FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-08772
HUGHES SUPPLY, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0559446
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 North Orange Avenue, Suite 200, Orlando, Florida 32801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407/841-4755
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of November 30, 1998
$1 Par Value 24,113,963
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1998 and January 30, 1998 ......... 3 - 4
Consolidated Statements of Income for the
Three Months Ended October 31, 1998 and 1997 .. 5
Consolidated Statements of Income for the
Nine Months Ended October 31, 1998 and 1997 .... 6
Consolidated Statements of Cash Flows for the
Nine Months Ended October 31, 1998 and 1997 .... 7
Notes to Consolidated Financial Statements .... 8 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations ................................. 10 - 16
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K .............. 17 - 21
Signatures .................................... 22
Index of Exhibits Filed with This Report ...... 23
Page 2
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
(in thousands, except share data)
October 31, January 30,
1998 1998
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,013 $ 8,204
Accounts receivable, less allowance for
losses of $7,811 and $3,522 372,164 293,837
Inventories 382,235 353,846
Deferred income taxes 10,377 9,708
Other current assets 28,514 18,625
---------- ----------
Total current assets 801,303 684,220
Property and Equipment, Net 121,707 108,068
Excess of Cost over Net Assets Acquired 160,253 153,775
Deferred Income Taxes - 3,438
Other Assets 16,267 16,241
---------- ----------
$1,099,530 $ 965,742
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets (unaudited) - continued
(in thousands, except share data)
October 31, January 30,
1998 1998
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 185 $ 674
Accounts payable 171,705 156,209
Accrued compensation and benefits 27,693 21,272
Other current liabilities 32,858 19,959
---------- ----------
Total current liabilities 232,441 198,114
Long-Term Debt 386,963 343,197
Other Noncurrent Liabilities 6,314 2,662
---------- ----------
Total liabilities 625,718 543,973
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock - -
Common stock-24,070,963 and
23,437,039 shares issued 24,071 23,437
Capital in excess of par value 216,864 202,210
Retained earnings 234,050 197,364
Unearned compensation related to
outstanding restricted stock (1,173) (1,242)
---------- ----------
Total shareholders' equity 473,812 421,769
---------- ----------
$1,099,530 $ 965,742
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three months ended October 31,
1998 1997
---------- ----------
Net Sales $ 659,045 $ 525,838
Cost of Sales 512,406 410,544
---------- ----------
Gross Profit 146,639 115,294
---------- ----------
Operating Expenses:
Selling, general and administrative 104,012 82,711
Depreciation and amortization 5,810 4,770
Provision for doubtful accounts 562 592
---------- ----------
Total operating expenses 110,384 88,073
---------- ----------
Operating Income 36,255 27,221
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 1,518 1,366
Interest expense (6,341) (5,293)
---------- ----------
(4,823) (3,927)
---------- ----------
Income Before Income Taxes 31,432 23,294
Income Taxes 12,282 8,625
---------- ----------
Net Income $ 19,150 $ 14,669
========== ==========
Earnings Per Share:
Basic $ .80 $ .72
========== ==========
Diluted $ .79 $ .71
========== ==========
Average Shares Outstanding:
Basic 23,989 20,318
========== ==========
Diluted 24,204 20,647
========== ==========
Dividends Per Share $ .085 $ .080
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Nine months ended October 31,
1998 1997
---------- ----------
Net Sales $1,935,626 $1,468,481
Cost of Sales 1,510,869 1,147,849
---------- ----------
Gross Profit 424,757 320,632
---------- ----------
Operating Expenses:
Selling, general and administrative 309,616 234,904
Depreciation and amortization 16,919 13,969
Provision for doubtful accounts 1,888 1,408
---------- ----------
Total operating expenses 328,423 250,281
---------- ----------
Operating Income 96,334 70,351
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 4,747 3,942
Interest expense (18,950) (14,397)
---------- ----------
(14,203) (10,455)
---------- ----------
Income Before Income Taxes 82,131 59,896
Income Taxes 31,605 21,797
---------- ----------
Net Income $ 50,526 $ 38,099
========== ==========
Earnings Per Share:
Basic $ 2.12 $ 1.93
========== ==========
Diluted $ 2.10 $ 1.89
========== ==========
Average Shares Outstanding:
Basic 23,840 19,722
========== ==========
Diluted 24,085 20,113
========== ==========
Dividends Per Share $ .245 $ .228
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine months ended October 31,
1998 1997
---------- ----------
Cash Flows from Operating Activities:
Net income $ 50,526 $ 38,099
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 16,919 13,969
Provision for doubtful accounts 1,888 1,408
Other, net (249) (382)
Changes in assets and liabilities, net
of effects of business acquisitions:
(Increase) in accounts receivable (69,053) (67,278)
(Increase) in inventories (18,327) (10,489)
(Increase) in other current assets (9,589) (3,116)
(Increase) in other assets (3,809) (6,320)
Increase in accounts payable and
accrued liabilities 17,258 29,067
Increase in accrued interest and
income taxes 7,573 5,918
Increase in other noncurrent
liabilities 3,652 413
Decrease in deferred income taxes 1,049 1,575
---------- ----------
Net cash (used in) provided by
operating activities (2,162) 2,864
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (20,753) (22,685)
Proceeds from sale of
property and equipment 6,216 429
Business acquisitions, net of cash (9,507) (16,220)
---------- ----------
Net cash (used in) investing
activities (24,044) (38,476)
---------- ----------
Cash Flows from Financing Activities:
Net payments under short-term
debt arrangements (5,145) (24,777)
Principal payments on long-term debt (12,183) (11,505)
Proceeds from issuance of long-term debt 50,000 80,000
Proceeds from stock options exercised 327 891
Purchase of common shares (201) (285)
Dividends paid (6,783) (3,976)
---------- ----------
Net cash provided by financing
activities 26,015 40,348
---------- ----------
Net (Decrease) Increase in Cash and
Cash Equivalents (191) 4,736
Cash and Cash Equivalents:
Beginning of period 8,204 6,619
---------- ----------
End of period $ 8,013 $ 11,355
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 7
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (dollars in thousands, except per share data)
1. In the opinion of Hughes Supply, Inc. (the "Company"), the
accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of October
31, 1998, the results of operations for the three and nine months
ended October 31, 1998 and 1997, and cash flows for the nine months
then ended. The results of operations for the three and nine
months ended October 31, 1998 are not necessarily indicative of the
results that may be expected for the full year. Prior period
financial statements have been restated to include the accounts of
Winn-Lange Electric, Inc. ("Winn-Lange") acquired and accounted for
as a pooling of interests (see Note 2).
The fiscal year of the Company is a 52-week period ending on the
last Friday in January. The three months ended October 31, 1998
and 1997 each contained 13 weeks and the nine months ended October
31, 1998 and 1997 each contained 39 weeks.
The Company adopted Statement of Financial Accounting Standards No.
128, Earnings per Share ("SFAS 128") commencing in the period ended
January 30, 1998. Accordingly, these financial statements include
the presentation of both basic and diluted earnings per share.
Basic earnings per share is calculated by dividing net income by
the weighted-average number of shares outstanding. Diluted
earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding, adjusted for
dilutive potential common shares. Earnings per share data for
prior periods was restated to give effect to the Company's adoption
of SFAS 128.
The weighted-average number of shares used in calculating basic
earnings per share were 23,989,000 and 20,318,000 for the three
months ended October 31, 1998 and 1997, respectively, and
23,840,000 and 19,722,000 for the nine months ended October 31,
1998 and 1997, respectively. In calculating diluted earnings per
share, these amounts were adjusted to include dilutive potential
common shares of 215,000 and 329,000 for the three months ended
October 31, 1998 and 1997, respectively, and 245,000 and 391,000
for the nine months ended October 31, 1998 and 1997, respectively.
Effective February 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"). SFAS 130 established standards for reporting
and display of comprehensive income and its components in the
financial statements. The adoption of this standard had no impact
on the Company's financial reporting.
Page 8
In the second quarter ended July 31, 1998, the Company changed the
format of its statements of cash flows from the direct method to
the indirect method for purposes of reporting cash flows from
operating activities. Accordingly, the statement of cash flows for
the nine months ended October 31, 1997 contains certain
reclassifications which were made to conform to the October 31,
1998 financial statement format.
2. On June 30, 1998, the Company exchanged 936,904 shares of the
Company's common stock for all of the common stock of Winn-Lange.
Winn-Lange is a wholesale distributor of electrical supplies and
equipment with three branches in Texas. Winn-Lange was a
Subchapter S corporation for federal income tax purposes and,
accordingly, did not pay U.S. federal income taxes. Winn-Lange
will be included in the Company's U.S. federal income tax return
commencing June 30, 1998.
The above transaction has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements
for the periods presented have been restated to include the
accounts of Winn-Lange. Winn-Lange's fiscal year end has been
changed to the last Friday in January to conform to the Company's
fiscal year end.
During the nine months ended October 31, 1998, the Company acquired
five wholesale distributors of materials to the construction
industry that were accounted for as purchases or immaterial
poolings. These acquisitions, individually or in the aggregate,
did not have a material effect on the consolidated financial
statements of the Company. Results of operations of these
companies from their respective dates of acquisition have been
included in the consolidated financial statements.
3. On May 5, 1998, the Company issued $50,000 of senior notes due 2013
in a private placement. The senior notes bear interest at 6.74%
and will be payable in 21 equal semi-annual payments beginning in
2003. Proceeds received by the Company from the sale of the senior
notes were used to reduce indebtedness outstanding under the
Company's revolving credit facility and line of credit agreement
(the "credit agreement").
On September 30, 1998, the Company executed a new $25,000 line of
credit for short-term borrowing. There were no amounts outstanding
under this line of credit as of October 31, 1998.
4. Subsequent events:
On November 11, 1998, the Company entered into an unsecured $50,000
Bridge Credit Agreement with two banks. The Bridge Credit
Agreement matures on January 31, 1999 and provides for interest at
London Interbank Offered Rates (LIBOR) plus an applicable margin.
Page 9
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the financial condition of the
Company as of October 31, 1998, and the results of operations for the
three and nine months then ended.
As described in Note 2 of the Notes to Consolidated Financial
Statements, on June 30, 1998 the Company entered into a business
combination with Winn-Lange which was accounted for as a pooling of
interests. Accordingly, all financial data in Management's Discussion
and Analysis of Financial Condition and Results of Operations is
reported as though the companies have always been one entity.
Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including, but not
limited to certain statements made regarding the Year 2000 Issue (as
defined below), constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and are
subject to the safe harbor created by such sections. When used in this
report, the words "believe," "anticipate," "estimate," "expect," and
similar expressions are intended to identify forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. The Company's actual
results may differ significantly from the results discussed in such
forward-looking statements. When appropriate, certain factors that
could cause results to differ materially from those projected in the
forward-looking statements are enumerated. This Management's Discussion
and Analysis of Financial Condition and Results of Operations should be
read in conjunction with the Company's consolidated financial statements
and the notes thereto contained herein and in the Company's Form 10-K
for the fiscal year ended January 30, 1998.
Material Changes in Results of Operations
Net Sales
Net sales were $659 million for the quarter ended October 31, 1998, a
25% increase over the prior year's third quarter. Net sales for the
nine months were $1.94 billion, which was 32% ahead of the same period
in the prior year. Same-store sales increased 4% and 6% for the three
and nine months ended October 31, 1998, respectively. The remaining
increases in net sales for the three and nine month periods are
attributable to branches opened and acquired after February 1, 1997.
Page 10
The same-store sales increases for the three and nine months ended
October 31, 1998 are primarily attributable to (i) continued growth in
construction markets and (ii) the favorable impact of warm and dry
weather conditions experienced in certain regions served by the
Company's air conditioning and pool supply product groups. These
increases were partially offset, however, by the impact of declining
prices in certain commodity items.
Gross Profit
Gross profit and gross margin for the three and nine months ended
October 31, 1998 and 1997 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------------- -------------------- Variance
Gross Gross Gross Gross ------------------
Profit Margin Profit Margin Amount %
--------- ------ --------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 146,639 22.3% $ 115,294 21.9% $ 31,345 27.2%
Nine months ended $ 424,757 21.9% $ 320,632 21.8% $104,125 32.5%
</TABLE>
The improvement in gross margins has resulted from several factors,
including the Company's overall expansion of higher-margin products
resulting primarily from its acquisition program, efficiencies created
with central distribution centers and enhanced purchasing power.
Enhanced purchasing power is attributable to increased volume and
concentration of supply sources as part of the Company's preferred
vendor program. The gross margin increases for the three and nine
months ended October 31, 1998 were partially offset by deflationary
pressures on certain of the Company's commodity-priced products,
including stainless steel, copper, aluminum and plastic.
Operating Expenses
Operating expenses for the three and nine months ended October 31, 1998
and 1997 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------------- -------------------- Variance
% of % of ------------------
Amount Net Sales Amount Net Sales Amount %
--------- --------- --------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 110,384 16.7% $ 88,073 16.7% $ 22,311 25.3%
Nine months ended $ 328,423 17.0% $ 250,281 17.0% $ 78,142 31.2%
</TABLE>
Approximately 22 and 25 percentage points of the 25.3% and 31.2%
increases in operating expenses for the three and nine months ended
October 31, 1998, respectively, are attributable to branches opened and
acquired after February 1, 1997. The remainder of the increase is
primarily due to personnel and transportation costs associated with
same-store sales growth.
Page 11
Non-Operating Income and Expenses
Interest and other income increased $.2 million and $.8 million for the
three and nine months ended October 31, 1998 over the prior year
periods. The increases are primarily the result of higher levels of
accounts receivable and the related collection of service charge income
on delinquent accounts receivable.
Interest expense was $6.3 million and $19.0 million for the three and
nine months ended October 31, 1998 compared to $5.3 million and $14.4
million for the three and nine months ended October 31, 1997,
respectively. The increases are primarily the result of higher
borrowing levels, partially offset by lower interest rates. Expansion
through business acquisitions has been partially funded by debt
financing.
Income Taxes
The effective tax rates for the three and nine months ended October 31,
1998 and 1997 were as follows:
1998 1997
Three months ended 39.1% 37.0%
Nine months ended 38.5% 36.4%
Prior to the mergers with Chad Supply, Inc. ("Chad") on January 30, 1998
and with Winn-Lange on June 30, 1998, these entities were Subchapter S
corporations and were not subject to corporate income tax. Each
entity's Subchapter S corporation status terminated upon the merger with
the Company. As a result, the Company's effective rate is higher for
the three and nine months ended October 31, 1998 compared to the prior
year periods. The Company's effective tax rate for the three and nine
months ended October 31, 1997 and the nine months ended October 31, 1998
would have been approximately 39.5% assuming Chad and Winn-Lange were
tax paying entities.
Net Income
Net income for the third quarter increased 31% to $19.2 million.
Diluted earnings per share for the third quarter were $.79 compared to
$.71 in the prior year, an 11% increase with 17% more average shares
outstanding.
For the nine months ended October 31, 1998, net income reached $50.5
million, a 33% increase over the nine months ended October 31, 1997.
Diluted earnings per share for the nine months ended October 31, 1998
and 1997 were $2.10 and $1.89, respectively. This increase of 11% was
on 20% more average shares outstanding.
Page 12
These improved results reflect operating leverage that has been achieved
through the Company's acquisition program and the resulting purchasing
and administrative synergies, as well as through internal growth.
Operating margins (operating income as a percentage of net sales) have
improved to 5.5% and 5.0% for the three and nine months ended October
31, 1998, compared to 5.2% and 4.8% for the three and nine months ended
October 31, 1997, respectively.
Liquidity and Capital Resources
Working capital at October 31, 1998 totaled $569 million compared to
$486 million at January 30, 1998. The working capital ratio was 3.4 to
1 and 3.5 to 1 as of October 31, 1998 and January 30, 1998,
respectively. The Company typically becomes more leveraged in
expansionary periods. Consequently, higher levels of inventories and
receivables, trade payables and debt are required to support the growth.
Net cash used in operations was $2.2 million for the nine months ended
October 31, 1998 compared net cash provided by operations of $2.9
million for the nine months ended October 31, 1997. This change is
primarily due to increases in accounts receivable and inventories
resulting from the Company's growth.
Expenditures for property and equipment were $20.8 million for the nine
months ended October 31, 1998 compared to $22.7 million for the nine
months ended October 31, 1997. This decrease of $1.9 million is
primarily due to higher levels of expenditures for computer and
communications hardware and related software during the nine months
ended October 31, 1997. Capital expenditures for property and
equipment, not including amounts for business acquisitions, are expected
to be approximately $24 million for fiscal year 1999.
Proceeds from the sale of property and equipment were $6.2 million for
the nine months ended October 31, 1998 compared to $.4 million for the
nine months ended October 31, 1997. This increase is primarily due to
the sale and subsequent lease-back of certain computer hardware during
the second quarter ended July 31, 1998, which generated proceeds of $5.4
million.
Cash payments for business acquisitions accounted for as purchases
totaled $9.5 million for the nine months ended October 31, 1998. In
addition, the Company issued approximately 189,000 shares of its common
stock valued at approximately $6.7 million for such purchases.
Principal reductions on long-term debt were $12.2 million for the nine
months ended October 31, 1998 compared to $11.5 million for the same
period in the prior year. These amounts are primarily attributable to
the repayment of debt assumed as a result of certain business
acquisitions. Dividend payments were $6.8 million and $4.0 million
during the nine months ended October 31, 1998 and 1997, respectively.
Page 13
As discussed in Note 3 of the Notes to Consolidated Financial
Statements, in May 1998 the Company issued $50 million of 6.74% senior
notes due 2013 in a private placement. The proceeds of this private
placement were used to reduce indebtedness outstanding under the
Company's credit agreement.
In November 1998, the Company entered into an unsecured $50 million
Bridge Credit Agreement with two banks. This facility provides the
Company with an interim source of financing pending anticipated future
amendments to its existing credit agreement to allow for additional
borrowing capacity. Future amendments are expected to increase the
Company's existing credit agreement from $180 million to $275 million
with an option to increase the capacity to $325 million. The amendments
are expected to close in January 1999.
As of October 31, 1998, the Company had approximately $52 million of
unused borrowing capacity (subject to borrowing limitations under long-
term debt covenants) without giving effect to the $50 million Bridge
Credit Agreement discussed above. With this facility and the $50
million Bridge Credit Agreement, management believes that the Company
has sufficient borrowing capacity to take advantage of growth and
business acquisition opportunities in the near term and has the
resources necessary to fund ongoing operating requirements and
anticipated capital expenditures. The Company expects to continue to
finance future expansion on a project-by-project basis through
additional borrowing or through the issuance of common stock.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year
in the date field. As the century date change occurs, these programs
may recognize the year 2000 as 1900, or not at all. If not corrected,
many computer systems and applications could fail or create erroneous
results by or at the year 2000 (the "Year 2000 Issue").
The Company has developed plans to address its possible exposures
related to the impact of the Year 2000 Issue on each of its internal
systems and those of third parties. These plans are expected to be
implemented primarily with the use of internal personnel.
The Company's internal systems consist of its central operating and
accounting systems, which handle the majority of its business
transactions, and other remote operating systems, which have resulted
from the Company's acquisition program. Plans to address the Year 2000
Issue with respect to the Company's internal systems include an
assessment phase, a remediation phase and a testing phase.
Page 14
The Company has completed an assessment of its central operating and
accounting systems. This assessment has resulted in the identification
of certain modifications which were necessary to bring these systems
into year 2000 compliance. These modifications have been made and are
in the final testing phase. Final testing, along with any further
remediation efforts necessary to ensure year 2000 compliance, is
scheduled for completion in fiscal 1999. Based on the results of
initial testing, with respect to these two systems, the Company does not
anticipate that the Year 2000 Issue will materially impact its
operations or operating results.
An assessment of the Company's 18 remote operating systems in place as
of July 31, 1998 is also complete. These systems are not year 2000
compliant. All such systems are, however, expected to be converted to
the Company's central operating and accounting systems or to be modified
to ensure year 2000 compliance using vendor-supplied software. The
remediation and testing phases for these remote operating systems are
expected to be completed by July 31, 1999. All additional remote
operating systems added after July 31, 1998 as a result of the Company's
acquisition program will be assessed, remediated and tested to the
extent that is necessary to ensure year 2000 compliance.
Management estimates total pretax costs relating to the Year 2000 Issue
to be approximately $2 million. Approximately 3% of these costs were
incurred through October 31, 1998 and the remaining costs are expected
to be incurred through March 2000. The estimate of $2 million excludes
costs of converting remote operating systems to the Company's central
operating and accounting systems, because such costs are not expected to
be material or the conversion is scheduled to be performed as part of
the Company's normal integration activities. Approximately $1 million
of the estimated total pretax costs of $2 million are personnel and
other expenses related to the Company's Year 2000 Project Team, which is
expected to remain intact through the turn of the century. The
remaining estimated cost of $1 million is expected to be incurred
primarily in connection with the remediation and testing of the
Company's remote operating systems.
The Company believes its planning efforts are adequate to address the
Year 2000 Issue and that its greatest risks in this area are primarily
those that it cannot directly control, including the readiness of its
major suppliers, customers and service providers. Failure on the part
of any of these entities to timely remediate their Year 2000 Issues
could result in disruptions in the Company's supply of materials,
disruptions in its customers' ability to conduct business and
interruptions to the Company's daily operations. Management believes
that its exposure to third party risk may be minimized to some extent
because it does not rely significantly on any one supplier or customer.
There can be no guarantee, however, that the systems of other third
parties on which the Company's systems and operations rely will be
corrected on a timely basis and will not have a material adverse effect
on the Company.
Page 15
The Company is in the preliminary stages of contacting its major
suppliers, customers and service providers regarding their Year 2000
Issues and therefore does not currently have adequate information to
assess the risk of these entities not being able to provide goods and
services to the Company. However, because the Company believes this
area is among its greatest risks, as information is received and
evaluated, the Company intends to develop contingency plans, as
deemed necessary, to safeguard its ongoing operations. Such
contingency plans may include identifying alternative suppliers or
service providers, stockpiling certain inventories if alternative
sources of supply are not available, evaluating the impact and credit
worthiness of non-compliant customers and the addition of lending
capacity if deemed necessary to finance higher levels of inventory or
working capital on an interim basis.
Page 16
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession. Not applicable.
(3) Articles of incorporation and by-laws.
3.1 Restated Articles of Incorporation, as amended,
incorporated by reference to Exhibit 3.1 to Form 10-Q for
the quarter ended April 30, 1997 (Commission File No.
001-08772).
3.2 Composite By-Laws, as amended, incorporated by reference
to Exhibit 3.2 to Form 10-K for the fiscal year ended
January 30, 1998 (Commission File No. 001-08772).
(4) Instruments defining the rights of security holders, including
indentures.
4.1 Form of Common Stock Certificate representing shares of
the Registrant's common stock, $1.00 par value,
incorporated by reference to Exhibit 4.1 to Form 10-Q for
the quarter ended July 31, 1997 (Commission File No. 001-
08772).
4.2 Rights Agreement dated as of May 20, 1998 between Hughes
Supply, Inc. and American Stock Transfer & Trust Company,
incorporated by reference to Exhibit 99.2 to Form 8-A
dated May 22, 1998 (Commission File No. 001-08772).
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance Operations
dated December 1, 1971, incorporated by reference
to Exhibit 13(n) to Registration No. 2-43900
(Commission File No. 0-5235). Letter dated April
15, 1992 extending lease from month to month, filed
as Exhibit 10.1(a) to Form 10-K for the fiscal year
ended January 31, 1992 (Commission File No. 0-
5235).
Page 17
(b) Leases effective March 31, 1988, incorporated by
reference to Exhibit 10.1(c) to Form 10-K for the
fiscal year ended January 27, 1989 (Commission File
No. 0-5235).
Sub-Item Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(6) Leesburg
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(11) Sarasota
(12) Venice
(13) Winter Haven
(c) Lease amendment letter between Hughes, Inc. and the
Registrant, dated December 1, 1986, amending
Orlando Truck Operations Center and Maintenance
Garage lease, incorporated by reference to Exhibit
10.1(i) to Form 10-K for the fiscal year ended
January 30, 1987 (Commission File No. 0-5235).
(d) Lease agreement dated June 1, 1987, between Hughes,
Inc. and the Registrant, for additional Sarasota
property, incorporated by reference to Exhibit
10.1(j) to Form 10-K for the fiscal year ended
January 29, 1988 (Commission File No. 0-5235).
(e) Lease dated March 11, 1992, incorporated by
reference to Exhibit 10.1(e) to Form 10-K for the
fiscal year ended January 31, 1992 (Commission File
No. 0-5235).
Sub-Item Property
(2) Gainesville Electrical Operation
(f) Amendments to leases between Hughes, Inc. and
Hughes Supply, Inc., dated April 1, 1998, amending
the leases for the thirteen properties listed in
Exhibit 10.1(b), (d) and (e), incorporated by
reference to Exhibit 10.1 to Form 10-K for the
fiscal year ended January 30, 1998 (Commission File
No. 001-08772).
Page 18
10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended
March 12, 1996 incorporated by reference to Exhibit 10.2
to Form 10-K for the fiscal year ended January 26, 1996
(Commission File No. 001-08772).
10.3 Form of Supplemental Executive Retirement Plan Agreement
entered into between the Registrant and eight of its
executive officers, incorporated by reference to Exhibit
10.6 to Form 10-K for the fiscal year ended January 30,
1987 (Commission File No. 0-5235).
10.4 Directors' Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.4 to Form 10-K for the fiscal
year ended January 30, 1998 (Commission File No. 001-
08772).
10.5 Written description of senior executives' long-term
incentive bonus plan for fiscal year 1996 incorporated by
reference to the description of the bonus plan set forth
under the caption "Approval of the Stock Award Provisions
of the Senior Executives' Long-Term Incentive Bonus Plan
for Fiscal Year 1996" on pages 26 and 27 of the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders To Be Held May 24, 1994 (Commission File No.
001-08772).
10.6 Hughes Supply, Inc. Amended Senior Executives' Long-Term
Incentive Bonus Plan, adopted January 25, 1996,
incorporated by reference to Exhibit 10.9 to Form 10-K
for the fiscal year ended January 26, 1996 (Commission
File No. 001-08772).
10.7 Amended and Restated Revolving Credit Agreement and Line
of Credit Agreement, dated as of August 18, 1997, by and
among the Company, SunTrust, SouthTrust, NationsBank,
First Union, Barnett and PNC, incorporated by reference
to Exhibit 10.14 to Form 10-Q for the quarter ended July
31, 1997 (Commission File No. 001-08772). The Amended
Credit Agreement contains a table of contents identifying
the contents of Schedules and Exhibits, all of which have
been omitted. The Company agrees to furnish a
supplemental copy of any omitted Schedule or Exhibit to
the Commission upon request.
10.8 Note Purchase Agreement, dated as of August 28, 1997, by
and among the Company and certain purchasers identified
in Schedule A of the Note Purchase Agreement,
incorporated by reference to Exhibit 10.15 to Form 10-Q
for the quarter ended July 31, 1997 (Commission File No.
001-08772).
Page 19
10.9 Hughes Supply, Inc. 1997 Executive Stock Plan (the
"Plan") incorporated by reference to the description of
the Plan set forth under Exhibit A of the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to
be held May 20, 1997 (Commission File No. 001-08772).
10.10 Note Purchase Agreement, dated as of May 29, 1996, by and
among the Company and certain purchasers identified in
Schedule A of the Note Purchase Agreement, incorporated
by reference to Exhibit 10.13 to Form 10-K for the fiscal
year ended January 30, 1998 (Commission File No. 001-
08772).
10.11 Note Purchase Agreement, dated as of May 5, 1998, by and
among the Company and certain purchasers identified in
Schedule A of the Note Purchase Agreement, incorporated
by reference to Exhibit 10.11 to Form 10-Q for the
quarter ended April 30, 1998 (Commission File No. 001-
08772).
10.12 Bridge Credit Agreement, dated as of November 11, 1998,
by and among the Company, SunTrust and First Union. The
Bridge Credit Agreement contains a table of contents
identifying the contents of Exhibits, all of which have
been omitted. The Company agrees to furnish a
supplemental copy of any omitted Exhibit to the
Commission upon request.
(11) Statement re computation of per share earnings. Not
applicable.
(15) Letter re unaudited interim financial information. Not
applicable.
(18) Letter re change in accounting principles. Not applicable.
(19) Report furnished to security holders. Not applicable.
(22) Published report regarding matters submitted to vote of
security holders. Not applicable.
(23) Consents of experts and counsel. Not applicable.
(24) Power of attorney. Not applicable.
(27) Financial data schedule.
27.1 Financial data schedule (filed electronically only).
(99) Additional exhibits. Not applicable.
Page 20
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended October 31, 1998.
Page 21
SIGNATURES
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.
HUGHES SUPPLY, INC.
Date: December 14, 1998 By: /s/ David H. Hughes
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
Date: December 14, 1998 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 22
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.12 Bridge Credit Agreement, dated as of November 11, 1998, by and
among the Company, SunTrust and First Union. The Bridge
Credit Agreement contains a table of contents identifying the
contents of Exhibits, all of which have been omitted. The
Company agrees to furnish a supplemental copy of any omitted
Exhibit to the Commission upon request.
27.1 Financial data schedule (filed electronically only).
Page 23
BRIDGE CREDIT AGREEMENT
Dated as of November 11, 1998
By and Among
HUGHES SUPPLY, INC.
AND
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION,
and
FIRST UNION NATIONAL BANK,
as Lenders
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CONSTRUCTION 01
Section 1.01. Definitions; Construction 01
Section 1.02. Accounting Terms and Determination 08
Section 1.03. Other Definitional Terms 08
Section 1.04. Exhibits 09
ARTICLE II LOANS 09
Section 2.01. Commitment; Use of Proceeds 09
Section 2.02. Notes; Repayment of Principal 09
Section 2.03. Voluntary Reduction of Loan 10
Section 2.04. Funding Notices 10
Section 2.05. Disbursement of Funds 11
Section 2.06. Interest 11
Section 2.07. Interest Periods 12
Section 2.08. Voluntary Prepayments of Borrowings 13
Section 2.09. Payments, etc. 14
Section 2.10. Interest Rate Not Ascertainable, etc. 15
Section 2.11. Illegality 15
Section 2.12. Increased Costs 16
Section 2.13. Lending Offices 17
Section 2.14. Funding Losses 18
Section 2.15. Assumptions Concerning Funding of Eurodollar
Advances 18
Section 2.16. Apportionment of Payments 18
Section 2.17. Sharing of Payments, Etc. 18
Section 2.18. Capital Adequacy 19
Section 2.19. Benefits to Guarantors 19
Section 2.20. Limitation on Certain Payment Obligations 19
ARTICLE III CONDITIONS TO BORROWINGS 20
Section 3.01. Conditions Precedent to Commitments 20
Section 3.02. Conditions to All Loans 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES 23
ARTICLE V COVENANTS 23
Section 5.01. Covenants in Amended and Restated Credit Agreement 23
Section 5.02. Additional Guarantors 24
ARTICLE VI EVENTS OF DEFAULT 24
Section 6.01. Payments 24
Section 6.02. Covenants 24
Section 6.03. Representations 24
Section 6.04. Defaults Under Amended ad Restated Credit Agreement 25
Section 6.05. Bankruptcy 25
Section 6.06. Default Under Other Credit Documents 25
ARTICLE VII MISCELLANEOUS 26
Section 7.01. Notices 26
Section 7.02. Amendments, Etc. 26
Section 7.03. No Waiver; Remedies Cumulative 26
Section 7.04. Payment of Expenses, Etc. 27
Section 7.05. Right of Setoff 28
Section 7.06. Benefit of Agreement 28
Section 7.07. Governing Law; Submission to Jurisdiction 30
Section 7.08. Independent Nature of Lenders' Rights 32
Section 7.09. Counterparts 32
Section 7.10. Effectiveness; Survival 32
Section 7.11. Severability 32
Section 7.12. Independence of Covenants 32
Section 7.13. Headings Descriptive; Entire Agreement 33
Section 7.14. Time is of the Essence 33
Section 7.15. Usury 33
Section 7.16. Construction 33
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Subsidiary Guaranty Agreement
Exhibit C Form of Contribution Agreement
Exhibit D Form of Closing Certificate
BRIDGE CREDIT AGREEMENT
THIS BRIDGE CREDIT AGREEMENT, dated as of November 11, 1998 (the
"Agreement") by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida
corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION
("SunTrust"), a national banking association, and FIRST UNION NATIONAL
BANK, a national banking associating ("First Union", and collectively with
SunTrust, the "Lenders").
W I T N E S S E T H :
WHEREAS, the Borrower has requested from the Lenders, and the
Lenders have agreed, to commit to a $50,000,000 bridge credit facility to
the Borrower on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants made
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.01. Definitions. As used in this Agreement, and in
any instrument, certificate, document or report delivered pursuant hereto,
the following terms shall have the following meanings (to be equally
applicable to both the singular and plural forms of the term defined):
"Advance" shall mean any principal amount advanced and remaining
outstanding at any time under the Loans which Advance shall be made or
outstanding as a Base Rate Advance or Eurodollar Advance, as the case may
be.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that Person.
"Agreement" shall mean this Bridge Credit Agreement, either as
originally executed or as it may be from time to time supplemented,
amended, restated, renewed or extended and in effect.
"Amended and Restated Credit Agreement" shall mean that certain
Amended and Restated Revolving Credit and Line of Credit Agreement, dated
as of August 18, 1997, by and among Hughes Supply, Inc., a Florida
corporation, SunTrust Bank, Central Florida, National Association, a
national banking association, SouthTrust Bank, National Association, a na
tional banking association, NationsBank, N.A., a national banking
association, First Union National Bank, a national banking Association,
Barnett Bank, N.A., a national banking association, and PNC Bank, Kentucky,
Inc., a Kentucky banking corporation, and SunTrust Bank, Central Florida,
National Association as Agent thereunder, as amended by the First Amendment
to Amended and Restated Revolving Credit and Line of Credit Agreement,
dated as of April 22, 1998, as so amended and as from time to time amended,
restated, modified or supplemented hereinafter.
"Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as
amended and in effect from time to time (11 U.S.C. 101 et seq.).
"Base Rate" shall mean (with any change in the Base Rate to be
effective as of the date of change of either of the following rates), with
respect to the Loans, the higher of (a) the rate which SunTrust designates
from time to time to be its prime lending rate, as in effect from time to
time, and (b) the Federal Funds Rate, as in effect from time to time, plus
one-half of one percent (0.50%) per annum. SunTrust's prime lending rate
is a reference rate and does not necessarily represent the lowest or best
rate charged to customers; SunTrust may make commercial loans or other
loans at rates of interest at, above or below its prime lending rate.
"Base Rate Advance" shall mean an Advance made or outstanding as
a Loan, bearing interest based on the Base Rate.
"Base Rate Loan" shall mean any Loan hereunder which bears
interest at the Base Rate.
"Borrowing" shall mean the incurrence by Borrower under the
Commitments of Advances of one Type concurrently having the same Interest
Period or the continuation or conversion of an existing Borrowing or
Borrowings in whole or in part.
"Business Day" shall mean, with respect to Eurodollar Loans, any
day other than a day on which commercial banks are closed or required to be
closed for domestic and international business, including dealings in
Dollar deposits on the London interbank market, and with respect to all
other Loans and matters, any day other than Saturday, Sunday and a day on
which commercial banks are required to be closed for business in Atlanta,
Georgia, or Orlando, Florida.
"Closing Date" shall mean the date on or before November 11,
1998, on which the Lenders extend the Commitments and the conditions set
forth in Section 3.01 are satisfied or waived in accordance with Section
7.02.
"Commitment" shall mean, at any time for any Lender, the amount
of such commitment set forth opposite such Lender's name on the signature
pages hereof or in any assignment executed by an assignee of a Lender
pursuant to Section 7.06, as the same may be increased or decreased from
time to time as a result of any reduction thereof pursuant to Section 2.03,
any assignment thereof pursuant to Section 7.06, or any amendment thereof
pursuant to Section 7.02.
"Consolidated Companies" shall mean, collectively, Borrower and
all of its Subsidiaries.
"Credit Documents" shall mean, collectively, this Agreement, the
Notes, the Guaranty Agreements, and all other Guaranty Documents, if any.
"Credit Parties" shall mean, collectively, each of Borrower, the
Guarantors, and every other Person who from time to time executes a Credit
Document with respect to all or any portion of the Obligations.
"Default" shall mean any condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful
money of the United States of America.
"Eligible Assignee" shall mean (i) a commercial bank organized
under the laws of the United States, or any state thereof, having total
assets in excess of $1,000,000,000 or any commercial finance or asset based
lending Affiliate of any such commercial bank and (ii) any Lender or any
Affiliate of any Lender.
"Environmental Laws" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, now or hereafter in effect (including,
without limitation, those with respect to asbestos or asbestos containing
material or exposure to asbestos or asbestos containing material), relating
to pollution or protection of the environment and relating to public health
and safety, relating to (i) emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial toxic or
hazardous constituents, substances or wastes, including without limitation,
any Hazardous Substance (as defined in CERCLA), petroleum including crude
oil or any fraction thereof, any petroleum product or other waste,
chemicals or substances regulated by any Environmental Law into the
environment (including without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), or (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of any Hazardous Substance, petroleum including crude
oil or any fraction thereof, any petroleum product or other waste,
chemicals or substances regulated by any Environmental Law, and (iii)
underground storage tanks and related piping, and emissions, discharges and
releases or threatened releases therefrom, such Environmental Laws to
include, without limitation (i) the Clean Air Act (42 U.S.C. 7401 et
seq.), (ii) the Clean Water Act (33 U.S.C. 1251 et seq.), (iii) the
Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), (iv) the
Toxic Substances Control Act (15 U.S.C. 2601 et seq.) and (v) the
Comprehensive Environmental Response Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act (42 U.S.C.
9601 et seq.).
"Eurodollar Advance" shall mean an Advance made or outstanding as
a Loan, bearing interest based on LIBOR.
"Eurodollar Loan" shall mean any Loan hereunder which bears
interest based on LIBOR.
"Event of Default" shall have the meaning set forth in Article
VI.
"Executive Officer" shall mean with respect to any Person (other
than a Guarantor), the President, Vice Presidents, Chief Financial Officer,
Treasurer, Secretary and any Person holding comparable offices or duties,
and with respect to a Guarantor, the President.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
member banks of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of
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 SunTrust from three Federal funds brokers of
recognized standing selected by SunTrust.
"Final Maturity Date" shall mean the date on which all
commitments have been terminated and all amounts outstanding under this
Agreement have been declared or have automatically become due and payable
pursuant to the provisions of Article VI.
"GAAP" shall mean generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the
circumstances as of the date of determination.
"Guarantors" shall mean, collectively, each Subsidiary of the
Borrower that has executed a Guaranty Agreement as of the Closing Date,
together with all other Material Subsidiaries that hereafter execute a
Guaranty Agreement, and their respective successors and permitted assigns.
"Guaranty Agreements" shall mean, collectively, the Guaranty
Agreement executed by each of the Guarantors in favor of the Lenders,
substantially in the form of Exhibit B as the same may be amended, restated
or supplemented from time to time, and the Contribution Agreement executed
by each of the Guarantors, substantially in the form of Exhibit C as the
same may be amended, restated or supplemented from time to time.
"Guaranty Documents" shall mean, collectively, the Guaranty
Agreements, and each other guaranty agreement, mortgage, deed of trust,
security agreement, pledge agreement, or other security or collateral
document guaranteeing or securing the Obligations, as the same may be
amended, restated, or supplemented from time to time, and the Contribution
Agreements executed by each of the Guarantors, as the same may be amended,
restated or supplemented from time to time.
"Interest Period" shall mean, with respect to Eurodollar Loans,
the period of 1 or 2 months selected by the Borrower, pursuant to the terms
of the credit facility and subject to customary adjustments in duration;
provided, that (a) the first day of an Interest Period must be a Business
Day, (b) any Interest Period that would otherwise end on a day that is not
a Business Day for Eurodollar Loans shall be extended to the next
succeeding Business Day for Eurodollar Loans, unless such Business Day
falls in the next calendar month, in which case the Interest Period shall
end on the next preceding Business Day for Eurodollar Loans.
"Investment" shall mean, when used with respect to any Person,
any direct or indirect advance, loan or other extension of credit (other
than the creation of receivables in the ordinary course of business) or
capital contribution by such Person (by means of transfers of property to
others or payments for property or services for the account or use of
others, or otherwise) to any Person, or any direct or indirect purchase or
other acquisition by such Person of, or of a beneficial interest in,
capital stock, partnership interests, bonds, notes, debentures or other
securities issued by any other Person.
"Lender" or "Lenders" shall mean the banks and lending
institutions listed on the signature pages hereof, and each assignee
thereof, if any, pursuant to Section 7.06.
"Lending Installation" shall mean any office, branch, subsidiary
or affiliate of any Lender.
"Lending Office" shall mean for each Lender the office such
Lender may designate in writing from time to time to Borrower with respect
to each Type of Loan.
"LIBOR" shall mean, for any Interest Period, the offered rates
for deposits in U.S. dollars for a period comparable to the Interest Period
appearing on the Reuters Screen LIBOR Page as of 11:00 a.m., London time,
on the day that is two London banking days prior to the first day of the
Interest Period. If at least two such rates appear on the Reuters Screen
LIBOR Page, the rate for that Interest Period will be the arithmetic mean
of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%. If
the foregoing rate is unavailable from the Reuters Screen for any reason,
then such rate shall be determined by SunTrust from Telerate Page 3750 or,
if such rate is also unavailable on such service, then on any other
interest rate reporting service of recognized standing designated in
writing by SunTrust to Borrower and the other Lenders; in any such case
rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not
such a multiple.
"Loans" shall mean, collectively, the revolving credit loans made
to Borrower by the Lenders pursuant to Section 2.01.
"Materially Adverse Effect" shall mean the occurrence of an
event, which would (i) cause the recognition of a liability, as required by
Statement of Financial Accounting Standards No. 5, in the current quarter
financial statements in the amount of $5,000,000 or more, or (ii) cause an
auditor to have a substantial doubt about the ability of Borrower to
continue as a going concern after consideration of management's plans as
described in Statement of Auditing Standards, No. 59.
"Material Subsidiary" shall mean each Subsidiary of Borrower, now
existing or hereinafter established or acquired, that at any time prior to
the Final Maturity Date, has or acquires total assets in excess of
$1,000,000 or that accounted for or produced more than 5% of the
Consolidated EBITR of Borrower on a consolidated basis during any of the
three most recently completed fiscal years of Borrower.
"Note" shall mean a promissory note evidencing Loans in the form
attached hereto as Exhibit A, as the same may be from time to time
supplemented, modified, amended, renewed or extended.
"Notice of Borrowing" shall have the meaning provided in
Section 2.04.
"Notice of Continuation/Conversion" shall have the meaning
provided in Section 2.04.
"Obligations" shall mean all amounts owing to the Lenders
pursuant to the terms of this Agreement and all other Credit Documents,
including without limitation, all Loans (including all principal and
interest payments due thereunder), fees, expenses, indemnification and
reimbursement payments, indebtedness, liabilities, and obligations of the
Credit Parties, direct or indirect, absolute or contingent, liquidated or
unliquidated, now existing or hereafter arising, together with all renew
als, extensions, modifications or refinancings thereof.
"Payment Office" shall mean, for any Lender, the "Payment Office"
listed on its signature page to this Agreement.
"Person" shall mean and shall include an individual, a part
nership, a joint venture, a corporation, a trust, an unincorporated
association, a government or any department or agency thereof and any other
entity whatsoever.
"Pro Rata Share" shall mean, with respect to each of the
Commitments of each Lender and each Loan to be made by and each payment
(including, without limitation, any payment of principal, interest or fees)
to be made to each Lender, the percentage designated as such Lender's Pro
Rata Share of such Commitments, such Loans or such payments, as applicable,
set forth under the name of such Lender on the respective signature page
for such Lender or in any assignment hereafter executed by an assignee of a
Lender pursuant to Section 7.06, in each case as such Pro Rata Share may
change from time to time as a result of assignments or amendments made
pursuant to this Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System, as the same may be in effect from time to
time.
"Requirement of Law" for any Person shall mean the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or a court or other
governmental authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"Reuters Screen" shall mean, when used in connection with any
designated page and LIBOR, the display page so designated on the Reuter
Monitor Money Rates Service (or such other page as may replace that page on
that service for the purpose of displaying rates comparable to LIBOR).
"Subsidiary" shall mean, with respect to any Person, any
corporation or other entity (including, without limitation, partnerships,
joint ventures, and associations) regardless of its jurisdiction of
organization or formation, at least a majority of the total combined voting
power of all classes of voting stock or other ownership interests of which
shall, at the time as of which any determination is being made, be owned by
such Person, either directly or indirectly through one or more other
Subsidiaries.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of
whatever nature, including without limitation, income, receipts, excise,
property, sales, transfer, license, payroll, withholding, social security
and franchise taxes now or hereafter imposed or levied by the United
States, or any state, local or foreign government or by any department,
agency or other political subdivision or taxing authority thereof or
therein and all interest, penalties, additions to tax and similar
liabilities with respect thereto.
"Telerate" shall mean, when used in connection with any
designated page and the "Certificate of Deposit Rate" or "LIBOR," the
display page so designated on the Dow Jones Telerate Service (or such other
page as may replace that page on that service for the purpose of displaying
rates comparable to the "Certificate of Deposit Rate" or "LIBOR").
"Termination Date" shall mean January 31, 1999.
"Type" of Borrowing shall mean a Borrowing consisting of Base
Rate Advances or Eurodollar Advances.
Section 1.02. Accounting Terms and Determination. Unless
otherwise defined or specified herein, all accounting terms shall be
construed herein, all accounting determinations hereunder shall be made,
all financial statements required to be delivered hereunder shall be
prepared, and all financial records shall be maintained in accordance with,
GAAP.
Section 1.03. Other Definitional Terms. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Article, Section, Schedule,
Exhibit and like references are to this Agreement unless otherwise
specified.
Section 1.04. Exhibits. All Exhibits attached hereto are by
reference made a part hereof.
ARTICLE II
LOANS
Section 2.01. Commitments; Use of Proceeds.
(a) Subject to and upon the terms and conditions herein set
forth, each Lender severally agrees to make to Borrower from time to time
on and after the Closing Date, but prior to the Termination Date, Loans in
an aggregate amount outstanding at any time not to exceed such Lender's
Commitment. Borrower shall be entitled to repay and reborrow Loans in
accordance with the provisions hereof.
(b) Each Loan shall, at the option of Borrower, be made or
continued as, or converted into, part of one or more Borrowings comprised
of Base Rate Advances or Eurodollar Advances. The aggregate principal
amount of each Borrowing of Loans shall be not less than $2,000,000 or a
greater integral multiple of $100,000, provided that each Borrowing of
Loans comprised of Base Rate Advances shall be not less than $250,000 or a
greater integral multiple of $10,000. At no time shall the number of
Borrowings outstanding under this Article II exceed six; provided that, for
the purpose of determining the number of Borrowings outstanding and the
minimum amount for Borrowings resulting from conversions or continuations,
all Borrowings of Base Rate Advances shall be considered as one Borrowing.
The parties hereto agree that (i) the aggregate principal balance of the
Loans of the Lenders as a group shall not exceed the aggregate principal
amount of all Commitments, and (ii) no Lender shall be obligated to make
Loans in excess of the Commitment of such Lender.
(c) The proceeds of Loans shall be used solely to finance
acquisitions of stock or assets of other corporations by the Borrower or
its Subsidiaries and for general corporate purposes.
Section 2.02. Notes; Repayment of Principal.
(a) Borrower's obligations to pay the principal of, and
interest on, the Loans to each Lender shall be evidenced by the records of
such Lender and by the Note payable to such Lender (or the assignor of such
Lender) completed in conformity with this Agreement.
(b) All outstanding principal amounts under the Loans shall
be due and payable in full on the Termination Date.
Section 2.03. Voluntary Reduction of Commitments. Upon at least
three (3) Business Days' prior telephonic notice (promptly confirmed in
writing) to both Lenders, Borrower shall have the right, without premium or
penalty, to terminate the Commitments, in part or in whole, provided that
(i) any such termination shall apply to proportionately and permanently
reduce the Commitments of each of the Lenders, (ii) any partial termination
pursuant to this Section 2.03 shall be in an amount of at least $1,000,000
and integral multiples of $100,000, and (iii) no such reduction shall be
permitted if prohibited or without payment of all costs required to be paid
hereunder with respect to a prepayment. If the aggregate outstanding
amount of the Loans exceeds the amount of the Commitments as so reduced,
Borrower shall immediately repay the Loans by an amount equal to such
excess, together with all accrued but unpaid interest on such excess amount
and any amounts due under Section 2.14 hereof.
Section 2.04. Funding Notices.
(a) Whenever Borrower desires to make a Borrowing of Loans
under its Commitments, it shall give both Lenders prior written notice (or
telephonic notice promptly confirmed in writing) of such Borrowing (a
"Notice of Borrowing"), such Notice of Borrowing to be given prior to 11:00
A.M. (Atlanta, Georgia time) at its Payment Office (x) one Business Day
prior to the requested date of such Borrowing in the case of Base Rate Ad
vances, and (y) three Business Days prior to the requested date of such
Borrowing in the case of Eurodollar Advances. Notices received after 11:00
A.M. shall be deemed received on the next Business Day. Each Notice of
Borrowing shall be irrevocable and shall specify the aggregate principal
amount of the Borrowing, the date of Borrowing (which shall be a Business
Day), and whether the Borrowing is to consist of Base Rate Advances or
Eurodollar Advances and (in the case of Eurodollar Advances) the Interest
Period to be applicable thereto.
(b) Whenever Borrower desires to convert all or a portion
of an outstanding Borrowing of Loans under its Commitments which Borrowing
consists of Base Rate Advances into one or more Borrowings consisting of
Eurodollar Advances or to continue outstanding a Borrowing consisting of
Eurodollar Advances for a new Interest Period, it shall give the Lenders at
least three Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) of each such Borrowing to be converted into
or continued as Eurodollar Advances. Such notice (a "Notice of
Continuation/Conversion") shall be given prior to 11:00 A.M. (Atlanta,
Georgia time) on the date specified at the Payment Office of the Lenders.
Each such Notice of Continuation/Conversion shall be irrevocable and shall
specify the aggregate principal amount of the Advances to be converted or
continued, the date of such conversion or continuation and the Interest
Period applicable thereto. If, upon the expiration of any Interest Period
in respect of any Borrowing, Borrower shall have failed to deliver the
Notice of Continuation/Conversion, Borrower shall be deemed to have elected
to convert or continue such Borrowing to a Borrowing consisting of Base
Rate Advances. So long as any Executive Officer of Borrower has knowledge
that any Default or Event of Default shall have occurred and be continuing,
no Borrowing may be converted into or continued as (upon expiration of the
current Interest Period) Eurodollar Advances unless each of the Lenders
shall have otherwise consented in writing. No conversion of any Borrowing
of Eurodollar Advances shall be permitted except on the last day of the
Interest Period in respect thereof.
(c) Without in any way limiting Borrower's obligation to
confirm in writing any telephonic notice, the Lenders may act without
liability upon the basis of telephonic notice believed by the Lenders in
good faith to be from Borrower prior to receipt of written confirmation.
In each such case, Borrower hereby waives the right to dispute each
Lender's record of the terms of such telephonic notice.
Section 2.05. Disbursement of Funds.
(a) No later than 11:00 A.M. (Atlanta, Georgia time) on the
date of each Borrowing pursuant to the Commitments (other than one
resulting from a conversion or continuation pursuant to Section 2.04(b)),
each Lender will make available its Pro Rata Share of the amount of such
Borrowing in immediately available funds by crediting such amounts to
Borrower's demand deposit account maintained with such Lender or at
Borrower's option, to effect a wire transfer of such amounts to Borrower's
account specified by the Borrower, by the close of business on such
Business Day.
(b) All Borrowings shall be loaned by the Lenders on the
basis of their Pro Rata Share of the Commitments. No Lender shall be
responsible for any default by any other Lender in its obligations
hereunder, and each Lender shall be obligated to make the Loans provided to
be made by it hereunder, regardless of the failure of any other Lender to
fund its Commitments hereunder.
Section 2.06. Interest.
(a) Borrower agrees to pay interest in respect of all
unpaid principal amounts of the Loans from the respective dates such
principal amounts were advanced to maturity (whether by acceleration,
notice of prepayment or otherwise) at rates per annum (on the basis of a
360-day year) equal to the applicable rates indicated below:
(i) For Base Rate Advances - The Base Rate in effect from time
to time; and
(ii) For Eurodollar Advances - The relevant Adjusted LIBO Rate
plus an additional forty-five one hundredths of one percent (0.45%).
(b) Overdue principal and, to the extent not prohibited by
applicable law, overdue interest, in respect of the Loans, and all other
overdue amounts owing hereunder, shall bear interest from each date that
such amounts are overdue:
(i) in the case of overdue principal and interest with respect
to all Loans outstanding as Eurodollar Advances, at the rate otherwise
applicable for the then-current Interest Period plus an additional two
percent (2.0%) per annum; thereafter at the rate in effect for Base Rate
Advances plus an additional two percent (2.0%) per annum; and
(ii) in the case of overdue principal and interest with respect
to all other Loans outstanding as Base Rate Advances, and all other
Obligations hereunder (other than Loans), at a rate equal to the applicable
Base Rate plus an additional two percent (2.0%) per annum; provided that no
Loan shall bear interest after maturity, whether by non-payment at
scheduled due date, acceleration, notice of prepayment or otherwise at a
rate per annum less than two percent (2.0%) per annum in excess of the rate
of interest applicable thereto at maturity.
(c) Interest on each Loan shall accrue from and including
the date of such Loan to but excluding the date of any repayment thereof;
provided that, if a Loan is repaid on the same day made, one day's interest
shall be paid on such Loan. Interest on all outstanding Base Rate Advances
shall be payable quarterly in arrears on the last calendar day of each
calendar quarter of Borrower in each year. Interest on all outstanding
Eurodollar Advances shall be payable on the last day of each Interest
Period applicable thereto and on the Final Maturity Date. Interest on all
Loans shall be payable on any conversion of any Advances comprising such
Loans into Advances of another Type, prepayment (on the amount prepaid), at
maturity (whether by acceleration, notice of prepayment or otherwise) and,
after maturity, on demand.
(d) SunTrust, upon determining LIBOR for any Interest
Period, shall promptly notify by telephone (confirmed in writing) or in
writing Borrower and the other Lenders. Any such determination shall,
absent manifest error, be final, conclusive and binding for all purposes.
Section 2.07. Interest Periods. In connection with the making
or continuation of, or conversion into, each Borrowing of Loans comprised
of Eurodollar Advances, Borrower shall select an interest period (each an
"Interest Period") to be applicable to such Eurodollar Advances, which
Interest Period shall be either a 1 or 2 month period; provided that:
(i) The initial Interest Period for any Borrowing of Eurodollar
Advances shall commence on the date of such Borrowing (including the date
of any conversion from a Borrowing consisting of Advances of another Type)
and each Interest Period occurring thereafter in respect of such Borrowing
shall commence on the day on which the next preceding Interest Period
expires;
(ii) If any Interest Period would otherwise expire on a day which
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
Eurodollar Advances would otherwise expire on a day that 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; and
(iii) Any Interest Period in respect of Eurodollar Advances which
begins on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period shall, subject to part
(iv) below, expire on the last Business Day of such calendar month.
Section 2.08. Voluntary Prepayments of Borrowings.
(a) Borrower may, at its option, prepay Borrowings
consisting of Base Rate Advances at any time in whole, or from time to time
in part, in amounts aggregating $250,000 or any greater integral multiple
of $10,000, by paying the principal amount to be prepaid together with
interest accrued and unpaid thereon to the date of prepayment. Those
Borrowings consisting of Eurodollar Advances may be prepaid, at Borrower's
option, in whole, or from time to time in part, in the respective minimum
amounts and multiples set forth in Section 2.01(b) by paying the principal
amount to be prepaid, together with interest accrued and unpaid thereon to
the date of prepayment, and all compensation payments pursuant to
Section 2.14 if such prepayment is made on a date other than the last day
of an Interest Period applicable thereto. Each such optional prepayment
shall be applied in accordance with Section 2.09(c) below.
(b) Borrower shall give written notice (or telephonic
notice confirmed in writing) to the Lenders of any intended prepayment of
the Loans (i) not less than one Business Day prior to any prepayment of
Base Rate Advances and (ii) not less than three Business Days prior to any
prepayment of Eurodollar Advances. Such notice, once given, shall be
irrevocable.
(c) Borrower, when providing notice of prepayment pursuant
to Section 2.09(b) may designate the Types of Advances and the specific
Borrowing or Borrowings which are to be prepaid, provided that (i) if any
prepayment of Eurodollar Advances made pursuant to a single Borrowing of
the Loans shall reduce the outstanding Advances made pursuant to such
Borrowing to an amount less than $1,000,000, such Borrowing shall
immediately be converted into Base Rate Advances; and (ii) each prepayment
made pursuant to a single Borrowing shall be applied pro rata among the
Loans comprising such Borrowing. All voluntary prepayments shall be
applied to the payment of any unpaid interest before application to
principal.
Section 2.09. Payments, etc.
(a) Except as otherwise specifically provided herein, all
payments under this Agreement and the other Credit Documents shall be made
without defense, set-off or counterclaim to the respective Lenders, not
later than 1:00 P.M. (Atlanta, Georgia time) on the date when due and shall
be made in Dollars in immediately available funds at the respective Payment
Office.
(b) All such payments shall be made free and clear of and
without deduction or withholding for any Taxes in respect of this
Agreement, the Notes or other Credit Documents, or any payments of
principal, interest, fees or other amounts payable hereunder or thereunder
(but excluding any Taxes imposed on the overall net income of the Lenders
pursuant to the laws of the jurisdiction in which the principal executive
office or appropriate Lending Office of such Lender is located). If any
Taxes are so levied or imposed, Borrower agrees (A) to pay the full amount
of such Taxes, and such additional amounts as may be necessary so that
every net payment of all amounts due hereunder and under the Notes and
other Credit Documents, after withholding or deduction for or on account of
any such Taxes (including additional sums payable under this Section 2.09),
will not be less than the full amount provided for herein had no such
deduction or withholding been required, (B) to make such withholding or
deduction and (C) to pay the full amount deducted to the relevant authority
in accordance with applicable law. Borrower will furnish to each Lender,
within 30 days after the date the payment of any Taxes is due pursuant to
applicable law, certified copies of tax receipts evidencing such payment by
Borrower. Borrower will indemnify and hold harmless each Lender and
reimburse each Lender upon written request for the amount of any Taxes so
levied or imposed and paid by Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or illegally asserted. A
certificate as to the amount of such payment by such Lender, absent
manifest error, shall be final, conclusive and binding for all purposes.
(c) Each Lender that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof
(including the District of Columbia) agrees to furnish to Borrower, prior
to the time it becomes a Lender hereunder, two copies of either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form
1001 or any successor forms thereto (wherein such Lender claims entitlement
to complete exemption from or reduced rate of U.S. Federal withholding tax
on interest paid by Borrower hereunder) and to provide to Borrower a new
Form 4224 or Form 1001 or any successor forms thereto if any previously
delivered form is found to be incomplete or incorrect in any material
respect or upon the obsolescence of any previously delivered form;
provided, however, that no Lender shall be required to furnish a form under
this paragraph (c) if it is not entitled to claim an exemption from or a
reduced rate of withholding under applicable law. A Lender that is not
entitled to claim an exemption from or a reduced rate of withholding under
applicable law, promptly upon written request of Borrower, shall so inform
Borrower in writing.
(d) Subject to Section 2.07(a), whenever any payment to be
made hereunder or under any Note shall be stated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the applicable rate during such
extension.
(e) All computations of interest and fees shall be made on
the basis of a year of 360 days for the actual number of days (including
the first day but excluding the last day) occurring in the period for which
such interest or fees are payable (to the extent computed on the basis of
days elapsed), except that interest on Base Rate Advances shall be computed
on the basis of a year of 360 days for the actual number of days. Interest
on Base Rate Advances shall be calculated based on the Base Rate from and
including the date of such Loan to but excluding the date of the repayment
or conversion thereof. Interest on Eurodollar Advances shall be calculated
as to each Interest Period from and including the first day thereof to but
excluding the last day thereof. Each determination by SunTrust of an
interest rate hereunder shall be made in good faith and, except for
manifest error, shall be final, conclusive and binding for all purposes.
Section 2.10. Interest Rate Not Ascertainable, etc. In the
event that SunTrust, in the case of LIBOR, shall have determined (which
determination shall be made in good faith and, absent manifest error, shall
be final, conclusive and binding upon all parties) that on any date for
determining LIBOR for any Interest Period, by reason of any changes arising
after the date of this Agreement affecting the London interbank market or
SunTrust'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 LIBO Rate then, and in any such event, SunTrust
shall forthwith give notice (by telephone confirmed in writing) to Borrower
and to the other Lenders of such determination and a summary of the basis
for such determination. Until SunTrust notifies Borrower that the
circumstances giving rise to the suspension described herein no longer
exist, the obligations of the Lenders to make or permit portions of the
Loans to remain outstanding past the last day of the then current Interest
Periods as Eurodollar Advances shall be suspended, and such affected
Advances shall bear the same interest as Base Rate Advances.
Section 2.11. Illegality.
(a) In the event that any Lender shall have determined
(which determination shall be made in good faith and, absent manifest
error, shall be final, conclusive and binding upon all parties) at any time
that the making or continuance of any Eurodollar Advance has become
unlawful by compliance by such Lender in good faith with any applicable
law, governmental rule, regulation, guideline or order (whether or not
having the force of law and whether or not failure to comply therewith
would be unlawful), then, in any such event, the Lender shall give prompt
notice (by telephone confirmed in writing) to Borrower and the other
Lenders of such determination and a summary of the basis for such
determination.
(b) Upon the giving of the notice to Borrower referred to
in subsection (a) above, (i) Borrower's right to request and such Lender's
obligation to make Eurodollar Advances shall be immediately suspended, and
such Lender shall make an Advance as part of the requested Borrowing of
Eurodollar Advances as a Base Rate Advance, which Base Rate Advance shall,
for all other purposes, be considered part of such Borrowing, and (ii) if
the affected Eurodollar Advance or Advances are then outstanding, Borrower
shall immediately, or if permitted by applicable law, no later than the
date permitted thereby, upon at least one Business Day's written notice to
the affected Lender, convert each such Advance into an Advance or Advances
of a different Type with an Interest Period ending on the date on which the
Interest Period applicable to the affected Eurodollar Advances expires,
provided that if more than one Lender is affected at any time, then all
affected Lenders must be treated the same pursuant to this Section 2.11(b).
Section 2.12. Increased Costs.
(a) If, by reason of (x) after the date hereof, the
introduction of or any change (including, without limitation, any change by
way of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation, or (y) 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):
(i) any Lender (or its applicable Lending Office) shall be
subject to any tax, duty or other charge with respect to its Eurodollar
Advances or its obligation to make Eurodollar Advances, or the basis of
taxation of payments to any Lender of the principal of or interest on its
Eurodollar Advances or its obligation to make Eurodollar Advances shall
have changed (except for changes in the tax on the overall net income of
such Lender or its applicable Lending Office imposed by the jurisdiction in
which such Lender's principal executive office or applicable Lending Office
is located); or
(ii) any reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender's applicable Lending Office shall be
imposed or deemed applicable or any other condition affecting its
Eurodollar Advances or its obligation to make Eurodollar Advances shall be
imposed on any Lender or its applicable Lending Office 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 Eurodollar
Advances (except to the extent already included in the determination of the
applicable Adjusted LIBO Rate for Eurodollar Advances), or there shall be a
reduction in the amount received or receivable by such Lender or its
applicable Lending Office, then Borrower shall from time to time (subject,
in the case of certain Taxes, to the applicable provisions of Section
2.09(b)), upon written notice from and demand by such Lender on Borrower,
pay to such Lender within five Business Days after the date of such notice
and demand, additional amounts sufficient to indemnify such Lender against
such increased cost. A certificate as to the amount of such increased
cost, submitted to Borrower by such Lender in good faith and accompanied by
a statement prepared by such Lender describing in reasonable detail the
basis for and calculation of such increased cost, shall, except for
manifest error, be final, conclusive and binding for all purposes.
(b) If any Lender shall advise the Borrower and the other
Lenders that at any time, because of the circumstances described in clauses
(x) or (y) in Section 2.12(a) or any other circumstances beyond such
Lender's reasonable control arising after the date of this Agreement
affecting such Lender or the London interbank market or the United States
secondary certificate of deposit market or such Lender's position in such
markets, LIBOR, as determined by SunTrust, will not adequately and fairly
reflect the cost to such Lender of funding its Eurodollar Advances, then,
and in any such event:
(i) Borrower's right to request and such Lender's obligation to
make or permit portions of the Loans to remain outstanding past the last
day of the then current Interest Periods as Eurodollar Advances shall be
immediately suspended; and
(ii) such Lender shall make a Loan as part of the requested
Borrowing of Eurodollar Advances, as the case may be, as a Base Rate
Advance, which such Base Rate Advance shall, for all other purposes, be
considered part of such Borrowing.
Section 2.13. Lending Offices.
(a) Each Lender agrees that, if requested by Borrower, it
will use reasonable efforts (subject to overall policy considerations of
such Lender) to designate an alternate Lending Office with respect to any
of its Eurodollar Advances affected by the matters or circumstances
described in Sections 2.09(b), 2.10, 2.11 or 2.12 to reduce the liability
of Borrower or avoid the results provided thereunder, so long as such
designation is not disadvantageous to such Lender as determined by such
Lender, which determination if made in good faith, shall be conclusive and
binding on all parties hereto. Nothing in this Section 2.13 shall affect
or postpone any of the obligations of Borrower or any right of any Lender
provided hereunder.
(b) If any Lender that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof
(including the District of Columbia) issues a public announcement with
respect to the closing of its lending offices in the United States such
that any withholdings or deductions and additional payments with respect to
Taxes may be required to be made by Borrower thereafter pursuant to Section
2.09(b), such Lender shall use reasonable efforts to furnish Borrower
notice thereof as soon as practicable thereafter; provided, however, that
no delay or failure to furnish such notice shall in any event release or
discharge Borrower from its obligations to such Lender pursuant to Section
2.09(b) or otherwise result in any liability of such Lender.
Section 2.14. Funding Losses. Borrower shall compensate each
Lender, upon its written request to Borrower (which request shall set forth
the basis for requesting such amounts in reasonable detail and which
request shall be made in good faith and, absent manifest error, shall be
final, conclusive and binding upon all of the parties hereto), for all
losses, expenses and liabilities (including, without limitation, any
interest paid by such Lender to lenders of funds borrowed by it to make or
carry its Eurodollar Advances, in either case to the extent not recovered
by such Lender in connection with the re-employment of such funds and
including loss of anticipated profits), which the Lender may sustain: (i)
if for any reason (other than a default by such Lender) a borrowing of, or
conversion to or continuation of, Eurodollar Advances to Borrower does not
occur on the date specified therefor in a Notice of Borrowing or Notice of
Continuation/Conversion (whether or not withdrawn), (ii) if any repayment
(including mandatory prepayments and any conversions pursuant to Section
2.11(b)) of any Eurodollar Advances to Borrower occurs on a date which is
not the last day of an Interest Period applicable thereto, or (iii) if, for
any reason, Borrower defaults in its obligation to repay its Eurodollar
Advances when required by the terms of this Agreement.
Section 2.15. Assumptions Concerning Funding of Eurodollar
Advances. Calculation of all amounts payable to a Lender under this
Article II shall be made as though that Lender had actually funded its
relevant Eurodollar Advances through the purchase of deposits in the
relevant market bearing interest at the rate applicable to such Eurodollar
Advances in an amount equal to the amount of the Eurodollar Advances and
having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar Advances from an offshore office of that
Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar
Advances in any manner it sees fit and the foregoing assumption shall be
used only for calculation of amounts payable under this Article II.
Section 2.16. Apportionment of Payments. Aggregate principal
and interest payments in respect of Loans shall be apportioned among all
outstanding Commitments and Loans to which such payments relate,
proportionately to the Lenders' respective pro rata portions of such
Commitments and outstanding Loans.
Section 2.17. Sharing of Payments, Etc. If any Lender shall
obtain any payment or reduction (including, without limitation, any amounts
received as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code) of the Obligations (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its pro rata portion of payments or reductions on account of such
obligations obtained by all the Lenders, such Lender shall forthwith (i)
notify each of the other Lenders 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, ratably with each
of them, 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 unless the Lender obligated to return such funds is
required to pay interest on such funds. Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section
2.17 may, to the fullest extent permitted by law, exercise all its rights
of payment (including the right of 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.
Section 2.18. Capital Adequacy. Without limiting any other
provision of this Agreement, in the event that any Lender shall have
determined that any law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order regarding capital adequacy not currently in
effect or fully applicable as of the Closing Date, or any change therein or
in the interpretation or application thereof after the Closing Date, or
compliance by such Lender with any request or directive regarding capital
adequacy not currently in effect or fully applicable as of the Closing Date
(whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) from a central bank or governmental
authority or body having jurisdiction, does or shall have the effect of
reducing the rate of return on such Lender's capital as a consequence of
its obligations hereunder to a level below that which such Lender could
have achieved but for such law, treaty, rule, regulation, guideline or
order, or such change or compliance (taking into consideration such
Lender's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then within ten (10) Business Days after
written notice and demand by such Lender, Borrower shall from time to time
pay to such Lender additional amounts sufficient to compensate such Lender
for such reduction (but, in the case of outstanding Base Rate Advances,
without duplication of any amounts already recovered by such Lender by rea
son of an adjustment in the applicable Base Rate). Each certificate as to
the amount payable under this Section 2.18 (which certificate shall set
forth the basis for requesting such amounts in reasonable detail),
submitted to Borrower by any Lender in good faith, shall, absent manifest
error, be final, conclusive and binding for all purposes.
Section 2.19. Benefits to Guarantors. In consideration for the
execution and delivery by the Guarantors of their Guaranty Agreement,
Borrower agrees to make the benefit of extensions of credit hereunder
available to the Guarantors.
Section 2.20. Limitation on Certain Payment Obligations.
(a) Each Lender shall make written demand on Borrower for
indemnification or compensation pursuant to Section 2.09 no later than 90
days after the earlier of (i) the date on which such Lender makes payment
of such Taxes, and (ii) the date on which the relevant taxing authority or
other governmental authority makes written demand upon such Lender for
payment of such Taxes.
(b) Each Lender shall make written demand on Borrower for
indemnification or compensation pursuant to Sections 2.14 and 2.15 no later
than 90 days after the event giving rise to the claim for indemnification
or compensation occurs.
(c) Each Lender shall make written demand on Borrower for
indemnification or compensation pursuant to Sections 2.12 and 2.18 no later
than 90 days after such Lender receives actual notice or obtains actual
knowledge of the promulgation of a law, rule, order or interpretation or
occurrence of another event giving rise to a claim pursuant to such
sections.
(d) In the event that the Lenders fail to give Borrower
notice within the time limitations prescribed in (a) or (b) above, Borrower
shall not have any obligation to pay such claim for compensation or indemni
fication. In the event that the Lender fail to give Borrower notice within
the time limitation prescribed in (c) above, Borrower shall not have any
obligation to pay any amount with respect to claims accruing prior to the
ninetieth day preceding such written demand.
ARTICLE III
CONDITIONS TO BORROWINGS
The obligations of each Lender to make Advances to Borrower
hereunder is subject to the satisfaction of the following conditions:
Section 3.01. Conditions Precedent to Commitments. At the time
of the making of the Commitments hereunder on the Closing Date, all
obligations of Borrower hereunder incurred prior to the Closing Date
(including, without limitation, Borrower's obligations to reimburse the
reasonable fees and expenses of counsel to the Lenders), shall have been
paid in full, and the Lenders shall have received the following, in form
and substance reasonably satisfactory in all respects to the Lenders:
(a) the duly executed counterparts of this Agreement;
(b) the duly completed Notes evidencing the Commitments;
(c) the Guaranty Agreements;
(d) certificate of Borrower in substantially the form of Exhibit
D attached hereto and appropriately completed;
(e) certificates of the Secretary or Assistant Secretary of each
of the Credit Parties (I) attaching and certifying copies of the
resolutions of the boards of directors of the Credit Parties, authorizing
as applicable the execution, delivery and performance of the Credit
Documents, (ii) certifying (A) the name, title and true signature of each
officer of such entities executing the Credit Documents, and (B) that the
certificate or articles of incorporation and bylaws or comparable governing
documents of each Credit Party have not been amended or modified since the
version of such documents certified to the lenders under the Amended and
Restated Credit Agreement;
(f) certificates of good standing or existence, as may be avail
able from the Secretary of State of the jurisdiction of incorporation or
organization of such Credit Party;
(g) copies of all documents and instruments, including all
consents, authorizations and filings, required or advisable under any
Requirement of Law or by any material contractual obligation of the Credit
Parties, in connection with the execution, delivery, performance, validity
and enforceability of the Credit Documents and the other documents to be ex
ecuted and delivered hereunder, and such consents, authorizations, filings
and orders shall be in full force and effect and all applicable waiting
periods shall have expired;
(h) the favorable opinion of counsel to the Credit Parties, in
form and substance reasonably satisfactory to the Lenders.
In addition to the foregoing, the following conditions shall have been
satisfied or shall exist, all to the satisfaction of the Lenders, as of the
time the initial Loans are made hereunder:
(x) the Loans to be made on the Closing Date and the use of
proceeds thereof shall not contravene, violate or conflict with, or
involve any Lender in a violation of, any law, rule, injunction, or
regulation, or determination of any court of law or other governmental
authority; and
(y) all corporate proceedings and all other legal matters in
connection with the authorization, legality, validity and
enforceability of the Credit Documents shall be reasonably
satisfactory in form and substance to the Lenders.
Section 3.02. Conditions to All Loans. At the time of the
making of all Loans (before as well as after giving effect to such Loans
and to the proposed use of the proceeds thereof), the following conditions
shall have been satisfied or shall exist:
(a) there shall exist no Default or Event of Default;
(b) all representations and warranties by Borrower contained
herein shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and
as of the date of such Loans;
(c) since the date of the most recent financial statements of
the Consolidated Companies described in Section 7.07 of the Amended and
Restated Credit Agreement, there shall have been no change which has had or
could reasonably be expected to have a Materially Adverse Effect.
(d) there shall be no action or proceeding instituted or pending
before any court or other governmental authority or, to the knowledge of
Borrower, threatened (i) which reasonably could be expected to have a
Materially Adverse Effect, or (ii) seeking to prohibit or restrict one or
more Credit Party's ownership or operation of any portion of its business
or assets, or to compel one or more Credit Party to dispose of or hold
separate all or any portion of its businesses or assets, where such portion
or portions of such business(es) or assets, as the case may be, constitute
a material portion of the total businesses or assets of the Consolidated
Companies;
(e) the Loans to be made and the use of proceeds thereof shall
not contravene, violate or conflict with, or involve any Lender in a
violation of, any law, rule, injunction, or regulation, or determination of
any court of law or other governmental authority applicable to Borrower;
and
(f) the Lenders shall have received such other documents or
legal opinions as any Lender may reasonably request, all in form and
substance reasonably satisfactory to the Lenders.
Each request for a Borrowing and the acceptance by Borrower of
the proceeds thereof shall constitute a representation and warranty by
Borrower, as of the date of the Loans comprising such Borrowing, that the
applicable conditions specified in Sections 3.01 and 3.02 have been
satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that all of the
representations and warranties set forth in Article 6 of the Amended and
Restated Credit Agreement, which representations and warranties are, for
the benefit of the Lenders, incorporated by reference herein (including the
definition of terms used therein which appear in other provisions of the
Amended and Restated Credit Agreement, and the schedules attached thereto)
are true and correct on and as of the date hereof; provided that (i) all
references to the "Agent" and "Lenders" shall be deemed to mean the
Lenders, (ii) all references to "this Agreement" or the "Credit Documents"
shall be deemed to refer to this Agreement and the Credit Documents and the
reference to "Loans" shall be deemed to refer to the Loans, and (iii) the
words "hereunder" and "hereby" and the like shall be deemed to refer to
this Agreement. In addition, the Borrower expressly represents and
warrants that there has been no material adverse change in the business,
condition or operations (financial or otherwise), or prospects of the
Borrower and its Subsidiaries since the date of the last audited financial
statements delivered by the Borrower to the lenders pursuant to the Amended
and Restated Credit Agreement.
ARTICLE V
COVENANTS
Section 5.01. Covenants in Amended and Restated Credit
Agreement. The Borrower covenants and agrees that, so long as any Loans or
any other Obligations shall remain unpaid or the Commitments shall be
outstanding, it will comply with each of the covenants set forth in
Articles 7 and 8 of the Amended and Restated Credit Agreement, which
covenants are, for the benefit of the Lenders, incorporated by reference
herein (including the definition of the terms used therein which appear in
other provisions of the Amended and Restated Credit Agreement and the
schedules thereto), irrespective of whether the Amended and Restated Credit
Agreement is terminated after the date hereof; provided that (i) all
references to the "Agent" and the "Lenders" shall be deemed to mean the
Lenders, (ii) all references to "this Agreement" or the "Credit Documents"
shall be deemed to refer to this Agreement and the Credit Documents and the
reference to "Loans" shall be deemed to refer to the Loans, (iii) the words
"hereunder" and "hereby" and the like shall be deemed to refer to this
Agreement. In the event of any amendment, consent, modification or waiver
of the Amended and Restated Credit Agreement occurring after the date
hereof, such amendment, consent, modification or waiver of the Amended and
Restated Credit Agreement shall automatically be effective hereunder. In
the event of the termination of the Amended and Restated Credit Agreement
or in the event that either Lender is no longer a lender thereunder, the
Borrower agrees to negotiate in good faith to enter into appropriate
amendments and modifications to this Agreement to set forth the covenants
governing the Borrower and its Subsidiaries herein but unless and until
such amendments or modifications are in full force and effect, the terms
and provisions of the Amended and Restated Credit Agreement incorporated
herein by reference shall continue in full force and effect notwithstanding
the termination or amendment thereof. The failure of the Borrower to
comply with this Article VI shall constitute an Event of Default pursuant
to this Agreement.
Section 5.02. Additional Guarantors. Borrower shall cause each
new Material Subsidiary reported to the Lenders pursuant to Section 7.07(l)
of the Amended and Restated Credit Agreement, incorporated into this
Agreement pursuant to Section 5.01 above, to execute and deliver to the
Lenders, simultaneously with the report given pursuant to Section 7.07(l)
of the Amended and Restated Credit Agreement, a Guaranty Agreement,
together with related documents of the kind described in Section 3.01, as
appropriate, all in form and substance satisfactory to the Lenders.
ARTICLE VI
EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following specified events (each an "Event of Default"):
Section 6.01. Payments. Borrower shall fail to make promptly
when due (including, without limitation, by mandatory prepayment) any
principal payment with respect to the Loans, or Borrower shall fail to make
within five (5) Business Days after the due date thereof any payment of
interest, fee or other amount payable hereunder;
Section 6.02. Section Covenants. Borrower shall fail to observe or
perform any covenant or agreement contained in this Agreement, other than
those referred to in Sections 6.01, and, if capable of being remedied, such
failure shall remain unremedied for 30 days after the earlier of (i)
Borrower's obtaining knowledge thereof, or (ii) written notice thereof
shall have been given to Borrower by any Lender;
Section 6.03. Representations. Any representation or warranty
made or deemed to be made by Borrower or any other Credit Party or by any
of its officers under this Agreement or any other Credit Document
(including the Schedules attached thereto), or any certificate or other
document submitted to the Lenders by any such Person pursuant to the terms
of this Agreement or any other Credit Document, shall be incorrect in any
material respect when made or deemed to be made or submitted;
Section 6.04. Defaults Under Amended and Restated Credit
Agreement. Any Event of Default (as defined in the Amended and Restated
Credit Agreement) has occurred and is continuing;
Section 6.05. Bankruptcy. Borrower or any other Consolidated
Company shall commence a voluntary case concerning itself under the
Bankruptcy Code or an involuntary case for bankruptcy is commenced against
any Consolidated Company and the petition is not controverted within 10
days, or is not dismissed within 60 days, after commencement of the case;
or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or any substantial part of the property of any
Consolidated Company; or any Consolidated Company commences proceedings of
its own bankruptcy or to be granted a suspension of payments or any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction, whether now or hereafter in effect, relating to any
Consolidated Company or there is commenced against any Consolidated Company
any such proceeding which remains undismissed for a period of 60 days; or
any Consolidated Company is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered;
or any Consolidated Company suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or any Consolidated
Company makes a general assignment for the benefit of creditors; or any
Consolidated Company shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or
any Consolidated Company shall call a meeting of its creditors with a view
to arranging a composition or adjustment of its debts; or any Consolidated
Company shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate
action is taken by any Consolidated Company for the purpose of effecting
any of the foregoing;
Section 6.06. Default Under Other Credit Documents. There shall
exist or occur any "Event of Default" as provided under the terms of any
other Credit Document, or any Credit Document ceases to be in full force
and effect or the validity or enforceability thereof is disaffirmed by or
on behalf of Borrower or any other Credit Party, or at any time it is or
becomes unlawful for Borrower or any other Credit Party to perform or
comply with its obligations under any Credit Document, or the obligations
of Borrower or any other Credit Party under any Credit Document are not or
cease to be legal, valid and binding on Borrower or any such Credit Party;
then, and in any such event, and at any time thereafter if any Event of
Default shall then be continuing, either Lender shall, by written notice to
Borrower, take any or all of the following actions, without prejudice to
the rights of any other Lender or the holder of any Note to enforce its
claims against Borrower or any other Credit Party: (i) declare its
Commitments terminated; and (ii) declare the principal of and any accrued
interest on the Loans owing to such Lender, and all other Obligations owing
to such Lender hereunder, to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower; provided, that, if an
Event of Default specified in Section 6.05 shall occur, all Commitments
shall automatically be terminated and the principal of and any accrued
interest on the Loans and all other Obligations shall automatically and
immediately become due and payable, in each case without the giving of any
notice.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, telecopy or similar teletransmission or writing) and shall be
given to such party at its address or applicable teletransmission number
set forth on the signature pages hereof, or such other address or
applicable teletransmission number as such party may hereafter specify by
notice to the Borrower. Each such notice, request or other communication
shall be effective (i) if given by telex, when such telex is transmitted to
the telex number specified in this Section and the appropriate answerback
is received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as
aforesaid, (iii) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified in this Section and the appropriate
confirmation is received, or (iv) if given by any other means (including,
without limitation, by air courier), when delivered or received at the
address specified in this Section; provided that notices to the Lenders
shall not be effective until received.
Section 7.02. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the other Credit Documents, nor consent to
any departure by any Credit Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Lenders,
and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 7.03. No Waiver; Remedies Cumulative. No failure or
delay on the part of any Lender or any holder of a Note in exercising any
right or remedy hereunder or under any other Credit Document, and no course
of dealing between any Credit Party and any Lender or the holder of any
Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right or remedy hereunder or under any other Credit Docu
ment preclude any other or further exercise thereof or the exercise of any
other right or remedy hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which any Lender or the holder of any Note would otherwise have.
No notice to or demand on any Credit Party not required hereunder or under
any other Credit Document in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lenders or the holder of any Note
to any other or further action in any circumstances without notice or
demand.
Section 7.04. Payment of Expenses, Etc. Borrower shall:
(i) whether or not the transactions hereby contemplated are
consummated, pay all reasonable, out-of-pocket costs and expenses of the
Lenders in the administration (both before and after the execution hereof
and including reasonable expenses actually incurred relating to advice of
counsel as to the rights and duties of the Lenders with respect thereto)
of, and in connection with the preparation, execution and delivery of,
preservation of rights under, enforcement of, and, after a Default or Event
of Default, refinancing, renegotiation or restructuring of, this Agreement
and the other Credit Documents and the documents and instruments referred
to therein, and any amendment, waiver or consent relating thereto
(including, without limitation, the reasonable fees actually incurred and
disbursements of counsel for the Lenders), and in the case of enforcement
of this Agreement or any Credit Document after an Event of Default, all
such reasonable, out-of-pocket costs and expenses (including, without
limitation, the reasonable fees actually incurred and disbursements of
counsel), for any of the Lenders;
(ii) subject, in the case of certain Taxes, to the applicable
provisions of Section 2.09(b), pay and hold each of the Lenders harmless
from and against any and all present and future stamp, documentary, and
other similar Taxes with respect to this Agreement, the Notes and any other
Credit Documents, any collateral described therein, or any payments due
thereunder, and save each Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay
such Taxes; and
(iii) indemnify each Lender, and their respective officers,
directors, employees, representatives and agents from, and hold each of
them harmless against, any and all costs, losses, liabilities, claims,
damages or expenses incurred by any of them (whether or not any of them is
designated a party thereto) (an "Indemnitee") arising out of or by reason
of any investigation, litigation or other proceeding related to any actual
or proposed use of the proceeds of any of the Loans or any Credit Party's
entering into and performing of the Agreement, the Notes, or the other
Credit Documents, including, without limitation, the reasonable fees
actually incurred and disbursements of counsel (including foreign counsel)
incurred in connection with any such investigation, litigation or other
proceeding; provided, however, Borrower shall not be obligated to indemnify
any Indemnitee for any of the foregoing arising out of such Indemnitee's
gross negligence or willful misconduct;
(iv) without limiting the indemnities set forth in subsection
(iii) above, indemnify each Indemnitee for any and all expenses and costs
(including without limitation, remedial, removal, response, abatement,
cleanup, investigative, closure and monitoring costs), losses, claims
(including claims for contribution or indemnity and including the cost of
investigating or defending any claim and whether or not such claim is
ultimately defeated, and whether such claim arose before, during or after
any Credit Party's ownership, operation, possession or control of its
business, property or facilities or before, on or after the date hereof,
and including also any amounts paid incidental to any compromise or
settlement by the Indemnitee or Indemnitees to the holders of any such
claim), lawsuits, liabilities, obligations, actions, judgments, suits,
disbursements, encumbrances, liens, damages (including without limitation
damages for contamination or destruction of natural resources), penalties
and fines of any kind or nature whatsoever (including without limitation in
all cases the reasonable fees actually incurred, other charges and disburse
ments of counsel in connection therewith) incurred, suffered or sustained
by that Indemnitee based upon, arising under or relating to Environmental
Laws based on, arising out of or relating to in whole or in part, the
existence or exercise of any rights or remedies by any Indemnitee under
this Agreement, any other Credit Document or any related documents (but
excluding those incurred, suffered or sustained by any Indemnitee as a
result of any action taken by or on behalf of the Lenders with respect to
any Subsidiary of Borrower (or the assets thereof) owned or controlled by
the Lenders.
If and to the extent that the obligations of Borrower under this Section
7.04 are unenforceable for any reason, Borrower hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law.
Section 7.05. Right of Setoff. In addition to and not in
limitation of all rights of offset that any Lender or other holder of a
Note may have under applicable law, each Lender or other holder of a Note
shall, upon the occurrence of any Event of Default and whether or not such
Lender or such holder has made any demand or any Credit Party's obligations
are matured, have the right to appropriate and apply to the payment of any
Credit Party's obligations hereunder and under the other Credit Documents,
all deposits of any Credit Party (general or special, time or demand,
provisional or final) then or thereafter held by and other indebtedness or
property then or thereafter owing by such Lender or other holder to any
Credit Party, whether or not related to this Agreement or any transaction
hereunder. Each Lender shall promptly notify Borrower of any offset
hereunder.
Section 7.06. Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, provided that Borrower may not assign or transfer any
of its interest hereunder without the prior written consent of the Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or
for the account of, any of its branch offices or the office of an Affiliate
of such Lender.
(c) Each Lender may assign all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of any of its Commitments and the Loans at the time owing to it and
the Notes held by it) to any Eligible Assignee; provided, however, that (i)
the Borrower must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld or delayed) unless such
assignment is an Affiliate of the assigning Lender, and (ii) the amount of
the Commitments, in the case of the Commitments, or Loans, in the case of
assignment of Loans, of the assigning Lender subject to each assignment
(determined immediately prior to such assignment) shall not be less than
$5,000,000. From and after the effective date of such assignment, the
assignee thereunder shall be a party hereto and to the extent of the inter
est assigned shall have the rights and obligations of a Lender under this
Agreement. Notwithstanding the foregoing, the assigning Lender must retain
after the consummation of such Assignment and Acceptance, a minimum
aggregate amount of Commitments or Loans, as the case may be, of
$5,000,000; provided, however, no such minimum amount shall be required
with respect to any such assignment made at any time there exists an Event
of Default hereunder. Within five (5) Business Days after receipt of the
notice of an assignment, Borrower, at its own expense, shall execute and de
liver to the assignee and the assignor, in exchange for the surrendered
Note or Notes of the assignor, a new Note or Notes to the order of such
assignee in a principal amount equal to the applicable Commitments or Loans
assumed by it and new Note or Notes to the assigning Lender in the amount
of its retained Commitment or Commitments or amount of its retained Loans.
Such new Note or Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Note or Notes, shall be
dated the date of the surrendered Note or Notes which they replace, and
shall otherwise be in substantially the form attached hereto.
(d) Each Lender may, without the consent of Borrower, sell
participations to one or more banks or other entities in all or a portion
of its rights and obligations under this Agreement (including all or a
portion of its Commitments in the Loans owing to it and the Notes held by
it), provided, however, that (i) no Lender may sell a participation in its
aggregate Commitments or Loans (after giving effect to any permitted
assignment hereof) in an amount in excess of fifty percent (50%) of such
aggregate Commitments or Loans, provided, however, sales of participations
to an Affiliate of such Lender shall not be included in such calculation;
provided, however, no such maximum amount shall be applicable to any such
participation sold at any time there exists an Event of Default hereunder,
(ii) such Lender's obligations under this Agreement shall remain unchanged,
(iii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iv) the participating
bank or other entity shall not be entitled to the benefit (except through
its selling Lender) of the cost protection provisions contained in Article
III of this Agreement, and (v) Borrower and other Lenders shall continue to
deal solely and directly with each Lender in connection with such Lender's
rights and obligations under this Agreement and the other Credit Documents,
and such Lender shall retain the sole right to enforce the obligations of
Borrower relating to the Loans and to approve any amendment, modification
or waiver of any provisions of this Agreement. Any Lender selling a
participation hereunder shall provide prompt written notice to Borrower of
the name of such participant.
(e) Any Lender or participant may, in connection with the
assignment or participation or proposed assignment or participation,
pursuant to this Section, disclose to the assignee or participant or
proposed assignee or participant any information relating to Borrower or
the other Consolidated Companies furnished to such Lender by or on behalf
of Borrower or any other Consolidated Company. With respect to any
disclosure of confidential, non-public, proprietary information, such
proposed assignee or participant shall agree to use the information only
for the purpose of making any necessary credit judgments with respect to
this credit facility and not to use the information in any manner
prohibited by any law, including without limitation, the securities laws of
the United States. The proposed participant or assignee shall agree not to
disclose any of such information except (i) to directors, employees,
auditors or counsel to whom it is necessary to show such information, each
of whom shall be informed of the confidential nature of the information,
(ii) in any statement or testimony pursuant to a subpoena or order by any
court, governmental body or other agency asserting jurisdiction over such
entity, or as otherwise required by law (provided prior notice is given to
Borrower unless otherwise prohibited by the subpoena, order or law), and
(iii) upon the request or demand of any regulatory agency or authority with
proper jurisdiction. The proposed participant or assignee shall further
agree to return all documents or other written material and copies thereof
received from any Lender or Borrower relating to such confidential
information unless otherwise properly disposed of by such entity.
(f) Any Lender may at any time assign all or any portion of
its rights in this Agreement and the Notes issued to it to a Federal
Reserve Bank; provided that no such assignment shall release the Lender
from any of its obligations hereunder.
(g) If (i) any Taxes referred to in Section 2.09(b) have
been levied or imposed so as to require withholdings or deductions by
Borrower and payment by Borrower of additional amounts to any Lender as a
result thereof, (ii) any Lender shall make demand for payment of any
material additional amounts as compensation for increased costs pursuant to
Section 2.12 or for its reduced rate of return pursuant to Section 2.18, or
(iii) any Lender shall decline to consent to a modification or waiver of
the terms of this Agreement or the other Credit Documents requested by
Borrower, then and in such event, upon request from Borrower delivered to
such Lender, such Lender shall assign, in accordance with the provisions of
Section 7.06(c), all of its rights and obligations under this Agreement and
the other Credit Documents to another Lender or an Eligible Assignee
selected by Borrower, in consideration for the payment by such assignee to
the Lender of the principal of, and interest on, the outstanding Loans
accrued to the date of such assignment, and the assumption of such Lender's
Commitment hereunder, together with any and all other amounts owing to such
Lender under any provisions of this Agreement or the other Credit Documents
accrued to the date of such assignment.
Section 7.07. Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF) OF THE STATE OF GEORGIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE
SUPERIOR COURT OF FULTON COUNTY, GEORGIA, OR ANY OTHER COURT OF THE STATE
OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND BORROWER HEREBY IR
REVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) BORROWER HEREBY IRREVOCABLY DESIGNATES THE CORPORATION
SERVICE COMPANY, ATLANTA, GEORGIA, AS ITS DESIGNEE, APPOINTEE AND LOCAL
AGENT TO RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH
RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR THE NOTES OR ANY DOCUMENT RELATED THERETO. IT IS
UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH LOCAL AGENT WILL BE
PROMPTLY FORWARDED BY SUCH LOCAL AGENT AND BY THE SERVER OF SUCH PROCESS BY
MAIL TO BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, BUT
THE FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY
THE SERVICE OF SUCH PROCESS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BE
COME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
(d) Nothing herein shall affect the right of any Lender,
any holder of a Note or any Credit Party to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise
proceed against Borrower in any other jurisdiction.
Section 7.08. Independent Nature of Lenders' Rights. The
amounts payable at any time hereunder to each Lender shall be a separate
and independent debt, and each Lender shall be entitled to protect and
enforce its rights pursuant to this Agreement and its Notes, and it shall
not be necessary for any other Lender to be joined as an additional party
in any proceeding for such purpose.
Section 7.09. Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 7.10. Effectiveness; Survival.
(a) This Agreement shall become effective on the date (the
"Effective Date") on which all of the parties hereto shall have signed a
counterpart hereof (whether the same or different counterparts) and shall
have delivered the same to counsel for SunTrust pursuant to Section 7.01
or, in the case of the Lenders, shall have given written or telex notice
(actually received) to counsel to SunTrust that the same has been signed
and mailed to them.
(b) The obligations of Borrower under Sections 2.09(b),
2.12, 2.14, 2.15, 2.18, and 7.04 hereof shall survive for ninety (90) days
after the payment in full of the Notes after the Final Maturity Date. All
representations and warranties made herein, in the certificates, reports,
notices, and other documents delivered pursuant to this Agreement shall
survive the execution and delivery of this Agreement, the other Credit
Documents, and such other agreements and documents, the making of the Loans
hereunder, and the execution and delivery of the Notes.
Section 7.11. Severability. In case any provision in or
obligation under this Agreement or the other Credit Documents shall be
invalid, illegal or unenforceable, in whole or in part, in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 7.12. Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular action
or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or be otherwise within the
limitation of, another covenant, shall not avoid the occurrence of a
Default or an Event of Default if such action is taken or condition exists.
Section 7.13. Headings Descriptive; Entire Agreement. The
headings of the several sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement. This Agreement, the
other Credit Documents, and the agreements and documents required to be
delivered pursuant to the terms of this Agreement constitute the entire
agreement among the parties hereto and thereto regarding the subject
matters hereof and thereof and supersede all prior agreements,
representations and understandings related to such subject matters.
Section 7.14. Time is of the Essence. Time is of the essence in
interpreting and performing this Agreement and all other Credit Documents.
Section 7.15. Usury. It is the intent of the parties hereto not
to violate any federal or state law, rule or regulation pertaining either
to usury or to the contracting for or charging or collecting of interest,
and Borrower and Lenders agree that, should any provision of this Agreement
or of the Notes, or any act performed hereunder or thereunder, violate any
such law, rule or regulation, then the excess of interest contracted for or
charged or collected over the maximum lawful rate of interest shall be
applied to the outstanding principal indebtedness due to Lenders by
Borrower under this Agreement.
Section 7.16. Construction. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that
the court interpreting or construing the same shall not apply a presumption
that the terms hereof shall be more strictly construed against one party by
reason of the rule of construction that a document is to be more strictly
construed against the party who itself or through its agents prepared the
same, it being agreed that Borrower, the Lenders and their respective
agents have participated in the preparation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in Atlanta, Georgia, by their duly
authorized officers as of the day and year first above written.
BORROWER:
HUGHES SUPPLY, INC.
Address for Notices: _______________________________
20 N. Orange Avenue J. Stephen Zepf
Suite 200 Treasurer
Orlando, Florida 32801
Attention: J. Stephen Zepf _______________________________
Benjamin Butterfield
Secretary
Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
200 S. Orange Avenue
4th Floor By: ______________________________
Orlando, Florida 32802 Name:
Attn: Mr. Bill Barr Title:
Telecopy No. 407/237-6894
Payment Office:
200 S. Orange Avenue
4th Floor
Orlando, Florida 32802
________________________________
Commitment: $25,000,000
Pro Rata Share of Commitment: 50%
Address for Notices: FIRST UNION NATIONAL BANK
100 S. Ashley Drive
Suite 100
Tampa, Florida 33602 By: ______________________________
Attn: Ms. Mary Doonan Name:
Title:
Telecopy No. 407/649-5732
Payment Office:
20 N. Orange Avenue
Orlando, Florida 32801
________________________________
Commitment: $25,000,000
Pro Rata Share of Commitment: 50%
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF OCTOBER 31, 1998, AND
THE RELATED STATEMENT OF INCOME FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
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<PERIOD-END> OCT-31-1998
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