be acceptable in all respects to Agent and Lenders, and
the Vendor Lien Subordination and the Vendor Debt Subordination shall have been
duly executed and delivered by each of the signatories thereto.
10.1.18. Vendor Supply Agreements. Borrower and Vendors shall have
executed, and Borrower shall have delivered to Agent copies of, the Vendor
Supply Agreements.
10.2. Conditions Precedent to All Credit Extensions. Lenders shall not
be required to fund any Revolver Loans, procure any Letters of Credit, or
otherwise extend any credit to or for the benefit of Borrower, unless and until
each of the following conditions has been and continues to be satisfied:
10.2.1. No Defaults. No Default or Event of Default exists at the
time, or would result from the funding, of any Revolver Loan or other extension
of credit.
10.2.2. Satisfaction of Conditions in Other Loan Documents. Each of
the conditions precedent set forth in any other Loan Document shall have been
and shall remain satisfied.
10.2.3. No Litigation. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of, this Agreement or any of the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
10.2.4. No Material Adverse Effect. No event shall have occurred and
no condition shall exist which has or could be reasonably expected to have a
Material Adverse Effect.
10.2.5. Borrowing Base Certificate. Agent shall have received
each Borrowing Base Certificate required by the terms of this Agreement or
otherwise requested by Agent.
10.2.6. LC Conditions. With respect to the procurement of any Letter
of Credit after the Closing Date, each of the LC Conditions shall have been
satisfied.
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10.3. Inapplicability of Conditions. None of the conditions precedent set
forth in Sections 10.1 or 10.2 shall be conditions to the obligation of (i) each
Participating Lender to make payments to Fleet pursuant to Section 1.2.2, (ii)
each Lender to deposit with Agent such Lender's Pro Rata share of a Borrowing in
accordance with Section 3.1.2, (iii) each Lender to fund its Pro Rata share of a
Revolver Loan to repay outstanding Settlement Loans to Fleet as provided in
Section 3.1.3(ii), (iv) each Lender to pay any amount payable to Agent or any
other Lender pursuant to this Agreement or (v) Agent to pay any amount payable
to any Lender pursuant to this Agreement.
10.4. Limited Waiver of Conditions Precedent. If Lenders shall make
any Revolver Loan, procure any Letter of Credit, or otherwise extend any credit
to Borrower under this Agreement at a time when any of the foregoing conditions
precedent are not satisfied (regardless of whether the failure of satisfaction
of any such conditions precedent was known or unknown to Agent or Lenders), the
funding of such Revolver Loan shall not operate as a waiver of the right of
Agent and Lenders to insist upon the satisfaction of all conditions precedent
with respect to each subsequent Borrowing requested by Borrower or a waiver of
any Default or Event of Default as a consequence of the failure of any such
conditions to be satisfied, unless Agent, with the prior written consent of the
Required Lenders, in writing waives the satisfaction of any condition precedent,
in which event such waiver shall only be applicable for the specific instance
given and only to the extent and for the period of time expressly stated in such
written waiver.
SECTION 11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
11.1. Events of Default. The occurrence or existence of any one or
more of the following events or conditions shall constitute an "Event of
Default" (each of which Events of Default shall be deemed to exist unless and
until waived by Agent and Lenders in accordance with the provisions of Section
12.9 hereof):
11.1.1. Payment of Obligations. Borrower shall fail to pay any of
the Obligations on the due date thereof (whether due at stated maturity, on
demand, upon acceleration or otherwise).
11.1.2. Misrepresentations. Any representation, warranty or other
written statement to Agent or any Lender by or on behalf of any Obligor, whether
made in or furnished in compliance with or in reference to any of the Loan
Documents, proves to have been false or misleading in any material respect when
made or furnished or when reaffirmed pursuant to Section 8.2 hereof.
11.1.3. Breach of Specific Covenants. Borrower shall fail or neglect
to perform, keep or observe (i) any covenant contained in Sections 6.4, 7.1.1,
7.2.5, 7.2.6, 9.1.1, 9.1.2(c), 9.2 or 9.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant, (ii) any covenant contained
in Section 7.5 hereof within 2 days after the date on which Borrower was
required to perform, keep or observe such covenant (provided that Borrower may
not avail itself of such 2-day cure period more than 6 times during any Fiscal
Year), or (iii) any covenant contained in Section 9.1.3 within 3 days after the
date on which
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Borrower was required to perform, keep or observe such covenant (provided that
Borrower may not avail itself of such 3-day cure period more than 3 times during
any Fiscal Year).
11.1.4. Breach of Other Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 11.1 hereof) and
the breach of such other covenant is not cured to Agent's and the Required
Lender's satisfaction within 15 days after the sooner to occur of any Senior
Officer's receipt of notice of such breach from Agent or the date on which such
failure or neglect first becomes known to any Senior Officer; provided, however,
that such notice and opportunity to cure shall not apply in the case of any
failure to perform, keep or observe any covenant which is not capable of being
cured at all or within such 15-day period or which is a willful and knowing
breach by Borrower.
11.1.5. Default Under Security Documents/Other Agreements. Borrower
or any other Obligor shall default in the due and punctual observance or
performance of any liability or obligation to be observed or performed by it
under any of the Other Agreements or Security Documents.
11.1.6. Other Defaults. There shall occur any default or event of
default on the part of Borrower or any Subsidiary under any agreement, document
or instrument to which Borrower or any Subsidiary is a party or by which
Borrower or any Subsidiary or any of their respective Properties is bound,
creating or relating to any Debt for Money Borrowed (other than the Obligations)
in excess of $250,000 if the payment or maturity of such Debt for Money Borrowed
may be accelerated in consequence of such event of default or demand for payment
of such Debt for Money Borrowed may be made.
11.1.7. Uninsured Losses. Any loss, theft, damage or destruction of
any of the Collateral not fully covered (subject to such deductibles as Agent
shall have permitted) by insurance if the amount not covered by insurance
exceeds $1,000,000.
11.1.8. Material Adverse Effect. There shall occur any event or
condition that has a Material Adverse Effect.
11.1.9. Solvency. Any Obligor shall cease to be Solvent.
11.1.10. Insolvency Proceedings. Any Insolvency Proceeding shall be
commenced by any Obligor; an Insolvency Proceeding is commenced against any
Obligor and any of the following events occur: such Obligor consents to the
institution of the Insolvency Proceeding against it, the petition commencing the
Insolvency Proceeding is not timely controverted by such Obligor, the petition
commencing the Insolvency Proceeding is not dismissed, discharged or bonded
within 60 days after the date of the filing thereof (provided that, in any
event, during the pendency of any such period, Lenders shall be relieved from
their obligation to make Revolver Loans or otherwise extend credit to or for the
benefit of Borrower hereunder), an interim trustee is appointed to take
possession all or a substantial portion of the Properties of such Obligor or to
operate all or any substantial portion of the business of such Obligor or an
order for relief shall have been issued or entered in connection
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with such Insolvency Proceeding; or any Obligor shall make an offer of
settlement extension or composition to its unsecured creditors generally.
11.1.11. Business Disruption; Condemnation. There shall occur a
cessation of a substantial part of the business of any Obligor for a period
which may be reasonably expected to have a Material Adverse Effect; or any
Obligor shall suffer the loss or revocation of any license or permit now held or
hereafter acquired by such Obligor which is necessary to the continued or lawful
operation of its business; or any Obligor shall be enjoined, restrained or in
any way prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs; or any material lease or
agreement pursuant to which any Obligor leases or occupies any premises on which
any Collateral is located shall be canceled or terminated prior to the
expiration of its stated term and such cancellation or termination has a
Material Adverse Effect or results in an Out-of-Formula Condition; or any
material part of the Collateral shall be taken through condemnation or the value
of such Property shall be materially impaired through condemnation.
11.1.12. Change of Control. A Change of Control shall occur.
11.1.13. ERISA. A Reportable Event shall occur which could
reasonably be expected to constitute grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed, or
if Borrower, any Subsidiary or any Obligor is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from Borrower's, such Subsidiary's or such Obligor's complete or
partial withdrawal from such Plan.
11.1.14. Challenge to Loan Documents. Any Obligor or any of its
Affiliates shall challenge or contest in any action, suit or proceeding the
validity or enforceability of any of the Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Agent, or any of the Loan Documents ceases to be in full force
or effect for any reason other than a full or partial waiver or release by Agent
and Lenders in accordance with the terms thereof.
11.1.15. Judgment. One or more judgments or orders for the payment
of money in an amount that exceeds, individually or in the aggregate, $250,000
shall be entered against Borrower or any other Obligor and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect.
11.1.16. Repudiation of or Default Under Guaranty. Any Guarantor
shall revoke or attempt to revoke the Guaranty signed by such Guarantor, shall
repudiate such Guarantor's liability thereunder, shall be in default under the
terms thereof, or shall fail to confirm in writing, promptly after receipt of
Agent's written request therefor, such Guarantor's ongoing liability under the
Guaranty in accordance with its terms.
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11.1.17. Criminal Forfeiture. Any Obligor shall be convicted under
any criminal law that could lead to a forfeiture of any material Property of
such Obligor.
11.1.18. Vendor Subordinated Note Documents. Any default or event of
default shall occur under any of the Vendor Subordinated Note Documents.
11.2. Acceleration of Obligations; Termination of Revolver Commitments.
Without in any way limiting the right of Agent to demand payment of any portion
of the Obligations payable on demand in accordance with this Agreement:
11.2.1. Upon or at any time after the occurrence of an Event of
Default (other than pursuant to Section 11.1.10 hereof) and for so long as such
Event of Default shall exist, Agent may in its discretion (and, upon receipt of
written instructions to do so from the Required Lenders, shall) (a) declare the
principal of and any accrued interest on the Revolver Loans and all other
Obligations owing under any of the Loan Documents to be, whereupon the same
shall become without further notice or demand (all of which notice and demand
Borrower expressly waives), forthwith due and payable and Borrower shall
forthwith pay to Agent the entire principal of and accrued and unpaid interest
on the Revolver Loans and other Obligations plus reasonable attorneys' fees and
expenses if such principal and interest are collected by or through an attorney-
at-law and (b) terminate the Revolver Commitments.
11.2.2. Upon the occurrence of an Event of Default specified in
Section 11.1.10 hereof, all of the Obligations shall become automatically due
and payable without declaration, notice or demand by Agent to or upon Borrower
and the Revolver Commitments shall automatically terminate as if terminated by
Agent pursuant to Section 5.2.1 hereof and with the effects specified in Section
5.2.4 hereof; provided, however, that, if Agent or Lenders shall continue to
make Revolver Loans or otherwise extend credit to Borrower pursuant to this
Agreement after an automatic termination of the Revolver Commitments by reason
of the commencement of an Insolvency Proceeding by or against Borrower, such
Revolver Loans and other credit shall nevertheless be governed by this Agreement
and enforceable against and recoverable from each Obligor as if such Insolvency
Proceeding had never been instituted.
11.3. Other Remedies. Upon and after the occurrence of an Event of
Default and for so long as such Event of Default shall exist, Agent may in its
discretion (and, upon receipt of written direction of the Required Lenders,
shall) exercise from time to time the following rights and remedies (without
prejudice to the rights of Agent or any Lender to enforce its claim against any
or all Obligors):
11.3.1. All of the rights and remedies of a secured party under the
UCC or under other Applicable Law, and all other legal and equitable rights to
which Agent may be entitled under any of the Loan Documents, all of which rights
and remedies shall be cumulative and shall be in addition to any other rights or
remedies contained in this Agreement or any of the other Loan Documents, and
none of which shall be exclusive.
11.3.2. The right to collect all amounts at any time payable to
Borrower from any Account Debtor or other Person at any time indebted to
Borrower.
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11.3.3. The right to take immediate possession of any of the
Collateral, and to (i) require Borrower to assemble the Collateral, at
Borrower's expense, and make it available to Agent at a place designated by
Agent which is reasonably convenient to both parties, and (ii) enter any
premises where any of the Collateral shall be located and to keep and store the
Collateral on said premises until sold (and if said premises be the Property of
Borrower, then Borrower agrees not to charge Agent for storage thereof).
11.3.4. The right to sell or otherwise dispose of all or any
Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale or sales, with such notice as may
be required by Applicable Law, in lots or in bulk, for cash or on credit, all as
Agent, in its sole discretion, may deem advisable. Borrower agrees that any
requirement of notice to Borrower or any other Obligor of any proposed public or
private sale or other disposition of Collateral by Agent shall be deemed
reasonable notice thereof if given at least 10 days prior thereto, and such sale
may be at such locations as Agent may designate in said notice. Agent shall
have the right to conduct such sales on Borrower's or any other Obligor's
premises, without charge therefor, and such sales may be adjourned from time to
time in accordance with Applicable Law. Agent shall have the right to sell,
lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Agent may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale or other
disposition of any Collateral may be applied, after allowing 2 Business Days for
collection, first to any Extraordinary Expenses incurred by Agent, second to
interest accrued with respect to any of the Obligations; and third, to the
principal balance of the Obligations. If any deficiency shall arise, Obligors
shall remain jointly and severally liable to Agent and Lenders therefor.
11.3.5 The right to the appointment of a receiver, without notice of
any kind whatsoever, to take possession of all or any portion of the Collateral
and to exercise such rights and powers as the court appointing such receiver
shall confer upon such receiver.
11.3.6. The right to require Borrower to deposit with Agent funds
equal to the LC Outstandings and, if Borrower fails promptly to make such
deposit, Lenders may (and shall upon the direction of the Required Lenders)
advance such amount as a Revolver Loan (whether or not an Out-of-Formula
Condition exists or is created thereby). Any such deposit or advance shall be
held by Agent as a reserve to fund future payments on any LC Support. At such
time as the LC Support has been paid or terminated and all Letters of Credit
have been drawn upon or expired, any amounts remaining in such reserve shall be
applied against any outstanding Obligations, or, if all Obligations have been
indefeasibly paid in full, returned to Borrower. Agent is hereby irrevocably
granted a license or other right to use, without charge, any or all of
Borrower's Intellectual Property and all of Borrower's computer hardware and
software trade secrets, brochures, customer lists, promotional and advertising
materials, labels, and packaging materials, and any Property of a similar
nature, in advertising for sale, marketing, selling and collecting and in
completing the manufacturing of any Collateral, and Borrower's rights under all
licenses and all franchise agreements shall inure to Agent's benefit.
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11.4. Setoff. In addition to any Liens granted under any of the Loan
Documents and any rights now or hereafter available under Applicable Law, Agent
and each Lender (and each of their respective Affiliates) is hereby authorized
by Borrower at any time that an Event of Default exists, without notice to
Borrower or any other Person (any such notice being hereby expressly waived) to
set off and to appropriate and to apply any and all deposits, general or special
(including Debt evidenced by certificates of deposit whether matured or
unmatured (but not including trust accounts)) and any other Debt at any time
held or owing by Agent, such Lender or any of their Affiliates to or for the
credit or the account of Borrower against and on account of the Obligations of
Borrower arising under the Loan Documents to Agent, such Lender or any of their
Affiliates, including all Revolver Loans and LC Outstandings and all claims of
any nature or description arising out of or in connection with this Agreement,
irrespective of whether or not (i) Agent or such Lender shall have made any
demand hereunder, (ii) Agent, at the request or with the consent of the Required
Lenders, shall have declared the principal of and interest on the Revolver Loans
and other amounts due hereunder to be due and payable as permitted by this
Agreement and even though such Obligations may be contingent or unmatured or
(iii) the Collateral for the Obligations is adequate. Notwithstanding the
foregoing, each of Agent and Lenders agree with each other that it shall not,
without the express consent of the Required Lenders, and that it shall (to the
extent that it is lawfully entitled to do so) upon the request of the Required
Lenders, exercise its setoff rights hereunder against any accounts of Borrower
now or hereafter maintained with Agent, such Lender or any Affiliate of any of
them, but Borrower shall have no claim or cause of action against Agent or any
Lender for any setoff made without the consent of the Required Lenders and the
validity of any such setoff shall not be impaired by the absence of such
consent. If any party (or its Affiliate) exercises the right of setoff provided
for hereunder, such party shall be obligated to share any such setoff in the
manner and to the extent required by Section 12.5.
11.5. Remedies Cumulative; No Waiver.
11.5.1. All covenants, conditions, provisions, warranties,
guaranties, indemnities, and other undertakings of Borrower contained in this
Agreement and the other Loan Documents, or in any document referred to herein or
contained in any agreement supplementary hereto or in any schedule or in any
Guaranty given to Agent or any Lender or contained in any other agreement
between Agent or any Lender and Borrower, heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The rights and remedies of Agent and Lenders under
this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies that Agent or any Lender would otherwise
have.
11.5.2. The failure or delay of Agent or any Lender to require strict
performance by Borrower of any provision of any of the Loan Documents or to
exercise or enforce any rights, Liens, powers or remedies under any of the Loan
Documents or with respect to any Collateral shall not operate as a waiver of
such performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Revolver Loans and all other Obligations owing or to become owing from
Borrower to Agent and Lenders shall have been fully satisfied. None of the
undertakings, agreements,
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warranties, covenants and representations of Borrower contained in this
Agreement or any of the other Loan Documents and no Event of Default by Borrower
under this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Agent or any Lender, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is signed
by a duly authorized representative of Agent or such Lender and directed to
Borrower.
11.5.3. If Agent or any Lender shall accept performance by Borrower,
in whole or in part, of any obligation that Borrower is required by any of the
Loan Documents to perform only when a Default or Event of Default exists, or if
Agent or any Lender shall exercise any right or remedy under any of the Loan
Documents that may not be exercised other than when a Default or Event of
Default exists, Agent's or Lender's acceptance of such performance by Borrower
or Agent's or Lender's exercise of any such right or remedy shall not operate to
waive any such Event of Default or to preclude the exercise by Agent or any
Lender of any other right or remedy, unless otherwise expressly agreed in
writing by Agent or such Lender, as the case may be.
SECTION 12. AGENT
12.1. Appointment, Authority and Duties of Agent.
12.1.1. Each Lender hereby irrevocably appoints and designates Fleet
as Agent to act as herein specified. Agent may, and each Lender by its
acceptance of a Note shall be deemed irrevocably to have authorized Agent to,
enter into all Loan Documents to which Agent is or is intended to be a party and
all amendments hereto and all Security Documents at any time executed by
Borrower, for its benefit and the Pro Rata benefit of Lenders and, except as
otherwise provided in this Section 12, to exercise such rights and powers under
this Agreement and the other Loan Documents as are specifically delegated to
Agent by the terms hereof and thereof, together with such other rights and
powers as are reasonably incidental thereto. Each Lender agrees that any action
taken by Agent or the Required Lenders in accordance with the provisions of this
Agreement or the other Loan Documents, and the exercise by Agent or the Required
Lenders of any of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all Lenders. Without limiting the generality of the foregoing,
Agent shall have the sole and exclusive right and authority to (a) act as the
disbursing and collecting agent for Lenders with respect to all payments and
collections arising in connection with this Agreement and the other Loan
Documents; (b) execute and deliver as Agent each Loan Document and accept
delivery of each such agreement delivered by Borrower or any other Obligor; (c)
act as collateral agent for Lenders for purposes of the perfection of all
security interests and Liens created by this Agreement or the Security Documents
with respect to all material items of the Collateral and, subject to the
direction of the Required Lenders, for all other purposes stated therein,
provided that Agent hereby appoints, authorizes and directs each Lender to act
as a collateral sub-agent for Agent and the other Lenders for purposes of the
perfection of all security interests and Liens with respect to Borrower's
Deposit Accounts maintained with, and all cash and Cash Equivalents held by,
such Lender; (d) subject to the direction of the Required Lenders, manage,
supervise or otherwise deal with the Collateral; and (e) except as may be
otherwise specifically
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restricted by the terms of this Agreement and subject to the direction of the
Required Lenders, exercise all remedies given to Agent with respect to any of
the Collateral under the Loan Documents relating thereto, Applicable Law or
otherwise. The duties of Agent shall be ministerial and administrative in
nature, and Agent shall not have by reason of this Agreement or any other Loan
Document a fiduciary relationship with any Lender (or any Lender's
participants). Unless and until its authority to do so is revoked in writing by
Required Lenders, Agent alone shall be authorized to determine whether any
Accounts or Inventory constitute Eligible Accounts or Eligible Inventory (basing
such determination in each case upon the meanings given to such terms in
Appendix A), or whether to impose or release any reserve, and to exercise its
own credit judgment in connection therewith, which determinations and judgments,
if exercised in good faith, shall exonerate Agent from any liability to Lenders
or any other Person for any errors in judgment.
12.1.2. Agent (which term, as used in this sentence, shall include
reference to Agent's officers, directors, employees, attorneys, agents and
Affiliates and to the officers, directors, employees, attorneys and agents of
Agent's Affiliates) shall not: (a) have any duties or responsibilities except
those expressly set forth in this Agreement and the other Loan Documents or (b)
be required to take, initiate or conduct any litigation, foreclosure or
collection proceedings hereunder or under any of the other Loan Documents except
to the extent directed to do so by the Required Lenders during the continuance
of any Event of Default. The conferral upon Agent any right hereunder shall not
imply a duty on Agent's part to exercise any such right unless instructed to do
so by the Required Lenders in accordance with this Agreement.
12.1.3. Agent may perform any of its duties by or through its agents
and employees and may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it with reasonable care. Borrower shall promptly (and in any
event, on demand) reimburse Agent for all reasonable expenses (including all
Extraordinary Expenses) incurred by Agent pursuant to any of the provisions
hereof or of any of the other Loan Documents or in the execution of any of
Agent's duties hereby or thereby created or in the exercise of any right or
power herein or therein imposed or conferred upon it or Lenders (excluding,
however, general overhead expenses), and each Lender agrees promptly to pay to
Agent, on demand, such Lender's Pro Rata share of any such reimbursement for
expenses (including Extraordinary Expenses) that is not timely made by Borrower
to Agent.
12.1.4. The rights, remedies, powers and privileges conferred upon
Agent hereunder and under the other Loan Documents may be exercised by Agent
without the necessity of the joinder of any other parties unless otherwise
required by Applicable Law. If Agent shall request instructions from the
Required Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or any of the other Loan Documents, Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from the Required Lenders; and
Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any of the Loan Documents pursuant to or in accordance with
the instructions of the Required Lenders except for Agent's own gross negligence
or willful misconduct in connection with any action taken by it.
Notwithstanding anything to the contrary contained in
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this Agreement, Agent shall not be required to take any action that is in its
opinion contrary to Applicable Law or the terms of any of the Loan Documents or
that would in its reasonable opinion subject it or any of its officers,
employees or directors to personal liability; provided, however, that if Agent
shall fail or refuse to take action that is not contrary to Applicable Law or to
any of the terms of any of the Loan Documents even if such action in Agent's
opinion would subject it to potential liability, the Required Lenders may remove
Agent and appoint a successor Agent in the same manner and with the same effects
as is provided in this Agreement with respect to Agent's resignation.
12.1.5. Agent shall promptly, upon receipt thereof, forward to each
Lender (i) copies of any significant written notices, reports, certificates and
other information received by Agent from any Obligor (but only if and to the
extent such Obligor is not required by the terms of the Loan Documents to supply
such information directly to Lenders) and (ii) copies of the results of any
field audits by Agent with respect to Borrower. Agent shall have no liability
to any Lender for any errors in or omissions from any field audit or other
examination of Borrower or the Collateral, unless such error or omission was the
direct result of Agent's willful misconduct.
12.2. Agreements Regarding Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien upon
any Collateral (i) upon the termination of the Revolver Commitments and payment
or satisfaction of all of the Obligations, (ii) constituting Equipment sold or
disposed of in accordance with the terms of this Agreement if Borrower certifies
to Agent that the disposition is made in compliance with the terms of this
Agreement (and Agent may rely conclusively on any such certificate, without
further inquiry), or (iii) if approved or ratified by the Required Lenders.
Agent shall have no obligation whatsoever to any of the Lenders to assure that
any of the Collateral exists or is owned by Borrower or is cared for, protected
or insured or has been encumbered, or that Agent's Liens have been properly or
sufficiently or lawfully created, perfected, protected or enforced or entitled
to any particular priority or to exercise any duty of care with respect to any
of the Collateral.
12.3. Reliance By Agent. Agent shall be entitled to rely, and shall be
fully protected in so relying, upon any certification, notice or other
communication (including any thereof by telephone, telex, telegram, telecopier
message or cable) believed by it to be genuine and correct and to have been
signed, sent or made by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by Agent. As to any matters not expressly provided for by this
Agreement or any of the other Loan Documents, Agent shall in all cases be fully
protected in acting or refraining from acting hereunder and thereunder in
accordance with the instructions of the Required Lenders, and such instructions
of the Required Lenders and any action taken or failure to act pursuant thereto
shall be binding upon Lenders.
12.4. Action Upon Default. Agent shall not be deemed to have knowledge
of the occurrence of a Default or an Event of Default unless it has received
written notice from a Lender or Borrower specifying the occurrence and nature of
such Default or Event of Default. If Agent shall receive such a notice of a
Default or an Event of Default or shall otherwise acquire actual knowledge of
any Default or Event of Default, Agent shall promptly notify Lenders in
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writing and Agent shall take such action and assert such rights under this
Agreement and the other Loan Documents, or shall refrain from taking such action
and asserting such rights, as the Required Lenders shall direct from time to
time. If any Lender shall receive a notice of a Default or an Event of Default
or shall otherwise acquire actual knowledge of any Default or Event of Default,
such Lender shall promptly notify Agent and the other Lenders in writing. As
provided in Section 12.3 hereof, Agent shall not be subject to any liability by
reason of acting or refraining to act pursuant to any request of the Required
Lenders except for its own willful misconduct or gross negligence in connection
with any action taken by it. Before directing Agent to take or refrain from
taking any action or asserting any rights or remedies under this Agreement and
the other Loan Documents on account of any Event of Default, the Required
Lenders shall consult with and seek the advice of (but without having to obtain
the consent of) each other Lender, and promptly after directing Agent to take or
refrain from taking any such action or asserting any such rights, the Required
Lenders will so advise each other Lender of the action taken or refrained from
being taken and, upon request of any Lender, will supply information concerning
actions taken or not taken. In no event shall the Required Lenders, without the
prior written consent of each Lender, direct Agent to accelerate and demand
payment of the Revolver Loans held by one Lender without accelerating and
demanding payment of all other Revolver Loans or to terminate the Revolver
Commitments of one or more Lenders without terminating the Revolver Commitments
of all Lenders. Each Lender agrees that, except as otherwise provided in any of
the Loan Documents and without the prior written consent of the Required
Lenders, it will not take any legal action or institute any action or proceeding
against any Obligor with respect to any of the Obligations or Collateral or
accelerate or otherwise enforce its portion of the Obligations. Without limiting
the generality of the foregoing, none of Lenders may exercise any right that it
might otherwise have under Applicable Law to credit bid at foreclosure sales,
UCC sales or other similar sales or dispositions of any of the Collateral except
as authorized by the Required Lenders. Notwithstanding anything to the contrary
set forth in this Section 12.4 or elsewhere in this Agreement, each Lender shall
be authorized to take such action to preserve or enforce its rights against any
Obligor where a deadline or limitation period is otherwise applicable and would,
absent the taken of specified action, bar the enforcement of Obligations held by
such Lender against such Obligor, including the filing of proofs of claim in any
Insolvency Proceeding.
12.5. Ratable Sharing. If any Lender shall obtain any payment or
reduction (including any amounts received as adequate protection of a bank
account deposit treated as cash collateral under the Bankruptcy Code) of any
Obligation of Borrower hereunder (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) in excess of its Pro Rata share
of payments or reductions on account of such Obligations obtained by all of the
Lenders, such Lender shall forthwith (i) notify the other Lenders and Agent of
such receipt and (ii) purchase from the other Lenders such participations in the
affected Obligations as shall be necessary to cause such purchasing Lender to
share the excess payment or reduction, net of costs incurred in connection
therewith, on a Pro Rata basis, provided that if all or any portion of such
excess payment or reduction is thereafter recovered from such purchasing Lender
or additional costs are incurred, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery or such additional costs,
but without interest. Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 12.5 may, to the
fullest extent permitted by Applicable Law, exercise all of its rights of
payment (including the right of
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set-off) with respect to such participation as fully as if such Lender were the
direct creditor of Borrower in the amount of such participation.
12.6. Indemnification of Agent Indemnitees.
12.6.1. Each Lender agrees to indemnify and defend the Agent
Indemnitees (to the extent not reimbursed by Borrower under this Agreement, but
without limiting the indemnification obligation of Borrower under this
Agreement), on a Pro Rata basis, and to hold each of the Agent Indemnitees
harmless from and against, any and all Claims which may be imposed on, incurred
by or asserted against any of the Agent Indemnitees in any way related to or
arising out of this Agreement or any of the other Loan Documents or any other
document contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses which Borrower
is obligated to pay under Section 14.2 hereof or amounts Agent may be called
upon to pay in connection with any lockbox or Dominion Account arrangement
contemplated hereby, including any amounts arising from any automated
clearinghouse transfers) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
to any Agent Indemnitee for any of the foregoing to the extent that they result
solely from the willful misconduct or gross negligence of such Agent Indemnitee.
12.6.2. Without limiting the generality of the foregoing provisions
of this Section 12.6, if Agent should be sued by any receiver, trustee in
bankruptcy, debtor-in-possession or other Person on account of any alleged
preference or fraudulent transfer received or alleged to have been received from
Borrower or any other Obligor as the result of any transaction under the Loan
Documents, then in such event any monies paid by Agent in settlement or
satisfaction of such suit, together with all Extraordinary Expenses incurred by
Agent in the defense of same, shall be promptly reimbursed to Agent by Lenders
to the extent of each Lender's Pro Rata share.
12.6.3. Without limiting the generality of the foregoing provisions
of this Section 12.6, if at any time (whether prior to or after the Commitment
Termination Date) any action or proceeding shall be brought against any of the
Agent Indemnitees by an Obligor or by any other Person claiming by, through or
under an Obligor, to recover damages for any act taken or omitted by Agent under
any of the Loan Documents or in the performance of any rights, powers or
remedies of Agent against any Obligor, any Account Debtor, the Collateral or
with respect to any Revolver Loans, or to obtain any other relief of any kind on
account of any transaction involving any Agent Indemnitees under or in relation
to any of the Loan Documents, each Lender agrees to indemnify, defend and hold
the Agent Indemnitees harmless with respect thereto and to pay to the Agent
Indemnitees such Lender's Pro Rata share of such amount as any of the Agent
Indemnitees shall be required to pay by reason of a judgment, decree, or other
order entered in such action or proceeding or by reason of any compromise or
settlement agreed to by the Agent Indemnitees, including all interest and costs
assessed against any of the Agent Indemnitees in defending or compromising such
action, together with attorneys' fees and other legal expenses paid or incurred
by the Agent Indemnitees in connection therewith; provided, however, that no
Lender shall be liable to any Agent Indemnitee for any of the foregoing to the
extent that they arise solely from the willful misconduct or gross negligence of
such Agent
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Indemnitee. In Agent's discretion, Agent may also reserve for or
satisfy any such judgment, decree or order from proceeds of Collateral prior to
any distributions therefrom to or for the account of Lenders.
12.7. Limitation on Responsibilities of Agent. Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall have
received further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.6 hereof against any and all Claims
which may be incurred by Agent by reason of taking or continuing to take any
such action. Neither Agent nor Arranger shall be liable to Lenders (or any
Lender's participants) for any action taken or omitted to be taken under or in
connection with this Agreement or the other Loan Documents except as a result of
actual gross negligence or willful misconduct on the part of Agent. Agent does
not assume any responsibility for any failure or delay in performance or breach
by any Obligor or any Lender of its obligations under this Agreement or any of
the other Loan Documents. Agent does not make to Lenders, and no Lender makes
to Agent or the other Lenders, any express or implied warranty, representation
or guarantee with respect to the Revolver Loans, the Collateral, the Loan
Documents or any Obligor. Neither Agent nor any of its officers, directors,
employees, attorneys or agents shall be responsible to Lenders, and no Lender
nor any of its agents, attorneys or employees shall be responsible to Agent or
the other Lenders, for: (i) any recitals, statements, information,
representations or warranties contained in any of the Loan Documents or in any
certificate or other document furnished pursuant to the terms hereof; (ii) the
execution, validity, genuineness, effectiveness or enforceability of any of the
Loan Documents; (iii) the validity, genuineness, enforceability, collectibility,
value, sufficiency or existence of any Collateral, or the perfection or priority
of any Lien therein; or (iv) the assets, liabilities, financial condition,
results of operations, business, creditworthiness or legal status of any Obligor
or any Account Debtor. Neither Agent nor any of its officers, directors,
employees, attorneys or agents shall have any obligation to any Lender to
ascertain or inquire into the existence of any Default or Event of Default, the
observance or performance by any Obligor of any of the duties or agreements of
such Obligor under any of the Loan Documents or the satisfaction of any
conditions precedent contained in any of the Loan Documents. Agent may consult
with and employ legal counsel, accountants and other experts and shall be
entitled to act upon, and shall be fully protected in any action taken in good
faith reliance upon, any advice given by such experts.
12.8. Successor Agent and Co-Agents.
12.8.1. Subject to the appointment and acceptance of a successor
Agent as provided below, Agent may resign at any time by giving at least 30 days
written notice thereof to each Lender and Borrower. Upon receipt of any notice
of such resignation, the Required Lenders, after prior consultation with (but
without having to obtain consent of) each Lender, shall have the right to
appoint a successor Agent which shall be (i) a Lender, (ii) a United States
based affiliate of a Lender, or (iii) a commercial bank that is organized under
the laws of the United States or of any State thereof and has a combined capital
surplus of at least $100,000,000 and, provided no Default or Event of Default
then exists, is reasonably acceptable to Borrower (and for purposes hereof, any
successor to Fleet shall be deemed acceptable to Borrower). Upon the acceptance
by a successor Agent of an appointment to serve as an Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers,
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privileges and duties of the retiring Agent without further act, deed or
conveyance, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 12 (including the provisions of Section
12.6 hereof) shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent. Notwithstanding
anything to the contrary contained in this Agreement, any successor by merger or
acquisition of the stock or assets of Fleet shall continue to be Agent hereunder
unless such successor shall resign in accordance with the provisions hereof.
12.8.2. It is the purpose of this Agreement that there shall be no
violation of any Applicable Law denying or restricting the right of financial
institutions to transact business as agent or otherwise in any jurisdiction. It
is recognized that, in case of litigation under any of the Loan Documents, or in
case Agent deems that by reason of present or future laws of any jurisdiction
Agent might be prohibited from exercising any of the powers, rights or remedies
granted to Agent or Lenders hereunder or under any of the Loan Documents or from
holding title to or a Lien upon any Collateral or from taking any other action
which may be necessary hereunder or under any of the Loan Documents, Agent may
appoint an additional Person as a separate collateral agent or co-collateral
agent which is not so prohibited from taking any of such actions or exercising
any of such powers, rights or remedies. If Agent shall appoint an additional
Person as a separate collateral agent or co-collateral agent as provided above,
each and every remedy, power, right, claim, demand or cause of action intended
by any of the Loan Documents to be exercised by or vested in or conveyed to
Agent with respect thereto shall be exercisable by and vested in such separate
collateral agent or co-collateral agent, but only to the extent necessary to
enable such separate collateral agent or co-collateral agent to exercise such
powers, rights and remedies, and every covenant and obligation necessary to the
exercise thereof by such separate collateral agent or co-collateral agent shall
run to and be enforceable by either of them. Should any instrument from Lenders
be required by the separate collateral agent or co-collateral agent so appointed
by Agent in order more fully and certainly to vest in and confirm to him or it
such rights, powers, duties and obligations, any and all of such instruments
shall, on request, be executed, acknowledged and delivered by Lenders whether or
not a Default or Event of Default then exists. In case any separate collateral
agent or co-collateral agent, or a successor to either, shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, duties and obligations of such separate collateral agent or co-
collateral agent, so far as permitted by Applicable Law, shall vest in and be
exercised by the Agent until the appointment of a new collateral agent or
successor to such separate collateral agent or co-collateral agent.
12.9. Consents, Amendments and Waivers; Out-of-Formula Loans.
12.9.1. To be effective against Agent and Lenders, any amendment or
modification of this Agreement and any waiver of any Default or Event of Default
must be in writing and must be signed by the Required Lenders; provided,
however, that (i) without the prior written consent of Agent, no amendment or
waiver shall be effective with respect to any provision in any of the Loan
Documents that affects Agent or relates to the rights, duties or immunities of
Agent (including Section 12 hereof); (ii) without the prior written consent of
Fleet, no amendment to the provisions of Sections 1.2 or 3.1.3 shall be
effective; (iii) without the prior consent of all Lenders, no waiver of any
Default or Event of Default shall be effective if the
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Default or Event of Default relates to Borrower's failure to observe or perform
any covenant that may not be amended without the unanimous written consent of
Lenders (and, where so provided hereinafter, the written consent of Agent) as
hereinafter set forth in this Section 12.9.1; written agreement of all Lenders
(except a defaulting Lender as provided in Section 3.2 of this Agreement) shall
be required to effectuate any amendment, modification or waiver that would (a)
alter the provisions of Sections 2.2, 2.4, 2.6, 2.7, 2.8, 2.9, 4.5, 4.9, 5.1,
12, 13, 14.2, or 14.3 or 14.14, the definitions of "Availability Reserve,"
"Borrowing Base" and the other defined terms used in such definitions, "Pro
Rata," "Required Lenders" or any provision of this Agreement obligating Agent to
take certain actions at the direction of the Required Lenders, or any provision
of any of the Loan Documents regarding the Pro Rata treatment or obligations of
Lenders; (b) increase or otherwise modify any of the Revolver Commitments (other
than to reduce proportionately each Lender's Revolver Commitment in connection
with any overall reduction in the amount of the Revolver Commitments); (c) alter
or amend (other than to increase) the rate of interest payable in respect of the
Revolver Loans (except as may be expressly authorized by the Loan Documents or
as may be necessary, in Agent's judgement, to comply with Applicable Law); (d)
waive or agree to defer collection of any fee or other expense reimbursement
provided for under any of the Loan Documents (except to the extent that the
Required Lenders agree after and during the continuance of any Event of Default
to a waiver or deferral of any termination charge provided for in Section 5.2.3
hereof) or the unused line fee in Section 2.2.3 hereof; (e) subordinate the
payment of any of the Obligations to any other Debt or the priority of any Liens
granted to Agent under any of the Loan Documents to Liens granted to any other
Person, except as currently provided in or contemplated by the Loan Documents in
connection with Borrower's incurrence of Permitted Purchase Money Debt, and
except for Liens granted by an Obligor to financial institutions with respect to
amounts on deposit with such financial institutions to cover returned items,
processing and analysis charges and other charges in the Ordinary Course of
Business that relate to deposit accounts with such financial institutions; (f)
alter the time or amount of repayment of any of the Revolver Loans or waive any
Event of Default resulting from nonpayment of the Revolver Loans on the due date
thereof (or within any applicable period of grace); (g) forgive any of the
Obligations, except any portion of the Obligations held by a Lender who consents
in writing to such forgiveness; or (h) release any Obligor from liability for
any of the Obligations. No Lender shall be authorized to amend or modify any
Note held by it, unless such amendment or modification is consented to in
writing by all Lenders; providedn, however, that the foregoing shall not be
construed to prohibit an amendment or modification to any provision of this
Agreement that may be effected pursuant to this Section 12.9.1 by agreement of
Borrower and the Required Lenders even though such an amendment or modification
results in an amendment or modification of the Notes by virtue of the
incorporation by reference in each of the Notes of this Agreement. The making of
any Revolver Loans hereunder by any Lender during the existence of a Default or
Event of Default shall not be deemed to constitute a waiver of such Default or
Event of Default. Any waiver or consent granted by Lenders hereunder shall be
effective only if in writing and then only in the specific instance and for the
specific purpose for which it was given.
12.9.2. In connection with any proposed amendment to any of the Loan
Documents or waiver of any of the terms thereof or any Default or Event of
Default thereunder, Borrower shall not solicit, request or negotiate for or with
respect to any such proposed amendment or waiver of any of the provisions of
this Agreement or any of the other Loan
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Documents unless each Lender shall be informed thereof by Borrower or Agent (to
the extent known by Agent) and shall be afforded an opportunity of considering
the same and supplied by Borrower with sufficient information to enable it to
make an informed decision with respect thereto. Borrower will not, directly or
indirectly, pay or cause to be paid any remuneration or other thing of value,
whether by way of supplemental or additional interest, fee or otherwise, to any
Lender (in its capacity as a Lender hereunder) as consideration for or as an
inducement to the consent to or agreement by such Lender with any waiver or
amendment of any of the terms and provisions of this Agreement or any of the
other Loan Documents unless such remuneration or thing of value is concurrently
paid, on the same terms, on a Pro Rata basis to all Lenders.
12.9.3. On any date that Lenders are not otherwise required to
provide Out-of-Formula Loans pursuant to Section 1.1.2 at Borrower's request,
Agent may (unless otherwise instructed in writing by the Required Lenders) call
upon Lenders to fund, and Lenders shall fund, their Pro Rata share of Out-of-
Formula Loans as hereinafter set forth, provided that, both prior to and after
the funding thereof, the aggregate amount of all of the Revolver Loans and LC
Outstandings does not exceed the Revolver Commitments. If no Event of Default
exists (or if an Event of Default exists, the existence thereof is not known by
Agent) at the time that Agent calls upon Lenders to make Out-of-Formula Loans
pursuant to this Section 12.9.3, then Lenders shall be required to fund Out-of-
Formula Loans only for periods that do not exceed 15 consecutive days, following
each of which periods the Out-of-Formula Condition may not exceed, for a period
of at least 15 consecutive days, the amount of the Out-of-Formula Condition at
the commencement of the preceding 15-consecutive day period during which Out-of-
Formula Loans were funded; and during each 15-day consecutive period during
which Out-of-Formula Loans are required to be funded, the Out-of-Formula
Condition is not increased by more than $3,000,000 above the amount in existence
at the commencement of such 15-day period. The amount of such Out-of-Formula
Condition shall be determined by Agent. If an Event of Default exists, Lenders
shall not be obligated to fund Out-of-Formula Loans for a period exceeding 5
Business Days and then only to the extend that the Out-of-Formula Condition is
not increased by more than $3,000,000 above the amount determined by Agent to
exist on the date that Agent calls upon Lenders pursuant to this Section 12.9.3
to fund Out-of-Formula Loans. In no event shall Borrower or any other Obligor
be deemed to be a beneficiary of this Section 12.9.3 or authorized to enforce
any of the provisions of this Section 12.9.3.
12.10. Due Diligence and Non-Reliance. Each Lender hereby acknowledges
and represents that it has, independently and without reliance upon Agent or the
other Lenders, and based upon such documents, information and analyses as it has
deemed appropriate, made its own credit analysis of each Obligor and its own
decision to enter into this Agreement and to fund the Revolver Loans to be made
by it hereunder and to purchase participations in the LC Outstandings pursuant
to Section 1.2.2 hereof, and each Lender has made such inquiries concerning the
Loan Documents, the Collateral and each Obligor as such Lender feels necessary
and appropriate, and has taken such care on its own behalf as would have been
the case had it entered into the other Loan Documents without the intervention
or participation of the other Lenders or Agent. Each Lender hereby further
acknowledges and represents that the other Lenders and Agent have not made any
representations or warranties to it concerning any Obligor, any of the
Collateral or the legality, validity, sufficiency or enforceability of any of
the Loan Documents. Each Lender also hereby acknowledges that it will,
independently and without
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reliance upon the other Lenders or Agent, and based upon such financial
statements, documents and information as it deems appropriate at the time,
continue to make and rely upon its own credit decisions in making Revolver Loans
and in taking or refraining to take any other action under this Agreement or any
of the other Loan Documents. Except for notices, reports and other information
expressly required to be furnished to Lenders by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Lender with any notices,
reports or certificates furnished to Agent by any Obligor or any credit or other
information concerning the affairs, financial condition, business or Properties
of any Obligor (or any of its Affiliates) which may come into possession of
Agent or any of Agent's Affiliates.
12.11. Representations and Warranties of Lenders. By its execution of
this Agreement, each Lender hereby represents and warrants to Borrower and the
other Lenders that it has the power to enter into and perform its obligations
under this Agreement and the other Loan Documents, and that it has taken all
necessary and appropriate action to authorize its execution and performance of
this Agreement and the other Loan Documents to which it is a party, each of
which will be binding upon it and the obligations imposed upon it herein or
therein will be enforceable against it in accordance with the respective terms
of such documents.
12.12. The Required Lenders. As to any provisions of this Agreement or
the other Loan Documents under which action may or is required to be taken upon
direction or approval of the Required Lenders, the direction or approval of the
Required Lenders shall be binding upon each Lender to the same extent and with
the same effect as if each Lender had joined therein. Notwithstanding anything
to the contrary contained in this Agreement, Borrower shall not be deemed to be
a beneficiary of, or be entitled to enforce, sue upon or assert as a defense to
any of the Obligations, any provisions of this Agreement that requires Agent or
any Lender to act, or conditions their authority to act, upon the direction or
consent of the Required Lenders; and any action taken by Agent or any Lender
that requires the consent or direction of the Required Lenders as a condition to
taking such action shall, insofar as Borrower is concerned, be presumed to have
been taken with the requisite consent or direction of the Required Lenders.
12.13. Several Obligations. The obligations and commitments of each
Lender under this Agreement and the other Loan Documents are several and neither
Agent nor any Lender shall be responsible for the performance by the other
Lenders of its obligations or commitments hereunder or thereunder.
Notwithstanding any liability of Lenders stated to be joint and several to third
Persons under any of the Loan Documents, such liability shall be shared, as
among Lenders, Pro Rata according to the respective Revolver Commitments of
Lenders.
12.14. Agent in its Individual Capacity. With respect to its obligation
to lend under this Agreement, the Revolver Loans made by it and each Note issued
to it, Agent shall have the same rights and powers hereunder and under the other
Loan Documents as any other Lender or holder of a Note and may exercise the same
as though it were not performing the duties specified herein; and the terms
"Lenders," "Required Lenders," or any similar term shall, unless the context
clearly otherwise indicates, include Agent in its capacity as a Lender. Agent
and its Affiliates may each accept deposits from, maintain deposits or credit
balances for, invest in, lend money to, act as trustee under indentures of,
serve as financial advisor to, and generally engage in any kind of business with
Borrower or any other Obligor, or any affiliate of Borrower or any
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other Obligor, as if it were any other bank and without any duty to account
therefor (or for any fees or other consideration received in connection
therewith) to the other Lenders.
12.15. No Third Party Beneficiaries. This Section 12 is not intended
to confer any rights or benefits upon Borrower or any other Person except
Lenders and Agent, and no Person (including Borrower) other than Lenders and
Agent shall have any right to enforce any of the provisions of this Section 12
except as expressly provided in Section 12.17 hereof. As between Borrower and
Agent, any action that Agent may take or purport to take on behalf of Lenders
under any of the Loan Documents shall be conclusively presumed to have been
authorized and approved by Lenders as herein provided.
12.16. Notice of Transfer. Agent may deem and treat a Lender party to
this Agreement as the owner of such Lender's portion of the Revolver Loans for
all purposes, unless and until a written notice of the assignment or transfer
thereof executed by such Lender has been received by Agent.
12.17. Replacement of Certain Lenders. If a Lender ("Affected Lender")
shall have (i) failed to fund its Pro Rata share of any Revolver Loan requested
(or deemed requested) by Borrower which such Lender is obligated to fund under
the terms of this Agreement and which such failure has not been cured, (ii)
requested compensation from Borrower under Section 2.7 to recover increased
costs incurred by such Lender (or its parent or holding company) which are not
being incurred generally by the other Lenders (or their respective parents or
holding companies), or (iii) delivered a notice pursuant to Section 2.6 hereof
claiming that such Lender is unable to extend LIBOR Loans to Borrower for
reasons not generally applicable to the other Lenders, then, in any such case
and in addition to any other rights and remedies that Agent, any other Lender or
Borrower may have against such Affected Lender, Borrower or Agent may make
written demand on such Affected Lender (with a copy to Agent in the case of a
demand by Borrower and a copy to Borrower in the case of a demand by Agent) for
the Affected Lender to assign, and such Affected Lender shall assign pursuant to
one or more duly executed Assignment and Acceptances within 5 Business Days
after the date of such demand, to one or more Lenders willing to accept such
assignment or assignments, or to one or more Eligible Assignees designated by
Agent, all of such Affected Lender's rights and obligations under this Agreement
(including its Revolver Commitments and all Revolver Loans owing to it) in
accordance with Section 13 hereof. Agent is hereby irrevocably authorized to
execute one or more Assignment and Acceptances as attorney-in-fact for any
Affected Lender which fails or refuses to execute and deliver the same within 5
Business Days after the date of such demand. The Affected Lender shall be
entitled to receive, in cash and concurrently with execution and delivery of
each such Assignment and Acceptance, all amounts owed to the Affected Lender
hereunder or under any other Loan Document, including the aggregate outstanding
principal amount of the Revolver Loans owed to such Lender, together with
accrued interest thereon through the date of such assignment. Upon the
replacement of any Affected Lender pursuant to this Section 12.17, such Affected
Lender shall cease to have any participation in, entitlement to, or other right
to share in the Liens of Agent in any Collateral and such Affected Lender shall
have no further liability to Agent, any Lender or any other Person under any of
the Loan Documents (except as provided in Section 12.6 hereof as to events or
transactions which occur prior to the replacement of such
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Affected Lender), including any commitment to make Revolver Loans or purchase
participations in LC Outstandings.
12.18. Remittance of Payments and Collections.
12.18.1. All payments by any Lender to Agent shall be made not later
than the time set forth elsewhere in this Agreement on the Business Day such
payment is due; provided, however, that if such payment is due on demand by
Agent and such demand is made on the paying Lender after 11:00 a.m. on such
Business Day, then payment shall be made by 11:00 p.m. on the next Business Day.
Payment by Agent to any Lender shall be made by wire transfer, promptly
following Agent's receipt of funds for the account of such Lender and in the
type of funds received by Agent; provided, however, that if Agent receives such
funds at or prior to 1:00 p.m., Agent shall pay such funds to such Lender by
2:00 p.m. on such Business Day, but if Agent receives such funds after 1:00
p.m., Agent shall pay such funds to such Lender by 2:00 p.m. on the next
Business Day.
12.18.2. With respect to the payment of any funds from Agent to a
Lender or from a Lender to Agent, the party failing to make full payment when
due pursuant to the terms hereof shall, on demand by the other party, pay such
amount together with interest thereon at the Federal Funds Rate. In no event
shall Borrower be entitled to receive any credit for any interest paid by Agent
to any Lender, or by any Lender to Agent, at the Federal Funds Rate as provided
herein.
12.18.3. If Agent pays any amount to a Lender in the belief or
expectation that a related payment has been or will be received by Agent from an
Obligor and such related payment is not received by Agent, then Agent shall be
entitled to recover such amount from each Lender that receives such amount. If
Agent determines at any time that any amount received by it under this Agreement
or any of the other Loan Documents must be returned to an Obligor or paid to any
other Person pursuant to any Applicable Law, court order or otherwise, then,
notwithstanding any other term or condition of this Agreement or any of the
other Loan Documents, Agent shall not be required to distribute such amount to
any Lender.
SECTION 13. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
13.1. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrower, Agent and Lenders and their respective
successors and assigns (which, in the case of Agent, shall include any successor
Agent appointed pursuant to Section 12.8 hereof), except that (i) Borrower shall
not have the right to assign its rights or delegate performance of any of its
obligations under any of the Loan Documents and (ii) any assignment by any
Lender must be made in compliance with Section 13.3 hereof. Agent may treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
such payee complies with Section 13.3 in the case of an assignment thereof or,
in the case of any other transfer, a written notice of the transfer is filed
with Agent. Any assignee or transferee of a Note agrees by acceptance thereof
to be bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or
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consent is the holder of a Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
13.2. Participations.
13.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with Applicable Law, at any
time sell to one or more banks or other Persons (each a "Participant") a
participating interest in any of the Obligations owing to such Lender, any
Revolver Commitment of such Lender or any other interest of such Lender under
any of the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any Note for all purposes under the Loan
Documents, all amounts payable by Borrower under this Agreement and any of the
Notes shall be determined as if such Lender had not sold such participating
interests, and Borrower and Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
the Loan Documents. If a Lender sells a participation to a Person other than an
Affiliate of such Lender, then such Lender shall give prompt written notice
thereof to Borrower and the other Lenders.
13.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than an amendment,
modification or waiver with respect to any Revolver Loans or Revolver Commitment
in which such Participant has an interest which forgives principal, interest or
fees or reduces the stated interest rate or the stated rates at which fees are
payable with respect to any such Revolver Loan or Revolver Commitment, postpones
the Commitment Termination Date, or any date fixed for any regularly scheduled
payment of interest or fees on such Revolver Loan or Revolver Commitment, or
releases from liability Borrower or any Guarantor or releases any substantial
portion of any of the Collateral.
13.2.3. Benefit of Set-Off. Borrower agrees that each Participant
shall be deemed to have the right of set-off provided in Section 11.4 hereof in
respect of its participating interest in amounts owing under the Loan Documents
to the same extent and subject to the same requirements under this Agreement
(including Section 12.5) as if the amount of its participating interest were
owing directly to it as a Lender under the Loan Documents, provided that each
Lender shall retain the right of set-off provided in Section 11.4 hereof with
respect to the amount of participating interests sold to each Participant.
Lenders agree to share with each Participant, and each Participant by exercising
the right of set-off provided in Section 11.4 agrees to share with each Lender,
any amount received pursuant to the exercise of its right of set-off, such
amounts to be shared in accordance with Section 12.5 hereof as if each
Participant were a Lender.
13.2.4. Notices. Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent that any such notice may be required, and neither Agent nor any other
Lender shall have any obligation, duty or liability to any Participant of any
other Lender. Without limiting the generality of the foregoing, neither
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Agent nor any Lender shall have any obligation to give notices or to provide
documents or information to a Participant of another Lender.
13.3. Assignments.
13.3.1. Permitted Assignments. Subject to its giving at least 2
Business Days notice to Agent and Borrower, any Lender may, in accordance with
Applicable Law, at any time assign to any Eligible Assignee all or any part of
its rights and obligations under the Loan Documents, so long as (i) each
assignment is of a constant, and not a varying, ratable percentage of all of the
transferor Lender's rights and obligations under the Loan Documents with respect
to the Revolver Loans and the LC Outstandings and, in the case of a partial
assignment, is in a minimum principal amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount; (ii) except in the case of an
assignment in whole of a Lender's rights and obligations under the Loan
Documents or an assignment by one original signatory to this Agreement to
another such signatory, immediately after giving effect to any assignment, the
aggregate amount of the Revolver Commitments retained by the transferor Lender
shall in no event be less than $10,000,000; and (iii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording,
an Assignment and Acceptance. Nothing contained herein shall limit in any way
the right of Lenders to assign (i) to any Eligible Assignee all of their rights
and obligations under the Loan Documents or (ii) all or any portion of the
Revolver Loans owing to it to any Federal Reserve Bank or the United States
Treasury as collateral security pursuant to Regulation A of the Board of
Governors and any Operating Circular issued by such Federal Reserve Bank,
provided that in the case of this clause (ii) any payment in respect of such
assigned Revolver Loans made by Borrower to the assigning Lender in accordance
with the terms of this Agreement shall satisfy Borrower's obligations hereunder
in respect of such assigned Revolver Loans to the extent of such payment, but no
such assignment shall release the assigning Lender from its obligations
hereunder.
13.3.2. Effect; Effective Date. Upon (i) delivery to Agent of a
notice of assignment substantially in the form attached as Exhibit G hereto,
together with any consents required by Section 13.3.1, and (ii) payment of a
$5,000 fee to the Agent for processing any assignment to an Eligible Assignee
that is not an Affiliate of the transferor Lender, such assignment shall become
effective on the effective date specified in such notice of assignment. On and
after the effective date of such assignment, such Eligible Assignee shall for
all purposes be a Lender party to the Agreement and any other Loan Document
executed by the Lenders and shall have all the rights and obligations of the
Lender under the Loan Documents to the same extent as if it were an original
party thereto, and no further consent or action by Borrower, Lenders or Agent
shall be required to release the transferor Lender with respect to the Revolver
Commitment (or portion thereof) of such Lender and Obligations assigned to such
Eligible Assignee. Upon the consummation of any assignment to an Eligible
Assignee pursuant to this Section 13.3, the transferor Lender, Agent and
Borrower shall make appropriate arrangements so that replacement Notes are
issued to such transferor Lender and new Notes or, as appropriate, replacement
Notes, are issued to such Eligible Assignee, in each case in principal amounts
reflecting their respective Revolver Commitments, as adjusted pursuant to such
assignment. If the transferor Lender shall have assigned all of its interests,
rights and obligations under this Agreement pursuant to Section 13.3.1 hereof,
such transferor Lender shall no longer have any
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obligation to indemnify Agent with respect to any transactions, events or
occurrences that transpire after the effective date of such assignment, and each
Eligible Assignee to which such transferor shall make an assignment shall be
responsible to Agent to indemnify Agent in accordance with this Agreement with
respect to transactions, events and occurrences transpiring on and after the
effective date of such assignment to it.
13.3.3. Dissemination of Information. Each Lender and Agent may
disclose to any Participant, any Eligible Assignee or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee"), and
any prospective Transferee, any and all information in Agent's or such Lender's
possession concerning Borrower, the Subsidiaries or the Collateral so long as
prior to any such disclosure, each such Transferee or prospective Transferee
agrees with Borrower, Agent or such Lender to preserve the confidentiality of
any confidential information relating to Borrower and received from Borrower,
Agent or any Lender in the same manner and to the same extent that Agent and
Lenders are so required pursuant to Section 14.16.
13.4. Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee that is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 4.10 hereof.
SECTION 14. MISCELLANEOUS
14.1. Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Agent (and all Persons designated by Agent) as
Borrower's true and lawful attorney (and agent-in-fact) and Agent, or Agent's
designee, may, without notice to Borrower and in either Borrower's or Agent's
name, but at the cost and expense of Borrower:
14.1.1. At such time or times as Agent or said designee, in its sole
discretion, may determine, endorse Borrower's name on any Payment Item or
proceeds of the Collateral which come into the possession of Agent or under
Agent's control; and
14.1.2. At any time that an Event of Default exists: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Agent
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of Lien, assignment or satisfaction of Lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
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account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to any Accounts or Inventory of any Obligor and
any other Collateral; (ix) use Borrower's stationery and sign the name of
Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Accounts,
Inventory, Equipment or any other Collateral; (xi) make and adjust claims under
policies of insurance; and (xii) do all other acts and things necessary, in
Agent's determination, to fulfill Borrower's obligations under this Agreement.
14.2. General Indemnity. Borrower hereby agrees to indemnify and defend
the Indemnitees and to hold the Indemnitees harmless from and against any Claim
ever suffered or incurred by any of the Indemnitees arising out of or related to
this Agreement or any of the other Loan Documents, the performance by any
Indemnitee of its duties or the exercise of any of its rights or remedies under
this Agreement or any of the other Loan Documents, or as a result of Borrower's
failure to observe, perform or discharge any of Borrower's duties hereunder.
Borrower shall also indemnify and defend the Indemnitees against and save the
Indemnitees harmless from all Claims of any Person arising out of, related to,
or with respect to any transactions entered into pursuant to this Agreement or
Agent's Lien upon the Collateral. Without limiting the generality of the
foregoing, this indemnity shall extend to any Claims asserted against or
incurred by any of the Indemnitees by any Person under any Environmental Laws or
similar laws by reason of Borrower's or any other Person's failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances. Additionally, if any Taxes (excluding Taxes imposed upon or
measured solely by the net income of Agent and Lenders, but including any
intangibles tax, stamp tax, recording tax or franchise tax) shall be payable by
Agent or any Obligor on account of the execution or delivery of this Agreement,
or the execution, delivery, issuance or recording of any of the other Loan
Documents, or the creation or repayment of any of the Obligations hereunder, by
reason of any Applicable Law now or hereafter in effect, Borrower will pay (or
will promptly reimburse Agent and Lenders for the payment of) all such Taxes,
including any interest and penalties thereon, and will indemnify and hold
Indemnitees harmless from and against all liability in connection therewith.
The foregoing indemnities shall not apply to Claims incurred by any of the
Indemnitees as a direct and proximate result of their own gross negligence or
willful misconduct or that arise out of any disputes arising solely out of the
relationship between Agent and any Lender.
14.3. Survival of All Indemnities. Notwithstanding anything to the
contrary in this Agreement or any of the other Loan Documents, the obligation of
Borrower and each Lender with respect to each indemnity given by it in this
Agreement, whether given by Borrower to Agent Indemnitees, Lender Indemnitees or
Fleet Indemnitees or by any Lender to any Agent Indemnitees or Fleet
Indemnitees, shall survive the payment in full of the Obligations and the
termination of any of the Revolver Commitments.
14.4. Modification of Agreement. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and
Agent and Lenders (or, where otherwise expressly allowed by Section 12 hereof,
the Required Lenders in lieu of Agent and Lenders); provided, however, that no
consent, written or otherwise, of Borrower shall be
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necessary or required in connection with any amendment of any of the provisions
of Section 12 (other than Section 12.17) or any other provision of this
Agreement that affects only the rights, duties and responsibilities of Lenders
and Agent as among themselves so long as no such amendment imposes any
additional obligations on Borrower.
14.5. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision of this Agreement shall be prohibited by or
invalid under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
14.6. Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Without limiting the generality of the foregoing,
the parties acknowledge that this Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters and that such limitations, tests and measures are cumulative and
each must be performed, except as may be expressly stated to the contrary in
this Agreement. Except as otherwise provided in any of the other Loan Documents
by specific reference to the applicable provision of this Agreement, if any
provision contained in this Agreement is in direct conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
14.7. Execution in Counterparts. This Agreement and any amendments
hereto may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which counterparts taken together
shall constitute but one and the same instrument.
14.8. Consent. Whenever Agent's, Lenders' or Required Lenders' consent is
required to be obtained under this Agreement or any of the other Loan Documents
as a condition to any action, inaction, condition or event (including any waiver
or amendment), Agent and each Lender shall be authorized to give or withhold its
consent in its sole and absolute discretion and to condition its consent upon
the giving of additional collateral security for the Obligations, the payment of
money or any other matter.
14.9. Notices. All notices, requests and demands to or upon a party
hereto shall be in writing and shall be sent by certified or registered mail,
return receipt requested, personal delivery against receipt or by telecopier or
other facsimile transmission and shall be deemed to have been validly served,
given or delivered when delivered against receipt or, in the case of facsimile
transmission, when received (if on a Business Day and, if not received on a
Business Day, then on the next Business Day after receipt) at the office where
the noticed party's telecopier is located, in each case addressed to the noticed
party at the address shown for such party on the signature page hereof or, in
the case of a Person who becomes a Lender after the date hereof, at the address
shown on the Assignment and Acceptance by which such Person became a Lender.
Notwithstanding the foregoing, no notice to or upon Agent pursuant to Sections
1.2, 2.1, 3.1 or 5.2.2 shall be effective until after actually received by the
individual to whose attention at Agent such notice is required to be sent. Any
written notice, request or
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demand that is not sent in conformity with the provisions hereof shall
nevertheless be effective on the date that such notice, request or demand is
actually received by the individual to whose attention at the noticed party such
notice, request or demand is required to be sent.
14.10. Performance of Borrower's Obligations. If Borrower shall fail to
discharge any covenant, duty or obligation hereunder or under any of the other
Loan Documents, Agent may, in its sole discretion at any time or from time to
time, for Borrower's account and at Borrower's expense, pay any amount or do any
act required of Borrower hereunder or under any of the Loan Documents or
otherwise lawfully requested by Agent to enforce any of the Loan Documents or
Obligations, preserve, protect, insure or maintain any of the Collateral, or
preserve, defend, protect or maintain the validity or priority of Agent's Liens
in any of the Collateral, including the payment of any judgement against
Borrower, any insurance premium, any warehouse charge, any finishing or
processing charge, any landlord claim, any other Lien upon or with respect to
any of the Collateral. All payments that Agent may make under this Section and
all out-of-pocket costs and expenses (including Extraordinary Expenses) that
Agent pays or incurs in connection with any action taken by it hereunder shall
be reimbursed to Agent by Borrower on demand with interest from the date such
payment is made or such costs or expenses are incurred to the date of payment
thereof at the Default Rate applicable for Revolver Loans that are Base Rate
Loans. Any payment made or other action taken by Agent under this Section shall
be without prejudice to any right to assert an Event of Default hereunder and to
proceed thereafter as provided herein or in any of the other Loan Documents.
14.11. Credit Inquiries. Borrower hereby authorizes and permits Agent
and Lenders (but Agent and Lenders shall have no obligation) to respond to usual
and customary credit inquiries from third parties concerning Borrower or any
Subsidiaries.
14.12. Time of Essence. Time is of the essence of this Agreement, the
Other Agreements and the Security Documents.
14.13. Entire Agreement; Appendix A, Exhibits and Schedules. This
Agreement and the other Loan Documents, together with all other instruments,
agreements and certificates executed by the parties in connection therewith or
with reference thereto, embody the entire understanding and agreement between
the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements,
whether express or implied, oral or written. Appendix A, each of the Exhibits
and each of the Schedules attached hereto are incorporated into this Agreement
and by this reference made a part hereof.
14.14. Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having, or being deemed to have, structured,
drafted or dictated such provision.
14.15. Obligations Several. The obligations of each Lender hereunder are
several, and no Lender shall be responsible for the obligations or Revolver
Commitment of any other Lender. Nothing contained in this Agreement and no
action taken by Lenders pursuant hereto shall be
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deemed to constitute the Lenders to be a partnership, association, joint venture
or any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and each Lender shall be
entitled, to the extent not otherwise restricted hereunder, to protect and
enforce its rights arising out of this Agreement and any of the other Loan
Documents and it shall not be necessary for Agent or any other Lender to be
joined as an additional party in any proceeding for such purpose.
14.16. Confidentiality. Agent and Lenders each agrees to exercise
reasonable efforts (and, in any event, with at least the same degree of care as
it ordinarily exercises with respect to its other customers) to keep any
Confidential Information that is delivered or made available by Borrower to it,
including Confidential Information made available to Agent or any Lender in
connection with a visit or investigation by any Person contemplated in Section
9.1.1 hereof, confidential from any Person other than individuals employed or
retained by Agent or such Lender who are or are expected to become engaged in
evaluating, approving, structuring, administering or otherwise giving
professional advice with respect to any of the Revolver Loans or Collateral;
provided, however, that nothing herein shall prevent Agent or any Lender from
disclosing such Confidential Information (i) to any party to this Agreement from
time to time or any Participant, (ii) pursuant to the order of any court or
administrative agency, (iii) upon the request or demand of any regulatory agency
or authority having jurisdiction over Agent or such Lender, (iv) which has been
publicly disclosed other than by an act or omission of Agent or such Lender
except as permitted herein, (v) to the extent reasonably required in connection
with any litigation (with respect to any of the Loan Documents or any of the
transactions contemplated thereby) to which Agent, any Lender or their
respective Affiliates may be a party, (vi) to the extent reasonably required in
connection with the exercise of any rights or remedies hereunder, (vii) to
Agent's or any Lender's legal counsel and independent auditors, (viii) to any
actual or proposed Participant, Assignee or other Transferee of all or part of a
Lender's rights hereunder so long as such Transferee has agreed in writing to be
bound by the provisions of this Section, and (ix) to the National Association of
Insurance Commissioners or any similar organization or to any nationally
recognized rating agency that requires access to information about a Lender's
portfolio in connection with ratings issued with respect to such Lender.
14.17. Governing Law; Consent to Forum. This Agreement has been
negotiated, executed and delivered at and shall be deemed to have been made in
Atlanta, Georgia. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia; provided, however, that if any
of the Collateral shall be located in any jurisdiction other than Georgia, the
laws of such jurisdiction shall govern the method, manner and procedure for
foreclosure of Agent's Lien upon such Collateral and the enforcement of Agent's
other remedies in respect of such Collateral to the extent that the laws of such
jurisdiction are different from or inconsistent with the laws of the State of
Georgia. As part of the consideration for new value received, and regardless of
any present or future domicile or principal place of business of Borrower, any
Lender or Agent, Borrower hereby consents and agrees that the Superior Court of
Cobb County, Georgia, or, at Agent's option, the United States District Court
for the Northern District of Georgia, Atlanta Division, shall have jurisdiction
to hear and determine any claims or disputes among Borrower, Agent and Lenders
pertaining to this Agreement or to any matter arising out of or related to this
Agreement. Borrower expressly submits and consents in advance
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to such jurisdiction in any action or suit commenced in any such Court, and
Borrower hereby waives any objection which Borrower may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such Court. Borrower hereby waives personal service of the
summons, complaint and other process issued in any such action or suit and
agrees that service of such summons, complaint and other process may be made by
certified mail addressed to Borrower at the address set forth in this Agreement
and that service so made shall be deemed completed upon the earlier of
Borrower's actual receipt thereof or 3 days after deposit in the U.S. mails,
proper postage prepaid. Nothing in this Agreement shall be deemed or operate to
affect the right of Agent to serve legal process in any other manner permitted
by law, or to preclude the enforcement by Agent of any judgment or order
obtained in such forum or the taking of any action under this Agreement to
enforce same in any other appropriate forum or jurisdiction.
14.18. Waivers by Borrower. To the fullest extent permitted by
Applicable Law, Borrower waives (i) the right to trial by jury (which Agent and
each Lender hereby also waives) in any action, suit, proceeding or counterclaim
of any kind arising out of or related to any of the Loan Documents, the
Obligations or the Collateral; (ii) presentment, demand and protest and notice
of presentment, protest, default, non payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Agent may do in this regard; (iii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Agent to exercise any of
Agent's remedies; (iv) the benefit of all valuation, appraisement and exemption
laws; and (v) notice of acceptance hereof. Borrower acknowledges that the
foregoing waivers are a material inducement to Agent's and Lender's entering
into this Agreement and that Agent and Lenders are relying upon the foregoing
waivers in its future dealings with Borrower. Borrower warrants and represents
that it has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial rights following consultation
with legal counsel. In the event of litigation, this Agreement may be filed
as a written consent to a trial by the Court.
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IN WITNESS WHEREOF, this Agreement has been duly executed in Atlanta,
Georgia, on the day and year specified at the beginning of this Agreement.
Borrower:
PAMECO CORPORATION
By: /s/ Mark S. Sellers
------------------------------------------
Mark S. Sellers, Chief Financial Officer
Attest: /s/ Richard S. Martin
--------------------------------------
Richard S. Martin, Vice-President of
Finance, Treasurer and Secretary
[CORPORATE SEAL]
Address:
1000 Center Place
Norcross, Georgia 30093
Attention: President
Telecopier No.: (770) 798-0636
Lender:
FLEET CAPITAL CORPORATION
Revolver Commitment:
$130,000,000.00 By: /s/ Dennis Losin
------------------------------------------
Title: Vice President
LIBOR Lending Office:
6100 Fairview Road
Suite 200
Charlotte, North Carolina 28210
Attention: Loan Administration Manager
Telecopier No.: (704) 553-6738
Agent:
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FLEET CAPITAL CORPORATION,
as Agent
By: /s/ Dennis Losin
-----------------------------------------
Title: Vice President
Address:
300 Galleria Parkway, N.W.
Suite 800
Atlanta, Georgia 30339
Attention: Loan Administration Manager
Telecopier No.: (770) 859-2483
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated February 17, 2000 (as at
any time amended, the "Loan Agreement"), by and among Pameco Corporation, a
Georgia corporation ("Borrower"), the various financial institutions listed on
the signature pages attached thereto as lenders ("Lenders") and Fleet Capital
Corporation ("Agent"), in its capacity as collateral and administrative agent
for itself and the Lenders, the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):
Accounts - all of Borrower's now owned and hereafter acquired accounts
and all other rights to payment for goods sold or leased or for services
rendered that are not evidenced by an Instrument or Chattel Paper, whether
or not they have been earned by performance.
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts Formula Amount - on any date of determination thereof, an
amount equal to 85% of the net amount of Eligible Accounts (other than
Eligible Guam Accounts) on such date.
Acquisition - any transaction, or any series of related transactions,
by which Borrower directly or indirectly (i) acquires any ongoing business
or all or substantially all of the assets of any Person, whether through
the purchase of assets, merger or otherwise, (ii) acquires (in one
transaction or as the most recent transaction in a series of transactions)
control of at least a majority of the Voting Stock of a corporation having
ordinary voting power for the election of directors, or (iii) acquires
control of 50% or more of the Equity Interests in any other Person.
Acquisition Subsidiary - a Subsidiary that is formed by Borrower to
purchase assets or stock of a Person in connection with a Permitted
Acquisition or an existing Subsidiary that purchases assets or stock of
another Person in connection with a Permitted Acquisition.
Adjusted LIBOR Rate - with respect to each Interest Period for a LIBOR
Loan, an interest rate per annum (rounded upwards, to the next 1/16th of
1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest
Period divided by (b) a percentage (expressed as a decimal) equal to 100%
minus Statutory Reserves.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, another
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Person; (ii) which beneficially owns or holds 10% or more of any class of
the Equity Interests of a Person; or (iii) 10% or more of the Equity
Interests with power to vote of which is beneficially owned or held by
another Person or a Subsidiary of another Person. For purposes hereof,
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of any Equity Interest, by contract or
otherwise.
Agent Indemnitees - Agent in its capacity as agent for the Lenders
under the Loan Documents and all of Agent's present and future officers,
directors, agents and attorneys.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits and Schedules thereto and this
Appendix A.
Applicable Law - all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Loan Document or Material Contract
in question, including all applicable common law and equitable principles;
all provisions of all applicable state, federal and foreign constitutions,
statutes, rules, regulations and orders of governmental bodies; and all
orders, judgments and decrees of all courts and arbitrators.
Applicable Margin - a percentage equal to 0.75% with respect to
Revolver Loans that are Base Rate Loans, 2.75% with respect to Revolver
Loans that are LIBOR Loans, and 0.375% with respect to the Unused Line Fee,
provided that, commencing August 1, 2000, the Applicable Margin shall be
increased or (if no Default or Event of Default exists) decreased, based
upon the Average Availability, as follows:
<TABLE>
<CAPTION>
Applicable Margin
- -------------------------------------------------------------------------------------
Average Base Rate LIBOR Rate Unused Line Fee
Availability
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $2,500,000 1.00% 3.00% 0.50%
- -------------------------------------------------------------------------------------
Less than $10,000,00 but 0.75% 2.75% 0.375%
greater than or equal to
$2,500,000
- -------------------------------------------------------------------------------------
Less than $20,000,000 but 0.50% 2.50% 0.375%
greater than or equal to
$10,000,000
- -------------------------------------------------------------------------------------
Less than $30,000,000 but 0.25% 2.25% 0.35%
greater than or equal to
$15,000,000
- -------------------------------------------------------------------------------------
Greater than or equal to 0.00% 2.00% 0.25%
$30,000,000
- -------------------------------------------------------------------------------------
</TABLE>
The Applicable Margin shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis, as
measured by Average Availability, (i) as of August 31, 2000, for the period
from the Closing Date through August 31, 2000, (ii) as
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of November 30, 2000, for the period from the Closing Date through November
30, 2000, (iii) as of February 28, 2001, for the period from the Closing
Date through February 28, 2001, and (iv) as of the end of each Fiscal
Quarter thereafter, based upon the immediately preceding 4 Fiscal Quarters
of Borrower. Except as set forth in the last sentence hereof, any such
increase or reduction in the Applicable Margin provided for herein shall be
effective 3 Business Days after receipt by Agent of Borrower's quarterly
financial statements and Compliance Certificate; provided, however, that
any reduction in the Applicable Margin shall not apply to any LIBOR Loans
outstanding on the effective date of such reduction that have an Interest
Period commencing prior to the effective date of such reduction. If the
financial statements and the Compliance Certificate of Borrower setting
forth the Average Availability are not received by Agent by the date
required pursuant to Section 9.1.3 of the Agreement, the Applicable Margin
shall be determined as if the Average Availability was less than $2,500,000
until such time as such financial statements and Compliance Certificate are
received and any Event of Default resulting from a failure timely to
deliver such financial statements or Compliance Certificate is waived in
writing by Agent and Lenders; provided, however, that nothing herein shall
be deemed to prevent Agent and Lenders from charging interest at the
Default Rate at any time that an Event of Default exists.
Assignment and Acceptance - an assignment and acceptance entered into
by a Lender and an Eligible Assignee and accepted by Agent, in the form of
Exhibit F.
Availability - on any date, the amount that Borrower is entitled to
borrow from time to time as Revolver Loans on such date, such amount being
the difference derived when the sum of the principal amount of Revolver
Loans then outstanding (including any amounts that Agent or Lenders may
have paid for the account of Borrower pursuant to any of the Loan Documents
and that have not been reimbursed by Borrower and any outstanding
Settlement Loans) is subtracted from the Borrowing Base on such date. If
the amount outstanding is equal to or greater than the Borrowing Base,
Availability is zero.
Availability Reserve - on any date of determination thereof, an amount
equal to the sum of the following (without duplication): (i) the LC
Reserve, (ii) aggregate amount of reserves established by Agent in its
reasonable discretion in respect of obligations of Borrower under any
Interest Rate Contract or any indemnity or guaranty of Agent or Lender with
respect to such obligations, (iii) the Slow Period Reserve Amount or the
Normal Period Reserve Amount, as appropriate and (iv) such additional
reserves as Agent in its reasonable credit judgment may elect to impose
from time to time.
Average Availability - for any period, the Availability at the end of
each day for the period in question and by dividing such sum by the number
of days in such period.
Average Revolver Loan Balance - for any period, the amount obtained by
adding the aggregate of the unpaid balance of Revolver Loans and LC
Outstandings at the end of each day for the period in question and by
dividing such sum by the number of days in such period.
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Bank - Fleet National Bank.
Bankruptcy Code - title 11 of the United States Code.
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its prime rate. The prime rate announced by Bank is a reference
rate and does not necessarily represent the lowest or best rate charged by
Bank. Bank may make loans or other extensions of credit at, above or below
its announced prime rate. If the prime rate is discontinued by Bank as a
standard, a comparable reference rate designated by Bank as a substitute
therefor shall be the Base Rate.
Base Rate Loan - a Revolver Loan, or portion thereof, during any
period in which it bears interest at a rate based upon the Base Rate.
Board of Governors - the Board of Governors of the Federal Reserve
System.
Borrowing - a borrowing consisting of Revolver Loans of one Type made
on the same day by Lenders (or by Fleet in the case of a Borrowing funded
by Settlement Loans) or a conversion of a Revolver Loan or Revolver Loans
of one Type from Lenders on the same day.
Borrowing Base - on any date of determination thereof, an amount equal
to the lesser of: (a) the aggregate amount of the Revolver Commitments on
such date minus the LC Outstandings on such date, or (b) an amount equal to
(i) the sum of the Accounts Formula Amount, the Inventory Formula Amount
and the Guam Formula Amount on such date minus (ii) the Availability
Reserve on such date.
Borrowing Base Certificate - a certificate, in the form requested by
Agent, by which Borrower shall certify to Agent and Lenders, with such
frequency as Agent may request, the amount of the Borrowing Base as of the
date of the certificate (which date shall be not more than 3 Business Days
earlier than the date of submission of such certificate to Agent) and the
calculation of such amount.
Business Day - any day excluding Saturday, Sunday and any other day
that is a legal holiday under the laws of the State of Georgia or is a day
on which banking institutions located in such state are closed; provided,
however, that when used with reference to a LIBOR Loan (including the
making, continuing, prepaying or repaying of any LIBOR Loan), the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in Dollar deposits on the London interbank market.
Business Interruption Insurance Assignment - the Collateral Assignment
of Business Interruption Insurance to be executed by Borrower on or about
the Closing Date in favor of Agent, in form and substance satisfactory to
Agent, as security for the payment of the Obligations.
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Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Debt represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Cash Collateral - cash or Cash Equivalents, and any interest earned
thereon, that is deposited with Agent in accordance with the Agreement for
the Pro Rata benefit of Lenders as security for the Obligations to the
extent provided in the Agreement.
Cash Collateral Account - a demand deposit, money market or other
account established by Agent at such financial institution as Agent may
select in its discretion, which account shall be in Agent's name and
subject to Agent's Liens for the Pro Rata benefit of Lenders.
Cash Equivalents - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by
the full faith and credit of the United States government having maturities
of not more than 12 months from the date of acquisition; (ii) domestic
certificates of deposit and time deposits having maturities of not more
than 12 months from the date of acquisition, bankers' acceptances having
maturities of not more than 12 months from the date of acquisition and
overnight bank deposits, in each case issued by any commercial bank
organized under the laws of the United States, any state thereof or the
District of Columbia, which at the time of acquisition are rated A-1 (or
better) by S&P or P-1 (or better) by Moody's, and (unless issued by a
Lender) not subject to offset rights in favor of such bank arising from any
banking relationship with such bank; (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types
described in clauses (i) and (ii) entered into with any financial
institution meeting the qualifications specified in clause (ii) above; and
(iv) commercial paper having at the time of investment therein or a
contractual commitment to invest therein a rating of A-1 (or better) by S&P
or P-1 (or better) by Moody's, and having a maturity within 9 months after
the date of acquisition thereof.
Cash Management Agreements - any agreement entered into from time to
time between Borrower or any of its Subsidiaries, on the one hand, and Bank
or any of its Affiliates or any other banking or financial institution, on
the other, in connection with cash management services for operating,
collections, payroll and trust accounts of Borrower or its Subsidiaries
provided by such banking or financial institution, including automatic
clearinghouse services, controlled disbursement services, electronic funds
transfer services, information reporting services, lockbox services, stop
payment services and wire transfer services.
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CERCLA - the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq. and its implementing regulations.
Change of Control - Littlejohn shall cease to beneficially own (as
determined under Rule 13d-3(a)(1) under the Exchange Act) 20% of the common
stock, par value $.01 per share of Borrower, or otherwise cease to have
pursuant to contractual rights, a controlling interest in Borrower.
Chattel Paper - shall have the meaning given to"chattel paper" in the
UCC.
Claims - any and all claims, demands, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, awards, remedial
response costs, expenses or disbursements of any kind or nature whatsoever
(including reasonable attorneys', accountants', consultants' or paralegals'
fees and expenses), whether arising under or in connection with the Loan
Documents, any Applicable Law (including any Environmental Laws) or
otherwise, that may now or hereafter be suffered or incurred by a Person
and whether suffered or incurred in or as a result of any investigation,
litigation, arbitration or other judicial or non-judicial proceeding or any
appeals related thereto.
Closing Date - the date on which all of the conditions precedent in
Section 10 of the Agreement are satisfied and the initial Revolver Loans
are made under the Agreement.
Co-Borrower - a Person which is a direct or indirect wholly-owned
Subsidiary of Borrower and which, with the consent of Agent and the
Required Lenders, joins in the Agreement (and the other Loan Documents
signed by Borrower) as a co-borrower of Revolver Loans and other extensions
of credit hereunder, and has joint and several liability with Borrower for
all of the Obligations, but subject in all events to the execution by such
Person, Borrower, Agent and Lenders of acceptable documentation (including
appropriate amendments to the Agreement) to evidence such Person's status
as a co-borrower.
Collateral - all of the Property and interests in Property described
in Section 6 of the Agreement; all Property described in any of the
Security Documents as security for the payment or performance of any of the
Obligations; and all other Property and interests in Property that now or
hereafter secure (or are intended to secure) the payment and performance of
any of the Obligations.
Commitment Termination Date - the date that is the soonest to occur of
(i) the last day of the Term; (ii) the date on which either Borrower or
Agent terminates the Revolver Commitments pursuant to Section 5.2 of the
Agreement; or (iii) the date on which the Revolver Commitments are
automatically terminated pursuant to Section 11.2 of the Agreement.
Compliance Certificate - a Compliance Certificate to be provided by
Borrower to Lender in accordance with, and in the form annexed as Exhibit D
to, the Agreement.
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Confidential Information - information that is furnished to either
Agent or any Lender by or on behalf of any Borrower or any of its
Subsidiaries on a confidential basis in connection with the Loan Documents
or any of the transactions contemplated thereby, but does not include any
such information that (a) is or becomes generally available to the public
(other than as a result of a breach by any such Agent or any Lender of its
confidentiality obligations hereunder), (b) was available to any Agent or
any Lender on a nonconfidential basis prior to its disclosure to such Agent
or any Lender by any Borrower or any of its Subsidiaries, or (c) is or
becomes available to Agent or Lender on a nonconfidential basis from a
source that is not, to the best of such Agent's or such Lender's knowledge,
as the case may be, bound by a confidentiality arrangement with Borrower or
any of its Subsidiaries in respect of such information or otherwise
prohibited from disclosing such information.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Consolidated Adjusted Net Earnings - with respect to any fiscal
period, the net earnings (or loss) for such fiscal period of Borrower and
its Subsidiaries, all as reflected on the financial statements of Borrower
and its Subsidiaries supplied to Agent pursuant to Section 9.1.3 hereof,
but excluding: (i) any gain or loss arising from the sale of capital
assets; (ii) any gain or loss arising from any write-up (or write-down) of
assets during such period; (iii) earnings of any Subsidiary accrued prior
to the date it became a Subsidiary; (iv) earnings of any Person,
substantially all the assets of which have been acquired in any manner by
Borrower, realized by such Person prior to the date of such acquisition;
(v) net earnings of any entity (other than a Subsidiary of Borrower) in
which Borrower has an ownership interest unless such net earnings have
actually been received by Borrower in the form of cash Distributions; (vi)
any portion of the net earnings of any Subsidiary which for any reason is
unavailable for payment of Distributions to Borrower; (vii) the earnings of
any Person to which any assets of Borrower shall have been sold,
transferred or disposed of, or into which Borrower shall have merged, or
been a party to any consolidation or other form of reorganization, prior to
the date of such transaction; (viii) any gain arising from the acquisition
of any Securities of Borrower; and (ix) any gain or loss arising from
extraordinary or non-recurring items, all as determined on a Consolidated
basis in accordance with GAAP.
Consolidated Debt Service - for any period, the aggregate of all
scheduled payments of principal and interest on Debt for Money Borrowed of
Borrower and its Subsidiaries due during such period.
Consolidated EBITDA - for any fiscal period of Borrower, an amount
equal to the sum for such fiscal period of (i) Consolidated Adjusted Net
Earnings, plus (ii) provision for Taxes based on income, plus (iii)
Consolidated Interest Expense, plus (iv) depreciation, amortization and
other non-cash charges minus other non-cash gains of Borrower and its
Subsidiaries on a Consolidated basis.
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Consolidated Fixed Charge Coverage Ratio - for any fiscal period, the
ratio of (i) Consolidated EBITDA minus cash Taxes and Unfinanced Capital
Expenditures in such period, to (ii) Consolidated Fixed Charges for such
period.
Consolidated Fixed Charges - for any fiscal period, the sum during
such period of Borrower's and its Subsidiaries, (a) Consolidated Interest
Expense plus (b) the aggregate of all scheduled principal payments of Debt
for Money Borrowed, plus (c) cash Distributions permitted by the Agreement.
Consolidated Interest Expense - for any period, total interest expense
(including that portion attributable to capitalized leases in accordance
with GAAP and capitalized interest) of Borrower and its Subsidiaries on a
Consolidated basis with respect to all outstanding Debts of Borrower and
its Subsidiaries, including all commissions, discounts, and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and net cost under Interest Rate Contracts.
Consolidated Net Income - net income of Borrower and its Subsidiaries
on a Consolidated basis, as determined in accordance with GAAP.
Consolidated Net Worth - on any date of determination thereof, the sum
on such date of (i) the Consolidated net worth of Borrower and its
Subsidiaries after deducting therefrom the amount of all intangible items
reflected therein, including all unamortized debt discount and expense,
unamortized research and development expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights,
unamortized excess cost of investment in Subsidiaries over equity at dates
of acquisition and all similar items that could properly be treated as
intangibles in accordance with GAAP, (ii) Subordinated Debt and (iii)
accrued but undeclared Distributions with respect to preferred stock as
reflected on a Consolidated balance sheet of Borrower and its Subsidiaries.
Consolidated Operating Cash Flow - for any period, an amount equal to
Consolidated EBITDA for such period, minus Taxes paid during such period
and Capital Expenditures of Borrower and its Subsidiaries.
Contingent Obligation - with respect to any Person, any obligation of
such Person arising from any guaranty, indemnity or other assurance of
payment or performance of any Debt, lease, dividend or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including (i) the direct or
indirect guaranty, endorsement (other than for collection or deposit in the
Ordinary Course of Business), co-making, discounting with recourse or sale
with recourse by such Person of the obligation of a primary obligor, (ii)
the obligation to make take-or-pay or similar payments, if required,
regardless of nonperformance by any other party or parties to an agreement,
(iii) any obligation of such Person, whether or not contingent, (A) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (B) to advance or supply funds (1) for the
purchase or payment of any such primary obligations or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the
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primary obligor, (C) to purchase Property, Securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation
or (D) otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation with respect to which such
Contingent Obligation is made (or, if less, the maximum amount of such
primary obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or, if not
stated or determinable, the maximum reasonably anticipated liability with
respect thereto (assuming such Person is required to perform thereunder),
as determined by such Person in good faith.
Controlled Disbursement Account - a demand deposit account maintained
by Borrower at Bank and to which proceeds of Revolver Loans will be wired
from time to time.
Current Assets - at any date, the amount at which all of the current
assets of a Person would be properly classified as current assets shown on
a balance sheet at such date in accordance with GAAP except that amounts
due from Affiliates and investments in Affiliates shall be excluded
therefrom.
Debt - as applied to a Person means, without duplication: (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such
Person as of the date as of which Debt is to be determined, including
Capitalized Lease Obligations; (ii) all Contingent Obligations of such
Person; (iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person; and (iv) in the case of Borrower (without duplication), the
Obligations. The Debt of a Person shall include any recourse Debt of any
partnership or joint venture in which such Person is a general partner or
joint venturer.
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - a fluctuating rate per annum which, on any date and for
each Revolver Loan oustanding, is equal to the rate otherwise in effect for
such Revolver Loan under Section 2.1, plus 2%.
Deposit Accounts - all of a Person's demand, time, savings, passbook,
money market or other depository accounts, and all certificates of deposit,
maintained by such Person with any bank, savings and loan association,
credit union or other depository institution.
Dilution Amount - 3% (or such greater or lesser percentage determined
by Agent in its reasonable credit judgment) of the gross amount of all
Accounts.
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Distribution - in respect of any entity, (i) any payment of any
dividends or other distributions on Equity Interests of the entity (except
distributions in such Equity Interests) and (ii) any purchase, redemption
or other acquisition or retirement for value of any Equity Interests of the
entity or any Affiliate of the entity unless made contemporaneously from
the net proceeds of the sale of Equity Interests.
Document - shall have the meaning given to"document" in the UCC.
Dollars and the sign $ - lawful money of the United States of America.
Domestic Subsidiary - a Subsidiary of Borrower that is incorporated
under the laws of a state of the United States or the District of Columbia.
Dominion Account - a special account of Agent established by Borrower
at a bank selected by Borrower, but acceptable to Agent and Lenders in
their discretion, and over which Agent shall have sole and exclusive access
and control for withdrawal purposes.
Dupont - E.I. du Pont de Nemours and Company.
Eligible Account - an Account which arises in the Ordinary Course of
Business of Borrower from the sale of goods, is payable in Dollars, is
subject to Agent's duly perfected Lien, and is deemed by Agent, in its
reasonable credit judgment, to be an Eligible Account. Without limiting
the generality of the foregoing, no Account shall be an Eligible Account
if: (i) it arises out of a sale made by Borrower to a Subsidiary or an
Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower; (ii) it is unpaid for more than 60 days after the original due
date shown on the invoice, provided, that for the period from the Closing
Date through August 16, 2001, Accounts that are more than 60 days but less
than 75 days past due shall not be deemed ineligible solely because of this
clause (ii); (iii) 50% or more of the Accounts from the Account Debtor are
not deemed Eligible Accounts hereunder by virtue of clause (ii) above; (iv)
the total unpaid Accounts of the Account Debtor exceed a credit limit
established by Agent for such Account Debtor, to the extent of such excess;
(v) any covenant, representation or warranty contained in the Agreement
with respect to such Account has been breached; (vi) the Account Debtor is
also Borrower's creditor or supplier, or the Account Debtor has disputed
liability with respect to such Account, or the Account Debtor has made any
claim with respect to any other Account due from such Account Debtor to
Borrower, or the Account otherwise is or may become subject to any right of
setoff, counterclaim, reserve or chargeback, provided that, the Accounts of
such Account Debtor shall be ineligible only to the extent of such offset,
counterclaim, disputed amount, reserve or chargeback; (vii) an Insolvency
Proceeding has been commenced by or against the Account Debtor or the
Account Debtor has failed, suspended business or ceased to be Solvent;
(viii) it arises from a sale to an Account Debtor with its principal
office, assets or place of business outside the United States, unless the
sale is backed by an irrevocable letter of credit issued or confirmed by a
bank acceptable to Agent and that is in form and substance acceptable to
Agent and payable in the full amount of the Account in freely convertible
Dollars at a place of payment within the United States and, if requested by
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Agent, such letter of credit, or amounts payable thereunder, is assigned to
Agent; (ix) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis; (x) the Account Debtor is located in any state
which imposes similar conditions on the right of a creditor to collect
accounts receivable unless Borrower has either qualified to transact
business in such state as a foreign entity or filed a Notice of Business
Activities Report or other required report with the appropriate officials
in those states for the then current year; (xi) the Account Debtor is
located in a state in which Borrower is deemed to be doing business under
the laws of such state and which denies creditors access to its courts in
the absence of qualification to transact business in such state or of the
filing of any reports with such state, unless Borrower has qualified as a
foreign entity authorized to transact business in such state or has filed
all required reports; (xii) the Account is subject to a Lien other than a
Permitted Lien; (xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving rise
to such Account have not been performed by Borrower and accepted by the
Account Debtor or the Account otherwise does not represent a final sale;
(xiv) the Account is evidenced by Chattel Paper or an Instrument of any
kind, or has been reduced to judgment; (xv) the Account represents a
progress billing or a retainage; (xvi) Borrower has made any agreement with
the Account Debtor for any deduction therefrom, except for discounts or
allowances which are made in the Ordinary Course of Business for prompt
payment and which discounts or allowances are reflected in the calculation
of the face value of each invoice related to such Account; or (xvii)
Borrower has made an agreement with the Account Debtor to extend the time
of payment thereof; (xviii) a Payment Item has been received for such
Account but such Payment Item has been returned unpaid for non-sufficient
funds, to the extent of the amount of such Payment Item; (xix) payment in
respect of such Account has been received, but not applied, to the payment
of such Account; (xx) the Account represents, in whole or in part, a
billing for interest, fees or late charges, provided that such Account
shall be ineligible only to the extent of the amount of such billing. The
net amount of Eligible Accounts on any date shall be reduced by the
Dilution Amount.
Eligible Assignee - a Lender or a U.S. based Affiliate of a Lender; a
commercial bank organized under the laws of the United States or any state
and having total assets in excess of $15 billion; or any other Person
(except Borrower or a Guarantor, or an Affiliate of either) approved by
Agent and, unless a Default or an Event of Default exists, Borrower (such
approval by Borrower, when required, not to be unreasonably withheld or
delayed and to be deemed given by Borrower if no objection is received by
the assigning Lender and Agent from Borrower within 2 Business Days after
notice of such proposed assignment has been provided by the assigning
Lender as set forth in Section 13.3 of the Agreement).
Eligible Guam Account - an Account that would otherwise constitute an
Eligible Account but for the fact that the Account Debtor liable therefor
has its principal office, assets or place of business in Guam.
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Eligible Guam Inventory - Inventory that would otherwise constitute
Eligible Inventory but for the fact that it is located in Guam.
Eligible Inventory - Inventory of Borrower consisting of Finished
Goods which Agent, in its reasonable credit judgment, deems to be Eligible
Inventory. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory unless: (i) it is owned by Borrower and not
held by it on consignment or other sale or return terms; (ii) it is in
good, new and saleable condition and is not damaged or defective; (iii) it
is not slow-moving, obsolete or unmerchantable and is not goods returned to
Borrower by or repossessed from an Account Debtor; (iv) it meets all
standards imposed by any Governmental Authority; (v) it conforms in all
respects to the warranties and representations set forth in the Agreement;
(vi) it is at all times subject to Agent's duly perfected, first priority
security interest and no other Lien except a Permitted Lien; (vii) it is in
Borrower's possession and control at a location in compliance with the
Agreement, is not in transit (other than in-transit between other locations
of Borrower or a Subsidiary Guarantor or Co-Borrower) or outside the United
States and is not consigned to any Person; (viii) it is not the subject of
a negotiable warehouse receipt or other negotiable Document; (ix) it is not
subject to any License Agreement or other agreement that limits, conditions
or restricts Borrower's or Agent's right to sell or otherwise dispose of
such Inventory unless the Licensor has entered into a Licensor/Lender
Agreement with Agent; and (x) it is not the subject of an Intellectual
Property Claim.
Emerson - Emerson Electric Co.
Environmental Laws - all federal, state and local laws, rules,
regulations, codes, ordinances, programs, permits, guidance documents
promulgated by regulatory agencies, orders and consent decrees, now or
hereafter in effect and relating to human health and safety or the
protection or pollution of the environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or under any
applicable Environmental Laws.
Equipment - all of Borrower's machinery, apparatus, equipment,
fittings, furniture, fixtures, motor vehicles and other tangible personal
Property (other than Inventory) of every kind and description, whether now
owned or hereafter acquired by Borrower and wherever located, and all
parts, accessories and special tools therefor, all accessions thereto, and
all substitutions and replacements thereof.
Equity Interest - the interest of (i) a shareholder in a corporation,
(ii) a partner (whether general or limited) in a partnership (whether
general, limited or limited liability), (iii) a member in a limited
liability company, or (iv) any other Person having any other form of equity
security or ownership interest.
ERISA - the Employee Retirement Income Security Act of 1974 and all
rules and regulations from time to time promulgated thereunder.
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Event of Default - as defined in Section 11 of the Agreement.
Exchange Act - Securities Exchange Act of 1934.
Extraordinary Expenses - all costs, expenses, fees or advances that
Agent or any Lender may suffer or incur, whether prior to or after the
occurrence of an Event of Default, and whether prior to, after or during
the pendency of an Insolvency Proceeding of any Obligor, on account of or
in connection with (i) the audit, inspection, repossession, storage,
repair, appraisal, insuring, completion of the manufacture of, preparing
for sale, advertising for sale, selling, collecting or otherwise preserving
or realizing upon any Collateral; (ii) the defense of Agent's Lien upon any
Collateral or the priority thereof or any adverse claim with respect to the
Revolver Loans, the Loan Documents or the Collateral asserted by any
Obligor, any receiver or trustee for any Obligor or any creditor or
representative of creditors of any Obligor; (iii) the settlement or
satisfaction of any Liens upon any Collateral (whether or not such Liens
are Permitted Liens); (iv) the collection or enforcement of any of the
Obligations; (v) the negotiation, documentation, and closing of any
restructuring or forbearance agreement with respect to the Loan Documents
or Obligations; (vi) amounts advanced by Agent pursuant to Section 7.1.3 of
the Agreement; (vii) the enforcement of any of the provisions of any of the
Loan Documents; or (viii) any payment under indemnity or other payment
agreement provided by Agent to Bank or any other financial institution in
connection with any Dominion Account or any lockbox arrangement. Such
costs, expenses and advances may include transfer fees, taxes, storage
fees, insurance costs, permit fees, utility reservation and standby fees,
legal fees, appraisal fees, brokers' fees and commissions, auctioneers'
fees and commissions, accountants' fees, environmental study fees, wages
and salaries paid to employees of Borrower or independent contractors in
completing the manufacturing of or liquidating any Collateral, travel
expenses, all other fees and expenses payable or reimbursable by Borrower
or any other Obligor under any of the Loan Documents, and all other fees
and expenses associated with the enforcement of rights or remedies under
any of the Loan Documents, but excluding compensation paid to employees
(including inside legal counsel who are employees) of Agent or any Lender.
Federal Funds Rate - for any period, a fluctuating interest rate per
annum equal for each date during such period 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) in Atlanta, Georgia by the Federal Reserve Bank of Atlanta, or if such
rate is not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by Agent from
3 federal funds brokers of recognized standing selected by Agent.
Fee Letter - the fee letter agreement between Agent and Borrower.
FEIN - with respect to any Person, the Federal Employer Identification
Number of such Person.
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Finished Goods - Inventory of Borrower consisting of goods held for
sale in the Ordinary Course of Business including HVAC residential
equipment, HVAC installation supplies, HVAC parts and accessories, HVAC
motors, refrigeration equipment, refrigeration installation supplies,
refrigeration parts and accessories, refrigerant, copper, tools and
instruments, oils and chemicals, and food service equipment and parts.
Fiscal Quarter - each 3-month period ending May 31, August 31,
November 30 and the last day of February of each Fiscal Year.
Fiscal Year - the fiscal year of Borrower and its Subsidiaries for
accounting and tax purposes, which ends on February 28/29 of each year.
Fleet - shall have the meaning ascribed to it on the first page of the
Agreement.
Fleet Indemnitees - Fleet and all of its present and future officers,
directors and agents.
FLSA - the Fair Labor Standards Act of 1938.
Foreign Subsidiary - a Subsidiary of Borrower that is not incorporated
under the laws of a state of the United States or the District of Columbia.
GAAP - generally accepted accounting principles in the United States
of America in effect from time to time.
General Intangibles - all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including all choses in
action, causes of action, company or other business records, inventions,
blueprints, designs, patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, service marks, goodwill, brand
names, copyrights, registrations, licenses, franchises, customer lists, tax
refund claims, computer programs, operational manuals, all claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of any of Borrower's Accounts by an
Account Debtor, all rights to indemnification and all other intangible
property of Borrower of every kind and nature (other than Accounts).
Governmental Approvals - all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to,
all Governmental Authorities.
Governmental Authority - any federal, state, municipal, national,
foreign or other governmental department, commission, board, bureau, court,
agency or instrumentality or political subdivision thereof or any entity or
officer exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to any government or any court,
in each case whether associated with a state of the United States, the
District of Columbia or a foreign entity or government.
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Guam Formula Amount - the lesser of (i) $500,000 or (ii) the sum of
85% of the net amount of Eligible Guam Accounts on such date plus 50% of
the Value of Eligible Guam Inventory on such date.
Guarantor Security Documents - (i) the Pameco Investment Security,
Agreement, (ii) each security agreement that is executed after the Closing
Date by a direct or indirect Subsidiary of Borrower in favor of Agent in
connection with a Permitted Acquisition and by which such Subsidiary shall
grant a security interest in favor of Agent, for its benefit and for the
ratable benefit of Lenders, in all of such Subsidiary's Properties as
security for the payment of the Obligations and such Guarantor's Guaranty,
and (iii) all Lien Perfection Documents requested by Agent from any
Guarantor.
Guarantors - Pameco Investment, Littlejohn and each other Person who
guarantees payment or performance of the whole or any part of the
Obligations.
Guaranty - each guaranty agreement now or hereafter executed by a
Guarantor in favor of Agent with respect to any of the Obligations,
including each Subsidiary Guaranty and the Littlejohn Guaranty.
Indemnified Amount - in the case of Agent Indemnitees, the amount of
any loss, cost, expenses or damages suffered or incurred by Agent
Indemnitees and against which Lenders or any Obligor have agreed to
indemnify Agent Indemnitees pursuant to the terms of the Agreement or any
of the other Loan Documents; in the case of Lender Indemnitees, the amount
of any loss, cost, expenses or damages suffered or incurred by Lender
Indemnitees and against which Lender or any Obligor have agreed to
indemnify Lender Indemnitees pursuant to the terms of the Agreement or any
of the other Loan Documents; and, in the case of Fleet Indemnitees, the
amount of any loss, cost, expenses or damages suffered or incurred by Fleet
Indemnitees and against which Lenders or any Obligor have agreed to
indemnify Fleet Indemnitees pursuant to the terms of the Agreement or any
of the other Loan Documents.
Indemnitees - the Agent Indemnitees, the Lender Indemnitees and the
Fleet Indemnitees.
Initial Lenders - Fleet, in its capacity as a Lender, and any other
Person that is a Lender on the Closing Date.
Insolvency Proceeding - any action, case or proceeding commenced by or
against a Person, or any agreement of such Person, for (i) the entry of an
order for relief under any chapter of the Bankruptcy Code or other
insolvency or debt adjustment law (whether state, federal or foreign), (ii)
the appointment of a receiver, trustee, liquidator or other custodian for
such Person or any part of its Property, (iii) an assignment or trust
mortgage for the benefit of creditors of such Person, or (iv) the
liquidation, dissolution or winding up of the affairs of such Person.
Instrument - shall have the meaning ascribed to the term "instrument"
in the UCC.
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Intellectual Property - Property constituting under any Applicable Law
a patent, patent application, copyright, trademark, service mark,
tradename, mask work, trade secret or license or other right to use any of
the foregoing.
Intellectual Property Claim - the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise)
that Borrower's ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other Property is violative
of any ownership or right to use any Intellectual Property of such Person.
Interest Period - shall have the meaning ascribed to it in Section
2.1.3 of the Agreement.
Interest Rate Contract - any interest rate agreement, interest rate
collar agreement, interest rate swap agreement, or other agreement or
arrangement at any time entered into by a Borrower with Bank that is
designed to protect against fluctuations in interest rates.
International - International Comfort Products Corporation (USA), a
Delaware corporation.
Inventory - all of Borrower's inventory, whether now owned or
hereafter acquired, including all goods intended for sale or lease by
Borrower, to be furnished by Borrower under contracts of service, or for
display or demonstration; all work in process; all raw materials and other
materials and supplies of every nature and description used or which might
be used in connection with the manufacture, printing, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise used
or consumed in Borrower's business; and all Documents evidencing and
General Intangibles relating to any of the foregoing, whether now owned or
hereafter acquired by Borrower.
Inventory Formula Amount - on any date of determination thereof, an
amount equal to 50% of the Value of Eligible Inventory (other than Eligible
Guam Inventory) on such date.
Investment Property - shall have the meaning given to "investment
property" under the UCC and shall include all Securities (whether
certificated or uncertificated), security entitlements, securities
accounts, commodity contracts and commodity accounts.
Landlord Waiver - an agreement duly executed in favor of Agent, in
form and content acceptable to Agent, by which an owner or mortgagee of
premises upon which any Property of an Obligor is located agrees to waive
or subordinate any Lien it may have with respect to such Property in favor
of Agent's Lien therein and to permit Agent to enter upon such premises and
to remove such Property or to use such premises to store or dispose of such
Property.
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LC Application - an application by Borrower to Bank (on which Fleet
may be a co-applicant), pursuant to a form approved by Bank for the
issuance of a Letter of Credit, that is submitted to Bank at least 5
Business Days prior to the requested issuance of such Letter of Credit.
LC Conditions - the following conditions, the satisfaction of each of
which is required before Fleet shall be obligated to provide any LC Support
to Bank for the issuance of a Letter of Credit: (i) each of the conditions
set forth in Section 10 of the Agreement has been and continues to be
satisfied, including the absence of any Default or Event of Default; (ii)
after giving effect to the issuance of the requested Letter of Credit and
all other unissued Letters of Credit for which an LC Application has been
signed by Fleet, the LC Outstandings would not exceed $15,000,000 and no
Out-of-Formula Condition would exist, and, if no Revolver Loans are
outstanding, the LC Outstandings do not, and would not upon the issuance of
the requested Letter of Credit, exceed the Borrowing Base; (iii) the expiry
date of the Letter of Credit does not extend beyond the earlier to occur of
365 days from the date of issuance or the 10th Business Day prior to the
last Business Day of the Term; and (iv) the currency in which payment is to
be made under the Letter of Credit is Dollars.
LC Documents - any and all agreements, instruments and documents
(other than an LC Application or an LC Support) required by Bank to be
executed by Borrower or any other Person and delivered to Bank for the
issuance of a Letter of Credit.
LC Facility - a subfacility of the Revolver Facility established
pursuant to Section 1.2 of the Agreement.
LC Outstandings - on any date of determination thereof, an amount (in
Dollars) equal to the sum of (i) all amounts then due and payable by any
Obligor on such date by reason of any payment made on or before such date
by Fleet under any LC Support plus (ii) the aggregate undrawn amount of all
Letters of Credit then outstanding or to be issued by Bank under an LC
Application theretofore submitted to Bank.
LC Request - a Letter of Credit Procurement Request from Borrower to
Fleet in the form of Exhibit H annexed hereto.
LC Reserve - at any date, the aggregate of all LC Outstandings
outstanding on such date arising from the issuance of standby Letters of
Credit and 50% of the aggregate amount of all LC Outstandings on such date
arising from the issuance of documentary Letters of Credit, but excluding
LC Outstandings that are fully secured by Cash Collateral.
LC Support - a guaranty or other support agreement from Fleet in favor
of Bank pursuant to which Fleet shall guarantee or otherwise assure the
payment or performance by the parties (other than Fleet, if a party) to an
LC Application of such parties' obligations with respect to such Letter of
Credit, including the obligation of such parties to reimburse Bank for any
payment made by Bank under such Letter of Credit.
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Lender Indemnitee - a Lender and its present and future officers,
directors, agents and attorneys.
Lenders - Fleet (whether in its capacity as a provider of Revolver
Loans under Section 1 of the Agreement, as the provider of Settlement Loans
under Section 3.1.3 of the Agreement, or as the procurer of Letters of
Credit under Section 1.2 of the Agreement) and each other Person who
becomes a "Lender" under the Agreement, and their respective successors and
permitted assigns.
Letter of Credit - any standby letter of credit or documentary letter
of credit issued by Bank for the account of Borrower.
LIBOR Lending Office - with respect to a Lender, the office designated
as a LIBOR Lending Office for such Lender on the signature page hereof (or
on any Assignment and Acceptance, in the case of an assignee) and such
other office of such Lender or any of its Affiliates that is hereafter
designated by written notice to Agent.
LIBOR Loan - a Revolver Loan, or portion thereof, during any period in
which it bears interest at a rate based upon the applicable Adjusted LIBOR
Rate.
LIBOR Rate - with respect to an Interest Period, the rate per annum
reported to Agent by Bank as the rate at which deposits of U.S. Dollars
approximately equal in principal amount to or comparable to the amount of
the LIBOR Loan to which such Interest Period relates and for a term
comparable to such Interest Period are offered to Bank by prime banks in
the London interbank foreign currency deposits market at approximately
11:00 a.m., London time, 2 Business Days prior to the commencement of such
Interest Period. Each determination by Agent of any LIBOR Rate shall, in
the absence of any manifest error, be conclusive.
License Agreement - any agreement between Borrower and a Licensor
pursuant to which Borrower is authorized to use any Intellectual Property
in connection with the manufacturing, marketing, sale or other distribution
of any Inventory of Borrower.
Licensor/Lender Agreement - an agreement between Agent and a Licensor
by which Agent is given the unqualified right, vis-a-vis such Licensor, to
enforce Agent's Liens with respect to and to dispose of Borrower's
Inventory with the benefit of any Intellectual Property applicable thereto,
irrespective of Borrower's default under any License Agreement with such
Licensor and which is otherwise in form and substance satisfactory to
Agent.
Licensor - any Person from whom Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property
in connection with Borrower's manufacture, marketing, sale or other
distribution of any Inventory.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions,
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encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purpose of the Agreement, a Person shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for
security purposes. The interest of a Person who delivers goods to another
Person (the "consignee") under a consignment which is not a security
interest, where the goods are not the Property of the consignee, shall not
be deemed to constitute a "Lien" for purposes of this Agreement.
Lien Perfection Documents - all instruments, agreements, filings and
recordings necessary or, in Agent's reasonable determination, necessary or
desirable to perfect, maintain or continue the perfection of, or achieve or
maintain the first priority status of any Lien granted to Agent pursuant to
any of the Loan Documents by Borrower or any Guarantor, including all UCC-1
financing statements, pledges, assignments, hypothecations, registrations
of pledge, notifications, bailment agreements, landlord or mortgagee
waivers, processor waivers, intercreditor agreements, subordination
agreements, chattel mortgage filings or similar instruments, agreements or
documents.
Littlejohn - Littlejohn Fund II, L.P., a Delaware limited partnership.
Littlejohn Guaranty - the Limited Guaranty Agreement dated on or about
the Closing Date from Littlejohn in favor of Agent and Lenders, in the form
of Exhibit J hereto.
Loan Account - the loan account established by each Lender on its
books pursuant to Section 4.7 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Margin Stock - shall have the meaning ascribed to it in Regulation U
and of the Board of Governors.
Material Adverse Effect - the effect of any event or condition which,
alone or when taken together with other events or conditions occurring or
existing concurrently therewith, (i) has a material adverse effect upon the
business, operations, Properties or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole; (ii) has or may be
reasonably expected to have any material adverse effect whatsoever upon the
validity or enforceability of the Agreement or any of the other Loan
Documents; (iii) has any material adverse effect upon the value of the
whole or any material part of the Collateral, the Liens of Agent with
respect to such Collateral or the priority of any such Liens; (iv)
materially impairs the ability of any other Obligor to perform its
obligations under the Agreement or any of the other Loan Documents,
including repayment of any of the Obligations when due; or (v) materially
impairs the ability of Agent or any Lender to
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enforce or collect the Obligations or realize upon any of the Collateral in
accordance with the Loan Documents and Applicable Law.
Material Contract - an agreement to which an Obligor is a party (other
than the Loan Documents) (i) which is deemed to be a material contract as
provided in Regulation S-K promulgated by the SEC under the Securities Act
of 1933 or (ii) for which breach, termination, cancellation, nonperformance
or failure to renew would reasonably be expected to have a Material Adverse
Effect.
Maximum Rate - the maximum non-usurious rate of interest permitted by
Applicable Law that at any time, or from time to time, may be contracted
for, taken, reserved, charged or received on the Debt in question or, to
the extent that at any time Applicable Law may thereafter permit a higher
maximum non-usurious rate of interest, then such higher rate.
Notwithstanding any other provision hereof, the Maximum Rate shall be
calculated on a daily basis (computed on the actual number of days elapsed
over a year of 365 or 366 days, as the case may be).
Money Borrowed - as applied to any Person, (i) Debt arising from the
lending of money by any other Person to such Person; (ii) Debt, whether or
not in any such case arising from the lending of money by another Person to
such Person, (A) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C) upon
which interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for Property;
(iii) Debt that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit; and (v) Debt of such Person under any guaranty of
obligations that would constitute Debt for Money Borrowed under clauses (i)
through (iii) hereof, if owed directly by such Person.
Moody's - Moody's Investors Services, a division of McGraw Hill, Inc.
Mueller - Mueller Industries, Inc.
Multi-Employer Plan - a Plan described in Section 4001(a)(3) of ERISA.
Net Proceeds - with respect to a disposition of any Collateral,
proceeds (including cash receivable (when received) by way of deferred
payment) received by Borrower in cash from the sale, lease, transfer or
other disposition of any Property, including insurance proceeds and awards
of compensation received with respect to the destruction or condemnation of
all or part of such Property, net of: (i) the reasonable and customary
costs of such sale, lease, transfer or other disposition (including legal
fees and sales commissions); (ii) amounts applied to repayment of Debt
(other than the Obligations) secured by a Permitted Lien on the Collateral
disposed of that is senior to Agent's Liens with respect to such
Collateral; and (iii) provided no Default or Event of Default exists,
amounts paid or retained for the payment of any tax liability incurred by
Borrower as a result of such disposition.
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Normal Period Reserve Amount - for each month, or portion thereof,
that the Slow Period Reserve is not in effect, an amount equal to
$10,000,000; provided that, commencing April 1, 2000, and for each month
thereafter (other than a month, or portion thereof, that the Slow Period
Reserve Amount is in effect), the amount shall be $5,000,000 if the ratio
of Consolidated Operating Cash Flow to Consolidated Debt Service is equal
to or greater than 1.25 to 1. The foregoing ratio shall be calculated for a
period (not to exceed 12 consecutive months) ending on the month preceding
the month for which the reserve amount is to be determined, but the first
month of such period shall be February 2000 until March 2001 (at which time
a rolling 12-month period shall be utilized to calculate the ratio).
Note Agreement - the Note Agreement to be entered into on or before
the Closing Date among Borrower and Vendors pursuant to which the Vendor
Notes are issued.
Notes - each Revolver Note, the Settlement Note and any other
promissory note executed by Borrower at Agent's request to evidence any of
the Obligations.
Notice of Borrowing - as defined in Section 3.1.1(i) of the Agreement.
Notice of Conversion/Continuation - as defined in Section 2.1.2(ii) of
the Agreement.
Obligations - in each case, whether now in existence or hereafter
arising, (i) the principal of, and interest and premium, if any, on, the
Revolver Loans; (ii) all LC Outstandings and all other obligations of any
Obligor to Agent or Fleet arising in connection with the issuance of any
Letter of Credit; (iii) all Debt and other obligations of Borrower to Agent
or Fleet under any Interest Rate Contract, including any premature
termination or breakage costs; and (iv) all other Debts, covenants, duties
and obligations (including Contingent Obligations) now or at any time or
times hereafter owing by Borrower to Agent or any Lender under or pursuant
to the Agreement or any of the other Loan Documents, whether evidenced by
any note or other writing, whether arising from any extension of credit,
opening of a letter of credit, acceptance, loan, guaranty, indemnification
or otherwise, and whether direct or indirect, absolute or contingent, due
or to become due, primary or secondary, or joint or several, including all
interest, charges, expenses, fees or other sums (including Extraordinary
Expenses) chargeable to any or all Obligors hereunder or under any of the
other Loan Documents.
Obligor - Borrower, each Guarantor, and any other Person who is at any
time liable for the payment of the whole or any part of the Obligations or
that has granted in favor of Agent a Lien upon any of any of such Person's
assets to secure payment of any of the Obligations.
Ordinary Course of Business - with respect to any transaction
involving any Person, the ordinary course of such Person's business, as
conducted by such Person in accordance with past practices and undertaken
by such Person in good faith and not for the purpose of evading any
covenant or restriction in any Loan Document.
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Organization Documents - with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of organization,
operating agreement, members agreement, partnership agreement, voting
trust, or similar agreement or instrument governing the formation or
operation of such Person.
OSHA - the Occupational Safety and Hazard Act of 1970.
Other Agreements - the Notes, each LC Support, the Fee Letter, the
Vendor Lien Subordination, the Vendor Debt Subordination, each Interest
Rate Contract with Bank and any and all agreements, instruments and
documents (other than the Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower, any Obligor or any other
Person and delivered to Agent or any Lender in respect of the transactions
contemplated by the Agreement.
Out-of-Formula Condition - as defined in Section 1.1.2 of the
Agreement.
Out-of-Formula Facility Conditions - shall have the meaning ascribed
to it in Section 1.1.2 of the Agreement.
Out-of-Formula Fix Date - as defined in the Littlejohn Guaranty.
Out-of-Formula Loan - a Revolver Loan made when an Out-of-Formula
Condition exists or the amount of any Revolver Loan which, when funded,
results in an Out-of-Formula Condition.
Pameco Investment - Pameco Investment Company, Inc., a Delaware
corporation.
Pameco Investment Security Agreement - the Security Agreement to be
executed by Pameco Investment on or before the Closing Date in favor of
Agent and by which Pameco Investment shall grant to Agent, for its benefit
as Agent and for the Pro Rata benefit of Lenders, a security interest in
all or substantially all of its assets as security for the payment and
performance of the Obligations.
Participant - as defined in Section 13.2.1.
Participating Lender - as defined in Section 1.3.2(i).
Payment Account - an account maintained by Agent to which all monies
from time to time deposited to a Dominion Account shall be transferred and
all other payments shall be sent in immediately available federal funds.
Payment Items - all checks, drafts, or other items of payment payable
to Borrower, including proceeds of any of the Collateral.
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Pending Revolver Loans - at any date, the aggregate principal amount
of all Revolver Loans which have been requested in any Notice of Borrowing
received by Agent but which have not theretofore been advanced by Agent or
Lenders.
Permitted Acquisition - any Acquisition by Borrower (or by an
Acquisition Subsidiary) in which each of the following conditions is
satisfied: (i) the business to be acquired is related or substantially
similar to the business of Borrower; (ii) immediately before and after
giving effect to such Acquisition, no Default or Event of Default shall
exist or result therefrom; (iii) Availability is at least $10,000,000 at
the time of and after giving effect to such Acquisition; (iv) Borrower has
a Consolidated Fixed Charge Coverage Ratio of at least 1.25 to 1.0 at the
time of and after giving effect to such Acquisition; (v) Borrower shall
have given Agent not less than 20 days written notice prior to the proposed
consummation of the Acquisition and shall have provided to Agent and each
Lender complete and accurate copies of all term sheets, letters of intent,
commitment letters, proposals and drafts of Acquisition Documents, promptly
after Borrower's receipt thereof; (vi) any Debt incurred by Borrower or
Acquisition Subsidiary to the seller in any such Acquisition shall
constitute Subordinated Debt and such seller shall have executed in favor
of Agent a subordination agreement in form and substance satisfactory to
Agent; (vii) Borrower's consummation of the Acquisition shall be in
compliance with all Applicable Law and Borrower shall have obtained all
required Governmental Approvals; (viii) each direct or indirect Subsidiary
of Borrower (including any Acquisition Subsidiary) created in connection
with or resulting from the Acquisition shall be wholly-owned, directly or
indirectly, by Borrower, and such Subsidiary, shall execute a Subsidiary
Guaranty and Guarantor Security Documents or, with the consent of agent and
the Required Lenders, shall become a Co-Borrower; and (ix) the aggregate of
all Acquisitions during the period from (a) the Closing Date through
February 28, 2001, does not exceed $1,000,000, (b) March 1, 2001 through
February 28, 2002, does not exceed $5,000,000 and (c) during each 12-month
period thereafter, does not exceed $10,000,000.
Permitted Contingent Obligations - Contingent Obligations arising from
endorsements for collection or deposit in the Ordinary Course of Business;
Contingent Obligations arising from Interest Rate Contracts entered into in
the Ordinary Course of Business pursuant to the Agreement or with Agent's
prior written consent; Contingent Obligations of Borrower and its
Subsidiaries existing as of the Closing Date, including extensions and
renewals thereof that do not increase the amount of such Contingent
Obligations as of the date of such extension or renewal; Contingent
Obligations incurred in the Ordinary Course of Business with respect to
surety bonds, appeal bonds, performance bonds and other similar
obligations; Contingent Obligations arising under indemnity agreements to
title insurers to cause such title insurers to issue to Agent title
insurance policies; and Contingent Obligations with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions of Equipment permitted under Section 7.4.2 of the Agreement.
Permitted Lien - a Lien of a kind specified in Section 9.2.5 of the
Agreement.
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Permitted Purchase Money Debt - Purchase Money Debt of Borrower and
its Subsidiaries which is incurred after the date of the Agreement and
which is secured by no Lien or only by a Purchase Money Lien, provided that
the aggregate amount of Purchase Money Debt outstanding at any time does
not exceed $3,000,000 and the incurrence of such Purchase Money Debt does
not violate any limitation in the Loan Documents regarding Capital
Expenditures. For the purposes of this definition, the principal amount of
any Purchase Money Debt consisting of capitalized leases shall be computed
as a Capitalized Lease Obligation.
Person - an individual, partnership, corporation, limited liability
company, limited liability partnership, joint stock company, land trust,
business trust, or unincorporated organization, or a Governmental
Authority.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Pledge Agreement - each stock pledge agreement executed by Borrower in
favor of Agent, pursuant to which Borrower pledges to Agent, for its
benefit as Agent and for the Pro Rata benefit of Lenders, all of its Equity
Interests in a Subsidiary.
Prior Lenders - Quilvest, General Electric Capital Corporation,
Wachovia Bank, N.A., Bank of America, N.A. and SunTrust Bank.
Pro Rata - a share of or in all Revolver Loans, participations in LC
Outstandings (or, in the case of Fleet, the portion of the LC Outstandings
in which Fleet does not sell a participation interest pursuant to Section
1.2.2 of the Agreement), liabilities, payments, proceeds, collections,
Collateral and Extraordinary Expenses, which share for any Lender on any
date shall be a percentage (expressed as a decimal, rounded to the ninth
decimal place) arrived at by dividing the amount of the Revolver Commitment
of such Lender on such date by the aggregate amount of the Revolver
Commitments of all Lenders on such date.
Projections - Borrower's forecasted Consolidated (a) balance sheets,
(b) profit and loss statements, (c) cash flow statements, and (d)
capitalization statements, all prepared on a consistent basis with
Borrower's historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions, a projection
of the Borrowing Base and Availability.
Properly Contested - in the case of any Debt of an Obligor (including
any Taxes) that is not paid as and when due or payable by reason of such
Obligor's bona fide dispute concerning its liability to pay same or
concerning the amount thereof, (i) such Debt is being properly contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted; (ii) such Obligor has established appropriate reserves as shall
be required in conformity with GAAP; (iii) the non-payment of such Debt
will not have a Material Adverse Effect and will not result in a forfeiture
of any assets of such Obligor; (iv) no Lien is imposed upon any of such
Obligor's assets with respect to such Debt unless such Lien is at all times
junior and subordinate in priority to the Liens in favor of
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Agent (except only with respect to property taxes that have priority as a
matter of applicable state law) and enforcement of such Lien is stayed
during the period prior to the final resolution or disposition of such
dispute; (v) if the Debt results from, or is determined by the entry,
rendition or issuance against an Obligor or any of its assets of a
judgment, writ, order or decree, enforcement of such judgment, writ, order
or decree is stayed pending a timely appeal or other judicial review; and
(vi) if such contest is abandoned, settled or determined adversely (in
whole or in part) to such Obligor, such Obligor forthwith pays such Debt
and all penalties, interest and other amounts due in connection therewith.
Property - any interest in any kind of property or asset, whether
real, personal or mixed and whether tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than the
Obligations) for the payment of all or any part of the purchase price of
any fixed assets, (ii) any Debt (other than the Obligations) incurred at
the time of or within 10 days prior to or after the acquisition of any
fixed assets for the purpose of financing all or any part of the purchase
price thereof, and (iii) any renewals, extensions or refinancings (but not
any increases in the principal amounts) thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Debt, but only if such Lien shall at all times be confined solely to
the fixed assets acquired through the incurrence of the Purchase Money Debt
secured by such Lien and such Lien constitutes a purchase money security
interest under the UCC.
Quilvest - Quilvest American Equity Ltd., a British Virgin Islands
international business company.
Refinancing Conditions - the following conditions, each of which must
be satisfied before Refinancing Debt shall be permitted under Section 9.2.3
of the Agreement: (i) the Refinancing Debt is in an aggregate principal
amount that does not exceed the aggregate principal amount of the Debt
being extended, renewed or refinanced plus any accrued interest, and
reasonable fees or expenses relating thereto, (ii) the Refinancing Debt has
a later or equal final maturity and a longer or equal weighted average life
than the Debt being extended, renewed or refinanced, (iii) the Refinancing
Debt does not bear a rate of interest that exceeds a market rate (as
determined in good faith by a Senior Officer) as of the date of such
extension, renewal or refinancing, (iv) if the Debt being extended, renewed
or refinanced is subordinate to the Obligations, the Refinancing Debt is
subordinated to the same extent, Borrower gives Agent at least 30 Business
Days prior written notice of any such refinancing and the aggregate
principal amount of the Refinancing Debt is not less than the principal
amount of the Debt being refinanced, (v) the covenants contained in any
instrument or agreement relating to the Refinancing Debt are no less
favorable to Borrower than those relating to the Debt being extended,
renewed or refinanced, and (vi) at the time of and after giving effect to
such extension, renewal or refinancing, no Default or Event of Default
shall exist.
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<PAGE>
Refinancing Debt - Debt for Money Borrowed that is permitted by
Section 9.2.3 and that is the subject or the result of an extension,
renewal or refinancing.
Regulation D - Regulation D of the Board of Governors.
Register - the register maintained by Agent in accordance with Section
4.8.2 of the Agreement.
Reimbursement Date - as defined in Section 1.2.1(iii) of the
Agreement.
Reportable Event - the occurrence, with respect to any Plan, of any of
the events set forth in Section 4043(b) of ERISA.
Required Lenders - at any date of determination thereof, Lenders
having Revolver Commitments representing at least 51% of the aggregate
Revolver Commitments at such time; provided, however, that if any Lender
shall be in breach of any of its obligations hereunder to Borrower or
Agent, including any breach resulting from its failure to honor its
Revolver Commitment in accordance with the terms of the Agreement, then,
for so long as such breach continues, the term "Required Lenders" shall
mean Lenders (excluding each Lender that is in breach of its obligations
under the Agreement) having Revolver Commitments representing at least 51%
of the aggregate Revolver Commitments at such time; provided further,
however, that if the Revolver Commitments have been terminated, the term
"Required Lenders" shall mean Lenders (excluding each Lender that is in
breach of its obligations hereunder) holding Revolver Loans (including
Settlement Loans) representing at least 51% of the aggregate principal
amount of Revolver Loans (including Settlement Loans) outstanding at such
time.
Restricted Investment - any acquisition of Property by Borrower or any
of its Subsidiaries in exchange for cash or other Property, whether in the
form of an acquisition of Equity Interests or Debt, or the purchase or
acquisition by Borrower or any Subsidiary of any other Property, or a loan,
advance, capital contribution or subscription, except acquisitions of the
following: (i) fixed assets to be used in the Ordinary Course of Business
of Borrower or any Subsidiary so long as the acquisition costs thereof
constitute Capital Expenditures permitted hereunder; (ii) goods held for
sale or lease or to be used in the manufacture of goods or the provision of
services by Borrower or any Subsidiary in the Ordinary Course of Business;
(iii) Current Assets arising from the sale or lease of goods or the
rendition of services in the Ordinary Course of Business of Borrower or any
Subsidiary; (iv) investments in Subsidiaries to the extent existing on the
Closing Date; and (v) Cash Equivalents to the extent they are not subject
to rights of offset in favor of any Person other than Agent or a Lender;
(vi) loans and other advances of money to the extent not prohibited by
Section 9.2.2; and (vii) Permitted Acquisitions.
Restrictive Agreement - an agreement (other than any of the Loan
Documents) that, if and for so long as an Obligor or any Subsidiary of such
Obligor is a party thereto, would prohibit, condition or restrict such
Obligor's or Subsidiary's right to incur or repay Debt for Money Borrowed
(including any of the Obligations); grant Liens upon any of
26
<PAGE>
such Obligor's or Subsidiary's assets (including Liens granted in favor of
Agent pursuant to the Loan Documents); declare or make Distributions;
amend, modify, extend or renew any agreement evidencing Debt for Money
Borrowed (including any of the Loan Documents); or repay any Debt owed to
any Obligor.
Revolver Commitment - at any date for any Lender, the obligation of
such Lender to make Revolver Loans and to purchase participations in LC
Outstandings pursuant to the terms and conditions of the Agreement, which
shall not exceed the principal amount set forth opposite such Lender's name
under the heading "Revolver Commitment" on the signature pages of the
Agreement or the signature page of the Assignment and Acceptance by which
it became a Lender, as modified from time to time pursuant to the terms of
the Agreement or to give effect to any applicable Assignment and
Acceptance; and "Revolver Commitments" means the aggregate principal amount
of the Revolver Commitments of all Lenders, the maximum amount of which
shall be $130,000,000, as reduced from time to time pursuant to Section
1.1.5 of the Agreement.
Revolver Loan - a loan made by Lenders as provided in Section 1.1 of
the Agreement (including each Out-of-Formula Loan) or a Settlement Loan
funded solely by Fleet.
Revolver Note - a Revolver Note to be executed by Borrower in favor of
each Lender in the form of Exhibit A, which shall be in the face amount of
such Lender's Revolver Commitment and which shall evidence all Revolver
Loans made by such Lender to Borrower pursuant to the Agreement.
S&P - Standard & Poor's Corporation.
Schedule of Accounts - as defined in Section 7.2.1 of the Agreement.
SEC - Securities and Exchange Commission.
Securities Purchase Agreement - the Securities Purchase Agreement
dated the date of the Agreement among the Borrower, Littlejohn and
Quilvest, pursuant to which, among other things, Littlejohn and Quilvest
have agreed to purchase 140,000 shares of Series A Preferred Stock and
140,000 warrants to purchase additional shares of Series A Preferred Stock
of Borrower.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933.
Security Documents - each Guaranty, the Trademark Security Agreements,
the Guarantor Security Documents, each Pledge Agreement, the Business
Interruption Insurance Assignment, the Lien Perfection Documents and all
other instruments and agreements now or at any time hereafter securing the
whole or any part of the Obligations.
27
<PAGE>
Senior Officer - the chief executive officer, chief operating officer,
the president, vice president of finance, treasurer or the chief financial
officer of, or in-house legal counsel to, Borrower.
Settlement Date - as defined in Section 3.1.3(i) of the Agreement.
Settlement Loan - as defined in Section 3.1.3(ii) of the Agreement.
Settlement Note - the Settlement Note to be executed by Borrower to
the order of Fleet on or before the Closing Date in the form of Exhibit
A-1, to evidence the outstanding Settlement Loans owing to Fleet from time
to time pursuant to Section 3.1.3 of the Agreement.
Settlement Report - a report delivered by Agent to Lenders summarizing
the amount of the outstanding Revolver Loans as of the Settlement Date and
the calculation of the Borrowing Base as of such Settlement Date.
Shareholders Agreement - the Shareholders Agreement dated the date of
the Agreement among Borrower, Littlejohn and Quilvest.
Slow Period Reserve Amount - for any interval of 90 consecutive days
selected by Borrower to be effective during the period from November 1 of
each year through the last day of February of the next year, an amount
equal to $5,000,000.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such
Person's Debts (including contingent Debts), (ii) is able to pay all of its
Debts as such Debts mature, (iii) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage, and (iv) is not "insolvent" within the meaning of Section
101(32) of the Bankruptcy Code.
Statutory Reserves - on any date, the percentage (expressed as a
decimal) established by the Board of Governors which is the then stated
maximum rate for all reserves (including any emergency, supplemental or
other marginal reserve requirements) applicable to any member bank of the
Federal Reserve System in respect to Eurocurrency Liabilities (or any
successor category of liabilities under Regulation D). Such reserve
percentage shall include those imposed pursuant to said Regulation D. The
Statutory Reserve shall be adjusted automatically on and as of the
effective date of any change in such percentage.
Subordinated Debt - Debt of Borrower that is fully and absolutely
subordinated in right of payment to the Obligations in a manner
satisfactory to Agent at the time of the incurrence of such Debt, including
Debt evidenced by the Vendor Notes.
Subsidiary - any Person in which more than 50% of its outstanding
Voting Securities or more than 50% of all Equity Interests is owned
directly or indirectly by
28
<PAGE>
Borrower, by one or more other Subsidiaries of Borrower or by Borrower and
one or more other Subsidiaries.
Subsidiary Guarantor - each Subsidiary of Borrower that is or
hereafter becomes a Guarantor.
Subsidiary Guaranty - a Subsidiary Guaranty that has been executed and
delivered by a Subsidiary Guarantor in favor of Agent in the form of
Exhibit I.
Taxes - any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer,
license, payroll, withholding, social security and franchise taxes now or
hereafter imposed or levied by the United States or any other Governmental
Authority and all interest, penalties, additions to tax and similar
liabilities with respect thereto, but excluding, in the case of each
Lender, taxes imposed on or measured by the net income or overall gross
receipts of such Lender.
Term - as defined in Section 5.1 of the Agreement.
Trademark Security Agreements - (i) the Trademark Security Agreement
to be executed by Pameco Investment in favor of Agent on or before the
Closing Date and by which Pameco Investment shall assign to Agent, for its
benefit as Agent and for the Pro Rata benefit of Lenders, as security for
the Obligations, all of Pameco Investment's right, title and interest in
and to all of its trademarks and (ii) the Trademark Security Agreement to
be executed by Borrower in favor of Agent on or before the Closing Date and
by which Borrower shall assign to Agent, for its benefit as Agent and for
the Pro Rata benefit of Lenders, as security for the Obligations, all of
Borrower's right, title and interest in and to all of its trademarks.
Transferee - as defined in Section 13.3.3 of the Agreement.
Type - any type of a Revolver Loan determined with respect to the
interest option applicable thereto, which shall be either a LIBOR Loan or a
Base Rate Loan.
UCC - the Uniform Commercial Code (or any successor statute) as
adopted and in force in the State of Georgia or, when the laws of any other
state govern the method or manner of the perfection or enforcement of any
security interest in any of the Collateral, the Uniform Commercial Code (or
any successor statute) of such state.
Unfinanced Capital Expenditures - for any Person, Capital Expenditures
of such Person that have not been financed by Debt for Money Borrowed of
such Person.
Upstream Payment - a payment or distribution of cash or other Property
by a Subsidiary to Borrower, whether in repayment of Debt owed by such
Subsidiary to Borrower, to pay dividends on account of Borrower's ownership
of Equity Interests or otherwise.
29
<PAGE>
Value - with reference to the value of Inventory, value determined on
the basis of the lower of cost or market of such Inventory, with the cost
thereof calculated on a first-in, first-out basis determined in accordance
with GAAP.
Vendor Agency Agreement - the Collateral Agency Agreement to be
entered into on or about the Closing Date between Vendor Agent and Vendors.
Vendor Agent - International Comfort Products Corporation (USA), in
its capacity as agent for the Vendors.
Vendor Debt Subordination - the Debt Subordination Agreement to be
executed on or about the Closing Date among Vendor Agent, Vendors, Borrower
and Agent in the form of Exhibit K, and pursuant to which, among other
things, Vendor Agent and Vendors shall agree to subordinate all of the
"Subordinated Debt" (as defined therein), including all Debt evidenced by
the Vendor Notes, to the prior payment in full of the Obligations.
Vendor Lien Subordination - the Lien Subordination Agreement to be
executed on or about the Closing Date by Vendor Agent and Agent in the form
of Exhibit L, pursuant to which Vendor Agent shall agree, among other
things, to subordinate its Liens in the Collateral to the Liens therein of
Agent.
Vendor Notes - those subordinated secured notes issued by Borrower to
the Vendors pursuant to the terms of the Note Agreement, in the aggregate
principal amount of $20,000,000.
Vendor Subordinated Note Documents - the Note Agreement, the Vendor
Notes, Vendor Agency Agreement, and any and all other agreements,
instruments or documents executed in connection with the Debt evidenced by
the Vendor Notes.
Vendor Supply Agreements - collectively, (i) that certain Supply
Agreement to be dated on or about the Closing Date between Borrower and
Emerson, (ii) that certain Supply Agreement to be dated on or about the
Closing Date between Borrower and Mueller, (iii) that certain Supply
Agreement to be dated on or about the Closing Date between Borrower and
International, and (iv) that certain Supply Agreement to be dated on or
about the Closing Date between Borrower and Dupont.
Vendors - Emerson, Mueller, International and Dupont.
Voting Power - with respect to any Person, the power ordinarily
(without the occurrence of a contingency) to elect the members of the Board
of Directors (or persons performing similar functions) of such Person.
30
<PAGE>
Voting Securities - Equity Interests of any class or classes of a
corporation or other entity the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the corporate
directors or Persons performing similar functions.
Accounting Terms. Unless otherwise specified herein, all terms of an
accounting character used in the Agreement shall be interpreted, all accounting
determinations under the Agreement shall be made, and all financial statements
required to be delivered under the Agreement shall be prepared in accordance
with GAAP, applied on a basis consistent with the most recent audited
Consolidated financial statements of Borrower and its Subsidiaries heretofore
delivered to Agent and Lenders and using the same method for inventory valuation
as used in such audited financial statements, except for any change required by
GAAP.
Other Terms. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the UCC to the extent the
same are used or defined therein.
Certain Matters of Construction. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time
from a specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding." The
section titles, table of contents and list of exhibits appear as a matter of
convenience only and shall not affect the interpretation of the Agreement. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations; to any of the Loan
Documents shall include any and all modifications thereto and any and all
restatements, extensions or renewals thereof; to any Person shall mean and
include the successors and permitted assigns of such Person; to "including" and
"include" shall be understood to mean "including, without limitation" (and, for
purposes of the Agreement and each other Loan Document, the parties agree that
the rule of ejusdem generis shall not be applicable to limit a general
statement, which is followed by or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned); or to the
time of day shall mean the time of day on the day in question in Atlanta,
Georgia, unless otherwise expressly provided in the Agreement. A Default or an
Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date
on which such Default or Event of Default is waived in writing by Agent pursuant
to the Agreement or, in the case of a Default, is cured within any period of
cure expressly provided in the Agreement; and an Event of Default shall
"continue" or be "continuing" until such Event of Default has been waived in
writing by Lender. Whenever the phrase "to the best of Borrower's knowledge" or
words of similar import relating to the knowledge or the awareness of Borrower
are used herein, such phrase shall mean and refer to (i) the actual knowledge of
a Senior Officer of any Borrower or (ii) the knowledge that a Senior Officer
would have obtained if they had engaged in good faith and diligent performance
of his duties, including the making of such reasonably specific inquiries as may
be necessary of the employees or agents of Borrower and a good faith attempt to
ascertain the existence or accuracy of the matter to which such phrase relates.
31
<PAGE>
IN WITNESS WHEREOF, this Appendix has been duly executed in Atlanta,
Georgia, on February 17, 2000.
Borrower:
PAMECO CORPORATION
By: /s/ Mark S. Sellers
-------------------------------------------
Mark S. Sellers, Chief Financial Officer
Attest: /s/ Richard S. Martin
---------------------------------------
Richard S. Martin, Vice-President of
Finance, Treasurer and Secretary
[CORPORATE SEAL]
Lender:
FLEET CAPITAL CORPORATION
By: /s/ Dennis Losin
-------------------------------------------
Title: Vice President
Agent:
FLEET CAPITAL CORPORATION,
as Agent
By: /s/ Dennis Losin
-------------------------------------------
Title: Vice President
32
<PAGE>
PAMECO CORPORATION
SECURITIES PURCHASE AGREEMENT
Dated as of February 18, 2000
$20,000,000 Senior Subordinated Notes due March 31, 2005
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<C> <S> <C>
1. PURCHASE AND SALE OF SECURITIES................................................................. 1
1.1. Issue of Securities by the Company....................................................... 1
1.2. The Closing.............................................................................. 2
1.3. Original Issue Discount.................................................................. 3
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY................................................... 3
2.1. Organization and Qualification........................................................... 3
2.2. Power and Authority...................................................................... 3
2.3. Legal Sale; Legally Enforceable Agreement................................................ 3
2.4. Capital Structure........................................................................ 4
2.5. Corporate Names.......................................................................... 4
2.6. Business Locations; Agent for Process.................................................... 4
2.7. Title to Properties; Priority of Liens................................................... 4
2.8. Financial Statements; Debt; Projections; Fiscal Year..................................... 5
2.9. Full Disclosure.......................................................................... 6
2.10. Solvent Financial Condition.............................................................. 6
2.11. Surety Obligations....................................................................... 6
2.12. Taxes.................................................................................... 6
2.13. Brokers.................................................................................. 6
2.14. Intellectual Property.................................................................... 6
2.15. Governmental Approvals................................................................... 6
2.16. Compliance with Laws..................................................................... 7
2.17. Restrictions............................................................................. 7
2.18. Restrictions. Litigation................................................................. 7
2.19. No Defaults.............................................................................. 7
2.20. Leases................................................................................... 7
2.21. Pension Plans............................................................................ 8
2.22. Trade Relations.......................................................................... 8
2.23. Labor Relations.......................................................................... 8
2.24. Not a Regulated Entity................................................................... 8
2.25. Margin Stock............................................................................. 8
2.26. Private Offering of Notes and Warrants................................................... 8
2.27. Senior Credit Documents.................................................................. 9
2.28. Capitalization........................................................................... 9
2.29. Governmental Consent to Sale of Notes and Warrants....................................... 9
3. WARRANTIES AND REPRESENTATIONS OF THE PURCHASER................................................. 10
3.1. Purchase for Investment.................................................................. 10
4. CLOSING CONDITIONS.............................................................................. 10
4.1. Opinions of Counsel...................................................................... 10
4.2. Warranties and Representations True; Compliance with
Agreement and Financing Documents...................................................... 10
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
4.3. Officers Certificates.................................................................... 11
4.4. Good Standing Certificates............................................................... 11
4.5. Warrant Agreement, Equity Investment, etc................................................ 11
4.6. Senior Credit Agreement.................................................................. 11
4.7. Subsidiary Guaranty...................................................................... 12
4.8. Evidence of Perfection and Priority of Liens............................................. 12
4.9. Solvency Certificates.................................................................... 12
4.10. No Labor Disputes........................................................................ 12
4.11. Compliance with Laws and Other Agreements................................................ 12
4.12. No Material Adverse Change............................................................... 12
4.13. No Defaults.............................................................................. 13
4.14. Fees and Expenses........................................................................ 13
4.15. SEC Filing............................................................................... 13
4.16. Supply Agreements........................................................................ 13
4.17. Other Purchasers......................................................................... 13
4.18. Proceedings Satisfactory................................................................. 13
5. INTERPRETATION OF THIS AGREEMENT................................................................ 13
5.1. Certain Terms Defined..................................................................... 13
5.2. Certain Terms Defined Elsewhere........................................................... 15
5.3. Directly or Indirectly.................................................................... 16
5.4. Section Headings and Table of Contents and Construction................................... 16
5.5. Governing Law............................................................................. 17
6. MISCELLANEOUS................................................................................... 17
6.1. Communications............................................................................ 17
6.2. Survival.................................................................................. 17
6.3. Successors and Assigns.................................................................... 18
6.4. Amendment and Waiver...................................................................... 18
6.5. Certain Expenses.......................................................................... 18
6.6. Waiver of Jury Trial; Consent to Jurisdiction; Etc........................................ 18
6.7. Entire Agreement.......................................................................... 19
6.8. Execution in Counterpart.................................................................. 19
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Annex 1 -- Information as to Purchaser
Annex 3 -- Information as to Company
Exhibit 1.1(a) -- Form of Note Agreement
Exhibit 4.3(a) -- Form of Officer's Certificate - Company
Exhibit 4.3(b) -- Form of Secretary's Certificate - Company
Exhibit 4.3(c) -- Form of Secretary's Certificate - Subsidiary Guarantor
Exhibit 4.7 -- Form of Subsidiary Guaranty
</TABLE>
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<PAGE>
PAMECO CORPORATION
Securities Purchase Agreement
$20,000,000 Senior Subordinated Notes due March 31, 2005
Dated as of February 18, 2000
Separately executed by each of the
Purchasers Listed on Annex 1 hereto
Ladies and Gentlemen:
PAMECO CORPORATION (together with any successors and assigns who become
such in accordance herewith, the "Company"), a Georgia corporation, hereby
agrees with you as set forth below.
1. PURCHASE AND SALE OF SECURITIES
1.1. Issue of Securities by the Company
(a) Issue of Notes. The Company will authorize the issue of
$20,000,000 in aggregate principal amount of its Senior Subordinated Notes
due March 31, 2005 (all such notes, whether initially issued, or issued in
exchange or substitution for, any such note, in each case in accordance
with the Note Agreement, collectively, the "Notes," whether such Notes
shall be PIK Notes (defined below) or Warrant Notes (defined below)). The
Notes shall be issued pursuant to a Note Agreement (as may be amended,
restated or otherwise modified from time to time, the "Note Agreement") in
the form of Exhibit 1.1(a). The Note Agreement shall specify whether each
purchaser of Notes at the Closing shall be purchasing notes in the form of
(i) Attachment A1 thereto (the "PIK Notes"), which shall provide for the
accrual of interest with respect to the principal thereof on a quarterly
basis, payable in arrears, at a rate of 12% per annum, as further set forth
therein, with a portion of such interest to be capitalized from time to
time on a quarterly basis, all as further set forth therein and in the Note
Agreement, or (ii) Attachment A2 thereto (the "Warrant Notes"), which shall
provide for the accrual of interest with respect to the principal thereof
on a quarterly basis, payable in arrears, at a rate of 12% per annum, as
further set forth therein, with a portion of such interest to be paid in
the form of Warrants (defined below), all as further set forth therein, in
the Note Agreement and in the Warrant Agreement.
(b) Authorization of Warrants. The Company will authorize the
issuance of up to an aggregate of the Warrant Authorization Amount of
warrants (the "Warrants") to purchase shares of Common Stock. The
certificates representing the Warrants (the "Warrant Certificates") shall
be in
1
<PAGE>
the form of Attachment A to the Warrant Agreement and the Warrants
shall have the terms provided in the Warrant Certificates. The Warrants
shall be issued to the holder of the Warrant Notes from time to time, all
as set forth herein, in the Note Agreement, in the Warrant Notes and in the
Warrant Agreement.
1.2. The Closing.
(a) Purchase and Sale of Purchased Securities. The Company hereby
agrees to sell to you and you hereby agree to purchase from the Company,
subject to Section 1.2(d), in accordance with the provisions hereof, the
aggregate principal amount of PIK Notes or Warrant Notes set forth below
your name on Annex 1, at an aggregate purchase price for such Notes and
Warrants equal to one hundred percent (100%) of the principal amount of
Notes to be purchased.
(b) The Closing. The closing (the "Closing") of the sale of the
Purchased Securities will be held at 10:00 a.m., local time, on February
28, 2000 or such other time and date as the Other Purchasers, the Company
and you shall agree (the "Closing Date"). At the Closing, the Company will
deliver to you one or more PIK Notes or Warrant Notes as set forth below
your name on Annex 1, in the denominations indicated on Annex 1, in the
aggregate principal amount of your purchase, dated the Closing Date and
registered in the name of the holder indicated on Annex 1, against payment
by federal funds wire transfer in immediately available funds of the
purchase price therefor, as directed by the Company in writing not later
than three (3) Business Days prior to the Closing Date, which shall be an
account at a bank located in the United States of America.
(c) Other Purchasers. Contemporaneously with the execution and
delivery hereof, the Company is entering into a separate Securities
Purchase Agreement identical (except for the name and signature of the
purchaser) to this Agreement (this Agreement and such other separate
Securities Purchase Agreements, each as from time to time amended or
modified, being herein sometimes referred to as the "Securities Purchase
Agreements") with each other purchaser (individually, an "Other Purchaser,"
and collectively, the "Other Purchasers") listed on Annex 1, providing for
the sale to each Other Purchaser of the Purchased Securities set forth
below its name on such Annex. The sales of the Purchased Securities to you
and to each Other Purchaser are separate sales.
(d) Election to Purchase Warrant Notes or PIK Notes. At any time
prior to the Closing Date, any Purchaser may, at its option, elect to
purchase,
(i) in lieu of any PIK Notes allocated to such holder on
Annex 1, a like principal amount of Warrant Notes or;
(ii) in lieu of any Warrant Notes allocated to such holder
on Annex 1, a like principal amount of PIK Notes;
2
<PAGE>
such election, in either case, to be made in writing delivered to the
Company pursuant to Section 6.1. Effective immediately upon the making of
any such election, Annex 1 shall be deemed to be amended to reflect such
election.
1.3. Original Issue Discount.
You and the Company agree that the amount of original issue discount
attributable, as a result of the delivery of the Warrants from time to time with
respect to the Warrant Notes in accordance with the terms and conditions of this
Agreement and the other Financing Documents is equal to Zero Dollars ($0).
2. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
To induce you to enter into this Agreement and to purchase and pay for the
Purchased Securities to be delivered to you at the Closing, the Company warrants
and represents, as of the Closing Date, as follows:
2.1. Organization and Qualification. Each of the Company and its
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each of the Company and
its Subsidiaries is duly qualified and is authorized to do business and is in
good standing as a foreign corporation in each state or jurisdiction listed on
Part 2.1 of Annex 3 hereto and in all other states and jurisdictions in which
the failure of the Company or any of such Subsidiaries to be so qualified would
have a Material Adverse Effect.
2.2. Power and Authority. Each of the Company and its Subsidiaries is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement, each Supply Agreement and each of the other Financing Documents to
which it is a party. The execution, delivery and performance of this Agreement,
each Supply Agreement and each of the other Financing Documents have been duly
authorized by all necessary action and do not and will not (i) require any
consent or approval of any of the holders of the Equity Interests of the Company
or any Subsidiary; (ii) contravene the Company's or any Subsidiary's
Organization Documents; (iii) violate, or cause the Company or any Subsidiary to
be in default under, any provision of any Applicable Law, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to the
Company or any Subsidiary; (iv) result in a breach of or constitute a default
under any Material Contract; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any
of the Properties now owned or hereafter acquired by the Company or any
Subsidiary.
2.3. Legal Sale; Legally Enforceable Agreement. This Agreement is, each
Supply Agreement is, and each of the other Financing Documents when delivered
under this Agreement will be, a legal, valid and binding obligation of each of
the Company and its Subsidiaries signatories thereto enforceable against them in
accordance with the respective terms of such Financing Documents and Supply
Agreements, respectively, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights.
3
<PAGE>
2.4. Capital Structure. As of the date hereof, Part 2.4 of Annex 3 states
(i) the correct name of each Subsidiary, its jurisdiction of incorporation and
the percentage of its Equity Interests having voting powers owned by each
Person, (ii) the name of each of the Company's corporate Affiliates (excluding
Persons other than the Company and its Subsidiaries that are controlled by
Littlejohn or Quilvest American Equity, Ltd.) and the nature of the affiliation
and (iii) the number of authorized and issued Equity Interests (and treasury
shares) of the Company that are owned by Affiliates, directors or employees of
the Company and the number of authorized and issued Equity Interests (including
treasury shares) of each Subsidiary. The Company has good title to all of the
shares it purports to own of the Equity Interests of each of its Subsidiaries,
free and clear in each case of any Lien other than Permitted Liens. All such
Equity Interests have been duly issued and are fully paid and non-assessable.
Except as disclosed on Part 2.4 of Annex 3, since the date of the financial
statements of the Company referred to in Section 2.8 hereof, the Company has not
made, or obligated itself to make, any Distribution except those permitted
pursuant to Section 4.6 of the Note Agreement. Except at set forth on Part 2.4
of Annex 3, there are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Equity Interests or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of the Company or any of its
Subsidiaries. Except as set forth on Part 2.4 of Annex 3, there are no
outstanding agreements or instruments binding upon the holders of any the
Company's Equity Interests relating to the ownership of its Equity Interests.
2.5. Corporate Names. During the 5-year period preceding the date of this
Agreement, neither the Company nor any Subsidiary has been known as or used any
corporate, fictitious or trade names except those listed on Part 2.5 of Annex 3
hereto. Except as set forth on Part 2.5 of Annex 3, neither the Company nor any
Subsidiary has been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person.
2.6. Business Locations; Agent for Process. As of the date hereof, the
chief executive office and other places of business of the Company and each
Subsidiary are as listed on Part 2.6 of Annex 3 hereto. Since July 1997, neither
the Company nor any Subsidiary has had an office, place of business or agent for
service of process other than as listed on Part 2.6 of Annex 3. Except as shown
on Part 2.6 of Annex 3, on the date hereof, no Inventory of the Company or any
Subsidiary is stored with a bailee, warehouseman or similar Person, nor is any
Inventory consigned to any Person. As of the date hereof, the Persons listed on
Part 2.6 of Annex 3 have consigned inventory to the Company in the amounts
referenced therein and at Agent's request, the Company shall certify to the
Agent from time to time on the next Compliance Certificate that is to be
delivered to the Agent by the Company under this Agreement after any such
request, the amount, type and name of the owner of any consigned inventory.
2.7. Title to Properties; Priority of Liens. The Company and each
Subsidiary has good and marketable title to and fee simple ownership of, or
valid and subsisting leasehold interests in, all of its real Property, and good
title to all of its personal Property, including all Property reflected in the
financial statements referred to in Section 2.8, in each case free and clear of
all Liens except Permitted Liens. The Company has paid or discharged, and has
caused each Subsidiary to pay and
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discharge, all lawful claims which, if unpaid, might become a Lien against any
Properties of the Company or such Subsidiary that is not a Permitted Lien. The
Liens granted to Agent pursuant to this Agreement and the other Financing
Documents are Liens with priority only subject to those granted in favor of the
holders of Senior Debt and subject only to those other Permitted Liens which are
expressly permitted by the terms of the Note Agreement to have priority over the
Liens of Agent.
2.8. Financial Statements; Debt; Projections; Fiscal Year.
(a) Financial Statements. The Company has provided you with the
Consolidated financial statements of the Company and the Subsidiaries
described on Part 2.8(a) of Annex 3. Such Consolidated financial statements
have been prepared in accordance with GAAP, and present fairly the
financial positions of the Company and such Persons at such dates specified
therein and the results of the Company's operations for such periods
specified therein. Since September 30, 1999, there has been no material
change in the condition, financial or otherwise, of the Company and such
other Persons as shown on the Consolidated balance sheet as of such date
and no material change in the aggregate value of Equipment and real
Property owned by the Company or such other Persons, except as set forth in
Part 2.8(a) of Annex 3, none of which transactions or changes, individually
or in the aggregate has been materially adverse.
(b) Debt. Part 2.8(b) of Annex 3 lists all Debt for Money Borrowed
of the Obligors as of the Closing Date, after giving effect to the
transactions contemplated by the Financing Documents and the Senior Credit
Agreement, and provides the following information with respect to each item
of such Debt: the obligor, each guarantor thereof and each other Person
similarly liable in respect thereof, the holder thereof, the outstanding
amount, the current portion of the outstanding amount, the final maturity,
required sinking fund payments, and a description of the collateral
securing such Debt.
(c) Projections. The Company has delivered to you projected
financial statements of the Obligors described on Part 2.8(c) of Annex 3
(collectively, the "Projections"). The assumptions used in preparation of
the Projections were reasonable when made and continue to be reasonable.
Such Projections have been prepared by the executive and financial
personnel of the Company in light of the business of the Company. Such
Projections have been prepared in good faith, have a reasonable basis and
represent the good faith opinion of the Company as to the projected results
of the operations of the Obligors. No material facts have occurred since
the preparation of the Projections that would cause the Projections, taken
as a whole, not to be reasonably attainable, and the Obligors do not have,
on the Closing Date, any material obligations (whether accrued, matured,
absolute, actual, contingent or otherwise) that are not reflected in the
Projections.
(d) Fiscal Year. The fiscal year of the Company ends on the last day
of February in each year.
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2.9. Full Disclosure. The financial statements referred to in Section 2.8
hereof do not contain any untrue statement of a material fact and neither this
Agreement nor any other written statement contains or omits any material fact
necessary to make the statements contained herein or therein not materially
misleading. There is no fact or circumstances in existence on the date hereof
which the Company has failed to disclose to Agent in writing that may reasonably
be expected to have a Material Adverse Effect.
2.10. Solvent Financial Condition. Each of the Company and its
Subsidiaries, after giving effect to the issuance of the Notes and the
consummation of the other transactions described in the Financing Documents is
Solvent.
2.11. Surety Obligations. Except as set forth on Part 2.11 of Annex 3
hereto, on the date hereof, neither the Company nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract issued or entered into any agreement to assure payment, performance or
completion of performance of any undertaking or obligation of any Person.
2.12 Taxes. The FEIN of each of the Company and the Subsidiaries is as
shown on Part 2.12 of Annex 3 hereto. The Company and each Subsidiary has filed
all federal, state and local tax returns and other reports it is required by law
to file and has paid, or made provision for the payment of, all Taxes upon it,
its income and Properties as and when such Taxes are due and payable, except to
the extent being Properly Contested. The provision for Taxes on the books of the
Company and each Subsidiary are adequate for all years not closed by applicable
statutes, and for its current Fiscal Year.
2.13. Brokers. There are no claims against the Company for brokerage
commissions, finder's fees or investment banking fees in connection with the
transactions contemplated by this Agreement or any of the other Financing
Documents.
2.14. Intellectual Property. The Company and its Subsidiaries each owns or
has the lawful right to use all Intellectual Property necessary for the present
and planned future conduct of its business without any conflict with the rights
of others; there is no objection to, or pending (or, to the Company's knowledge,
threatened) Intellectual Property Claim with respect to, the Company's or any
Subsidiary's right to use any such Intellectual Property which could reasonably
be expected to have a Material Adverse Effect, and the Company is not aware of
any grounds for challenge or objection thereto; and, except as may be disclosed
on Part 2.14 of Annex 3, neither the Company nor any Subsidiary pays any royalty
or other compensation to any Person for the right to use any Intellectual
Property. All such patents, trademarks, service marks, tradenames, copyrights,
licenses and other similar rights are listed on Part 2.14 of Annex 3, to the
extent they are registered under any Applicable Law or are otherwise material to
the Company's or any Subsidiary's business.
2.15. Governmental Approvals. Each of the Company and its Subsidiaries
has, and is in good standing with respect to, Governmental Approval necessary to
continue to conduct its business as heretofore or proposed to be conducted by it
and to own or lease and operate its Properties as now owned or leased by it if
the failure to
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obtain such Governmental Approval could reasonably be expected to have a
Material Adverse Effect.
2.16. Compliance with Laws. Each of the Company and its Subsidiaries has
duly complied with, and its Properties, business operations and leaseholds are
in compliance in all material respects with, the provisions of all Applicable
Law (except to the extent that any such noncompliance with Applicable Law could
not reasonably be expected to have a Material Adverse Effect) and there have
been no citations, notices or orders of noncompliance issued to the Company or
any of the Subsidiaries under any such law, rule or regulation. No Inventory has
been produced in violation of the Fair Labor Standards Act (29 U.S.C. (S) 201 et
seq.).
2.17. Restrictions. Neither the Company nor any of the Subsidiaries is a
party or subject to any contract, agreement, or charter or other corporate
restriction, which has or could be reasonably expected to have a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries is a party or
subject to any Restrictive Agreements (including, without limitation, any
agreement or contract that restricts its right or ability to issue capital stock
or rights with respect thereto), except as set forth on Part 2.17 of Annex 3,
none of which prohibit the execution or delivery of any of the Financing
Documents by any Obligor or the performance by any Obligor of its obligations
under any of the Financing Documents to which it is a party, in accordance with
the terms of such Financing Documents.
2.18. Restrictions. Litigation. Except as set forth on Part 2.18 of Annex
3, there are no actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened on the date hereof against or affecting the
Company or any of the Subsidiaries, or the business, operations, Properties,
prospects, profits or condition of the Company or any of the Subsidiaries, (i)
which relate to any of the Financing Documents or any of the transactions
contemplated thereby or (ii) which, if determined adversely to the Company or
any Subsidiary, would reasonably be expected to have a Material Adverse Effect.
To the knowledge of the Company, neither the Company nor any of its Subsidiaries
is in default on the date hereof with respect to any order, writ, injunction,
judgment, decree or rule of any court, Governmental Authority or arbitration
board or tribunal.
2.19. No Defaults. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or the
Company's performance hereunder, constitute a Default or an Event of Default.
Neither the Company nor any of the Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes or which with the passage of
time or the giving of notice or both would constitute a default, under any
Material Contract or in the payment of any Debt in excess of $50,000
individually or $200,000 in the aggregate of the Company or a Subsidiary to any
Person for Money Borrowed.
2.20. Leases. Part 2.20 of Annex 3 is a complete listing of all material
capitalized and operating leases of the Company and its Subsidiaries on the date
hereof requiring payment in any year in excess of $300,000. Each of the Company
and its Subsidiaries is in substantial compliance with all of the terms of each
of its respective capitalized and operating leases and there is no basis upon
which the
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lessors under any such leases could terminate same or declare the Company or
any of its Subsidiaries in default thereunder.
2.21. Pension Plans. Except as disclosed on Part 2.21 of Annex 3, neither
the Company nor any of the Subsidiaries has any Plan on the date hereof. The
Company and each of its Subsidiaries is in substantial compliance with the
requirements of ERISA and the regulations promulgated thereunder with respect to
each Plan. No fact or situation that is reasonably likely to result in a
material adverse change in the financial condition of the Company or any of the
Subsidiaries exists in connection with any Plan. Except as disclosed on Part
2.21 of Annex 3, neither the Company nor any of its Subsidiaries has any
withdrawal liability in connection with a Multiemployer Plan.
2.22. Trade Relations. The Company has not received any written notice of
cancellation of the business relationship between the Company and any customer
or any group of customers whose purchases individually or in the aggregate are
material to the business of the Company, or with any material supplier or group
of suppliers.
2.23. Labor Relations. Except as described on Part 2.23 of Annex 3,
neither the Company nor any of the Subsidiaries is a party to any collective
bargaining agreement on the date hereof. On the date hereof, there are no
material grievances, disputes or controversies with any union or any other
organization of the Company's or any Subsidiary's employees, or, to the
Company's knowledge, any threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
2.24. Not a Regulated Entity. No Obligor is (i) an "investment company" or
a "person directly or indirectly controlled by or acting on behalf of an
investment company" within the meaning of the Investment Company Act of 1940;
(ii) a "holding company," or a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935;
or (iii) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.
2.25. Margin Stock. Neither the Company nor any of the Subsidiaries is
engaged, principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. The
Company shall apply the proceeds from the sale of the Notes and Warrants as
specified on Part 2.25 of Annex 3.
2.26. Private Offering of Notes and Warrants.
(a) Number of Offerees. Neither the Company nor any Person acting on
behalf of the Company has offered any of the Notes or the Warrants or any
similar security of the Company for sale to, or solicited offers to buy any
thereof from, or otherwise approached or negotiated with respect thereto
with, any prospective purchaser, other than not more than ten "accredited
investors" (as defined in Regulation D under the Securities Act) (including
you).
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(b) Conduct of Sale. Neither the Company nor any Person acting on
behalf of the Company as employee, agent, broker, dealer or otherwise in
connection with the transactions contemplated by the Note Agreements
(including, without limitation, the issuance of the Notes and Warrants) has
engaged in any conduct or entered into any agreements or understandings so
as to subject the transactions contemplated by the Financing Documents to
the registration provisions of section 5 of the Securities Act, the
provisions of the Trust Indenture Act of 1939, as amended, or to the
registration, qualification or other similar provisions of any securities
or "blue sky" law of any applicable state.
2.27. Senior Credit Documents.
The Company has provided to you true, correct and complete copies of the
Senior Credit Agreement and each of the other agreements and instruments
executed in connection therewith (collectively, the "Senior Credit Documents"),
and there is no agreement or understanding between or among the Company and the
other parties to the Senior Credit Documents except as set forth in the Senior
Credit Documents.
2.28. Capitalization.
(a) Pre-Emptive and Similar Rights. Except as specified on Part 2.28
of Annex 3, there are no preemptive rights, subscription rights, or other
contractual rights similar in nature to preemptive rights with respect to
any Capital Stock of the Company.
(b) Reservation of Common Stock. The Company has authorized, and has
reserved for issuance, a sufficient number of shares of Common Stock to
permit, after giving effect to the transactions contemplated by the
Financing Documents, the exercise of all of the Warrants and all other
options, warrants and rights exercisable or convertible into Common Stock.
Each share of Common Stock reserved for issuance upon exercise of the
Warrants, when issued, will be fully paid and nonassessable, free and clear
of any Lien and not subject to any preemptive rights.
(c) No Other Agreements. Other than the Warrant Agreement and the
Related Transaction Documents, there is no other agreement or understanding
between or among the holders of the Capital Stock of the Company or the
holders of rights to acquire such Capital Stock, regarding the Capital
Stock of the Company.
2.29. Governmental Consent to Sale of Notes and Warrants.
Neither the nature of the Company, or of any of its businesses or
Properties, nor any relationship between the Company and any other Person, nor
any circumstance in connection with the offer, issuance, sale or delivery of the
Notes or the Warrants, the execution and delivery of any Financing Document, the
performance of the obligations of the Company thereunder nor the transactions
contemplated thereby, is such as to require a consent, approval or authorization
of, or pre-filing, registration or qualification with, any Governmental
Authority on the part of the Company as a
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condition thereto, except for such consents, approvals, authorizations, pre-
filings, registrations and qualifications described on Part 2.29 of Annex 3, all
of which have been obtained on or prior to the Closing Date.
3. WARRANTIES AND REPRESENTATIONS OF THE PURCHASER
3.1. Purchase for Investment.
You represent to the Company that you are a financially sophisticated
investor that is experienced in financial matters and you are purchasing the
Purchased Securities listed on Annex 1 below your name for your own account for
investment and with no present intention of, or view to, distributing such
Purchased Securities or any part thereof except in compliance with the
Securities Act, but without prejudice to your right at all times to:
(a) sell or otherwise dispose of all or any part of the Purchased
Securities under a registration statement filed under the Securities Act,
or in a transaction exempt from the registration requirements of such Act,
including a transaction pursuant to Rule 144A; and
(b) have control over the disposition of all of your assets to the
fullest extent required by any applicable law.
4. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation, the
obligation to purchase and pay for the Notes at the Closing, are subject to the
following conditions precedent, and the failure by the Company to satisfy all
such conditions on or prior to March 15, 2000 shall relieve you, at your
election, of all such obligations; provided, however that the Company in all
cases shall remain liable in respect of its obligations under Section 6.5.
4.1. Opinions of Counsel.
You shall have received from
(a) Kilpatrick Stockton LLP, counsel for the Company; and
(b) Cadwalader Wickersham and Taft;
closing opinions, each dated as of the Closing Date, in form and substance
satisfactory to the Purchasers. This Section 4.1 shall constitute direction by
the Company to such counsel named in the immediately preceding subsection (a) to
deliver such closing opinion to you.
4.2. Warranties and Representations True; Compliance with Agreement and
Financing Documents.
(a) Warranties and Representations True. The warranties and
representations contained in Section 2 hereof shall be true on the Closing
Date with the same effect as though made on and as of that date.
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(b) Compliance with this Agreement and Financing Documents. The
Company and each of the other Obligors shall have performed and complied
with all agreements and conditions contained herein and in the other
Financing Documents that are required to be performed or complied with by
the Company or such Obligor on or prior to the Closing Date, and such
performance and compliance shall remain in effect on the Closing Date.
4.3. Officers Certificates.
You shall have received:
(a) a certificate dated the Closing Date and signed on behalf of the
Company by a Senior Officer of the Company, substantially in the form of
Exhibit 4.3(a);
(b) a certificate dated the Closing Date and signed on behalf of the
Company by the Secretary or an Assistant Secretary of the Company,
substantially in the form of Exhibit 4.3(b); and
(c) a certificate dated the Closing Date and signed on behalf of each
Subsidiary Guarantor by the Secretary or an Assistant Secretary of such
Subsidiary Guarantor, substantially in the form of Exhibit 4.3(c).
4.4. Good Standing Certificates.
You shall have received good standing certificates for each Obligor, issued
by the Secretary of State or other appropriate official of such Obligor's
jurisdiction of organization and each jurisdiction where the conduct of such
Obligor's business activities or ownership of its Property necessitates
qualification.
4.5. Warrant Agreement, Equity Investment, etc.
(a) Warrant Agreement. The Company shall have executed and delivered
the Warrant Agreement to each Purchaser receiving Warrants Notes on the
Closing Date.
(b) Reservation of Shares. The shares of Common Stock issuable upon
exercise of each Warrant shall have been duly authorized and reserved for
issuance.
(c) Equity Investment. The Company shall have received not less than
$35,000,000 in the aggregate in cash pursuant to a sale of shares of
convertible preferred stock of the Company to Littlejohn and to Quilvest
American Equity, Ltd., and you shall have received evidence satisfactory to
you of such contribution.
4.6 Senior Credit Agreement.
(a) Senior Credit Agreement. The Company and the other parties
thereto shall have entered into the Senior Credit Agreement, which
agreement, and all documents and instruments executed and delivered in
connection therewith, shall be in form and substance satisfactory to you.
The Company
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shall deliver to you a copy of a fully executed counterpart of the Senior
Credit Agreement and each other Senior Credit Document, certified as true
and correct by an officer of the Company. Pursuant to the Senior Credit
Agreement, the Company shall have received proceeds in an amount which is
sufficient, together with the proceeds of the Notes and the equity
investment referred to in Section 4.5(c), to repay the Debt and make the
other payments to be made at the Closing, from borrowings under the Senior
Credit Agreement.
(b) No Defaults; Satisfaction of Conditions Precedent. No event shall
have occurred and no condition shall exist that shall prohibit the Company
from borrowing under the Senior Credit Agreement and all conditions
precedent to closing specified in the Senior Credit Agreement shall have
been satisfied on or prior to the Closing Date and you shall have received
such evidence of the satisfaction of such conditions precedent as you shall
deem appropriate.
4.7. Subsidiary Guaranty.
Pameco Investments shall have executed and delivered to the Purchasers a
guaranty (as amended from time to time, the "Subsidiary Guaranty"),
substantially in the form of Exhibit 4.7, guarantying the obligations and
indebtedness of the Company under the Note Agreements, the Notes and the other
Financing Documents.
4.8. Evidence of Perfection and Priority of Liens.
You or the Agent on your behalf shall have received for filing any filing
or recordation necessary to perfect the Liens of Agent in the Collateral and
evidence in form satisfactory to the Purchasers that such Liens constitute valid
and perfected security interests and Liens, and that there are no other Liens
upon any Collateral except for Permitted Liens.
4.9. Solvency Certificates.
You shall have received certificates satisfactory to you from one or more
knowledgeable Senior Officers of the Company that, after giving effect to the
financing under this Agreement and the other Financing Documents, the Company is
Solvent.
4.10. No Labor Disputes.
You shall have received assurances satisfactory to you that there are no
threats of strikes or work stoppages by any employees, or organization of
employees, of any Obligor which you reasonably determine may have a Material
Adverse Effect.
4.11. Compliance with Laws and Other Agreements.
You shall have determined or received assurances satisfactory to you that
none of the Financing Documents or any of the transactions contemplated thereby
violate any Applicable Law, court order or agreement binding upon any Obligor.
4.12. No Material Adverse Change.
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No material adverse change in the financial condition of any Obligor or in
the quality, quantity or value of any Collateral shall have occurred since
November 30, 1999.
4.13. No Defaults.
No Default or Event of Default shall exist.
4.14. Fees and Expenses.
All fees and disbursements required to be paid pursuant to Section 6.5 and
pursuant to the separate commitment letters between the Purchasers and the
Company shall have been paid in full.
4.15. SEC Filing.
The Company shall have filed with the Securities and Exchange Commission
and mailed to its stockholders of record, at least 10 days prior to the closing
date, a Schedule 14f-1 relating to the appointment of representatives of
Littlejohn Fund II, L.P. to the board of directors of the Company.
4.16. Supply Agreements.
Each of the Purchasers shall have received a Supply Agreement (which shall
include an executed term sheet with respect to a supply agreement to be
formalized after the date of such term sheet) executed by the Company.
4.17. Other Purchasers.
None of the Other Purchasers shall have failed to execute and deliver a
Note Agreement or any other Financing Document to be executed and delivered by
it, or to accept delivery of or make payment for the Notes to be purchased by it
on the Closing Date.
4.18. Proceedings Satisfactory.
All proceedings taken in connection with the issuance and sale of the Notes
and all documents and papers relating thereto shall be satisfactory to you and
your special counsel. You and your special counsel shall have received copies
of such documents and papers as you or they may reasonably request in connection
therewith or in connection with your special counsel's closing opinion, all in
form and substance satisfactory to you and your special counsel.
5. INTERPRETATION OF THIS AGREEMENT
5.1. Certain Terms Defined.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
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Agreement, this - means this Securities Purchase Agreement, as it may be
amended, restated or otherwise modified from time to time.
Bankruptcy Code - title 11 of the United States Code, as amended and in
effect from time to time.
Capital Stock - means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person.
Closing - see Section 1.2(b).
Closing Date - see Section 1.2(b).
Common Stock - means the voting Class A Common Stock, par value $.01 per
share, of the Company.
Company - has the meaning specified in the introductory sentence hereof.
Margin Stock - shall have the meaning ascribed to it in Regulation U of the
Board of Governors of the Federal Reserve.
Note Agreement - see Section 1.1(a).
Notes - see Section 1.1(a).
Other Purchasers - see Section 1.2(c).
PIK Notes - see Section 1.2(a).
Projections - see Section 2.8(c).
Purchased Securities - means the Notes (including, without limitation, the
Warrants to be delivered from time to time in respect of the Warrant Notes) to
be purchased by the Purchasers pursuant to Section 1.2 of the Securities
Purchase Agreements.
Purchasers - means you and the Other Purchasers.
Related Transaction Documents -- means, collectively, the Securities
Purchase Agreement, of even date herewith, by and among the Company, Littlejohn
Fund II, L.P., and Quilvest America Equity, Ltd.; the Shareholders Agreement, of
even date herewith, by and among the Company, Littlejohn Fund II, L.P., Quilvest
America Equity, Ltd. and Willem F.P. deVogel; the several Voting Agreements by
and among the Company, Littlejohn Fund II, L.P. and the shareholders named
therein; and the Registration Rights Agreement, of even date herewith, by and
among the Company, Littlejohn Fund II, L.P., Quilvest America Equity, Ltd. and
International Comfort Products Corporation (USA).
Rule 144A - means Rule 144A promulgated under the Securities Act, 17 C.F.R.
(S)230.144A, as such rule may be amended from time to time.
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Securities Act - means the Securities Act of 1933, as amended from time to
time.
Securities Purchase Agreement - see Section 1.2(c).
Security - means "security" as defined by section 2(1) of the Securities
Act.
Senior Credit Documents - see Section 2.27.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Debts (including contingent Debts), (ii) is able to pay all of its Debts as such
Debts mature, (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage,
and (iv) is not "insolvent" within the meaning of Section 101(32) of the
Bankruptcy Code.
Voting Stock - means capital stock (or other equity interests) of any class
or classes of a corporation, an association or another business entity the
holders of which are ordinarily, in the absence of contingencies, entitled to
vote in the election of corporate directors (or Persons performing similar
functions).
Warrant Agreement - see Section 1.1(b).
Warrant Authorization Amount - means an amount equal to the product of (a)
666,934 multiplied by (b) a fraction, the numerator of which is the principal
amount of Warrant Notes issued at the Closing and the denominator of which is
20,000,000.
Warrant Certificates - see Section 1.1(b).
Warrant Notes - see Section 1.2(a).
Warrants - see Section 1.1(b).
5.2. Certain Terms Defined Elsewhere.
As used herein, the following terms have the respective meanings set forth
in the Note Agreement:
Affiliate
Applicable Law
Business Day
Collateral
Consolidated
Debt
Default
Distribution
Equity Interests
ERISA
Event of Default
FEIN
Financing Documents
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Fiscal Year
Governmental Approvals
Governmental Authority
GAAP
Intellectual Property
Intellectual Property Claim
Inventory
Lien
Littlejohn
Material Adverse Effect
Material Contract
Money Borrowed
Multiemployer Plan
Obligor
Organization Documents
Pameco Investments
Permitted Lien
Person
Plan
Properly Contested
Property
Restrictive Agreements
Senior Credit Agreement
Senior Debt
Senior Officer
Subsidiary
Supply Agreement
Taxes
All terms used herein and not defined herein or otherwise provided for in
Section 5.1 or Section 5.2 have the respective meanings set forth in the Note
Agreement.
5.3. Directly or Indirectly.
Where any provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person, including
actions taken by or on behalf of any partnership in which such Person is a
general partner.
5.4. Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. References to Sections are,
unless otherwise specified, references to Sections of this Agreement.
References to Annexes and Exhibits are, unless otherwise specified,
references to Annexes and Exhibits attached to this Agreement.
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(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
5.5. Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
6. MISCELLANEOUS
6.1. Communications.
(a) Method; Address. All communications hereunder or under the Notes
shall be in writing and shall be delivered either by nationwide overnight
courier or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2 to the Note Agreement, or at such other address of which
the Company shall have notified each holder of Notes pursuant to the Note
Agreement. Communications to the holders of the Notes shall be addressed
as set forth on Annex 1 by such holder, or at such other address of which
such holder shall have notified the Company (and the Company shall record
such address in the register for the registration and transfer of Notes
maintained pursuant to the Note Agreement).
(b) When Given. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
6.2. Survival.
All warranties, representations, certifications and covenants made by the
Company or any Obligor herein or in any certificate or other instrument
delivered by the Company or the Obligor or on behalf of the Company or the
Obligor hereunder shall be considered to have been relied upon by you and shall
survive the delivery to you of the Notes regardless of any investigation made by
you or on your behalf. All statements in any certificate or other instrument
delivered by or on behalf of the Company pursuant to the terms hereof shall
constitute warranties and representations by the Company hereunder. All payment
obligations of the Company hereunder (other than payment of the Notes, but
including, without limitation, reimbursement obligations in respect of costs,
expenses and fees of or incurred by the holders of the Notes) shall survive the
payment of the Notes and the termination hereof.
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6.3. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign. Anything contained in this Section 6.3 notwithstanding, the Company may
not assign any of its respective rights, duties or obligations hereunder or
under any of the other Financing Documents without the prior written consent of
all holders of Notes.
6.4. Amendment and Waiver.
This Agreement may be amended, and the observance of any term hereof may be
waived, with (and only with) the written consent of the Company and all of the
holders of Notes.
6.5. Certain Expenses.
Whether or not the Notes are sold, the Company shall pay, at the Closing
(if the Notes are sold, and otherwise upon receipt of any statement or invoice
therefor), all reasonable fees, expenses and costs incurred by you relating
hereto, including, without limitation, the statement presented at the Closing by
your special counsel for reasonable fees and disbursements incurred in
connection herewith, each additional statement for reasonable fees and
disbursements (promptly upon receipt thereof) of your special counsel rendered
after the Closing in connection with the issuance of the Notes and the Warrants,
and all expenses incurred by you or on your behalf or the Company's behalf in
complying with each of the conditions to closing set forth in Section 4 (limited
to the extent set forth in the separate commitment letters between each of the
Purchasers and the Company, each effect as of February 7, 2000, with respect to
the agreement to purchase the Notes and other matters).
6.6. Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS AGREEMENT OR
ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN
ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK, OR ANY NEW YORK
STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY IN ITS SOLE
DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
PARTIES HERETO
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IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM
JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN
PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY SUCH COURT, AND
HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY AGREES THAT PROCESS
PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE ADDRESSES PROVIDED
HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY,
OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED
HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS
EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR
ANY COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN ANY
MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE COMPANY IN
SUCH OTHER JURISDICTION, AND IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY
APPLICABLE LAW.
6.7. Entire Agreement.
This Agreement constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
6.8. Execution in Counterpart.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
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If this Agreement is satisfactory to you, please so indicate by signing the
acceptance at the foot of a counterpart hereof and returning such counterpart to
the Company, whereupon this Agreement shall become binding among us in
accordance with its terms.
Very truly yours,
PAMECO CORPORATION
By /s/ Richard Martin
---------------------------------
Name: Richard Martin
Title: Vice President
Accepted:
E.I. DU PONT DE NEMOURS AND COMPANY
By /s/ Thomas M. Connelley, Jr.
-------------------------------
Name: Thomas M. Connelley, Jr.
Title: Vice President & General Manager
DuPont Fluoroproducts
Accepted:
MUELLER INDUSTRIES, INC.
By /s/ Kent McKee
-------------------------------
Name: Kent McKee
Title: Vice President and CFO
Accepted:
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By /s/ Christopher J. Brogan
-------------------------------
Name: Christopher J. Brogan
Title: Assistant Secretary
Accepted:
EMERSON ELECTRIC CO.
By /s/ R. M. Cox, Jr.
-------------------------------
Name: R. M. Cox, Jr.
Title: Vice President--Acquisitions & Development
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PAMECO CORPORATION
NOTE AGREEMENT
Dated as of February 18, 2000
$20,000,000 Senior Subordinated Notes due March 31, 2005
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
Page
----
1. PAYMENTS......................................................... 1
1.1. Interest Payments.......................................... 1
1.2. Mandatory Principal Payments............................... 3
1.3. Optional Principal Payments................................ 3
1.4. Delivery of Notes in Payment of Warrant Purchase Price..... 4
1.5. Payments Among Noteholders................................. 4
1.6. Notation of Notes on Payment............................... 4
1.7. Offer to Pay Upon Change in Control........................ 4
1.8. No Other Payments of Principal; Acquisition of Notes....... 6
1.9. Manner of Payments......................................... 6
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.................... 7
2.1. Registration of Notes...................................... 7
2.2. Exchange of Notes.......................................... 8
2.3. Replacement of Notes....................................... 9
2.4. Issuance Taxes............................................ 10
3. GENERAL COVENANTS............................................... 10
3.1. Visits and Inspections.................................... 10
3.2. Notices................................................... 10
3.3. Financial and Other Information........................... 11
3.4. Intentionally Omitted..................................... 13
3.5. Taxes..................................................... 13
3.6. Compliance with Laws...................................... 14
3.7. Insurance................................................. 14
3.8. Year 2000 Compatibility................................... 14
3.9. Intellectual Property..................................... 14
3.10. Dividends of Subsidiaries After Default................... 14
3.11. Pledged Shares............................................ 15
3.12. Payment of Notes and Maintenance of Office................ 15
3.13. Private Offering.......................................... 15
3.14. Subsidiary Guaranties..................................... 15
4. NEGATIVE AND FINANCIAL COVENANTS................................ 15
4.1. Fundamental Changes....................................... 16
4.2. Loans..................................................... 16
4.3. Debt...................................................... 16
4.4. Affiliate Transactions.................................... 17
4.5. Liens..................................................... 18
4.6. Distributions............................................. 19
4.7. Upstream Payments......................................... 19
4.8. Capital Expenditures...................................... 19
4.9. Disposition of Assets..................................... 20
4.10. Restricted Investments.................................... 20
4.11. Tax Consolidation......................................... 20
4.12. Accounting Changes........................................ 20
4.13. Organization Documents.................................... 20
4.14. Restrictive Agreements.................................... 21
4.15. Conduct of Business....................................... 21
4.16. Consolidated Net Worth.................................... 21
4.17. Consolidated EBITDA....................................... 21
4.18. Fixed Charge Ratio........................................ 21
<PAGE>
4.19. Senior Credit Facility Provisions......................... 22
5. EVENTS OF DEFAULT............................................... 22
5.1. Events of Default......................................... 22
5.2. Default Remedies.......................................... 26
5.3. Annulment of Acceleration of Notes........................ 27
6. INTERPRETATION OF THIS AGREEMENT................................ 28
6.1. Terms Defined............................................. 28
6.2. Accounting Principles..................................... 51
6.3. Directly or Indirectly.................................... 52
6.4. Section Headings and Table of Contents and Construction... 52
6.5. Governing Law............................................. 53
6.6. General Interest Provisions............................... 53
7. MISCELLANEOUS................................................... 55
7.1. Communications............................................ 55
7.2. Reproduction of Documents................................. 55
7.3. Survival; Entire Agreement................................ 56
7.4. Successors and Assigns.................................... 56
7.5. Amendment and Waiver...................................... 56
7.6. Expenses.................................................. 58
7.7. Indemnification of Each Holder of Notes................... 59
7.8. Confidentiality........................................... 59
7.9. Waiver of Jury Trial; Consent to Jurisdiction; Etc........ 60
7.10. Execution in Counterpart.................................. 61
<PAGE>
Annex 1 - Addresses of Purchasers; Payment Instructions
Annex 2 - Addresses for Notices
Schedule 4.5 - Certain Liens
Schedule 4.14 - Certain Restrictive Agreements
Attachment A1 - Form of PIK Note
Attachment A2 - Form of Warrant Note
<PAGE>
NOTE AGREEMENT
NOTE AGREEMENT, dated as of February 18, 2000, among PAMECO
CORPORATION, (together with any successors and assigns who become such in
accordance herewith, the "Company"), a Georgia corporation, and the Persons
listed on Annex 1 hereto (together with their respective successors and assigns,
collectively, the "Purchasers").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the Purchasers
have agreed to purchase from the Company, and the Company has agreed to sell to
the Purchasers, $20,000,000 in aggregate principal amount of Notes; and
WHEREAS, the Company and the Purchasers wish to enter into this
Agreement to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. PAYMENTS
1.1. Interest Payments.
Interest on the Notes shall be computed and paid in the manner provided
below.
(a) Interest Payments on Notes. Subject to Section 1.1(b) and
Section 1.1(c), interest (computed on the basis of a 360-day year of twelve
30-day months) shall accrue on the unpaid principal balance of each of the
Notes from time to time outstanding from and including the date of such
Note at a rate per annum equal to twelve percent (12%), payable quarterly
on the last day of March, June, September and December in each year (each
an "Interest Payment Date"), commencing with March 31, 2000, until the
principal amount thereof shall have become due and payable, and, to the
extent permitted by law in respect of any Note, on any overdue payment of
principal and any overdue payment of interest, payable on demand, at a rate
per annum equal to the lesser of:
(i) the highest rate allowed by applicable law; and
(ii) fourteen percent (14%) per annum.
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(b) PIK Notes Capitalized Interest Amount. On each Interest Payment
Date, in lieu of making the entire interest payment due on a PIK Note in
cash, the Company shall:
(i) pay in cash on such Interest Payment Date that portion of
the interest accrued on the outstanding principal amount of such
PIK Note which would have accrued if the rate of interest on the
Notes were six percent (6%) per annum (or, in the event that
interest shall at such time be accruing at a higher rate by
operation of Section 1.1(a)(i) or Section 1.1(a)(ii), such higher
rate minus six (6) percentage points); and
(ii) add to the outstanding principal amount of such PIK Note
on such Interest Payment Date the portion of accrued interest which
is not paid in cash pursuant to the immediately preceding clause
(i) (each such addition with respect to any PIK Note, a
"Capitalized Interest Amount").
Once added to the principal amount of a PIK Note, a Capitalized Interest Amount
shall be considered principal for all purposes, and shall bear interest and be
payable in accordance with this Section 1.
(c) Delivery of Warrants with respect to Warrant Notes. On each
Interest Payment Date, in lieu of making the entire interest payment due on
a Warrant Note in cash, the Company shall:
(i) pay in cash on such Interest Payment Date that portion of
the interest accrued on the outstanding principal amount of such
Warrant Note which would have accrued if the rate of interest on
the Notes were six percent (6%) per annum (or, in the event that
interest shall at such time be accruing at a higher rate by
operation of Section 1.1(a)(i) or Section 1.1(a)(ii), such higher
rate minus six (6) percentage points);
(ii) so long as no Warrant Interest Termination Event shall
have occurred on each March Interest Payment Date (beginning with
March, 2001), deliver to each holder of Warrant Notes, with respect
to the Warrant Notes held by it at such time, one or more Warrant
Certificates representing a number of Warrants equal to the Warrant
Interest Number at such time; and
(iii) if any Warrant Interest Termination Event shall have
occurred, add to the outstanding principal amount of such Warrant
Note on such Interest Payment Date the Warrant Interest Amount.
Once added to the principal amount of a Warrant Note, a Warrant
Interest Amount shall be considered principal for all purposes, and
shall bear interest and be payable in accordance with this Section
1.1.
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1.2. Mandatory Principal Payments.
On March 31, 2003 and on March 31, 2004, the Company will prepay $2,000,000
principal amount (or such lesser principal amount as shall then be outstanding)
of the Notes at par. The entire outstanding principal amount of the Notes, and
all accrued and unpaid interest thereon and any other amounts due with respect
thereto, shall become due and payable on March 1, 2005, the maturity date of the
Notes.
1.3. Optional Principal Payments.
(a) Optional Principal Payments. The Company may pay the principal
amount of the Notes in whole or in part, at any time without premium or
penalty, in a minimum aggregate principal amount of $50,000 (or, if the
aggregate outstanding principal amount of the Notes is less than $50,000 at
such time, then such principal amount) and in multiples of $10,000,
together with interest on such principal amount then being paid accrued to
the payment date.
(b) Notice of Optional Payment. The Company will give notice of any
optional payment of the Notes pursuant to this Section 1.3 to each holder
of Notes not less than 1 day before the specified payment date, stating:
(i) the specified payment date;
(ii) that such payment is to be made pursuant to this Section
1.3;
(iii) the principal amount of each Note to be paid on such
date; and
(iv) the interest to be paid on each such Note, accrued to the
specified payment date.
Notice of payment having been so given, the aggregate principal amount of
the Notes to be paid stated in such notice, and interest thereon accrued to the
specified payment date, shall become due and payable on the specified payment
date.
(c) Application of Optional Payment. Each partial prepayment of the
Notes pursuant to this Section 1.3 will be applied first, to the amount due
on the maturity date of the Notes and second, to the mandatory prepayments
applicable to the Notes as set forth in Section 1.2, in the inverse order
of the maturity thereof.
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1.4. Delivery of Notes in Payment of Warrant Purchase Price.
The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the shares of Common
Stock issued upon exercise of the Warrants. Promptly following the receipt of
any Note so tendered, the Company shall promptly cancel and retire such
surrendered Note (and no such Note shall be reissued), and shall issue to the
holder thereof a new Note in the principal amount of such tendered Note
remaining after deduction of the principal amount thereof applied to payment of
the purchase price for the shares of Common Stock. For purposes of Rule 144
under the Securities Act, 17 C.F.R. (S)230.144, the Company and each Purchaser
agrees that a tender of Notes in payment of the exercise price in respect of the
Warrants shall not be deemed a prepayment of the Notes, but rather a conversion
of such Notes, pursuant to the terms of the Warrant Agreement and the Warrants,
into Common Stock.
1.5. Payments Among Noteholders.
If at the time any payment of the principal of the Notes made pursuant to
Section 1.2 or Section 1.3 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial payment of
the Notes shall be allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such outstanding
Notes.
1.6. Notation of Notes on Payment.
Upon any partial payment of a Note or upon the addition of any Capitalized
Interest Amount or Warrant Interest Amount, the holder of such Note may (but
shall not be required to), at its option:
(a) surrender such Note to the Company pursuant to Section 2.2 in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) make such Note available to the Company for notation thereon of
the portion of the principal so paid; or
(c) mark such Note with a notation thereon of the portion of the
principal so paid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.7. Offer to Pay Upon Change in Control.
(a) Notice of Change in Control Notice Event. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any
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Senior Officer (including, without limitation, via the receipt of notice of
a Change in Control Notice Event from any holder of Notes), the Company
will, within three (3) Business Days after obtaining knowledge of the
occurrence of such event, give notice of such Change in Control Notice
Event to each holder of Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 1.7; and
(iv) specify, in reasonable detail, the nature and date of the
Change in Control Notice Event.
(b) Offer in Respect of a Change in Control. In the event of a
Change in Control, the Company will, within 3 Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would require any affirmative action
by of the Company, at least 30 days prior to such Change in Control), give
notice of such Change in Control to each holder of Notes. Such notice shall
contain an irrevocable separate offer to each holder of Notes to repurchase
all, but not less than all, of the Notes held by such holder at par
together with interest thereon. Such payment shall occur on a date (the
"Change in Control Payment Date") specified in such notice that is not less
than 30 days and not more than 45 days after the date of such notice. Each
such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the nature and date of
the Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note outstanding;
(vi) specify the interest that will be due on each Note offered
to be repurchased, accrued to the Change in Control Payment Date;
(vii) certify that the conditions of this Section 1.7 have
been fulfilled; and
(viii) state that a failure to respond to the notice shall be
deemed to be an acceptance of such offer.
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(c) Acceptance, Rejection. To accept such offered repurchase, a
holder of Notes shall either cause a notice of such acceptance to be
delivered to the Company not later than 30 days after the date of receipt
by such holder of the written offer of such repurchase or fail to respond
to such written offer of repurchase within such period of 30 days. To
reject such offer such holder of Notes shall deliver a written notice of
rejection of such offer within such period. If accepted (or if such offer
is deemed accepted pursuant to Section 1.7(b)(viii)), such offered
repurchase shall be due and payable on the Change in Control Payment Date.
(d) Deferral of Obligation to Purchase. The obligation of the Company
to purchase Notes pursuant to the offers required by Section 1.7(b) and
accepted in accordance with Section 1.7(c) is subject to the occurrence of
the Change in Control in respect of which such offers and acceptances shall
have been made. In the event that such Change in Control does not occur
prior to the Change in Control Payment Date in respect thereof, such
purchase shall be deferred until and shall be made on the date on which
such Change in Control occurs or, if the Company determines that efforts to
effect such Change in Control have ceased or have been abandoned, then such
offer, acceptances and obligation to purchase shall be deemed to have been
rescinded. The Company shall keep each holder of Notes reasonably and
timely informed of:
(i) any such deferral of the date of purchase;
(ii) the date on which such Change in Control and the purchase
are expected to occur; and
(iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned.
1.8. No Other Payments of Principal; Acquisition of Notes.
Except for payments of principal made in accordance with this Section 1,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes.
1.9. Manner of Payments.
(a) Manner of Payment. The Company shall pay all amounts payable
with respect to each Note (other than amounts with respect to Warrant Notes
payable by delivery of Warrants), without any presentment of such Notes and
without any notation of such payment being made thereon, by crediting, by
federal funds bank wire transfer, the account of the holder thereof in any
bank in the United States of America as may be designated in writing by
such holder, or in such other
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manner as may be reasonably directed or to such other address in the United
States of America as may be reasonably designated in writing by such
holder. Annex 1 shall be deemed to constitute notice, direction or
designation (as appropriate) by the Purchaser to the Company with respect
to payments to be made to the Purchaser as aforesaid. In the absence of
such written direction, all amounts payable with respect to each Note shall
be paid by check mailed and addressed to the registered holder of such Note
at the address shown in the register maintained by the Company pursuant to
Section 2.1.
(b) Payments Due on Holidays. If any payment due on, or with
respect to, any Note shall fall due on a day other than a Business Day,
then such payment shall be made on the first Business Day following the day
on which such payment shall have so fallen due; provided that if all or any
portion of such payment shall consist of a payment of interest, for
purposes of calculating such interest, such payment shall be deemed to have
been originally due on such first following Business Day, such interest
shall accrue and be payable to (but not including) the actual date of
payment, and the amount of the next succeeding interest payment shall be
adjusted accordingly.
(c) Payments, When Received. Any payment to be made to the holders
of Notes hereunder or under the Notes shall be deemed to have been made on
the Business Day such payment actually becomes available at such holder's
bank prior to the close of business of such bank, provided that interest
for one day at the non-default interest rate of the Notes shall be due on
the amount of any such payment that actually becomes available to such
holder at such holder's bank after 12:00 noon (local time of such bank).
(d) Payments in United States Dollars. All payments under this Agreement
and the Notes shall be made in United States Dollars.
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1. Registration of Notes.
The Company will keep at its office, maintained pursuant to Section 3.12, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 2.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall
be registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
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2.2. Exchange of Notes.
(a) Exchange of Notes. Upon surrender of any Note at the office of
the Company maintained pursuant to Section 3.12, duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly authorized in
writing, the Company will execute and deliver, at the Company's expense
(except as provided in Section 2.2(b)), a new Note or Notes in exchange
therefor, in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be registered in
the name of such Person as such holder may request and shall be
substantially in the form of Attachment A1 or Attachment A2, as the case
may be with respect to such surrendered Note. Each such new Note shall be
dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. Each such new Note shall carry
the same rights to unpaid interest, interest to accrue and delivery of
Warrants that were carried by the Note so exchanged or transferred. Notes
shall not be transferred in denominations of less than $100,000, provided
that a holder of Notes may transfer its entire holding of Notes regardless
of the principal amount of such holder's Notes.
(b) Costs. The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company, insured
to the reasonable satisfaction of such holder, the surrendered Note and any
Note issued in substitution or replacement for the surrendered Note. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes.
(c) Certain Restrictions on Transfer. Notwithstanding the provisions
of Section 2.2(a):
(i) so long as no Event of Default shall exist (and subject to
clause (ii) below), no holder of Notes shall be permitted to transfer
any Notes held by it other than to its subsidiaries and/or affiliates
or to another Purchaser or its subsidiaries and/or affiliates without
the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed), provided that, upon the existence
of an Event of Default, any holder of Notes may transfer any or all of
the Notes held by it to any Person;
(ii) in connection with the termination of the Supply Agreement
of any Vendor in accordance with the provisions thereof and if no
Event of Default (other than solely in respect of such terminated
Supply Agreement) shall exist at such time, such Vendor (and any
affiliate to which such Vendor has transferred its
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Note(s)) shall, at the request of the Company and if the Company shall
have provided all Vendors with written notice of such action, transfer
all of the Notes (and if applicable, any Warrants) held by it to
another of the Company's suppliers, at a price equal to the
outstanding principal amount of such Notes, interest accrued to the
date of transfer (including any Capitalized Interest Amount and any
Warrant Purchase Amount) and any other amounts due to such Vendor as
the holder of Notes (upon the consummation of such transfer, such
supplier shall be deemed to be a "Vendor" for all purposes hereof);
and
(iii) in connection with the termination of the Supply Agreement
of any Vendor in accordance with the provisions thereof and if an
Event of Default shall exist at such time (other than one caused
solely by a breach by the Company of such Supply Agreement), such
Vendor (and any affiliate of such Vendor to which such Vendor has
transferred its Note(s)) shall, at the request of the Company and if
the Company shall have provided all Vendors with written notice of
such action, transfer all of the Notes (and if applicable, any
Warrants) held by it to another of the Company's suppliers, at a price
equal to the outstanding principal amount of such Notes, interest
accrued to the date of transfer (including any Capitalized Interest
Amount and any Warrant Purchase Amount) and any other amounts due to
such Vendor as the holder of Notes, so long as the Required Holders
(determined as though the Notes of the affected Vendor and its
affiliates were not outstanding) have consented in writing to such
transfer (such consent not to be unreasonably withheld) (upon the
consummation of such transfer, such supplier shall be deemed to be a
"Vendor" for all purposes hereof).
If and to the extent that the Warrant Purchase Amount can not be calculated at
the time that the purchase of the selling Note holder's Note is to be
consummated under clause (ii) or (iii) of this Section 2.2(c), then the
purchaser of such Note shall unconditionally agree to pay the Warrant Purchase
Amount to the selling Note holder within five (5) Business Days after the
Warrant Purchase Amount has been determined.
2.3. Replacement of Notes.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of a Purchaser,
notice from such Purchaser of such loss, theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; provided, however, that if the
holder of such Note is a Purchaser or a subsidiary or affiliate of a
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Purchaser, an institutional investor or a nominee of any such Person, the
unsecured agreement of indemnity of such Person shall be deemed to be
satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
2.4. Issuance Taxes.
The Company will pay all taxes (if any) due in connection with and as the
result of the initial issuance and sale of the Notes and in connection with any
modification, waiver or amendment of this Agreement or the Notes and shall save
each holder of Notes harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
3.1. Visits and Inspections.
The Company shall, and shall cause each Subsidiary to, permit
representatives of each holder of Notes, from time to time, as often as may be
reasonably requested, but only during normal business hours and (except when a
Default or Event of Default exists) upon reasonable prior notice to the Company
at times and in a manner not unduly disruptive to the Company, to visit and
inspect the Properties of the Company and each Subsidiary, inspect, audit and
make extracts from the Company's and each Subsidiary's books and records, and
discuss with its officers, its employees and its independent accountants the
overall business, financial condition and results of operations of the Company
and its Subsidiaries: provided, however, that in no event shall the Company or
its Subsidiaries be required to allow any Note holder to inspect, or otherwise
make available to or discuss with any Note holder, any information relating to
the particular terms of its business arrangements with any party, its profit
margins with respect to any particular party or business line, or any other
information that the Company reasonably determines is competitively sensitive
and has not been previously disclosed. Expenses incurred by the holders of the
Notes in connection with this Section shall be paid by the Company in accordance
with Section 7.6.
3.2. Notices.
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(a) The Company shall notify each holder of Notes in writing,
promptly after the Company's obtaining knowledge thereof, (i) of the
commencement of any litigation affecting any Obligor or any of its Properties,
whether or not the claims asserted in such litigation are considered by the
Company to be covered by insurance, and of the institution of any administrative
proceeding, to the extent that such litigation or proceeding, if determined
adversely to such Obligor, would reasonably be expected to have a Material
Adverse Effect; (ii) of any material labor dispute to which any Obligor may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (iii) of any material default by any Obligor under, or
termination of, any Material Contract or any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any Debt
of such Obligor exceeding $600,000; (iv) of the existence of any Default or
Event of Default; (v) of any default by any Person under any note or other
evidence of Debt payable to an Obligor in an amount exceeding $600,000; (vi) of
any judgment against any Obligor in an amount exceeding $600,000; (vii) of the
assertion by any Person of any Intellectual Property Claim, the adverse
resolution of which could reasonably be expected to have a Material Adverse
Effect; (viii) of any violation or asserted violation by the Company of any
Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), the
adverse resolution of which would reasonably be expected to have a Material
Adverse Effect; and (ix) of any Environmental Release by an Obligor or on any
Property owned or occupied by an Obligor which would reasonably be expected to
have a Material Adverse Effect. In addition, the Company shall give each holder
of Notes at least 30 Business Days' prior written notice of any Obligor's
opening of any new office or place of business.
(b) The Company shall notify the Agent in writing (i) at least 30
Business Days' prior to the Company or any of its Subsidiaries opening any new
office or place of business and shall promptly execute any and all documents
requested by Agent and (ii) at least 30 Business Days' prior to any proposed
change of name of the Company or any of its Subsidiaries and cause to be
delivered to Agent (A) at least 15 Business Days prior thereto all Lien
Perfection Documents required by Agent in connection with such name change, and
(B) within 5 Business Days after the effective date of such name change, written
notice of the effective date of such name change and any state in which such
name change is not effective.
3.3. Financial and Other Information.
(a) The Company shall keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions; and cause
to be prepared and to be furnished to each holder of Notes the following
(all to be prepared in accordance with GAAP applied on a consistent basis,
unless the Company's certified public accountants
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concur in any change therein, such change is disclosed to each holder of
Notes and is consistent with GAAP:
(i) as soon as available, and in any event within 90 days (or to
the extent that a filing extension is granted by the SEC, within 150
days) after the close of each Fiscal Year, unqualified audited
balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and the related statements of income, shareholders'
equity and cash flow, all on a Consolidated basis, certified without
material qualification by a firm of independent certified public
accountants of recognized national standing selected by the Company
but reasonably acceptable to the Required Holders (except for a
qualification for a change in accounting principles with which the
accountant concurs), and setting forth in each case in comparative
form the corresponding Consolidated figures for the preceding Fiscal
Year;
(ii) as soon as available, and in any event within 30 days after
the end of each of the first six (6) months ending after the Closing
Date, unaudited balance sheets of the Company and its Subsidiaries as
of the end of such month and the related unaudited Consolidated
statements of income and cash flow for such month and for the portion
of the Company's financial year then elapsed, all on a Consolidated
basis, setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and certified by the principal
financial officer of the Company as prepared in accordance with GAAP
and fairly presenting the Consolidated financial position and results
of operations of the Company and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments
and except that such statements need not contain notes;
(iii) as soon as available, and in any event within 50 days
after the end of each Fiscal Quarter hereafter, including the last
Fiscal Quarter of the Company's Fiscal Year, unaudited balance sheets
of the Company and its Subsidiaries as of the end of such Fiscal
Quarter and the related unaudited Consolidated statements of income
and cash flow for such Fiscal Quarter and for the portion of the
Company's financial year then elapsed, on a Consolidated basis,
setting forth in comparative form the corresponding figures for the
preceding Fiscal Year and certified by the principal financial
officer of the Company as prepared in accordance with GAAP and fairly
presenting the Consolidated financial position and results of
operations of the Company and its Subsidiaries for such Fiscal
Quarter and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
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(iv) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or
reports which the Company has made generally available to its
shareholders and copies of any regular, periodic and special reports
or registration statements which the Company files with the SEC or
any Governmental Authority which may be substituted therefor, or any
national securities exchange;
(v) promptly after (and in any event within 3 Business Days of)
becoming aware (i) of the existence of any condition or event which
constitutes a Default or an Event of Default, or (ii) that the holder
of any Note, or of any Debt, shall have given notice or taken any
other action with respect to a claimed Default, Event of Default or
default or event of default, a notice specifying the nature of the
claimed Default, Event of Default or default or event of default and
the notice given or action taken (if any) by such holder and what
action the Company is taking or proposes to take with respect
thereto; and
(vi) with reasonable promptness, such other data and information
as from time to time may be reasonably requested by any holder of
Notes.
(b) Concurrently with the delivery of the financial statements
described in clause (i) of Section 3.3(a), the Company shall cause to be
prepared and shall deliver to each holder of Notes a certificate of the
Company's certified public accountants stating to such holders that, based
upon such accountants' audit of the Consolidated financial statements of
the Company and its Subsidiaries performed in connection with their
examination of said financial statements, nothing came to their attention
that caused them to believe that the Company was not in compliance with
Section 4.12, Section 4.16, Section 4.17 or Section 4.18 hereof, or, if
they are aware of such noncompliance, specifying the nature thereof.
Concurrently with the delivery of the financial statements described in
clauses (i) and (ii) of Section 3.3(a), or more frequently if requested by
any holder of Notes during any period that a Default or Event of Default
exists, the Company shall cause to be prepared and furnished to each holder
of Notes a Compliance Certificate executed by the chief financial officer
of the Company, in form and substance reasonably satisfactory to the
Required Holders.
3.4. Intentionally Omitted.
3.5. Taxes.
The Company shall pay and discharge all Taxes prior to the date on which
such Taxes become delinquent or penalties attach thereto, except and to the
extent only that such Taxes are being Properly Contested.
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3.6. Compliance with Laws.
The Company shall comply with all Applicable Law, including ERISA, all
Environmental Laws, OSHA, FLSA and all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of Taxes, and obtain
and keep in force any and all Governmental Approvals necessary to the ownership
of its Properties or to the conduct of its business, to the extent that any such
failure to comply, obtain or keep in force could be reasonably expected to have
a Material Adverse Effect. Without limiting the generality of the foregoing, if
any Environmental Release shall occur at or on any of the Properties of the
Company or any Subsidiary, the Company shall, or shall cause the applicable
Subsidiary to, act promptly and diligently to investigate and report to each
holder of Notes and all appropriate Governmental Authorities the extent of, and
to make appropriate remedial action to eliminate, such Environmental Release all
in accordance with applicable Environmental Laws, to the extent the failure to
do so would reasonably be expected to have a Material Adverse Effect.
3.7. Insurance.
In addition to the insurance required pursuant to the Financing Documents
with respect to the Collateral, the Company shall maintain with financially
sound and reputable insurers, (i) insurance with respect to its Properties and
business against such casualties and contingencies of such type (including
product liability, workers' compensation, larceny, embezzlement, or other
criminal misappropriation insurance) and in such amounts as is customary in the
business of the Company or such Subsidiary and (ii) business interruption
insurance in an amount not less than $10,000,000.
3.8. Year 2000 Compatibility.
The Company shall take all action necessary to assure that the Company's
computer based systems are (and remain) able to operate and effectively process
data (including dates) after January 1, 2000.
3.9. Intellectual Property.
The Company shall, promptly after applying for or otherwise acquiring any
Intellectual Property, deliver to each holder of Notes (or the Agent for their
benefit), in form and substance acceptable to the Required Holders and in
recordable form, all documents necessary for the holders of Notes to perfect
their Lien on such Intellectual Property subject to the Subordination
Agreements.
3.10. Dividends of Subsidiaries After Default.
The Company shall, promptly upon (but in no case more than 5 Business Days
after) the occurrence of an Event of Default, cause each Subsidiary to declare
and pay cash Distributions on, or to make payments or Distributions
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<PAGE>
on account of, the shares of all classes of Equity Interests of such Subsidiary
in an amount equal to the maximum amount permitted by Applicable Law at such
time to such Subsidiary for the payment of Distributions, and turn over all such
Distributions for application to the Obligations subject to the Subordination
Agreements.
3.11. Pledged Shares.
The Company shall pledge to the Agent, for the benefit of itself and each
holder of Notes from time to time, 100% of the Equity Interests of each Domestic
Subsidiary and 65% of the Equity Interests of each Foreign Subsidiary pursuant
to a Pledge Agreement which is subject to the Subordination Agreements.
3.12. Payment of Notes and Maintenance of Office.
The Company will punctually pay, or cause to be paid, the principal of, and
interest on, the Notes, as and when the same shall become due according to the
terms hereof and of the Notes, and will maintain an office at the address of the
Company as provided on Annex 2 hereto where notices, presentations and demands
in respect hereof or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company notifies the holders
of the Notes of any change of location of such office, which will in any event
be located within the United States of America.
3.13. Private Offering.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
3.14. Subsidiary Guaranties.
The Company will cause each Subsidiary that at any time incurs, creates,
guarantees or in effect guarantees or otherwise becomes liable in respect of any
Senior Debt, to simultaneously become a guarantor pursuant to a Subsidiary
Guaranty (each, a "Subsidiary Guaranty") in form and substance reasonably
satisfactory to the Purchasers. At the time each such Subsidiary executes such
Subsidiary Guaranty, the Company shall cause such Subsidiary to deliver to each
holder of Notes a certificate of the secretary or assistant secretary of such
Subsidiary attaching and certifying as true, complete and accurate copies of the
constitutive documents of such Subsidiary and corporate resolutions (or
equivalent) authorizing such transaction, in each case certified as true and
correct by an appropriate officer of such Subsidiary.
4. NEGATIVE AND FINANCIAL COVENANTS
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The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
4.1. Fundamental Changes.
The Company shall not, and shall not permit any Subsidiary to, merge,
reorganize, consolidate or amalgamate with any Person, or liquidate, wind up its
affairs or dissolve itself, except for, upon prior written notice to the Agent,
mergers or consolidations of any Subsidiary with another Subsidiary or the
Company and mergers as to which the Permitted Merger Conditions are satisfied;
or change the Company's FEIN.
4.2. Loans.
The Company shall not, and shall not permit any Subsidiary to, make any
loans or other advances of money to any Person other than (i) to an officer or
employee of the Company or a Subsidiary for salary, travel advances, advances
against commissions and other similar advances in the Ordinary Course of
Business, (ii) to an officer or employee of the Company in the Ordinary Course
of Business, provided, however, that the total of such loans to officers or
-------- -------
employees of a the Company under this clause (ii) shall not exceed $600,000 in
the aggregate at any time; and (iii) for so long as no Default or Event of
Default exists loans to a Subsidiary that is a Guarantor so long as such
Guarantor has granted a security interest in all of its assets in favor of the
Agent for the benefit of the Purchasers.
4.3. Debt.
The Company shall not, and shall not permit any Subsidiary to, create,
incur, assume, guarantee or suffer to exist any Debt, except:
(a) the Notes;
(b) Senior Debt existing on the Closing Date and Senior Debt
existing pursuant to an Acceptable Credit Facility;
(c) accounts payable by the Company or a Subsidiary to trade
creditors in the Ordinary Course of Business;
(d) Permitted Purchase Money Debt;
(e) Debt for accrued payroll, Taxes and other operating expenses
(other than for Money Borrowed) incurred in the Ordinary Course of Business
of the Company or such Subsidiary, so long as payment thereof is not past
due and payable unless, in the case of Taxes only, such Taxes are being
Properly Contested;
(f) Debt for Money Borrowed by the Company (other than the Notes),
but only to the extent that such Debt is outstanding on the date
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of this Agreement and is not to be satisfied on or about the Closing Date
from the proceeds of the sale of the Notes;
(g) Permitted Contingent Obligations;
(h) Debt that is not included in any of the preceding paragraphs of
this Section 4.3, is not secured by a Lien (unless such Lien is a Permitted
Lien) and does not exceed at any time, in the aggregate, the sum of
$120,000 as to the Company and all of its Subsidiaries;
(i) Refinancing Debt so long as each of the Refinancing Conditions
is met; and
(j) Additional unsecured Debt, so long as (i) no Default or Event of
Default has occurred and is continuing at the time of the incurrence
thereof (ii) pursuant to Section 3.3(b) the Company shall have delivered to
the holders of the Notes the Company's financial statements for the most
recent Fiscal Quarter ended prior to the incurrence of such additional
Debt, and (A) the Debt to EBITDA Ratio was less than 4.5 to 1 at the end of
such Fiscal Quarter, and (B) the Pro Forma Debt to EBITDA Ratio was less
than 4.5 to 1 at the end of such Fiscal Quarter.
4.4. Affiliate Transactions.
The Company shall not, and shall not permit any Subsidiary to, enter into,
or be a party to any transaction with any Affiliate, except: (i) the
transactions contemplated by the Financing Documents; (ii) payment of reasonable
compensation to officers and employees for services actually rendered to the
Company or its Subsidiaries; (iii) payment of customary directors' fees and
indemnities; (iv) transactions with Affiliates that were consummated prior to
the date hereof and have been disclosed to each purchaser of Notes in writing
prior to the Closing Date; (v) transactions with Affiliates in the Ordinary
Course of Business and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to the holders of the Notes and are no less favorable to the Company
or such Subsidiary than the Company or such Subsidiary would obtain in a
comparable arm's length transaction with a Person not an Affiliate of the
Company or such Subsidiary; (vi) any of the transactions contemplated by the
Pameco Securities Purchase Agreement and the Shareholders Agreement as in effect
on the Closing Date without giving effect to any amendments thereafter, provided
that management fees and other cash amounts may be paid to Littlejohn and
Quilvest American Equity only if (x) no Default or Event of Default has occurred
and is continuing at the time of or after giving effect thereto and (y) the
Company shall have delivered to the holders of the Notes the Company's financial
statements for the most recent Fiscal Quarter ended prior to the payment of such
fees and amounts and the Debt to EBITDA Ratio was less than 4.5 to 1 at the end
of such Fiscal Quarter; and (vii) Distributions to the extent permitted by
Section 4.6 of this Agreement.
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4.5. Liens.
The Company shall not, and shall not permit any Subsidiary to, create or
suffer to exist any Lien upon any of its Property, income or profits, whether
now owned or hereafter acquired, except the following (collectively, "Permitted
Liens"):
(a) Liens at any time granted in favor of Agent;
(b) Liens for Taxes (excluding any Lien imposed pursuant to any of
the provisions of ERISA) not yet due or being Properly Contested;
(c) statutory Liens (excluding any Lien imposed pursuant to any of
the provisions of ERISA) arising in the Ordinary Course of Business of the
Company or a Subsidiary, but only if and for so long as (x) payment in
respect of any such Lien is not at the time required or the Debt secured by
any such Liens is being Properly Contested and (y) such Liens do not
materially detract from the value of the Property of the Company or such
Subsidiary and do not materially impair the use thereof in the operation of
the Company's or such Subsidiary's business;
(d) Purchase Money Liens securing Permitted Purchase Money Debt;
(e) Liens securing Debt of a Subsidiary of the Company to the
Company or to another such Subsidiary;
(f) Liens arising by virtue of the rendition, entry or issuance
against the Company or any Subsidiary, or any Property of the Company or
any Subsidiary, of any judgment, writ, order, or decree for so long as each
such Lien (i) is in existence for less than 20 consecutive days after it
first arises or is being Properly Contested and (ii) is at all times junior
in priority to any Liens in favor of Agent;
(g) Liens incurred or deposits made in the Ordinary Course of
Business to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Money Borrowed), statutory obligations and
other similar obligations or arising as a result of progress payments under
government contracts, provided that, to the extent any such Liens attach to
any of the Collateral, such Liens are at all times subordinate and junior
to the Liens upon the Collateral in favor of the Agent;
(h) easements, rights-of-way, restrictions, covenants or other
agreements of record and other similar charges or encumbrances on real
Property of the Company or a Subsidiary that do not interfere with the
ordinary conduct of the business of the Company or such Subsidiary;
(i) normal and customary rights of setoff upon deposits of cash in
favor of banks and other depository institutions and Liens of a
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collection bank arising under the UCC on Payment Items in the course of
collection;
(j) Liens in existence immediately prior to the Closing Date that
are satisfied in full and released on the Closing Date as a result of the
application of the Company's cash on hand at the Closing Date or the
proceeds of the sale of the Notes;
(k) Liens in favor of the holders of Senior Debt that are permitted
pursuant to the applicable Acceptable Credit Facility;
(l) such other Liens as appear on Schedule 4.5 hereof, to the extent
provided therein; and
(m) such other Liens as the Required Holders in their sole
discretion may hereafter approve in writing.
4.6. Distributions.
The Company shall not, and shall not permit any Subsidiary to, declare or
make any Distributions, except (i) for Upstream Payments and (ii) as otherwise
provided in Section 3.12 and (iii) dividends in respect of either (I) the Series
A Cumulative Preferred Stock issued pursuant to the Pameco Securities Purchase
Agreement as in effect on the date hereof and the Certificate of Designations
providing for the issuance of Series A Cumulative Preferred Stock, par value
$1.00 per share, in accordance with the terms of such Certificate of
Designations as in effect on the date hereof and (II) any additional series of
Preferred Stock issued pursuant to the Pameco Securities Purchase Agreement as
in effect on the date hereof and the Certificate of Designations providing for
the issuance of any additional series of Cumulative Payment in Kind Convertible
Preferred Stock, par value $1.00 per share, in accordance with the terms of such
Certificate of Designations as in effect on the date hereof; each of the
foregoing agreements or documents as in effect on the Closing Date without
giving effect to any amendment thereof after the Closing Date; provided,
---------
however, that such dividends can only be paid in cash after February 28, 2003
- -------
and only so long as both (x) no Default or Event of Default has occurred and is
continuing at the time of or after the making of such dividend, and (y) the
Company shall have delivered to the holders o the Notes the Company's financial
statements for the most recent Fiscal Quarter ended and the Debt to EBITDA Ratio
was less than 4.5 to 1 at the end of such Fiscal Quarter.
4.7. Upstream Payments.
The Company shall not, and shall not permit any Subsidiary to, create or
suffer to exist any encumbrance or restriction on the ability of a Subsidiary to
make any Upstream Payment, except for encumbrances or restrictions (i) pursuant
to the Financing Documents or (ii) existing under Applicable Law.
4.8. Capital Expenditures.
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The Company shall not, and shall not permit any Subsidiary to, make Capital
Expenditures (including expenditures by way of capitalized leases) which in the
aggregate, as to the Company and its Subsidiaries, exceed $6,000,000 during the
period from the date of this Agreement through February 28, 2001 or $8,000,000
during any Fiscal Year after February 28, 2001, provided, however, that the
Company may make additional Capital Expenditures in excess of the amounts set
forth herein so long as (a) no Default or Event of Default has occurred and is
continuing at the time of making such Capital Expenditure and (b) at the time of
making such Capital Expenditure the Company shall have delivered to the holders
of the Notes the Company's financial statements for the most recent Fiscal
Quarter ended prior to making such Capital Expenditure and the Debt to EBITDA
Ratio was less than 4.5 to 1 at the end of such Fiscal Quarter.
4.9. Disposition of Assets.
The Company shall not, and shall not permit any Subsidiary to, sell,
assign, lease, consign or otherwise dispose of any of its Properties or any
interest therein, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the Ordinary Course of Business and (ii) so long as no Default or
Event of Default shall have occurred and be continuing, the Company may sell
Property which, in the aggregate amount, does not exceed $10,000,000 in Value
after the date hereof.
4.10. Restricted Investments.
The Company shall not, and shall not permit any Subsidiary to, make or have
any Restricted Investment.
4.11. Tax Consolidation.
The Company shall not, and shall not permit any Subsidiary to, file or
consent to the filing of any consolidated income tax return with any Person
other than a Subsidiary.
4.12. Accounting Changes.
The Company shall not, and shall not permit any Subsidiary to, make any
significant change in accounting treatment or reporting practices, except as may
be required by GAAP, or establish a fiscal year different from the Fiscal Year.
4.13. Organization Documents.
The Company shall not, and shall not permit any Subsidiary to, amend,
modify or otherwise change any of the terms or provisions in any of its
Organization Documents as in effect on the date hereof, except for changes that
do not affect in any way the Company's or such Subsidiary's rights and
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obligations to enter into and perform the Financing Documents to which it is a
party and to pay all of the Obligations and that do not otherwise have a
Material Adverse Effect.
4.14. Restrictive Agreements.
The Company shall not, and shall not permit any Subsidiary to, enter into
or become party to any Restrictive Agreement other than those disclosed in
Schedule 4.14 hereto, provided that none of such disclosed agreements shall be
amended without prior notice to and the consent of the Required Holders.
4.15. Conduct of Business.
The Company shall not, and shall not permit any Subsidiary to engage in any
business other than the business engaged in by it on the Closing Date and any
business or activities which are substantially similar, related or incidental
thereto.
4.16. Consolidated Net Worth.
The Company shall maintain a Consolidated Net Worth of at least
$43,200,000, as of the last day of each Fiscal Quarter. Commencing with the
Fiscal Quarter ending May 31, 2001, this test shall be increased by 50% of
Consolidated Net Income based upon the immediately preceding Fiscal Quarter
(without regard to any loss).
4.17. Consolidated EBITDA.
The Company shall achieve Consolidated EBITDA of at least the amount shown
below for the period corresponding thereto:
Period Amount
- ------ ------
February 29, 2000 through May 31, 2000 $(6,000,000)
February 29, 2000 through August 31, 2000 $ 6,400,000
February 29, 2000 through November 30, 2000 $ 9,200,000
February 29, 2000 through February 28, 2001 $ 9,600,000
Commencing on March 1, 2001, Borrower shall achieve Consolidated EBITDA of
at least the amount shown below for the period corresponding thereto, based upon
the immediately preceding four Fiscal Quarter period:
The four Fiscal Quarter Period ending May 31, 2001 $12,800,000
The four Fiscal Quarter Period ending August 31, 2001 $14,400,000
The four Fiscal Quarter Period ending November 30, 2001 $14,400,000
The four Fiscal Quarter Period ending February 28, 2002 $15,200,000
4.18. Fixed Charge Ratio.
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Commencing March 1, 2002, the Company shall achieve a Consolidated Fixed
Charge Coverage Ratio of at least the ratios shown below for the periods
corresponding thereto:
Fiscal Quarter ended May 31, 2002 1.04 to 1.00
Each Fiscal Quarter ended thereafter 1.12 to 1.00
4.19. Senior Credit Facility Provisions.
To the extent that the provisions of the Senior Credit Agreement that
are analogous to Sections 4.16, Section 4.17 and/or Section 4.18 hereof
(including any amendment to the defined terms used therein or the manner of
calculating such covenants) are amended, waived or modified at any time while
any Notes are outstanding hereunder, Section 4.16, Section 4.17 and/or Section
4.18 hereof, as appropriate, shall be deemed to be so amended, waived or
modified upon delivery to all holders of Notes of a copy of the executed
agreement containing such amendment, waiver or modification, in the same manner
and for the same amount of time as with respect to the Senior Credit Agreement,
provided that, to the extent that an amendment or modification of such Senior
Credit Agreement provisions affects the dollar values or thresholds set forth
therein, the corresponding dollar values or thresholds contained in Section
4.16, Section 4.17 and/or Section 4.18 shall be deemed to be amended in a such
manner so as to retain a margin of 20% greater flexibility for the Company.
5. EVENTS OF DEFAULT
5.1. Events of Default.
An "Event of Default" exists at any time if any of the following occurs and
is continuing thereafter for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(a) Payments on Notes. The Company fails to make any payment of
principal, interest or any other amount on any Note on or before the date
such payment is due; or
(b) Other Defaults.
(i) Negative Covenant Defaults - the Company or any Subsidiary
--------------------------
fails to comply with any provision of Section 3.1, Section 3.2,
Section 3.3, Section 3.14 or Section 4; or
(ii) Other Defaults - any Obligor fails to comply with any
--------------
other provision hereof or of any other Financing Document, and the
breach of such other provision is not cured to Agent's and the
Required Holders' satisfaction within 15 days after the sooner to
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occur of any Senior Officer's receipt of notice of such breach from
Agent or the date on which such failure first becomes known to any
Senior Officer; provided, however, that such notice and opportunity
-------- -------
to cure shall not apply in the case of any failure which is not
capable of being cured at all or is not capable of being cured
within such 15-day period or which is a willful and knowing failure
or breach by Company; or
(c) Warranties or Representations. Any warranty, representation or
other written statement by or on behalf of any Obligor contained in the
Securities Purchase Agreement or any other Financing Document, in any
written amendment, supplement, modification or waiver with respect to any
Financing Document or in any instrument furnished in compliance herewith or
in reference hereto, shall have been false or misleading in any material
respect when made; or
(d) Default in Respect of Other Debt. Any event shall occur or any
condition shall exist in respect of Debt for Money Borrowed, or under any
agreement securing or relating to such Debt for Money Borrowed, (i) as a
result of which the holders of such Debt for Money Borrowed, or an agent or
trustee therefor, has accelerated the maturity of such Debt for Money
Borrowed or otherwise demanded its immediate repayment or (ii) that permits
any one or more of the holders thereof or a trustee therefor to require the
Company or any Subsidiary to repurchase such Debt for Money Borrowed from
the holders thereof, and such holder or holders have required the Company
or any Subsidiary to do so, provided that the aggregate amount of all
obligations in respect of all such Debt for Money Borrowed exceeds at such
time $500,000; or
(e) Insolvency.
(i) Involuntary Bankruptcy Proceedings:
----------------------------------
(A) a receiver, liquidator, custodian or trustee of any
Obligor, or of all or any substantial part of the Property of
any of them, is appointed by court order; or an order for
relief is entered with respect any Obligor, or any Obligor is
adjudicated a bankrupt or insolvent;
(B) all or any substantial part of the Property of any
Obligor is sequestered by court order; or
(C) a petition is filed against any Obligor under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not
dismissed within thirty (30) days after such filing;
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(ii) Voluntary Petitions. any Obligor files a petition in
-------------------
voluntary bankruptcy or seeks relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, or consents to the filing of any
petition against it under any such law; or
(iii) Assignments for Benefit of Creditors, etc. any Obligor
-----------------------------------------
makes an assignment for the benefit of its creditors, or admits in
writing its inability, or fails, to pay its debts generally as they
become due, or consents to the appointment of a receiver, liquidator
or trustee of the any Obligor or of all or a substantial part of its
Property; or
(f) Undischarged Final Judgments. A final judgment or final,
judgments for the payment of money aggregating in excess of $500,000 is or
are outstanding against one or more of the Obligors and any one of such
judgments shall have been outstanding for more than 30 days from the date
of its entry and shall not have been discharged in full or stayed; or
(g) Financing Documents. Any Financing Document or the Supply
Agreement shall cease to be in full force and effect or shall be declared
by a court or other Governmental Authority of competent jurisdiction to be
void, voidable or unenforceable against any Obligor or any Affiliate; the
validity or enforceability of any Financing Document or the Supply
Agreement against any Obligor or any Affiliate shall be contested by any
Obligor or Affiliate; or any Obligor or Affiliate shall deny that any
Obligor has any further liability or obligation under any Financing
Document or any provision thereof; or
(h) Material Event of Default under Vendor's Supply Agreement. Any
"material event of default" as defined in any Supply Agreement (or any term
sheet with respect to any Supply Agreement that has not been superceded
thereby) shall exist provided, that subject to Section 5.1(i) hereof, such
material event of default under a Supply Agreement shall only constitute an
Event of Default with respect to the Notes held by the Vendor that is a
party to such Supply Agreement; or
(i) Acceleration under Other Supply Agreements. Any Vendor shall
have accelerated Notes held by it through the operation of Section
5.2(a)(iii); or
(j) Uninsured Losses. Any loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as the
Required Holders shall have permitted) by insurance if the amount not
covered by insurance exceeds $1,000,000; or
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(k) Material Adverse Effect. There shall occur any event or
condition that has a Material Adverse Effect; or
(l) Business Disruption; Condemnation. There shall occur a cessation
of a substantial part of the business of any Obligor (other than as a
result of a transaction permitted by Section 4.1 hereof) for a period which
may be reasonably expected to have a Material Adverse Effect; or any
Obligor shall suffer the loss or revocation of any license or permit now
held or hereafter acquired by such Obligor which is necessary to the
continued or lawful operation of its business; or any Obligor shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its
business affairs; or any material lease or agreement pursuant to which any
Obligor leases or occupies any premises on which any Collateral is located
shall be canceled or terminated prior to the expiration of its stated term
and such cancellation or termination has a Material Adverse Effect; or any
material part of the Collateral shall be taken through condemnation or the
value of such Property shall be materially impaired through condemnation;
or
(m) ERISA. A Reportable Event shall occur which could reasonably be
expected to constitute grounds for the termination by the Pension Benefit
Guaranty Corporation of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or if any Plan
shall be terminated or any such trustee shall be requested or appointed, or
if the Company, any Subsidiary or any Obligor is in "default" (as defined
in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Plan resulting from the Company's, such Subsidiary's or such Obligor's
complete or partial withdrawal from such Plan if such termination, trustee
appointment or default could reasonably be expected to result in a Material
Adverse Effect; or
(n) Challenge to Financing Documents. Any Obligor or any of its
Affiliates shall challenge or contest in any action, suit or proceeding the
validity or enforceability of any of the Financing Documents, the legality
or enforceability of any of the Obligations or the perfection or priority
of any Lien granted to Agent or any of the holders of Notes, or any of the
Financing Documents ceases to be in full force or effect for any reason
other than a full or partial waiver or release by Agent and the holders of
the Notes in accordance with the terms thereof; or
(o) Repudiation of or Default Under Subsidiary Guaranty. Any
Subsidiary Guarantor shall revoke or attempt to revoke the Subsidiary
Guaranty signed by such Subsidiary Guarantor, shall repudiate such
Subsidiary Guarantor's liability thereunder, or shall be in default under
the terms thereof, or shall fail to confirm in writing, promptly after
receipt of any holder of Notes' written request therefor,
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such Subsidiary Guarantor's ongoing liability under the Subsidiary Guaranty
in accordance with the terms thereof; or
(p) Criminal Forfeiture. Any Obligor shall be convicted under any
criminal law that could lead to a forfeiture of any material Property of
such Obligor.
5.2. Default Remedies.
(a) Acceleration of Maturity of Notes.
(i) Acceleration on Event of Default.
--------------------------------
(A) Automatic. If any Event of Default specified in
Section 5.1(e) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived.
(B) By Action of Holders. If any Event of Default (other
than an Event of Default specified in Section 5.1(e) or Section
5.1(h)) shall exist, the Required Holders may exercise any
right, power or remedy permitted to such holder or holders by
law, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare, the entire
principal of, and all interest accrued on, all the Notes then
outstanding to be due and payable, and such Notes shall
thereupon become forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on,
the Notes.
(ii) Acceleration on Payment Default. During the existence of
-------------------------------
an Event of Default described in Section 5.1(a), and irrespective of
whether the Notes then outstanding shall have become due and payable
pursuant to Section 5.2(a)(i)(B), any holder of Notes who or which
shall have not consented to any waiver with respect to such Event of
Default may, at his or its option, by notice in writing to the
Company, declare the Notes then held by such holder to be, and such
Notes shall thereupon become, forthwith due and payable together with
all interest accrued thereon, without any presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall forthwith pay to such holder
the entire principal of and interest accrued on such Notes.
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(iii) Acceleration upon Supply Agreement Material Event of
----------------------------------------------------
Default. With respect to any individual Vendor, during the existence
-------
of an Event of Default described in Section 5.1(h) with respect to
the Supply Agreement of such Vendor, and irrespective of whether the
Notes then outstanding shall have become due and payable pursuant to
Section 5.2(a)(i)(B), such Vendor may, at his or its option, by
notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due
and payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and the Company shall forthwith
pay to such Vendor the entire principal of and interest accrued on
such Notes.
(b) Other Remedies. During the existence of an Event of Default.
irrespective of whether the Notes then outstanding shall become due and
payable pursuant to Section 5.2(a),and irrespective of whether any holder
of Notes then outstanding shall otherwise have pursued or be pursuing any
other rights or remedies, any holder of Notes may proceed to protect and
enforce its rights hereunder and under such Notes by exercising such
remedies as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any agreement contained herein or in
aid of the exercise of any power granted herein; provided, however, that
the maturity of such holder's Notes may be accelerated only in accordance
with Section 5.2(a).
(c) Nonwaiver; Remedies Cumulative. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. All rights
and remedies of each holder of Notes hereunder and under applicable law are
cumulative to, and not exclusive of, any other rights or remedies any such
holder of Notes would otherwise have.
(d) Subordination. The rights of the holders of the Notes to receive
payments in respect of this Agreement and the Notes, and to exercise any
remedies, solely as between the holders of the Notes and the holders of the
Senior Debt, shall be subject in all respects to the provisions of the
Subordination Agreement; provided, however, that all such rights shall
remain unconditional and absolute as between the holders of the Notes and
the Company and the other Obligors.
5.3. Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 5.2(a)(i), then and in
every such case, the Required Holders may, by written instrument filed with the
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Company, rescind and annul such declaration, and the consequences thereof;
provided, however, that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of the
other sums payable hereunder and under the Notes (except any principal of,
or interest on, the Notes which shall have become due and payable by reason
of such declaration under Section 5.2(a)(i)) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 7.5 or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
6. INTERPRETATION OF THIS AGREEMENT
6.1. Terms Defined.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
Acceptable Credit Facility - means and includes:
(a) the Senior Credit Agreement, as in effect on the date hereof;
and
(b) the Senior Credit Agreement, as amended, modified supplemented,
renewed or extended after the date hereof; and each and every agreement or
document refinancing, renewing or refunding the Senior Credit Agreement, as
amended, modified supplemented, renewed or extended after the date; but, in
each case, only so long as:
(i) the aggregate principal amount of the Debt committed to
thereunder does not exceed at any time the Senior Debt Limit;
(ii) such loan or credit agreement does not expressly restrict
payments on the Subordinated Debt so as to create any default or event
of default in respect of such facility by virtue of no other fact
except the making by the Company of a payment required to be made in
respect of the Notes, and shall not restrict the payment of dividends
or distributions from the Subsidiaries to the Company in any manner
which would have such effect.
28
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Acquisition - any transaction, or any series of related transactions, by
which the Company directly or indirectly (i) acquires any ongoing business or
all or substantially all of the assets of any Person, whether through the
purchase of assets, merger or otherwise, (ii) acquires (in one transaction or as
the most recent transaction in a series of transactions) control of at least a
majority of the Voting Securities of a corporation having ordinary Voting Power
for the election of directors, or (iii) acquires control of 50% or more of the
Equity Interests in any other Person.
Acquisition Subsidiary - a Subsidiary that is formed by the Company to
purchase assets or stock of a Person in connection with a Permitted Acquisition
or an existing Subsidiary that purchases assets or stock of another Person in
connection with a Permitted Acquisition.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, another Person; (ii) which beneficially owns or
holds 10% or more of any class of the Equity Interests of a Person; or (iii) 10%
or more of the Equity Interests with power to vote of which is beneficially
owned or held by another Person or a Subsidiary of another Person. For purposes
hereof, "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of any Equity Interest, by contract or otherwise.
Agent - means International Comfort Products Corporation (USA), as agent
pursuant to the Collateral Agency Agreement.
Agreement, this - and references thereto shall mean this Note Agreement as
it may from time to time be amended or supplemented.
Applicable Interest Law - means any present or future law which has
application to the interest and other charges pursuant to this Agreement and the
Notes; provided, however, that pursuant to Section 6.5, the parties have
selected the internal laws of the State of New York as the Applicable Interest
Law for purposes of this Agreement.
Applicable Law - all laws, rules and regulations applicable to the Person,
conduct, transaction, covenant, Financing Document or Material Contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of governmental bodies; and all orders, judgments
and decrees of all courts and arbitrators.
Bankruptcy Code - title 11 of the United States Code, as amended and in
effect from time to time.
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Business Day - means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
Capital Expenditures - expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.
Capitalized Interest Amount - Section 1.1(b).
Capitalized Lease Obligation - any Debt represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
Cash Equivalents - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government having maturities of not
more than 12 months from the date of acquisition; (ii) domestic certificates of
deposit and time deposits having maturities of not more than 12 months from the
date of acquisition, bankers' acceptances having maturities of not more than 12
months from the date of acquisition and overnight bank deposits, in each case
issued by any commercial bank organized under the laws of the United States, any
state thereof or the District of Columbia, which at the time of acquisition are
rated A-1 (or better) by S&P or P-1 (or better) by Moody's, and (unless issued
by a holder of Senior Debt) not subject to offset rights in favor of such bank
arising from any banking relationship with such bank; (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (i) and (ii) entered into with any financial
institution meeting the qualifications specified in clause (ii) above; and (iv)
commercial paper having at the time of investment therein or a contractual
commitment to invest therein a rating of A-1 (or better) by S&P or P-1 (or
better) by Moody's, and having a maturity within 9 months after the date of
acquisition thereof.
CERCLA - the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq. and its implementing regulations, as
amended and in effect from time to time.
Change in Control - means either (a) Littlejohn Fund II, L.P. shall cease
to beneficially own (as determined under Rule 13d-3(a)(1) under the Exchange
Act) 20% of the common stock, par value $.01 per share, of the Company, or shall
at least cease to have pursuant to contractual rights, control of the Company,
(b) the transfer of all or substantially all of the Property of the Company as
an entirety in one or a series of transactions or (c) the acquisition by any
Person or group of Persons (other than Littlejohn Fund II, L.P. or
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Littlejohn Fund II, L.P. and Quilvest American Equity, Ltd. as a group) of
control of a majority of the Voting Securities of the Company.
Change in Control Notice Event - means:
(a) the execution of any written agreement (including, without
limitation, any "letter of intent" or other similar agreement which
contemplates more complete documentation or agreement) which, when fully
performed by the parties thereto, would result in a Change in Control; or
(b) the making of any written offer by any person (as such term is used
in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the Closing Date) or related persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the Closing
Date), which offer, if accepted by the requisite number of such holders,
would result in a Change in Control.
Change in Control Payment Date - see Section 1.7.
Closing Date - means the date any Notes are first sold.
Collateral - all of the Property and interests in Property described in
Section 1 of the Company Security Agreement; all Property described in any other
security documents as security for the payment or performance of any of the
Obligations; and all other Property and interests in Property that now or
hereafter secure (or are intended to secure) the payment and performance of any
of the Obligations.
Collateral Agency Agreement - means that certain Collateral Agency
Agreement, dated as of even date herewith, by and among the Agent, the
Purchasers, the Company and the Guarantor pursuant to which the Purchasers
appoint the Agent with respect to certain matters relating to the Collateral, as
amended from time to time.
Common Stock - means the voting Class A Common Stock, par value $0.1 per
share, of the Company.
Company - see the introductory paragraph.
Company Security Agreement - the security agreement of even date herewith
between the Company and the Agent, as amended from time to time.
Compliance Certificate - a Compliance Certificate to be provided by the
Company in accordance with Section 3.3.
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Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Consolidated Adjusted Net Earnings - with respect to any fiscal period,
means the net earnings (or loss) for such fiscal period of the Company and its
Subsidiaries, all as reflected on the financial statements of the Company and
its Subsidiaries supplied to Agent pursuant to Section 3.3 hereof, but
excluding: (i) any gain or loss arising from the sale of capital assets; (ii)
any gain or loss arising from any write-up or write-down of assets during such
period; (iii) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary; (iv) earnings of any Person, substantially all the assets of which
have been acquired in any manner by the Company, realized by such Person prior
to the date of such acquisition; (v) net earnings of any entity (other than a
Subsidiary of the Company) in which the Company has an ownership interest
unless such net earnings have actually been received by the Company in the form
of cash Distributions; (vi) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of Distributions to the
Company; (vii) the earnings of any Person to which any assets of the Company
shall have been sold, transferred or disposed of, or into which the Company
shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; (viii) any gain arising
from the acquisition of any Securities of the Company; and (ix) any gain or
loss arising from extraordinary or non-recurring items, all as determined on a
Consolidated basis in accordance with GAAP.
Consolidated EBITDA - for any fiscal period of the Company, an amount equal
to the sum for such fiscal period of (i) Consolidated Adjusted Net Earnings,
plus (ii) provision for Taxes based on income, plus (iii) Consolidated Interest
Expense, plus (iv) depreciation, amortization and other non-cash charges of the
Company and its Subsidiaries on a Consolidated basis.
Consolidated Fixed Charge Coverage Ratio - with respect to any fiscal
period, the ratio of (i) Consolidated EBITDA minus cash income taxes paid and
Unfinanced Capital Expenditures made during such period, to (ii) Consolidated
Fixed Charges for such period.
Consolidated Fixed Charges - with respect to any fiscal period, the sum of
the Company's and its Subsidiaries' (a) Consolidated Interest Expense, plus (b)
the aggregate of all actual principal payments of Debt, plus (c) cash
Distributions permitted by the Agreement.
Consolidated Interest Expense - for any period, total interest expense
(including that portion attributable to capitalized leases in accordance with
GAAP and capitalized interest) of the Company and its Subsidiaries on a
Consolidated basis with respect to all outstanding Debts of the Company and its
Subsidiaries, including all commissions, discounts, and other fees and
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charges owed with respect to letters of credit and bankers' acceptance financing
and net cost under Interest Rate Contracts.
Consolidated Net Income - net income of the Company and its Subsidiaries on
a Consolidated basis, as determined in accordance with GAAP.
Consolidated Net Worth - on any date of determination thereof, (i) the
Consolidated net worth of the Company and its Subsidiaries on such date after
deducting therefrom the amount of all intangible items reflected therein,
including all unamortized debt discount and expense, unamortized research and
development expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, unamortized excess cost of
investment in Subsidiaries over equity at dates of acquisition and all similar
items that could properly be treated as intangibles in accordance with GAAP,
plus (ii) Subordinated Debt on such date, plus (iii) accrued but undeclared
Distributions to the extent not reflected on the balance sheet of Company and
its Subsidiaries in accordance with GAAP.
Contingent Obligation - with respect to any Person, any obligation of such
Person arising from any guaranty, indemnity or other assurance of payment or
performance of any Debt, lease, dividend or other obligation ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the Ordinary Course of
Business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to make take-
or-pay or similar payments, if required, regardless of nonperformance by any
other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
Property constituting direct or indirect security therefor, (B) to advance or
supply funds (1) for the purchase or payment of any such primary obligations or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase Property, Securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (D) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation with respect to
which such Contingent Obligation is made (or, if less, the maximum amount of
such primary obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or, if not stated
or determinable, the maximum reasonably anticipated liability with respect
thereto (assuming such Person is required to perform thereunder), as determined
by such Person in good faith.
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Current Assets - at any date, the amount at which all of the current assets
of a Person would be properly classified as current assets shown on a balance
sheet at such date in accordance with GAAP except that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
Debt - as applied to a Person means, without duplication: (i) all items
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of such Person as of the date
as of which Debt is to be determined, including Capitalized Lease Obligations;
(ii) all Contingent Obligations of such Person; (iii) all reimbursement
obligations in connection with letters of credit or letter of credit guaranties
issued for the account of such Person; and (iv) in the case of the Company
(without duplication), the Obligations. The Debt of a Person shall include any
recourse Debt of any partnership or joint venture in which such Person is a
general partner or joint venturer.
Debt to EBITDA Ratio - means, as of the end of any Fiscal Quarter of the
Company, the ratio of the aggregate Debt for Money Borrowed of the Company and
its Subsidiaries as at such date to Consolidated EBITDA for the period of four
Fiscal Quarters ending on such date.
Debt Obligations - means, with respect to any Debt, all obligations,
liabilities and indebtedness, whether now or hereafter existing and whether
fixed or contingent, for principal, premium, interest (including interest
accruing after the filing of a petition under the Bankruptcy Code, to the extent
allowed), expenses and fees incurred by the Company in respect of such Debt.
Default - means any event which, with the giving of notice or the passage
of time, or both, would become an Event of Default.
Distribution - in respect of any entity, (i) any payment of any dividends
or other distributions on Equity Interests of the entity (except distributions
in such Equity Interests) and (ii) any purchase, redemption or other acquisition
or retirement for value of any Equity Interests of the entity or any Affiliate
of the entity unless made contemporaneously from the net proceeds of the sale of
Equity Interests.
DOL - means the United States Department of Labor and any successor agency.
Domestic Subsidiary - a Subsidiary of the Company that is incorporated
under the laws of a state of the United States or the District of Columbia.
Environmental Laws - all federal, state and local laws, rules, regulations,
codes, ordinances, programs, permits, guidance documents promulgated by
regulatory agencies, orders and consent decrees, now or
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hereafter in effect and relating to human health and safety or the protection or
pollution of the environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or under any
applicable Environmental Laws.
Equipment - all of the Company's machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal Property (other
than Inventory) of every kind and description, whether now owned or hereafter
acquired by the Company and wherever located, and all parts, accessories and
special tools therefor, all accessions thereto, and all substitutions and
replacements thereof.
Equity Interest - the interest of (i) a shareholder in a corporation, (ii)
a partner (whether general or limited) in a partnership (whether general,
limited or limited liability), (iii) a member in a limited liability company, or
(iv) any other Person having any other form of equity security or ownership
interest.
ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate - means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the IRC.
Event of Default - Section 5.1.
Exchange Act - means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.
Extraordinary Expenses - all costs, expenses, fees or advances that Agent
or any holder of Notes may suffer or incur, whether prior to or after the
occurrence of an Event of Default, and whether prior to, after or during the
pendency of an Insolvency Proceeding of any Obligor, on account of or in
connection with (i) the audit, inspection, repossession, storage, repair,
appraisal, insuring, completion of the manufacture of, preparing for sale,
advertising for sale, selling, collecting or otherwise preserving or realizing
upon any Collateral; (ii) the defense of Agent's Lien upon any Collateral or the
priority thereof or any adverse claim with respect to the Notes, the Financing
Documents or the Collateral asserted by any Obligor, any receiver or trustee for
any Obligor or any creditor or representative of creditors of any Obligor; (iii)
the settlement or satisfaction of any Liens upon any Collateral (whether or not
such Liens are Permitted Liens); (iv) the collection or enforcement of any of
the Obligations; (v) the negotiation, documentation, and closing of any
restructuring or forbearance agreement with respect to the Financing Documents
or Obligations; (vi) amounts advanced by Agent pursuant to the Company Security
Agreement; or (vii) the enforcement of any of
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the provisions of any of the Financing Documents. Such costs, expenses and
advances may include transfer fees, taxes, storage fees, insurance costs, permit
fees, utility reservation and standby fees, legal fees, appraisal fees, brokers'
fees and commissions, auctioneers' fees and commissions, accountants' fees,
environmental study fees, wages and salaries paid to employees of the Company or
independent contractors in liquidating any Collateral, travel expenses, all
other fees and expenses payable or reimbursable by the Company or any other
Obligor under any of the Financing Documents, and all other fees and expenses
associated with the enforcement of rights or remedies under any of the Financing
Documents, but excluding compensation paid to employees (including inside legal
counsel who are employees) of Agent.
FEIN - with respect to any Person, the Federal Employer Identification
Number of such Person.
Financing Documents - means and includes this Agreement, the Securities
Purchase Agreement, the Notes, the Pledge Agreement, the Stock Pledge Letter,
the Trademark Security Agreements, the Warrant Agreement, the Warrant
certificates, the Registration Rights Agreement, the Company Security Agreement,
the Pledge Agreement, the Subsidiary Guarantor Security Documents, the
Subsidiary Guaranties, the Collateral Agency Agreement, the Subordination
Agreement and the other agreements, certificates and instruments to be executed
and/or delivered pursuant to the terms of each of the foregoing, as each may be
amended, restated or otherwise modified from time to time.
Fiscal Quarter - each consecutive period of three months beginning on the
first day of a Fiscal Year.
Fiscal Year - the fiscal year of the Company and its Subsidiaries for
accounting and tax purposes, which ends on the last day of February in each
year.
FLSA - the Fair Labor Standards Act of 1938, as amended and in effect from
time to time.
Foreign Pension Plan - means any plan, fund or other similar program:
(a) established or maintained outside of the United States of America
by the Company or any Subsidiary primarily for the benefit of the employees
(substantially all of whom are aliens not residing in the United States of
America) of the Company or such Subsidiary, which plan, fund or other
similar program provides for retirement income for such employees or
results in a deferral of income for such employees in contemplation of
retirement; and
(b) not otherwise subject to ERISA.
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Foreign Subsidiary - a Subsidiary of the Company that is not incorporated
under the laws of a state of the United States or the District of Columbia.
GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.
General Intangibles - all general intangibles of the Company, whether now
owned or hereafter created or acquired by the Company, including all choses in
action, causes of action, company or other business records, inventions,
blueprints, designs, patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, service marks, goodwill, brand names,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, computer programs, operational manuals, all claims under guaranties,
security interests or other security held by or granted to the Company to secure
payment of any of any of the Company's Accounts by an Account Debtor, all rights
to indemnification and all other intangible property of the Company of every
kind and nature (other than Accounts).
Governmental Approvals - all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
Governmental Authority - any federal, state, municipal, national, foreign
or other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the District of Columbia or a
foreign entity or government.
Guarantor Security Documents - means (i) each security agreement that is
executed after the Closing Date by a direct or indirect Subsidiary of Borrower
in favor of Agent in connection with a Permitted Acquisition and by which such
Subsidiary shall grant a security interest in favor of Agent, for its benefit
and for the ratable benefit of Lenders, in all of such Subsidiary's Properties
as security for the payment of the Obligations and such Guarantor's Guaranty,
and (ii) all Lien Perfection Documents requested by Agent from any Guarantor.
Guarantors - Pameco Investment and each other Person who guarantees payment
or performance of the whole or any part of the Obligations.
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Guaranty - means with respect to any Person (for the purposes of this
definition, the "Guarantor") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness, dividend or
obligation; or
(ii) to maintain working capital or other balance sheet condition or
any income statement condition of the Primary Obligor or otherwise to
advance or make available funds for the purchase or payment of such
indebtedness, dividend or obligation;
(c) to lease Property or to purchase securities or other Property or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or obligation of
the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:
(i) in each case where the obligation that is the subject of such
Guaranty is in the nature of indebtedness for money borrowed it shall
be assumed that the amount of the Guaranty is the amount of the direct
obligation then outstanding; and
(ii) in each case where the obligation that is the subject of such
Guaranty is not in the nature of indebtedness for money borrowed it
shall be assumed that the amount of the Guaranty is the amount (if
any) of the direct obligation that is then due.
Indemnified Party - Section 7.7.
Insolvency Proceeding - any action, case or proceeding commenced by or
against a Person, or any agreement of such Person, for (i) the entry of an
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order for relief under any chapter of the Bankruptcy Code or other insolvency or
debt adjustment law (whether state, federal or foreign), (ii) the appointment of
a receiver, trustee, liquidator or other custodian for such Person or any part
of its Property, (iii) an assignment or trust mortgage for the benefit of
creditors of such Person, or (iv) the liquidation, dissolution or winding up of
the affairs of such Person.
Intellectual Property - Property constituting under any Applicable Law a
patent, patent application, copyright, trademark, service mark, tradename, mask
work, trade secret or license or other right to use any of the foregoing.
Intellectual Property Claim - the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
the Company's ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other Property is violative of any ownership
or right to use any Intellectual Property of such Person.
Interest Payment Date- Section 1.1(b).
Interest Rate Contract - any interest rate agreement, interest rate collar
agreement, interest rate swap agreement, or other agreement or arrangement at
any time entered into by the Company with a bank or financial institution that
is designed to protect against fluctuations in interest rates.
Inventory - all of the Company's inventory, whether now owned or hereafter
acquired, including all goods intended for sale or lease by the Company, to be
furnished by the Company under contracts of service, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
the Company's business; and all Documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by the
Company.
IRC - means the Internal Revenue Code of 1986, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
IRS - means the Internal Revenue Service of the United States of America,
and any successor agency charged with administering or enforcing the IRC.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, the Company shall be
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deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes. The interest of a Person who delivers goods to another Person (the
"consignee") under a consignment which is not a security interest, where the
goods are not the Property of the consignee, shall not be deemed to constitute a
"Lien" for purposes of this Agreement.
Lien Perfection Documents - all instruments, agreements, filings and
recordings necessary or, in Agent's reasonable determination, necessary or
desirable to perfect, maintain or continue the perfection of, or achieve or
maintain the perfected status of any Lien granted to Agent pursuant to any of
the Financing Documents by the Company or Subsidiary Guarantor, including all
UCC-1 financing statements, pledges, assignments, hypothecations, registrations
of pledge, notifications, bailment agreements, landlord or mortgagee waivers,
processor waivers, intercreditor agreements, subordination agreements, chattel
mortgage filings or similar instruments, agreements or documents.
Littlejohn - Littlejohn & Co., LLC.
March Interest Payment Date - means any Interest Payment Date occurring on
March of any year (but not any Interest Payment Date occurring in June,
September or December of any year).
Material Adverse Effect - the effect of any event or condition which, alone
or when taken together with other events or conditions occurring or existing
concurrently therewith, (i) has a material adverse effect upon the business,
operations, Properties or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole; (ii) has or may be reasonably expected to
have any material adverse effect whatsoever upon the validity or enforceability
of the Agreement or any of the other Financing Documents; (iii) has any material
adverse effect upon the value of the whole or any material part of the
Collateral, the Liens of Agent with respect to such Collateral or the priority
of any such Liens; (iv) materially impairs the ability of any other Obligor to
perform its obligations under the Agreement or any of the other Financing
Documents, including repayment of any of the Obligations when due; or (v)
materially impairs the ability of Agent or any holder of Notes to enforce or
collect the Obligations or realize upon any of the Collateral in accordance with
the Financing Documents and Applicable Law.
Material Contract - an agreement to which an Obligor is a party (other than
the Financing Documents) (i) which is deemed to be a material contract as
provided in Regulation S-K promulgated by the SEC under the Securities Act of
1933 or (ii) for which breach, termination, cancellation, nonperformance or
failure to renew would reasonably be expected to have a Material Adverse Effect.
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Maximum Legal Rate of Interest - means the maximum rate of interest that a
holder of Notes may from time to time legally charge the Company by agreement
and in regard to which the Company would be prevented successfully from raising
the claim or defense of usury under the Applicable Interest Law as now or
hereafter construed by courts having appropriate jurisdiction.
Money Borrowed - as applied to any Person, (i) Debt arising from the
lending of money by any other Person to such Person; (ii) Debt, whether or not
in any such case arising from the lending of money by another Person to such
Person, (A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (iii) Debt that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with respect to
letters of credit or guaranties of letters of credit and (v) Debt of such Person
under any guaranty of obligations that would constitute Debt for Money Borrowed
under clauses (i) through (iv) hereof, if owed directly by such Person.
Moody's - Moody's Investors Services, a division of McGraw Hill, Inc.
Multiemployer Plan - means any "multiemployer plan" (as defined in section
3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as such term is defined in section 3 of ERISA).
Notes - means and includes each PIK Note and each Warrant Note.
Obligations - in each case, whether now in existence or hereafter arising,
(i) the principal of, and interest and premium, if any, on, the Notes; (ii) all
other Debts, covenants, duties and obligations (including Contingent
Obligations) now or at any time or times hereafter owing by the Company to Agent
or any holder of Notes under or pursuant to this Agreement or any of the other
Financing Documents, whether evidenced by any note or other writing, whether
arising from any extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, and whether direct or indirect,
absolute or contingent, due or to become due, primary or secondary, or joint or
several, including all interest, charges, expenses, fees or other sums
(including Extraordinary Expenses) chargeable to any or all Obligors hereunder
or under any of the other Financing Documents.
Obligor - the Company and each Subsidiary Guarantor, and any other Person
that is at any time liable for the payment of the whole or any part of the
Obligations or that has granted in favor of Agent or any other holder of Notes a
Lien upon any of any of such Person's assets to secure payment of any of the
Obligations.
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Ordinary Course of Business - with respect to any transaction involving any
Person, the ordinary course of such Person's business, as conducted by such
Person and undertaken by such Person in good faith and not for the purpose of
evading any covenant or restriction in any Financing Document.
Organization Documents - with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of organization,
operating agreement, members agreement, partnership agreement, voting trust, or
similar agreement or instrument governing the formation or operation of such
Person.
OSHA - the Occupational Safety and Hazard Act of 1970, as amended and in
effect from time to time.
Pameco Investment - Pameco Investment Company, Inc., a Delaware
corporation.
Pameco Securities Purchase Agreement - means the Securities Purchase
Agreement dated as of January [15], 2000, by and among the Company, Littlejohn
Fund II, LLP, and Quilvest American Equity, Ltd.
Payment Items - all checks, drafts, or other items of payment payable to
the Company, including proceeds of any of the Collateral.
Permitted Acquisition - any Acquisition by the Company (or by an
Acquisition Subsidiary) in which each of the following conditions is satisfied:
(i) the business to be acquired is related or substantially similar to the
business of the Company; (ii) immediately before and after giving effect to such
Acquisition, no Default or Event of Default shall exist or result therefrom;
(iii) such Acquisition is otherwise permitted under the Acceptable Credit
Facility in effect at such time; (iv) the Company's consummation of the
Acquisition shall be in compliance with all Applicable Law and the Company shall
have obtained all required Governmental Approvals; (v) any Acquisition
Subsidiary created in connection with or resulting from the Acquisition shall be
wholly-owned by the Company, and, if requested to do so by Agent, such
Subsidiary shall execute a Subsidiary Guaranty and Subsidiary Guarantor Security
Documents; and (vi) the entire purchase price of the Permitted Acquisition is
funded with the proceeds of the issuance of additional equity of the Company and
the aggregate purchase price of all such Permitted Acquisitions made after the
Closing Date does not exceed $35,000,000 or the Company shall have delivered to
the Note holders the Company's financial statements for the most recent Fiscal
Quarter ended and prior to making such Permitted Acquisition the Debt to EBITDA
Ratio was less than 4.5 to 1 at the end of such Fiscal Quarter.
Permitted Contingent Obligations - Contingent Obligations arising from
endorsements for collection or deposit in the Ordinary Course of Business;
Contingent Obligations arising from Interest Rate Contracts entered
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into in the Ordinary Course of Business pursuant to this Agreement or with the
Required Holders' prior written consent; Contingent Obligations of the Company
and its Subsidiaries existing as of the Closing Date, including extensions and
renewals thereof that do not increase the amount of such Contingent Obligations
as of the date of such extension or renewal; Contingent Obligations incurred in
the Ordinary Course of Business with respect to surety bonds, appeal bonds,
performance bonds and other similar obligations; Contingent Obligations arising
under indemnity agreements to title insurers to cause such title insurers to
issue to Agent title insurance policies; and Contingent Obligations with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions of Equipment permitted under Section 4.9 of this Agreement.
Permitted Lien - a Lien of a kind specified in Section 4.5 of this
Agreement.
Permitted Merger Conditions - means, with respect to any proposed merger,
that (a) no Default or Event of Default shall exist before or after giving
effect to the merger; (b) the Company is the surviving entity in the merger; (c)
on a pro forma basis, based upon the balance sheets, as of the end of the most
recent Fiscal Quarter ended prior to the merger, of the Company and the entity
merging into the Company; (i) the Company's Consolidated Net Worth after giving
effect to the merger and the consideration paid by the Company in connection
with the merger are no less than the Company's Consolidated Net Worth prior to
giving effect to the merger, and (ii) the Company is in compliance with its
covenants in Section 4 after giving effect to the merger; (d) the Company shall
have provided to the Agent such lien searches and other evidence as may be
reasonably requested by the Agent in order to confirm that there are no liens of
record against any of the assets of the entity that is to be merged into the
Company and the Agent has a perfected security interest in all the assets of
such merged entity and the Company shall have executed any and all Lien
Perfection Documents as requested by the Agent; (e) the entity that is to be
merged into the Company is engaged in the same or a related or substantially
similar to the business as that engaged in by the Company; (f) such merger is
permitted by the Acceptable Credit Facility in effect at such time; (g) the
merger shall be in compliance with Applicable Law and the Company and the
Company shall have obtained all required Governmental Approvals and (h) any
Subsidiary of the entity to be merged into the Company shall execute a
Subsidiary Guaranty and Subsidiary Guarantor Security Documents.
Permitted Purchase Money Debt - Purchase Money Debt of the Company and its
Subsidiaries which is incurred after the date of this Agreement and which is
secured by no Lien or only by a Purchase Money Lien, provided that the aggregate
amount of Purchase Money Debt outstanding at any time does not exceed $5,000,000
and the incurrence of such Purchase
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Money Debt does not violate any limitation in the Financing Documents regarding
Capital Expenditures. For the purposes of this definition, the principal amount
of any Purchase Money Debt consisting of capitalized leases shall be computed as
a Capitalized Lease Obligation.
Person - means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
PIK Notes - means those certain 12% Senior Subordinated Notes due March 31,
2005, substantially in the form set forth as Attachment A1 hereto, as such notes
are amended or restated from time to time, and including any notes issued in
substitution therefor pursuant to this Agreement.
Plan - means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability
thereof.
Pledge Agreement - means the Stock Pledge Agreement of even date herewith
by and between the Company and the Agent, as amended from time to time.
Pro Forma Debt to EBITDA Ratio - means, with respect to any incurrence of
additional Debt, the ratio of (a) the sum of (i) the aggregate Debt of the
Company and its Subsidiaries as of the end of the most recent Fiscal Quarter of
the Company prior to the incurrence of such additional Debt, plus (ii) the
amount of such additional Debt to be incurred, to (b) Consolidated EBITDA for
the four Fiscal Quarters ended at the end of such Fiscal Quarter.
Projections - the Company's forecasted Consolidated (a) balance sheets, (b)
profit and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with the Company's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Properly Contested - in the case of any Debt of an Obligor (including any
Taxes) that is not paid as and when due or payable by reason of such Obligor's
bona fide dispute concerning its liability to pay same or concerning the amount
thereof, (i) such Debt is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (ii) such Obligor has
established appropriate reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such Debt will not have a Material Adverse Effect and
will not result in a forfeiture of any assets of such Obligor; (iv) no Lien is
imposed upon any of such Obligor's assets with respect to such Debt
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unless such Lien is at all times junior and subordinate in priority to the Liens
in favor of Agent (except only with respect to property taxes that have priority
as a matter of applicable state law) and enforcement of such Lien is stayed
during the period prior to the final resolution or disposition of such dispute;
(v) if the Debt results from, or is determined by the entry, rendition or
issuance against an Obligor or any of its assets of a judgment, writ, order or
decree, enforcement of such judgment, writ, order or decree is stayed pending a
timely appeal or other judicial review; and (vi) if such contest is abandoned,
settled or determined adversely (in whole or in part) to such Obligor, such
Obligor forthwith pays such Debt and all penalties, interest and other amounts
due in connection therewith.
Property - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than the
Obligations) for the payment of all or any part of the purchase price of any
fixed assets, (ii) any Debt (other than the Obligations) incurred at the time of
or within 10 days prior to or after the acquisition of any fixed assets for the
purpose of financing all or any part of the purchase price thereof, and (iii)
any renewals, extensions or refinancings (but not any increases in the principal
amounts) thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase Money
Debt, but only if such Lien shall at all times be confined solely to the fixed
assets acquired through the incurrence of the Purchase Money Debt secured by
such Lien and such Lien constitutes a purchase money security interest under the
UCC.
Purchasers - see the introductory paragraph.
Refinancing Conditions - the following conditions, each of which must be
satisfied before Refinancing Debt shall be permitted under Section 4.3 of this
Agreement: (i) the Refinancing Debt is in an aggregate principal amount that
does not exceed the aggregate principal amount of the Debt being extended,
renewed or refinanced plus any accrued interest, and reasonable fees or expenses
relating thereto, (ii) the Refinancing Debt has a later or equal final maturity
and a longer or equal weighted average life than the Debt being extended,
renewed or refinanced, (iii) the Refinancing Debt does not bear a rate of
interest that exceeds a market rate (as determined in good faith by a Senior
Officer) as of the date of such extension, renewal or refinancing, (iv) if the
Debt being extended, renewed or refinanced is subordinate to the Obligations,
the Refinancing Debt is subordinated to the same extent, (v) the covenants
contained in any instrument or agreement relating to the Refinancing Debt are no
less favorable to the Company than those relating to the Debt being extended,
renewed or refinanced, and (vi) at the time of and after giving effect
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to such extension, renewal or refinancing, no Default or Event of Default shall
exist.
Refinancing Debt - Debt for Money Borrowed that is permitted by Section 4.3
and that is the subject or the result of an extension, renewal or refinancing.
Registration Rights Agreement - means, the Registration Rights Agreement,
of even date herewith, by and among the Company, Littlejohn Fund II, L.P.,
Quilvest America Equity, Ltd. and International Comfort Products Corporation
(USA).
Related Transaction Documents - means, collectively, the Pameco Securities
Purchase Agreement, of even date herewith, by and among the Company, Littlejohn
Fund II, L.P., and Quilvest America Equity, Ltd.; the Shareholders Agreement;
the several Voting Agreements by and among the Company, Littlejohn Fund II, L.P.
and the shareholders named therein; and the Registration Rights Agreement.
Release - has the meaning set forth in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq.
Reportable Event - the occurrence, with respect to any Plan, of any of the
events set forth in Section 4043(b) of ERISA provided that the requirement to
report such event has not been waived by the Pension Benefit Guaranty
Corporation or pursuant to regulations issued by the Pension Benefit Guaranty
Corporation.
Required Holders - means, at any time, the holders of fifty-one percent
(51%) in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by any one or more of the Company, any Subsidiary or any
Affiliate).
Restricted Investment - any acquisition of Property by the Company or any
of its Subsidiaries in exchange for cash or other Property, whether in the form
of an acquisition of Equity Interests or Debt, or the purchase or acquisition by
the Company or any Subsidiary of any other Property, or a loan, advance, capital
contribution or subscription, except acquisitions of the following: (i) fixed
assets to be used in the Ordinary Course of Business of the Company or any
Subsidiary so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (ii) goods held for sale or lease or to be
used in the manufacture of goods or the provision of services by the Company or
any Subsidiary in the Ordinary Course of Business; (iii) Current Assets arising
from the sale or lease of goods or the rendition of services in the Ordinary
Course of Business of the Company or any Subsidiary; (iv) investments in
Subsidiaries to the extent existing on the Closing Date; and (v) Cash
Equivalents to the extent they are not subject to rights of offset in
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favor of any Person other than the holder of Senior Debt; (vi) loans and other
advances of money to the extent not prohibited by Section 4.2; and (vii)
Permitted Acquisitions.
Restrictive Agreement - an agreement (other than any of the Financing
Documents) that, if and for so long as an Obligor or any Subsidiary of such
Obligor is a party thereto, would prohibit, condition or restrict such Obligor's
or Subsidiary's right to incur or repay Debt for Money Borrowed (including any
of the Obligations); grant Liens upon any of such Obligor's or Subsidiary's
assets (including Liens granted in favor of Agent or the Required Holders
pursuant to the Financing Documents); declare or make Distributions; amend,
modify, extend or renew any agreement evidencing Debt for Money Borrowed
(including any of the Financing Documents); or repay any Debt owed to any
Obligor.
S&P - Standard & Poor's Corporation.
SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
Securities Act - means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Securities Purchase Agreement - means, collectively, each of the several
substantially identical Securities Purchase Agreements, of even date herewith,
between the Company and each of the Purchasers, relating to the offering and
sale of the Notes and the Warrants.
Security - means "security" as defined by section 2(1) of the Securities
Act.
Senior Credit Agreement - means the Loan and Security Agreement dated
February 18, 2000 between the Company, Fleet Capital Corporation, as Agent,
FleetBoston Robertson Stephens Inc., as Arranger and the financial institutions
party thereto.
Senior Debt - means all Debt Obligations arising under an Acceptable Credit
Facility; provided, however, that if the aggregate principal amount of all such
Debt Obligations shall exceed the Senior Debt Limit, such excess shall not
constitute Senior Debt for purposes of this Agreement.
Senior Debt Limit - shall have the meaning assigned to it in the
Subordination Agreement.
Senior Officer - means any one of the chief executive officer, the chief
financial officer, and the president of the Company.
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Shareholders Agreement - the Shareholders Agreement, of even date herewith,
by and among the Company, Littlejohn Fund II, L.P., Quilvest America Equity,
Ltd. and Willem F.P. deVogel.
Stock Pledge Letter - means the letter of even date herewith by and among
the Company, Fleet Capital Corporation and the Agent in respect of the pledge of
the capital stock of the Company's Subsidiaries, as amended from time to time.
Subsidiary - any Person in which more than 50% of its outstanding Voting
Securities or more than 50% of all Equity Interests is owned directly or
indirectly by the Company, by one or more other Subsidiaries of the Company or
by the Company and one or more other Subsidiaries.
Subsidiary Guaranty - Section 3.14.
Subsidiary Guarantors - Pameco Investment and each other Person who
guarantees payment or performance of the whole or any part of the Obligations.
Subsidiary Guarantor Security Documents - (i) each security agreement that
may be duly executed by a Subsidiary Guarantor in favor of Agent, in form and
content acceptable to the Agent, in connection with the consummation of the
transactions contemplated by this Agreement or in connection with a Permitted
Acquisition and by which such Subsidiary Guarantor shall grant a security
interest in favor of Agent, for its benefit and for the ratable benefit of all
holders of Notes from time to time, in all of such Subsidiary Guarantor's
properties as security for the Obligations and such Subsidiary Guarantor's
Subsidiary Guaranty and (ii) all Lien Perfection Documents requested by Agent.
Subordinated Debt - Debt of the Company that is fully and absolutely
subordinated in right of payment to Senior Debt.
Subordination Agreement - means, collectively, the Lien Subordination
Agreement dated as of February 18, 2000, between the Agent and Fleet Capital
Corporation, in its capacity as collateral and administrative agent, and the
Debt Subordination Agreement dated as of February 18, 2000, among the Company,
the Purchasers and Fleet Capital Corporation, in its capacity as collateral and
administrative agent, as each such agreement is amended from time to time.
Supply Agreement - means any of the individual supply agreements, or any of
the term sheets with respect thereto, between the Company and any Vendor and/or
any of its subsidiaries and/or affiliates entered into on or around the date
hereof, providing for the provision of goods or services by such Vendor and/or
any of its subsidiaries and/or affiliates to the Company, as each such agreement
is amended and in effect from time to time.
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Taxes - means any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer, license,
payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States or any other Governmental Authority and
all interest, penalties, additions to tax and similar liabilities with respect
thereto, but excluding, in the case of each holder of Notes, taxes imposed on or
measured by the net income or overall gross receipts of such holder of Notes.
Trademark Security Agreements - means, collectively, each of the Trademark
Security Agreements of even date herewith between the Agent and each of the
Company and its Significant Subsidiaries, as amended from time to time.
Unfinanced Capital Expenditures - for any Person, Capital Expenditures of
such Person that have not been financed by Debt for Money Borrowed of such
Person.
Upstream Payment - a payment or Distribution of cash or other Property by a
Subsidiary to the Company, whether in repayment of Debt owed by such Subsidiary
to the Company, to pay dividends on account of the Company's ownership of Equity
Interests or otherwise.
Value - with reference to the value of Inventory, value determined on the
basis of the lower of cost or market of such Inventory, with the cost thereof
calculated on a first-in, first-out basis determined in accordance with GAAP.
Vendor - means any of Emerson, ICP, Mueller or DuPont, and their respective
subsidiaries and affiliates.
Voting Power - with respect to any Person, the power ordinarily (without
the occurrence of a contingency) to elect the members of the Board of Directors
(or persons performing similar functions) of such Person.
Voting Securities - Equity Interests of any class or classes of a
corporation or other entity the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate directors or
Persons performing similar functions.
Warrant - means each warrant to purchase Common Stock issued pursuant to
the Securities Purchase Agreement and the Warrant Agreement.
Warrant Agreement - means the Warrant Agreement, of even date herewith,
between the Company and one or more of the Purchasers pursuant to which the
Warrants are issued from time to time.
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Warrant Interest Amount - means, with respect to any Warrant Note on any
March Interest Payment Date, the difference of:
(a) the aggregate amount of interest accrued in respect of such
Warrant Note pursuant to Section 1.1(a) from and including the later of
the date of such Note and the next previous March Interest Payment Date on
which interest in respect of the Notes pursuant to Section 1.1(c)(ii) was
actually paid by the issuance of Warrants to the then-current March
Interest Payment Date; minus
(b) the aggregate amount of interest required to have been paid in
cash pursuant to Section 1.1(c)(i) from and including the later of the
date of such Note and the next previous March Interest Payment Date on
which interest in respect of the Notes pursuant to Section 1.1(c)(ii) was
actually paid by the issuance of Warrants to the then-current March
Interest Payment Date.
Warrant Interest Number - means, on any March Interest Payment Date on any
Warrant Note, a number of Warrants equal to the quotient of:
(a) the Warrant Interest Amount: divided by
(b) $9.14634 per Warrant.
In the event that any adjustment is made to the Purchase Price (as such
term is defined in the Warrant Agreement) or the number of shares of Common
Stock issuable upon exercise of one Warrant pursuant to Section 4 of the Warrant
Agreement or by written agreement of the parties thereto, no adjustment shall be
made to the price per Warrant set forth in clause (b) of this definition, but
each Warrant issued pursuant to Section 1.1(c)(ii) shall have such Purchase
Price as adjusted and shall be exercisable into such adjusted number of shares
of Common Stock.
Warrant Interest Termination Event - means and includes any and all of the
following:
(a) a Change in Control;
(b) any consolidation of the Company with, or merger of the Company
with or into, another Person (other than a merger in which the Company is
the surviving corporation and that does not result in any reclassification
or change of shares of Common Stock outstanding immediately prior to such
merger or a merger or consolidation in which the state of incorporation of
the Company changes and does not result in any reclassification or change
in the terms and conditions applicable to the then outstanding capital
stock of the Company, other than those arising from the applicability of
the laws of another jurisdiction);
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(c) the sale, lease, conveyance, exchange or other transfer of all or
substantially all of the Property of the Company;
(d) any reclassification of the Common Stock that results in the
issuance of other Securities of the Company (other than a reclassification
of the Class B Common Stock, par value $.01 per share, of the Company, into
Common Stock); or
(e) the occurrence of any event by virtue of which the Common Stock
either ceases to exist as a class or ceases to be registered under section
12 of the Exchange Act.
Warrant Notes - means those certain 12% Senior Subordinated Notes due March
31, 2005, substantially in the form set forth as Attachment A2 hereto, as such
notes are amended or restated from time to time, and including any notes issued
in substitution therefor pursuant to this Agreement.
Warrant Purchase Amount - means, with respect to a sale of Notes by a Note
holder pursuant to Section 2.2(c) hereof who has Warrant Notes, the sum of the
product of (a) the number of shares of Common Stock that the selling Note holder
has Warrants to purchase, multiplied by (b) the result of (i) the Market Price
(as defined in the Warrant Agreement) per share of such Common Stock minus (ii)
-----
the Purchase Price per share of such Common Stock under the Warrants held by
such selling Note holder (each of the capitalized terms used in this definition
that are not otherwise defined in this Agreement having the meanings ascribed to
them in the Warrant Agreement between the selling Note holder and the Company.
For the purposes of this definition, the selling Note holder will be deemed to
own, in addition to any Warrants previously issued to such Note holder,
additional Warrants to purchase a number of shares of Common Stock equal to the
product of (x) the number of shares for which such Note holder would be entitled
to receive Warrants on the next date that Warrant Certificates are to be issued
to such Note holder under Section 1.1(c) hereof (such number to be determined as
if the principal amount of the Notes held by such Note holder remained the same
between the date of sale and the date of such issuance of additional Warrants),
multiplied by (y) a fraction, the numerator of which is the number of days
between the later of the Closing Date and the most recent March Interest Payment
Date, and the denominator of which is 365.
6.2. Accounting Principles.
(a) Generally. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in accordance
with GAAP. Where the character or amount of any asset or liability or item
of income or expense, or any consolidation or other accounting computation
is required to be made for any purpose
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hereunder, it shall be done in accordance with GAAP; provided, however,
that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if such
term were defined with reference solely to GAAP, such term will be deemed
to include or exclude such amounts, items or concepts as set forth herein.
(b) Consolidation. Whenever accounting amounts of a group of Persons
are to be determined "on a consolidated basis" it shall mean that, as to
balance sheet amounts to be determined as of a specific time, the amount
that would appear on a consolidated balance sheet of such Persons prepared
as of such time, and as to income statement amounts to be determined for a
specific period, the amount that would appear on a consolidated income
statement of such Persons prepared in respect of such period, in each case
with all transactions among such Persons eliminated, and prepared in
accordance with GAAP except as otherwise required hereby.
(c) Currency. With respect to any determination, consolidation or
accounting computation required hereby, any amounts not denominated in the
currency in which this Agreement specifies shall be converted to such
currency in accordance with the requirements of GAAP (as such requirements
relate to such determination, consolidation or computation) and, if no such
requirements shall exist, converted to such currency in accordance with
normal banking procedures, at the closing rate as reported in The Wall
Street Journal published most recently as of the date of such
determination, consolidation or computation or, if no such quotation shall
then be available, as quoted on such date by any bank or trust company
reasonably acceptable to the Required Holders.
6.3. Directly or Indirectly.
Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
6.4. Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. References to Sections are, unless
otherwise specified, references to Sections of this
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Agreement. References to Annexes and Exhibits are, unless otherwise
specified, references to Annexes and Exhibits attached to this Agreement.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
6.5. Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. IN
ADDITION, THE PARTIES HERETO SELECT, TO THE EXTENT THEY MAY LAWFULLY DO SO, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, THE
PROVISIONS OF SECTIONS 5-501(6) AND SECTION 5-521 OF THE GENERAL OBLIGATIONS
LAW) AS THE APPLICABLE INTEREST LAW.
6.6. General Interest Provisions.
(a) Interest in Respect of the Notes. The Purchasers and the Company
agree that the provisions of section 5-501(6) and section 5-521 of the
General Obligations Law of the State of New York apply to the transactions
contemplated by the Financing Documents. Notwithstanding the foregoing, it
is the intention of the Company and the Purchasers to conform strictly to
the Applicable Interest Law, and the parties agree that the aggregate of
all interest, and any other charges or consideration constituting interest
under the Applicable Interest Law that is taken, reserved, contracted for,
charged or received pursuant to this Agreement or the Notes shall under no
circumstances exceed the maximum amount of interest allowed by the
Applicable Interest Law. Thus, if any such excess interest is ever charged,
received or collected on account of or relating to this Agreement and the
Notes (including any charge or amount which is not denominated as
"interest" but is legally deemed to be interest under Applicable Interest
Law) for any reason, then in such event:
(i) the provisions of this Section 6.6 shall govern and control;
(ii) the Company shall not be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of
interest allowed by the Applicable Interest Law;
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(iii) any excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited to the
principal amount of the Notes by the holders thereof, and if the
principal balance of the Notes is paid in full, any remaining excess
shall be forthwith paid to the Company; and
(iv) the effective rate of interest shall be automatically
subject to reduction to the Maximum Legal Rate of Interest.
If at any time thereafter, the Maximum Legal Rate of Interest is
increased, then, to the extent that it shall be permissible under the
Applicable Interest Law, the Company shall forthwith pay to the holders of
the Notes, on a pro rata basis, all amounts of such excess interest that
the holders of the Notes would have been entitled to receive pursuant to
the terms of this Agreement and the Notes had such increased Maximum Legal
Rate of Interest been in effect at all times when such excess interest
accrued. To the extent permitted by the Applicable Interest Law, all sums
paid or agreed to be paid to the holders of the Notes for the use,
forbearance or detention of the indebtedness evidenced thereby shall be
amortized, prorated, allocated and spread throughout the full term of the
Notes.
(b) Effect of Issuance of Notes Together with Warrants. The Company
and the Purchasers agree, to the extent permitted by the Applicable
Interest Law, that, for purposes of computing the interest in respect of
the Notes under the Applicable Interest Law:
(i) the aggregate purchase price of the Notes shall equal the
difference of:
(A) the initial aggregate principal amount of the Notes;
minus
(B) the amount of original issue discount attributable to the
Notes in respect of the issuance of the Warrants together with
the Notes, as set forth in section 1.3 of the Securities Purchase
Agreement;
(ii) the amount of original issue discount attributable to the
Notes in respect of the issuance of the Warrants, as set forth in
section 1.3 of the Securities Purchase Agreement, shall be deemed to
be the purchase price of the Warrants;
(iii) the Warrants and the Notes shall be deemed to have been
separately issued for the respective purchase prices set forth above;
and
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(iv) no portion of the return, if any, to the holders of the
Warrants in respect of their investment therein shall be deemed to be
interest in respect of the Notes.
7. MISCELLANEOUS
7.1. Communications.
(a) Method; Address. All communications hereunder or under the Notes
shall be in writing and shall be delivered either by nationwide overnight
courier or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2, or at such other address of which the Company shall have
notified each holder of Notes. Communications to the holders of the Notes
shall be addressed as set forth on Annex 1 by such holder, or at such other
address of which such holder shall have notified the Company (and the
Company shall record such address in the register for the registration and
transfer of Notes maintained pursuant to Section 2.1).
(b) When Given. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
(c) Service of Process. Notwithstanding the foregoing provisions of
this Section 7.1, service of process in any suit, action or proceeding
arising out of or relating to this agreement or any document, agreement or
transaction contemplated hereby, or any action or proceeding to execute or
otherwise enforce any judgment in respect of any breach hereunder or under
any document or agreement contemplated hereby, shall be delivered in the
manner provided in Section 7.9(c).
7.2. Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by the Purchasers at the closing of the sale of the Notes
(except the Notes themselves), and financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be
reproduced by the Company or any holder of Notes by any photographic,
photostatic, microfilm, micro-card, miniature photographic, digital or other
similar process and each holder of Notes may destroy any original document so
reproduced. Any such reproduction shall be admissible in evidence as the
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original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by the
Company or such holder of Notes in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 7.2 shall prohibit
the Company or any holder of Notes from contesting the accuracy or validity of
any such reproduction.
7.3. Survival; Entire Agreement.
All warranties, representations, certifications and covenants contained
herein, in the Securities Purchase Agreement or in any certificate or other
instrument delivered hereunder shall be considered to have been relied upon by
the other parties hereto and shall survive the delivery of the Notes regardless
of any investigation made by or on behalf of any party hereto. All statements
in any certificate or other instrument delivered pursuant to the terms hereof or
of the Securities Purchase Agreement shall constitute warranties and
representations hereunder. All obligations hereunder (other than payment of the
Notes, but including, without limitation, reimbursement obligations in respect
of costs, expenses and fees) shall survive the payment of the Notes and the
termination hereof. Subject to the preceding sentence, this Agreement, the
Notes and the other Financing Documents embody the entire agreement and
understanding among the Company and the Purchasers, and supersede all prior
agreements and understandings, relating to the subject matter hereof.
7.4. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder shall have been made by any Purchaser or its successor or assign.
Anything contained in this Section 7.4 notwithstanding, (i) the Company may not
assign any of its respective rights, duties or obligations hereunder or under
any of the other Financing Documents without the prior written consent of all
holders of Notes and (ii) no holder of the Notes may assign any of its
respective rights, debts or obligations hereunder or under any of the other
Financing Documents except as provided in Section 2.2.
7.5. Amendment and Waiver.
(a) Requirements. This Agreement may be amended, and the observance
of any term hereof may be waived, with (and only with) the written consent
of the Company and the Required Holders; provided, however, that no such
amendment or waiver shall, without the written consent of the holders of
all Notes (exclusive of Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding;
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(i) change the amount or time of any prepayment or payment of
principal or the rate or time of payment of interest;
(ii) amend or waive the provisions of Section 5.1(a), Section
5.2, or Section 5.3, or amend or waive any defined term to the extent
used therein;
(iii) amend or waive the definition of "Required Holders;" or
(iv) amend or waive this Section 7.5 or amend or waive any
defined term to the extent used herein.
Notwithstanding the foregoing, the waiver of any Default or Event of
Default under Section 5.1(h) may be waived individually by such Purchaser
and only by such Purchaser in respect of its Note affected thereby.
(b) Solicitation of Noteholders.
(i) Solicitation. Each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall be provided by the Company
with all material information provided by the Company to any other
holder of Notes with respect to any proposed waiver or amendment of
any of the provisions hereof or the Notes. Executed or true and
correct copies of any amendment or waiver effected pursuant to the
provisions of this Section 7.5 shall be delivered by the Company to
each holder of outstanding Notes forthwith following the date on
which such amendment or waiver becomes effective.
(ii) Payment. The Company shall not, nor shall any Subsidiary or
Affiliate, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the provisions
hereof or of the Notes unless such remuneration is concurrently paid,
or security is concurrently granted, on the same terms, ratably to
the holders of all Notes then outstanding.
(iii) Scope of Consent. Any amendment or waiver made pursuant to
this Section 7.5 by a holder of Notes that has transferred or has
agreed to transfer its Notes to the Company, any Subsidiary or any
Affiliate and has provided or has agreed to provide such amendment or
waiver as a condition to such transfer shall be void and of no force
and effect except solely as to such holder, and any amendments
effected or waivers granted that would
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not have been or would not be so effected or granted but for such
amendment or waiver (and the amendments or waivers of all other
holders of Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
(c) Binding Effect. Except as provided in Section 7.5(b)(iii), any
amendment or waiver consented to as provided in this Section 7.5 shall
apply equally to all holders of Notes and shall be binding upon them and
upon each future holder of any Note and upon the Company whether or not
such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or
waived or impair any consequent thereon.
7.6. Expenses.
(a) Amendments and Waivers. The Company shall pay when billed the
reasonable costs and expenses (including reasonable attorneys' fees)
incurred by the holders of the Notes in connection with the consideration,
negotiation, preparation or execution of any amendments, waivers, consents,
standstill agreements and other similar agreements with respect to this
Agreement or any other Financing Document (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(b) Restructuring and Workout, Inspections. At any time when the
Company and the holders of Notes are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default exists,
the Company shall pay when billed the reasonable costs and expenses
(including reasonable attorneys' fees and the fees of professional
advisors) incurred by the holders of the Notes in connection with the
assessment, analysis or enforcement of any rights or remedies that are or
may be available to the holders of Notes, including, without limitation, in
connection with inspections made pursuant to Section 3.1; provided,
however, that at all times during which no restructuring or workout
negotiations are continuing and no Default or Event of Default exists,
inspections in excess of a single annual inspection undertaken by one or
more of the holders of Notes for the benefit of all of such holders will be
at the expense of the inspecting holder of Notes.
(c) Collection. If the Company shall fail to pay when due any
principal of, or interest on, any Note, the Company shall pay to each
holder of Notes, to the extent permitted by law, such amounts as shall be
sufficient to cover the reasonable costs and expenses, including but not
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<PAGE>
limited to reasonable attorneys' fees, incurred by such holder in
collecting any sums due on such Note.
7.7. Indemnification of Each Holder of Notes.
From and at all times after the date of this Agreement, and in addition to
all other rights and remedies of each holder of Notes against the Company, the
Company agrees to indemnify and hold harmless each holder of Notes and each
director, trustee, officer, employee, agent, investment advisor and affiliate of
each such holder (each, an "Indemnified Party") against any and all claims
(whether valid or not), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including, without limitation, reasonable attorneys'
fees, costs and expenses), incurred by or asserted against any Indemnified
Party, from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement, the Notes or the other Financing Documents or any transactions
contemplated herein or therein, or any of the transactions contemplated
hereunder or thereunder, whether or not such Indemnified Party is a party to any
such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability resulting from the willful
misconduct or gross negligence of such Indemnified Party or breach by such
Indemnified Party of its own obligations under this Agreement. All of the
foregoing losses, damages, costs and expenses of any Indemnified Party shall be
payable as and when incurred upon demand by such Indemnified Party and shall be
additional obligations hereunder. The rights of the Indemnified Parties under
this Section 7.7 shall survive the termination of this Agreement.
7.8. Confidentiality.
Each holder of any Note agrees to use commercially reasonable efforts to
maintain and to cause its officers, employees and agents to maintain procedures
appropriate to maintain the confidentiality of Confidential Information. Each
such Note holder shall not disclose such Confidential Information to any party,
or in any manner use any such Confidential Information, except as reasonably
necessary in connection with monitoring and administering such holder's
relationship with the Company pursuant to the Note and this Agreement and other
Financing Documents, and shall ensure that the Confidential Information is not
disclosed to any Person except for those employees, officers or agents,
including without limitation, employees, officers or agents of any subsidiary or
affiliate or any holder of any Note, with
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<PAGE>
specific responsibility for monitoring and administering such relationship,
provided that nothing herein shall limit the disclosure of any such Confidential
- --------
Information (a) after such Confidential Information shall have become public
other than through a violation of this Section 7.8, (b) to the extent required
by statute, rule, regulation or judicial process, (c) to counsel for any of the
holders of the Notes or the Agent, (d) in connection with any litigation to
which any one or more of the holders of the Notes or the Agent is a party, or in
connection with the enforcement of rights or remedies hereunder or under any
other Financing Document or (e) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant agrees to be
bound by the provisions of this Section 7.8. As used herein, "Confidential
Information" means information that is furnished to either Agent or any Note by
the Company or any of its Subsidiaries or Affiliates in connection with the
Notes or this Agreement or any of the transactions contemplated thereby pursuant
to Section 3.1 (other than any such Confidential Information that may also be
provided pursuant to a different Section of this Agreement), or that is
otherwise identified in writing by the Company as being confidential at the time
the same is delivered to the holder of any Note, but does not include any such
information that is or becomes generally available to the public or to the
holders of the Notes (other than as a result of a breach by Agent or any Note
holder of its confidentiality obligations hereunder or otherwise).
7.9. Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW
YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS
SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND
AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION,
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<PAGE>
AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE
IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN
ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES
IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER
THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH OTHER MANNER, AS MAY BE
PERMITTED BY APPLICABLE LAW.
7.10. Execution in Counterpart.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered by one of its duly authorized
officers or representatives.
PAMECO CORPORATION
By: /s/ Richard Martin
--------------------------------
Name: Richard Martin
Title: Vice President
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By: /s/ Christopher J. Brogan
--------------------------------
Name: Christopher J. Brogan
Title: Assistant Secretary
E.I. DU PONT DE NEMOURS AND COMPANY
By: /s/ Thomas M. Connelly, Jr.
--------------------------------
Name: Thomas M. Connelly, Jr.
Title: Vice President & General Manager
DuPont Flouroproducts
MUELLER INDUSTRIES, INC.
By: /s/ Kent McKee
--------------------------------
Name: Kent McKee
Title: Vice President & CFO
EMERSON ELECTRIC CO.
By: /s/ R. M. Cox, Jr.
--------------------------------
Name: R. M. Cox, Jr.
Title: Sr. Vice President--Acquisitions &
Development
<PAGE>
PAMECO CORPORATION
CONTACT:
Olivia Yuspa Van Negris / Philip J. Denning
Pameco Corporation Kehoe, White, Van Negris & Company, Inc.
(770) 798-0600 (212) 396-0606
FOR IMMEDIATE RELEASE
- ---------------------
Pameco Corporation Reaches Agreements on
$35 Million Private Equity Financing,
$130 Million Credit Facility Refinancing
and $20 Million Subordinated Debt Placement
NORCROSS, GA - FEBRUARY 18, 2000 - Pameco Corporation (NYSE: PCN) (the
"Company"), a leading distributor of HVAC systems and equipment and
refrigeration products in the United States, today announced that it has signed
a series of agreements with The Littlejohn Fund II, L.P. ("Littlejohn") and
Quilvest American Equity Ltd. ("Quilvest") (collectively the "Purchasers")
pursuant to which the Purchasers have agreed to pay $35 million in exchange for
shares of a new series of the Company's Preferred Stock (the "Preferred Stock")
and Warrants to purchase such shares, subject to certain terms and conditions
(the "Warrants"). Littlejohn will contribute $28 million of the purchase price
and Quilvest will contribute $7 million of the purchase price. Upon receipt of
certain approvals, the Preferred Stock will be convertible into shares of the
Company's Class A Common Stock at an initial conversion price per share of $2.50
and will vote with the Class A Common Stock on an as-converted basis. The
Warrants have an initial effective exercise price per share of Class A Common
Stock of $3.00. The Warrants enable the Purchasers to acquire additional shares
of Preferred Stock which, upon the receipt of certain approvals, will become
convertible into the same number of shares of Class A Common Stock as the $35
million of Preferred Stock. The transaction is anticipated to close by February
29, 2000.
Simultaneously, the Company announced that it has signed agreements entering
into a senior credit facility amounting to an aggregate $130 million and a
subordinated debt placement of $20 million, both of which are also anticipated
to close simultaneously with the Littlejohn/Quilvest purchase of the Company's
convertible Preferred Stock.
The net proceeds from the Littlejohn/Quilvest equity investment, together with
funds available under the new senior credit facility and the subordinated debt,
will be used to refinance the Company's existing debt arrangements and for
working capital purposes.
In accordance with the rules and regulations of the New York Stock Exchange, the
Company must obtain shareholder approval of the conversion and voting rights
before they become effective. The Company is preparing proxy materials for
filing and distribution and anticipates that a special meeting of shareholders
will be held on or about May 15, 2000. The purchase is not conditioned on
obtaining such shareholder approval. However, in connection with the
transaction, shareholders who control more than 50 percent of the voting power
of the Company have agreed to vote for, and granted proxies in favor of, the
approval of the foregoing conversion and voting rights. Thus, the foregoing
shareholder approval will be obtained. Quilvest must also obtain the required
clearances under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 to
exercise its voting and conversion rights. After such approvals, assuming the
full exercise of the Warrants, Littlejohn will beneficially own approximately 60
percent of the then outstanding voting securities of the Company and Quilvest
will beneficially own approximately 20 percent of the then outstanding voting
securities of the Company.
--more--
<PAGE>
Pameco Corporation
Page Two
February 18, 2000
Pursuant to the Transaction, the Company's Board of Directors will be expanded
to nine members with Littlejohn being entitled to nominate five Board seats and
Quilvest one Board seat. The Littlejohn nominees will take office upon the
closing. Quilvest's nominee is currently a member of the Board and will
continue to serve as a Director. One current Board member, Mr. Richard A.
Bearse, will resign upon the closing.
Angus C. Littlejohn, Chairman of Littlejohn & Co., LLC, said: "We are excited
to make an investment in Pameco Corporation at this time. The Company has very
attractive long-term prospects and we believe that the restructuring actions
taken this past year have advanced Pameco's ability to achieve its full
potential. We are also prepared to utilize our additional resources to assist
in the future growth of the Company."
James R. Balkcom, Chairman and Chief Executive Officer, stated: "We are very
pleased that an investor of the caliber of The Littlejohn Fund II recognizes
Pameco's inherent ability to lead the changes in the HVAC/R industry and provide
an exceptional level of service and support to our valued customers. This
additional capital supplies us with a solid financial infrastructure that will
provide us with an opportunity to grow. We hope to expand our position in the
marketplace through internal growth and possibly through the acquisition of
quality independent businesses in strategic markets."
Pameco Corporation is one of the largest distributors of HVAC systems and
equipment and refrigeration products in the United States, with predecessor
corporations dating back to 1931. It has established a leading position in the
consolidating distribution segment of the climate control industry, building a
centralized national distribution network. Pameco's products include a complete
range of heating, air conditioning and refrigeration ("HVAC/R") equipment, parts
and supplies for the light commercial and residential HVAC markets and
commercial refrigeration market. The products sold by Pameco are used
principally for the repair and replacement of existing HVAC/R and for new
construction. Pameco proudly serves its customers in 47 states and Guam.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Certain statements contained in this press release are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including without limitation, the Company's plans for future business
development, industry position and industry condition, the Company's financial
condition and structure, and the Company's ability to engage in an acquisition
program as well as the outcome thereof. Such forward-looking statements are
subject to risks, uncertainties and other factors that could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. Investors are cautioned than any forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties and that actual results may differ materially from those
contemplated by such forward-looking statements. Such risks include, without
limitation, risks associated with the Company not being able to successfully
implement its new strategies, the risk that new acquisitions, if any, will not
be successfully integrated into the Company, the seasonality and cyclicality of
the Company's sales, the Company's competition, the Company's dependence on
supplier relationships, the increased presence of buying groups and risks
related to the Company's borrowings.
Note: Additional information about Pameco Corporation is available on Pameco's
World Wide Web site on the Internet located at http://www.pameco.com.
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