<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30,1998 Commission File Number 0-13147
------------ --------
LESCO, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 34-0904517
- ------------------------------ ---------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
20005 Lake Road
Rocky River, Ohio 44116
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(440) 333-9250
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practical date.
Outstanding at
Class August 13, 1998
-------------------------------- ----------------
Common shares, without par value 8,356,116 shares
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LESCO, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 June 30 December 31
(In thousands except share data) 1998 1997 1997
----------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 3,102 $ 4,600 $ 3,403
Accounts receivable -- net 82,873 72,696 65,869
Inventories 98,813 86,649 82,174
Deferred income taxes 2,742 4,734 2,680
Prepaid expenses and other assets 1,846 1,422 5,989
--------- --------- ---------
TOTAL CURRENT ASSETS 189,376 170,101 160,115
Property, Plant and Equipment 68,140 50,321 58,454
Less allowance for depreciation and amortization (29,320) (26,482) (27,238)
--------- --------- ---------
38,820 23,839 31,216
Bond proceeds held for construction 341 - 4,761
--------- --------- ---------
39,161 23,839 35,977
Other Assets 8,703 4,979 4,226
--------- --------- ---------
TOTAL ASSETS $ 237,240 $ 198,919 $ 200,318
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 66,021 $ 55,952 $ 34,002
Other current liabilities 7,716 10,684 8,202
Current portion of debt 200 200 200
--------- --------- ---------
TOTAL CURRENT LIABILITIES 73,937 66,836 42,404
Long-term debt 82,895 63,429 83,353
Deferred income taxes 2,282 1,627 2,268
SHAREHOLDERS' EQUITY:
Preferred shares-- without par value--
authorized 500,000 shares
Common shares--without par value--
19,500,000 shares authorized; 8,395,560 shares issued
and 8,389,832 outstanding at June 30, 1998, 8,151,847
at June 30, 1997, 8,250,356 at December 31, 1997 839 815 825
Paid-in capital 31,143 27,576 29,268
Retained earnings 47,075 38,987 42,347
Less treasury shares (59) (17) (59)
Unearned compensation (872) (334) (88)
--------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 78,126 67,027 72,293
--------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 237,240 $ 198,919 $ 200,318
========= ========= =========
</TABLE>
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LESCO, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
------------------------- -------------------------
(In Thousands, Except per Share Data) 1998 1997 1998 1997
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 134,446 $ 111,128 $ 207,136 $ 176,395
Cost of sales 88,709 74,332 136,883 117,347
--------- --------- --------- ---------
GROSS PROFIT ON SALES 45,737 36,796 70,253 59,048
Selling, general and
administrative expenses 32,891 25,893 58,805 49,096
--------- --------- --------- ---------
INCOME FROM OPERATIONS 12,846 10,903 11,448 9,952
Other deductions (income):
Interest expense 1,319 1,075 3,044 2,324
Other - net (497) (459) (1,124) (1,005)
--------- --------- --------- ---------
822 616 1,920 1,319
--------- --------- --------- ---------
Income Before Income Taxes 12,024 10,287 9,528 8,633
Income taxes 4,690 4,012 3,716 3,367
--------- --------- --------- ---------
NET INCOME $ 7,334 $ 6,275 $ 5,812 $ 5,266
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ 0.88 $ 0.77 $ 0.70 $ 0.65
========= ========= ========= =========
DILUTED EARNINGS PER SHARE $ 0.85 $ 0.74 $ 0.67 $ 0.63
========= ========= ========= =========
</TABLE>
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LESCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
(In Thousands) 1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,812 $ 5,266
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 2,667 2,044
Increase in accounts receivable (17,809) (16,529)
Provision for uncollectible accounts receivable 1,055 1,257
Increase in inventories (15,445) (18,559)
Increase in accounts payable 31,799 29,166
Increase in other current items 3,615 4,005
Other 464 (146)
--------- ---------
NET CASH PROVIDED IN OPERATING ACTIVITIES 12,158 6,504
INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (8,268) (2,591)
Acquisition of businesses (8,174) -
Bond proceeds held for construction 4,420 -
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (12,022) (2,591)
FINANCING ACTIVITIES:
Proceeds from borrowings 131,897 40,000
Reduction of borrowings (132,355) (41,275)
Issuance of common shares 1,105 1,035
Cash Dividend (1,084) (973)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (437) (1,213)
--------- ---------
Net (Decrease) Increase in Cash (301) 2,700
Cash -- Beginning of the Period 3,403 1,900
--------- ---------
CASH - END OF THE PERIOD $ 3,102 $ 4,600
========= =========
</TABLE>
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LESCO, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE A - Basis of Presentation
- ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the requirements of Regulation S-X and Form 10-Q. The statements
reflect all adjustments, consisting only of normal recurring accruals, which
are, in the opinion of management, necessary for a fair presentation of the
results for interim periods. For further information, refer to the audited
financial statements and footnotes thereto for the year ended December 31, 1997
included in the Company's Form 10-K.
Operating results for the six months ended June 30 are not necessarily
indicative of the results to be expected for the year due to the seasonal nature
of the Company's business.
NOTE B - Earnings per Share
- ---------------------------
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
(In thousands except share data) 1998 1997 1998 1997
------------------------------------------ ------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $7,344 $6,275 $5,812 $5,266
Denominator:
Denominator for basic
earnings per share -
weighted average shares 8,326,488 8,101,555 8,292,741 8,081,209
Effect of dilutive securities:
Employee stock options 330,674 326,966 356,293 288,395
Performance shares 18,301 18,301 18,301 18,301
------------------- ------------------ ------------------- -------------------
Diluted potential common
shares 348,975 345,267 374,594 306,696
Denominator for diluted
earnings per share -
adjusted weighted average
shares and assumed
conversions 8,675,463 8,446,822 8,667,335 8,387,905
Earnings per share
Basic $0.88 $0.77 $0.70 $0.65
Diluted $0.85 $0.74 $0.67 $0.63
</TABLE>
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NOTE C - Acquisitions
- ---------------------
On January 30,1998, the Company acquired certain assets of Agriturf, Inc. and
Cadwell & Jones, Inc. for $6.0 million in cash, plus the assumption of $2.2
million of debt. The asset purchase included land, a fertilizer manufacturing
facility and related warehouse, working capital and manufacturing equipment. The
asset purchase was financed by the Company's credit facility.
6
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LESCO, INC.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
Results of Operations
- ---------------------
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH
THE THREE MONTHS ENDED JUNE 30, 1997
Net sales for the three-month period ended June 30, 1998 of $134.4 million
increased 21.0% over the net sales of $111.1 million for the same period in
1997. The increase in net sales is due to volume increases which reflect strong
demand for fertilizer and control products, with other products growing at a
slower pace. The Company had 235 Service Centers in operation for the
three-month period ended June 30, 1998 compared to 215 Service Centers in
operation for the same period a year ago. Comparable store sales increased 12.4%
for the three-month period ended June 30, 1998.
Gross profit for the second quarter of $45.7 million, constituting 34.0% of
sales, increased 24.2% over the $36.8 million gross profit, constituting 33.1%
of sales, for the same period in 1997. The gross profit percentage increase
occurred primarily in control products due to cost reductions associated with a
higher volume of purchases.
Selling, general and administrative expenses of $32.9 million increased 27.0%
over the $25.9 million incurred during the same period in 1997. Expense
increases are largely attributable to expenses associated with the addition of
20 new Service Centers and two additional Stores-on-Wheels(R) for 1998, and
increases in the Company's distribution and freight expenses associated with
higher level of sales. During the first six months, the Company relocated its
distribution center in New Jersey and moved its distribution center in Sebring,
Florida in order to consolidate Florida operations closer to its manufacturing
site. Both of these events also contributed to the higher level of expense.
Interest expense was $1.3 million in the current quarter compared with $1.1
million a year ago and is largely attributable to increased debt levels
associated with the August 1, 1997 acquisition of the Tri Delta operation in
California, and the January 30, 1998 Agrifturf and Cadwell & Jones asset
purchases, the construction of the Company's new plant facility in Sebring,
Florida, and increases in working capital associated with sales increases
compared to a year ago. Other deductions - net consist primarily of customer
finance charges which totaled $723,000 for the three month period ended June 30,
1998 and $625,000 in 1997.
The effective tax rate for both the second quarter of 1998 and 1997 was 39.0%
Primarily as a result of the factors above, the Company's net income for the
three-month period ending June 30, 1998 of $7.3 million represents an increase
of 16.9% compared to the $6.3 million earned a year earlier.
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SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH
THE SIX MONTHS ENDED JUNE 30, 1997
Net sales for the six-month period ended June 30, 1998 of $207.1 million
increased 17.4% over the net sales of $176.4 million for the same period in
1997. The increase in net sales is due to volume increases which reflect strong
demand for fertilizer and control products, with other products growing at a
slower pace. The Company had 235 Service Centers in operation for the six-month
period ended June 30, 1998 compared to 215 Service Centers in operation for the
same period a year ago. Comparable store sales increased 10.6% for the six-month
period ended June 30, 1998.
Gross profit for the six-month period ended June 30, 1998 of $70.3 million,
constituting 33.9% of sales, increased 19.2% over the $59.0 million gross
profit, constituting 33.5% of sales, for the same period in 1997. The gross
profit percentage increase occurred primarily in control products due to cost
reductions associated with a higher volume of purchases.
Selling, general and administrative expenses of $58.8 million increased 19.8%
over the $49.1 million incurred during the same period in 1997. Expense
increases are largely attributable to expenses associated with the addition of
20 new Service Centers and two additional Stores-on-Wheels(R) for 1998, and
increases in the Company's distribution and freight expenses associated with
higher level of sales. During the first six months, the Company relocated its
distribution center in New Jersey and moved its distribution center in Sebring,
Florida in order to consolidate Florida operations closer to its manufacturing
site. Both of these events also contributed to the higher level of expense.
Interest expense was $3.0 million in the current six-month period compared with
$2.3 million a year ago. The higher interest expense is mainly attributable to
increased bank debt levels associated with the August 1, 1997 acquisition of the
Tri Delta operation in California, and the January 30, 1998 Agriturf and Cadwell
& Jones asset purchases, the construction of the Company's new plant facility in
Sebring, Florida, and increases in working capital associated with sales
increases compared to a year ago. Other deductions - net consist primarily of
customer finance charges which totaled $1.4 million for the six month period
ended June 30, 1998 and $1.2 million in 1997.
The effective tax rate for the current year six-month period was 39.0% compared
with 39.0% for the same period a year ago.
Primarily as a result of the factors above, the Company's net income for the
six-month period ending June 30, 1998 of $5.8 million represents an increase of
10.4% compared to the $5.3 million earned a year earlier.
8
<PAGE> 9
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
On January 30, 1998, the Company acquired certain assets of Agriturf, Inc. and
Cadwell and Jones, Inc. for $6.0 million in cash, plus the assumption of $2.2
million in debt. The asset purchase included land, a fertilizer manufacturing
facility and related warehouse, working capital, and other manufacturing assets.
Funding for the asset purchase was financed by an extension of the Company's
credit facilities.
As of June 30, 1998, total assets of the Company were $237.2 million compared to
$198.9 million as of June 30, 1997 and $200.3 million as of December 31, 1997.
The asset increase compared to a year ago is primarily attributable to increases
in working capital and increases in property, plant, and equipment associated
with the acquisitions completed by the Company within the past year, while the
increase from December 31, 1997 is primarily due to seasonality. Accounts
receivable were $82.9 million as of June 30, 1998 compared to $72.7 million a
year ago, and $65.9 million as of December 31, 1997. Compared to a year ago,
Accounts receivable have increased by 14.0% compared to the 17.4% increase in
sales. Inventory was $98.8 million as of June 30, 1998 compared to $86.6 million
a year ago, and $82.2 million as of December 31, 1997. Compared to a year ago,
inventory has increased by 20.2% compared to the 17.4% increase in sales. The
increase in inventory reflects the Company's seasonal build combined with
inventory associated with the increase in Service Centers.
Funding for the asset changes was provided primarily by an increase in long-term
debt, along with an increase in accounts payable. The Company's long-term debt
increased to $82.9 million as of June 30, 1998. Accounts payable increased to
$66.0 million as of June 30, 1998 from $56.0 million as of June 30, 1997, and
$34.0 million as of December 31, 1997. The increase in accounts payable
year-over-year was due to inventory purchases related to year-to-year sales
volume while the December to June increase reflects seasonal supplier deferred
payment programs which are due in the second and third quarter of the year.
On June 23, 1998, the Company completed a $50 million private placement of
Senior Notes with five lenders. The Senior Notes have an average life of seven
and one-half years, with average fixed-rate interest of 6.81%. Proceeds of the
Senior Notes were used to reduce the amounts outstanding under the Company's
bank credit facility.
Outstanding debt under the Company's credit facility was $19.1 million as of
June 30, 1998 compared to $57.0 million as of June 30, 1997 and $69.5 million as
of December 31, 1997. As of June 30, 1998, the Company had $60.9 million
available under its bank credit facility. The Company experiences peak seasonal
working capital needs which will reduce in the third quarter and believes its
current borrowing capacity is adequate for the foreseeable future.
Capital expenditures for the first six months of 1998 totaled $8.3 million of
which $2.0 million related to property, plant and equipment purchased in the
Agrifturf, Inc. and Cadwell & Jones, Inc. asset purchases. The primary
expenditure of the remaining $6.3 million included the construction of the new
fertilizer manufacturing facility in Sebring, Florida, improvements in the
Company's information systems and the opening of twenty new Service Centers.
9
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Year 2000 Compliance
- --------------------
Over the past three years, the Company has broadly implemented new information
systems and technology with respect to production, production planning,
inventory management, order entry, distribution and financial systems. This
broad-based strategic initiative, which also includes noninformation systems,
will be completed by mid 1999. As a result, it is the Company's assessment that
these new systems and technology either have the capability now, or will by the
end of 1998, to adequately recognize the year 2000. The Company does not
currently expect third-party year 2000 compliance issues to have a material
impact on its operation. An internal initiative has been established to continue
to evaluate the potential impact of year 2000 on its operations.
New Accounting Requirements
- ---------------------------
In June 1997, the Financial Accounting Standards Board issued FAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." The
statement requires a "management" approach to reporting financial and
descriptive information about a Company's operating segments. Management
continues to study the potential effect of adopting this statement.
As of January 1, 1998 the Company adopted FAS No. 130, "Reporting Comprehensive
Income." The statement establishes new rules for the reporting and display of
comprehensive income and its components. The adoption of this statement had no
impact on the Company's net income or shareholders' equity and the Company has
no elements of other comprehensive income in any period presented.
Forward-Looking Statements
- --------------------------
Certain statements included in the report are forward-looking statements that
are based on management's current belief, assumptions and expectations. These
forward-looking statements can be identified by the use of predictive or future
tense terms such as "anticipate," "estimate," "project," "may," "will" or
similar terms. These statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company's actual
future performance may differ materially from that anticipated in
forward-looking statements. Risk factors that would cause or contribute to such
differences include, but are not limited to:
- regional weather conditions which have an impact on both timing
and volume of sales;
- the Company's successful execution of its operating plans;
- the Company's ability to integrate business acquisitions
successfully;
- general economic and business conditions;
- changes in market demographics; and
- changes in the regulation of the Company's products, including
applicable environmental regulations.
10
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PART II - OTHER INFORMATION
---------------------------
Except as noted below, the items in Part II are inapplicable or, if applicable,
would be answered in the negative. These items have been omitted and no other
reference is made thereto.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On May 13, 1998, the Registrant conducted its Annual Meeting of Shareholders,
The following matters were brought before the shareholders for vote at this
meeting:
Election of Directors for a One-Year Term
-----------------------------------------
<TABLE>
<CAPTION>
Votes "For" Votes "Withheld"
----------- ----------------
<S> <C> <C>
Ronald Best 6,436,990 370,470
Drexel Bunch 6,436,735 370,725
Robert F. Burkhardt 6,443,859 363,602
Paul H. Carleton 6,434,348 373,112
David H. Clark 6,442,451 365,010
J. Martin Erbaugh 6,377,718 429,742
Michael J. FitzGibbon 6,443,540 363,920
William A. Foley 6,443,386 364,074
Lee C. Howley 6,443,685 363,775
</TABLE>
Amendment to the 1992 Stock Incentive Plan
------------------------------------------
For Against Abstain/Broker Non-Votes
--- ------- ------------------------
1992 Stock Incentive Plan 6,057,239 132,617 132,617
No other matters were brought before shareholders for a vote.
Item 5 - Other Information
- --------------------------
Shareholders who intend to submit proposals included in the Company's
proxy materials may do so in compliance with Rule 14a-8 promulgated under the
Securities Exchange Act of 1934. As stated in the Company's proxy statement
dated April 9, 1998, the last date any such proposal will be received by the
Company for inclusion in the Company's proxy materials relating to the 1999
Annual Meeting is December 8, 1998. For those shareholder proposals which are
not submitted in accordance with Rule 14a-8, the Company's designated proxies
may exercise their discretionary voting authority for any proposal received
after February 23, 1999, without any discussion of the proposal in the Company's
proxy materials.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
(4) (i) $50,000,000 Senior Note Purchase Agreement dated June
15, 1998
(10) (r) Sixth Amendment to the Credit Agreement dated June
25, 1998
(27) Financial Data Schedule
11
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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.
LESCO, INC.
August 13, 1998 By: /s/ Ware H. Grove
- ---------------- ----------------------------------
Ware H. Grove, Vice-President/
Chief Financial Officer
12
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Exhbit 4(i)
================================================================================
LESCO, INC.
$5,000,000 6.52% Senior Notes, Series A, due June 15, 2001
$15,000,000 6.64% Senior Notes, Series B, due June 15, 2004
$5,000,000 6.71% Senior Notes, Series C, due June 15, 2008
and
$25,000,000 7.00% Senior Notes, Series D, due June 15, 2008
--------------
NOTE PURCHASE AGREEMENT
-------------
Dated as of June 15, 1998
================================================================================
<PAGE> 2
Model Form No. 2 Version of September 13, 19
<PAGE> 3
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES................................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES............................................................................2
SECTION 3. CLOSING...............................................................................................2
SECTION 4. CONDITIONS TO CLOSING.................................................................................2
Section 4.1. Representations and Warranties....................................................................2
Section 4.2. Performance; No Default...........................................................................3
Section 4.3. Compliance Certificates...........................................................................3
Section 4.4. Opinions of Counsel...............................................................................3
Section 4.5. Purchase Permitted By Applicable Law, etc.........................................................3
Section 4.6. Related Transactions..............................................................................4
Section 4.7. Payment of Special Counsel Fees...................................................................4
Section 4.8. Private Placement Numbers.........................................................................4
Section 4.9. Changes in Corporate Structure....................................................................4
Section 4.10. Proceedings and Documents.........................................................................4
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................4
Section 5.1. Organization; Power and Authority.................................................................4
Section 5.2. Authorization, etc................................................................................5
Section 5.3. Disclosure........................................................................................5
Section 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates..................................5
Section 5.5. Financial Statements..............................................................................6
Section 5.6. Compliance with Laws, Other Instruments, etc......................................................6
Section 5.7. Governmental Authorizations, etc..................................................................7
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.........................................7
Section 5.9. Taxes.............................................................................................7
Section 5.10. Title to Property; Leases.........................................................................7
Section 5.11. Licenses, Permits, etc............................................................................8
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5.12. Compliance with ERISA.............................................................................8
Section 5.13. Private Offering by the Company...................................................................9
Section 5.14. Use of Proceeds; Margin Regulations...............................................................9
Section 5.15. Existing Indebtedness; Future Liens...............................................................9
Section 5.16. Foreign Assets Control Regulations, etc..........................................................10
Section 5.17. Status under Certain Statutes....................................................................10
Section 5.18. Environmental Matters............................................................................10
SECTION 6. REPRESENTATIONS OF THE PURCHASER.....................................................................11
Section 6.1. Purchase for Investment..........................................................................11
Section 6.2. Source of Funds..................................................................................11
SECTION 7. INFORMATION AS TO COMPANY............................................................................12
Section 7.1. Financial and Business Information...............................................................12
Section 7.2. Officer's Certificate............................................................................15
Section 7.3. Inspection.......................................................................................15
SECTION 8. PREPAYMENT OF THE NOTES..............................................................................16
Section 8.1. Required Prepayments.............................................................................16
Section 8.2. Optional Prepayments with Make-Whole Amount......................................................16
Section 8.3. Allocation of Partial Prepayments................................................................17
Section 8.4. Maturity; Surrender, etc.........................................................................17
Section 8.5. Purchase of Notes................................................................................17
Section 8.6. Make-Whole Amount................................................................................17
SECTION 9. AFFIRMATIVE COVENANTS................................................................................19
Section 9.1. Compliance with Law..............................................................................19
Section 9.2. Insurance........................................................................................19
Section 9.3. Maintenance of Properties........................................................................19
Section 9.4. Payment of Taxes and Claims......................................................................19
Section 9.5. Corporate Existence, etc.........................................................................20
Section 9.6. Ranking..........................................................................................20
SECTION 10. NEGATIVE COVENANTS...................................................................................20
Section 10.1. Consolidated Net Worth...........................................................................20
Section 10.2. Maintenance of Consolidated Debt.................................................................20
Section 10.3. Restricted Subsidiary Debt.......................................................................21
</TABLE>
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<TABLE>
<S> <C> <C>
Section 10.4. Priority Debt; Qualified Securitization Transaction Debt.........................................21
Section 10.5. Fixed Charges Coverage Ratio.....................................................................21
Section 10.6. Liens............................................................................................22
Section 10.7. Merger, Consolidation, etc.......................................................................24
Section 10.8. Sale of Assets, etc..............................................................................25
Section 10.9. Sale-and-Leasebacks..............................................................................26
Section 10.10. Restricted Investments...........................................................................26
Section 10.11. Guaranties.......................................................................................27
Section 10.12. Line of Business.................................................................................27
Section 10.13. Transactions with Affiliates.....................................................................27
Section 10.14. Changes in Status of Subsidiaries................................................................27
SECTION 11. EVENTS OF DEFAULT....................................................................................28
SECTION 12. REMEDIES ON DEFAULT, ETC.............................................................................30
Section 12.1. Acceleration.....................................................................................30
Section 12.2. Other Remedies...................................................................................30
Section 12.3. Rescission.......................................................................................31
Section 12.4. No Waivers or Election of Remedies, Expenses, etc................................................31
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................................................31
Section 13.1. Registration of Notes............................................................................31
Section 13.2. Transfer and Exchange of Notes...................................................................31
Section 13.3. Replacement of Notes.............................................................................32
SECTION 14. PAYMENTS ON NOTES....................................................................................33
Section 14.1. Place of Payment.................................................................................33
Section 14.2. Home Office Payment..............................................................................33
SECTION 15. EXPENSES, ETC........................................................................................33
Section 15.1. Transaction Expenses.............................................................................33
Section 15.2. Survival.........................................................................................34
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.........................................34
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 17. AMENDMENT AND WAIVER.................................................................................34
Section 17.1. Requirements.....................................................................................34
Section 17.2. Solicitation of Holders of Notes.................................................................35
Section 17.3. Binding Effect, etc..............................................................................35
Section 17.4. Notes Held by Company, etc.......................................................................35
SECTION 18. NOTICES..............................................................................................36
SECTION 19. REPRODUCTION OF DOCUMENTS............................................................................36
SECTION 20. CONFIDENTIAL INFORMATION.............................................................................36
SECTION 21. SUBSTITUTION OF PURCHASER............................................................................37
SECTION 22. MISCELLANEOUS........................................................................................38
Section 22.1. Successors and Assigns...........................................................................38
Section 22.2. Payments Due on Non-Business Days................................................................38
Section 22.3. Severability.....................................................................................38
Section 22.4. Construction.....................................................................................38
Section 22.5. Counterparts.....................................................................................38
Section 22.6. Governing Law....................................................................................38
Section 22.7. Consent to Jurisdiction and Service of Process...................................................39
Signature.......................................................................................................................40
</TABLE>
-6-
<PAGE> 7
SCHEDULE A -- Information Relating To Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE C -- Restricted Investments
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Licenses, Permits, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
EXHIBIT 1-A -- Form of 6.52% Senior Note, Series A, due June 15, 2001
EXHIBIT 1-B -- Form of 6.64% Senior Note, Series B, due June 15, 2004
EXHIBIT 1-C -- Form of 6.71% Senior Note, Series C, due June 15, 2008
EXHIBIT 1-D -- Form of 7.00% Senior Note, Series D, due June 15, 2008
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
-7-
<PAGE> 8
LESCO, INC.
20005 LAKE ROAD
ROCKY RIVER, OHIO 44116
6.52% Senior Notes, Series A, due June 15, 2001
6.64% Senior Notes, Series B, due June 15, 2004
6.71% Senior Notes, Series C, due June 15, 2008
and
7.00% Senior Notes, Series D, due June 15, 2008
as of June 15, 1998
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
LESCO, INC., an Ohio corporation (the "Company"), agrees with the
Purchasers listed in the attached Schedule A as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $5,000,000 aggregate
principal amount of its 6.52% Senior Notes, Series A, due June 15, 2001 (the
"Series A Notes," such term to include any such notes of such series issued in
substitution therefor pursuant to Section 13 of this Agreement), $15,000,000
aggregate principal amount of its 6.64% Senior Notes, Series B, due June 15,
2004 (the "Series B Notes," such term to include any such notes of such series
issued in substitution therefor pursuant to Section 13 of this Agreement),
$5,000,000 aggregate principal amount of its 6.71% Senior Notes, Series C, due
June 15, 2008 (the "Series C Notes," such term to include any such notes of such
series issued in substitution therefor pursuant to Section 13 of this
Agreement), and $25,000,000 aggregate principal amount of its 7.00% Senior
Notes, Series D, due June 15, 2008 (the "Series D Notes," such term to include
any such notes of such series issued in substitution therefor pursuant to
Section 13 of this Agreement; the Series A Notes, Series B Notes, Series C Notes
and Series D Notes are hereinafter collectively referred to as the "Notes"). The
Series A Notes shall be substantially in the form set out in Exhibit 1-A, the
Series B Notes shall be substantially in the form set out in Exhibit 1-B,
EXHIBIT-4.4(b)
(to Note Purchase Agreement)
<PAGE> 9
the Series C Notes shall be substantially in the form set out in Exhibit 1-C,
and the Series D Notes shall be substantially in the form set out in Exhibit
1-D, in each case, with such changes therefrom, if any, as may be approved by
each Purchaser and the Company.
Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each Purchaser and each Purchaser will purchase from the
Company, at the Closing provided for in Section 3, Notes in the principal amount
and of the series specified opposite such Purchaser's name in Schedule A at the
purchase price of 100% of the principal amount thereof. The obligations of each
Purchaser hereunder are several and not joint obligations, and each Purchaser
shall have no obligation and no liability to any Person for the performance or
nonperformance by any other Purchaser hereunder.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser
shall occur at the offices of Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603, at 10:00 A.M. Chicago time, at a closing (the
"Closing") on June 26, 1998 or on such other Business Day thereafter on or prior
to June 30, 1998 as may be agreed upon by the Company and the Purchasers. At the
Closing the Company will deliver to each Purchaser the Notes of each series to
be purchased by such Purchaser in the form of a single Note of such series (or
such greater number of Notes of such series in denominations of at least
$100,000 as such Purchaser may request) dated the date of the Closing and
registered in such Purchaser's name (or in the name of such Purchaser's
nominee), against delivery by such Purchaser to the Company or its order of
immediately available funds in the amount of the purchase price therefor by wire
transfer of immediately available funds for the account of the Company to
account number 3311277 at National City Bank, (ABA # 041 000124) 1900 East 9th
Street, Cleveland, Ohio. If at the Closing the Company shall fail to tender such
Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to any
Purchaser's satisfaction, such Purchaser shall, at such Purchaser's election, be
relieved of all further obligations under this
E-4.4(b)-9
<PAGE> 10
Agreement, without thereby waiving any rights such Purchaser may have by reason
of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Notes to
be sold to such Purchaser at the Closing is subject to the fulfillment to such
Purchaser's satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.1.Representations and Warranties. The representations and warranties
of the Company in this Agreement shall be correct when made and at the time of
the Closing.
Section 4.2.Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Schedule 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Section 10 hereof had such Section
applied since such date.
Section 4.3.Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to such
Purchaser an Officer's Certificate, dated the date of the Closing, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to such
Purchaser a certificate certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Notes and this Agreement.
(c) ERISA Certificate. If such Purchaser shall have made the
disclosures referred to in Section 6.2(b), (c) or (e), such Purchaser shall have
received the certificate from the Company described in the penultimate paragraph
of Section 6.2 and such certificate shall state that (i) the Company is neither
a "party in interest" nor a "disqualified person" (as defined in Section
4975(e)(2) of the Code), with respect to any plan identified pursuant to Section
6.2(b) or (e) or (ii) with respect to any plan, identified pursuant to Section
6.2(c), neither the Company nor any "affiliate" (as defined in Section V(c) of
the QPAM Exemption) has, at such time or during the
E-4.4(b)-10
<PAGE> 11
immediately preceding one year, exercised the authority to appoint or terminate
the QPAM as manager of the assets of any plan identified in writing pursuant to
Section 6.2(c) or to negotiate the terms of said QPAM's management agreement on
behalf of any such identified plans.
Section 4.4.Opinions of Counsel. Such Purchaser shall have received opinions in
form and substance satisfactory to such Purchaser, dated the date of the Closing
(a) from Baker & Hostetler LLP, special counsel for the Company, covering the
matters set forth in Exhibit 4.4(a) and covering such other matters incident to
the transactions contemplated hereby as such Purchaser or such Purchaser's
counsel may reasonably request (and the Company hereby instructs its counsel to
deliver such opinion to such Purchaser) and (b) from Chapman and Cutler, the
Purchaser's special counsel in connection with such transactions, substantially
in the form set forth in Exhibit 4.4(b) and covering such other matters incident
to such transactions as such Purchaser may reasonably request.
Section 4.5.Purchase Permitted By Applicable Law, etc. On the date of the
Closing each purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which each Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject any
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by any Purchaser, such Purchaser shall have received an Officer's
Certificate certifying as to such matters of fact as such Purchaser may
reasonably specify to enable such Purchaser to determine whether such purchase
is so permitted.
Section 4.6.Related Transactions. The Company, contemporaneously herewith, shall
have consummated the sale of the entire principal amount of the Notes scheduled
to be sold on the Closing Date pursuant to this Agreement.
Section 4.7.Payment of Special Counsel Fees. Without limiting the provisions of
Section 15.1, the Company shall have paid on or before the Closing the fees,
charges and disbursements of the Purchaser's special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.
E-4.4(b)-11
<PAGE> 12
Section 4.8.Private Placement Numbers. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each series of the Notes.
Section 4.9.Changes in Corporate Structure. Except as specified in Schedule 4.9
the Company shall not have changed its jurisdiction of incorporation or been a
party to any merger or consolidation and shall not have succeeded to all or any
substantial part of the liabilities of any other entity, at any time following
the date of the most recent financial statements referred to in Schedule 5.5.
Section 4.10.Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
such Purchaser and such Purchaser's special counsel, and such Purchaser and such
Purchaser's special counsel shall have received all such counterpart originals
or certified or other copies of such documents as such Purchaser or such
Purchaser's special counsel may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1.Organization; Power and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement and the Notes and to
perform the provisions hereof and thereof.
Section 5.2.Authorization, etc. This Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar
E-4.4(b)-12
<PAGE> 13
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 5.3.Disclosure. The Company, through its agent, PNC Capital Markets,
Inc., has delivered to each Purchaser a copy of a Confidential Private Placement
Memorandum, dated April, 1998, including the Company's Annual Report on Form
10-K for the fiscal year ending December 31, 1997 (the "Memorandum"), relating
to the transactions contemplated hereby. The Memorandum fairly describes, in all
material respects, the general nature of the business and principal properties
of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to each Purchaser by or on behalf of the Company in connection with
the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
December 31, 1997, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the Memorandum or in the other documents,
certificates and other writings delivered to each Purchaser by or on behalf of
the Company specifically for use in connection with the transactions
contemplated hereby.
Section 5.4.Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and correct lists
(i) of the Company's Subsidiaries, showing, as to each Subsidiary, its status
(whether a Restricted Subsidiary or Unrestricted Subsidiary) the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
the Company and each other Subsidiary, (ii) of the Company's Affiliates, other
than Subsidiaries, and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned
E-4.4(b)-13
<PAGE> 14
by the Company or another Subsidiary free and clear of any Lien (except as
otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
Section 5.5.Financial Statements. The Company has delivered to each Purchaser
copies of the financial statements of the Company and its Subsidiaries listed on
Schedule 5.5. All of said financial statements (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so specified and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments and the
absence of related notes).
Section 5.6.Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which the Company or any Restricted Subsidiary is
bound or by which the Company or any Restricted Subsidiary or any of their
respective properties may be bound or affected, (b) conflict with or result in a
breach of any of the terms, conditions or provisions of
E-4.4(b)-14
<PAGE> 15
any order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Restricted Subsidiary or (c) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Restricted Subsidiary.
Section 5.7.Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.
Section 5.8.Litigation; Observance of Agreements, Statutes and Orders. (a)
Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Restricted Subsidiary or any property of the Company or any
Restricted Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9.Taxes. The Company and its Restricted Subsidiaries have filed all
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (a)
the amount of which is not individually or in the aggregate Material or (b) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Restricted Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Company knows of no basis for any other tax or
assessment that could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Company and its
Restricted Subsidiaries in respect of federal, state or other taxes for all
fiscal periods are adequate. The federal income tax liabilities of the Company
and its Subsidiaries have been
E-4.4(b)-15
<PAGE> 16
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1995.
Section 5.10.Title to Property; Leases. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Restricted Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course
of business and except for the disposition of certain assets from the Company's
original Sebring, Florida facility in connection with the shut down of that
facility described in Note 10 in the Company's 1997 Annual Report), in each case
free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 5.11.Licenses, Permits, etc. Except as disclosed in Schedule 5.11,
(a) the Company and its Restricted Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned by any other
Person which infringement could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect; and
(c) to the best knowledge of the Company, there is no violation by
any Person of any right of the Company or any of its Restricted Subsidiaries
with respect to any patent, copyright, service mark, trademark, trade name or
other right owned or used by the Company or any of its Restricted Subsidiaries
which violation could individually or in the aggregate reasonably be expected to
have a Material Adverse Effect.
Section 5.12.Compliance with ERISA. (a) The Company and each ERISA Affiliate
have operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or
E-4.4(b)-16
<PAGE> 17
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
(with respect to the foregoing) such liabilities or Liens as would not be
individually or in the aggregate be expected to have Material Adverse Effect.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities by more than $5,000,000 in the case of any
single Plan and by more than $5,000,000 in the aggregate for all Plans. The term
"benefit liabilities" has the meaning specified in Section 4001 of ERISA and the
terms "current value" and "present value" have the meanings specified in Section
3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate would be expected to have a Material Adverse
Effect.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Restricted Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's representation in Section
6.2 as to the sources of the funds used to pay the purchase price of the Notes
to be purchased by such Purchaser.
E-4.4(b)-17
<PAGE> 18
Section 5.13.Private Offering by the Company. Neither the Company nor anyone
acting on its behalf has offered the Notes or any similar Securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any person other than the Purchasers and
not more than 39 other Institutional Investors, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act.
Section 5.14.Use of Proceeds; Margin Regulations. The Company will apply the
proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the
proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the consolidated assets of the Company
and its Restricted Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 5% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.
Section 5.15.Existing Indebtedness; Future Liens. (a) Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the Company and its
Restricted Subsidiaries as of May 31, 1998, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its Restricted
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or such Restricted Subsidiary and
no event or condition exists with respect to any Indebtedness of the Company or
any Restricted Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Indebtedness to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.6.
E-4.4(b)-18
<PAGE> 19
Section 5.16.Foreign Assets Control Regulations, etc. Neither the sale of the
Notes by the Company hereunder nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
Section 5.17.Status under Certain Statutes. Neither the Company nor any
Restricted Subsidiary is subject to regulation under the Investment Company Act
of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.
Section 5.18.Environmental Matters. Neither the Company nor any Restricted
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Restricted Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental Laws,
except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect. Except as otherwise disclosed to each Purchaser in
writing:
(a) neither the Company nor any Restricted Subsidiary has
knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or
to other assets or their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Restricted
Subsidiaries has stored any Hazardous Materials on real properties now
or formerly owned, leased or operated by any of them or has disposed of
any Hazardous Materials in a manner contrary to any Environmental Laws
in each case in any manner that could reasonably be expected to result
in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Restricted Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
E-4.4(b)-19
<PAGE> 20
Section 6.1.Purchase for Investment. Each Purchaser represents that (a) it is
purchasing the Notes for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds and
not with a view to the resale or distribution thereof, provided that the resale
or disposition of such Purchaser's or its property shall at all times be within
such Purchaser's or such pension or trust fund's control, and (b) it is an
"accredited investor" within the meaning of Rule 501 of Regulation D of the
Securities Act. Each Purchaser understands that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
Section 6.2.Source of Funds. Each Purchaser represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the
amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds ten percent (10%)
of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement for such Purchaser filed with such
Purchaser's state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such
E-4.4(b)-20
<PAGE> 21
investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption)
of such employer or by the same employee organization and managed by
such QPAM, exceed 20% of the total client assets managed by such QPAM,
the conditions of Part l(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by
the QPAM (applying the definition of "control" in Section V(e) of the
QPAM Exemption) owns a 5% or more interest in the Company and (i) the
identity of such QPAM and (ii) the names of all employee benefit plans
whose assets are included in such investment fund have been disclosed
to the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
If any Purchaser or any subsequent transferee of the Notes indicates
that such Purchaser or such transferee is relying on any representation
contained in paragraph (b), (c) or (e) above, the Company shall deliver on the
date of the Closing or on the date of transfer, as applicable, a certificate,
which shall state whether (i) it is a party in interest or a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), with respect to any plan
identified pursuant to paragraphs (b) or (e) above, or (ii) with respect to any
plan, identified pursuant to paragraph (c) above, whether it or any "affiliate"
(as defined in Section V(c) of the QPAM Exemption) has at such time, and during
the immediately preceding one year, exercised the authority to appoint or
terminate the QPAM as manager of any plan identified in writing pursuant to
paragraph (c) above or to negotiate the terms of said QPAM's management
agreement on behalf of any such identified plan.
As used in this Section 6.2, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY
E-4.4(b)-21
<PAGE> 22
Section 7.1.Financial and Business Information. The Company shall deliver to
each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- promptly, and in any event within
60 days after the end of each quarterly fiscal period in each fiscal
year of the Company (other than the last quarterly fiscal period of
each such fiscal year), duplicate copies of:
(i) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Restricted Subsidiaries for such quarter and (in the case of
the second and third quarters) for the portion of the fiscal
year ending with such quarter,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments and the absence of related notes, provided that delivery within the
time period specified above of copies of the Company's Quarterly Report on Form
10-Q prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of this Section 7.1(a);
(b) Annual Statements -- promptly, and in any event within
120 days after the end of each fiscal year of the Company, duplicate
copies of,
(i) a consolidated balance sheet of the Company and
its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which
opinion shall state that such financial
E-4.4(b)-22
<PAGE> 23
statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, provided that the delivery
within the time period specified above of the Company's Annual Report
on Form 10-K for such fiscal year (together with the Company's annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under
the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission shall be deemed
to satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
publicly available, one copy of (i) each financial statement, report,
notice or proxy statement sent by the Company or any Restricted
Subsidiary to public securities holders generally, and (ii) each
regular or periodic report, each registration statement that shall have
become effective (without exhibits except as expressly requested by
such holder), and each final prospectus and all amendments thereto
filed by the Company or any Restricted Subsidiary with the Securities
and Exchange Commission and of all press releases and other statements
made available generally by the Company or any Restricted Subsidiary to
the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person
has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any
action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of
existence thereof and what action the Company is taking or proposes to
take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within
fifteen days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in Section 4043(b) of ERISA and the regulations
thereunder, for which notice
E-4.4(b)-23
<PAGE> 24
thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Restricted Subsidiary from any federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Restricted Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes.
Section 7.2.Officer's Certificate. Each set of financial statements delivered to
a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be
accompanied by a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.1 through
Section 10.10 hereof,
E-4.4(b)-24
<PAGE> 25
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the
terms of such Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Restricted Subsidiaries from the
beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists (including,
without limitation, any such event or condition resulting from the
failure of the Company or any Restricted Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to
take with respect thereto.
Section 7.3.Inspection. The Company shall permit the representatives of each
holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Restricted Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of
the Company, which consent will not be unreasonably withheld) to visit
the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists,
at the expense of the Company to visit and inspect any of the offices
or properties of the Company or any Restricted Subsidiary, to examine
all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs,
E-4.4(b)-25
<PAGE> 26
finances and accounts of the Company and its Restricted Subsidiaries),
all at such times and as often as may be requested.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1.Required Prepayments. (a) The entire outstanding principal amount of
the Series A Notes shall be due on June 15, 2001. Except as set forth in Section
8.2, the Series A Notes may not be prepaid prior to maturity at the option of
the Company.
(b) On the fifteenth day of June, 2002 and on June 15, 2003 the
Company will prepay $5,000,000 principal amount (or such lesser principal amount
as shall then be outstanding) of the Series B Notes at par and without payment
of the Make-Whole Amount or any premium, provided that upon any partial
prepayment of the Series B Notes pursuant to Section 8.2 or purchase of the
Series B Notes permitted by Section 8.5 the principal amount of each required
prepayment of the Notes becoming due under this Section 8.1(b) on and after the
date of such prepayment or purchase shall be reduced in the same proportion as
the aggregate unpaid principal amount of the Series B Notes is reduced as a
result of such prepayment or purchase. The entire remaining principal amount of
the Series B Notes shall be due on June 15, 2004. Except as set forth in Section
8.2, the Series B Notes may not be prepaid prior to maturity at the option of
the Company.
(c) On the fifteenth day of June, 2002 and on each June 15 thereafter
to and including June 15, 2007 the Company will prepay $714,286 principal amount
(or such lesser principal amount as shall then be outstanding) of the Series C
Notes at par and without payment of the Make-Whole Amount or any premium,
provided that upon any partial prepayment of the Series C Notes pursuant to
Section 8.2 or purchase of the Series C Notes permitted by Section 8.5 the
principal amount of each required prepayment of the Notes becoming due under
this Section 8.1(c) on and after the date of such prepayment or purchase shall
be reduced in the same proportion as the aggregate unpaid principal amount of
the Series C Notes is reduced as a result of such prepayment or purchase. The
entire remaining principal amount of the Series C Notes shall be due on June 15,
2008. Except as set forth in Section 8.2, the Series C Notes may not be prepaid
prior to maturity at the option of the Company.
(d) The entire outstanding principal amount of the Series D Notes
shall be due on June 15, 2008. Except as set forth in Section 8.2, the Series D
Notes may not be prepaid prior to maturity at the option of the Company.
E-4.4(b)-26
<PAGE> 27
Section 8.2.Optional Prepayments with Make-Whole Amount. The Company may, at its
option, upon notice as provided below, prepay at any time all, or from time to
time any part of, the Notes, in an amount not less than 5% of the aggregate
principal amount of the Notes then outstanding in the case of a partial
prepayment, at 100% of the principal amount so prepaid, and accrued interest
thereon to the date of prepayment, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 8.3), and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid, and shall be accompanied by
a certificate of a Senior Financial Officer as to the estimated Make-Whole
Amount due in connection with such prepayment (calculated as if the date of such
notice were the date of the prepayment), setting forth the details of such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.
Section 8.3.Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof.
Section 8.4.Maturity; Surrender, etc. In the case of each prepayment of Notes
pursuant to Section 8.1 and 8.2, the principal amount of each Note to be prepaid
shall mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and the
applicable Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.
Section 8.5.Purchase of Notes. The Company will not and will not permit any
Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel
E-4.4(b)-27
<PAGE> 28
all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of this Agreement and no Notes may
be issued in substitution or exchange for any such Notes.
Section 8.6.Make-Whole Amount. The term "Make-Whole Amount" means, with respect
to any Note, an amount equal to the excess, if any, of the Discounted Value of
the Remaining Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal, provided that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page USD" of the
Bloomberg Financial Markets Services Screen (or, if not available, any
other nationally recognized trading screen reporting on-line intraday
trading in the U.S. Treasury Securities) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or (ii) if
such yields are not reported as of such time or the yields reported as
of such time are not ascertainable, the Treasury Constant Maturity
Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such
E-4.4(b)-28
<PAGE> 29
Settlement Date. Such implied yield will be determined, if necessary,
by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S. Treasury
security with the maturity closest to and greater than the Remaining
Average Life and (2) the actively traded U.S. Treasury security with
the maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1.Compliance with Law. The Company will and will cause each of its
Subsidiaries to comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and
E-4.4(b)-29
<PAGE> 30
other governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 9.2.Insurance. The Company will and will cause each of its Restricted
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
Section 9.3.Maintenance of Properties. The Company will and will cause each of
its Restricted Subsidiaries to maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.4.Payment of Taxes and Claims. The Company will and will cause each of
its Subsidiaries to file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
E-4.4(b)-30
<PAGE> 31
Section 9.5.Corporate Existence, etc. Subject to Section 10.7, The Company will
at all times preserve and keep in full force and effect its corporate existence.
Subject to Sections 10.7 and 10.8, the Company will at all times preserve and
keep in full force and effect the corporate existence of each of its Restricted
Subsidiaries and all rights and franchises of the Company and its Restricted
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
Section 9.6.Ranking. The Company will ensure that, at all times, all liabilities
of the Company under the Notes will rank in right of payment either pari passu
or senior to all other Debt of the Company except for Debt which is preferred as
a result of being secured as permitted by Section 10.6 (but then only to the
extent of such security).
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1.Consolidated Net Worth. The Company will not, at any time, permit
Consolidated Net Worth to be less than the sum of (a) $60,000,000, plus (b) an
aggregate amount equal to 50% of its Consolidated Net Income (but, in each case,
only if a positive number) for each completed fiscal year beginning with the
fiscal year ended December 31, 1998.
Section 10.2.Maintenance of Consolidated Debt. The Company will not permit, as
of the last day of any fiscal quarter of the Company beginning with the fiscal
quarter ended June 30, 1998, the ratio of Consolidated Debt to Consolidated
Capitalization to exceed
(a) 0.62 to 1 for any fiscal quarter ended June 30, 1998
through and including the fiscal quarter ended September 30, 1999, and
(b) 0.60 to 1 for any fiscal quarter thereafter;
provided that for all purposes of this Section 10.2 (including for purposes of
determining Consolidated Capitalization), Consolidated Debt shall not include
(i) the guarantee by the Company of up to $10,000,000 of outstanding Debt of CTP
pursuant to the CTP Guaranties, and (ii) up to $25,000,000 of Non-Recourse Debt
of the Company and its Restricted Subsidiaries incurred in connection with
Qualifying Securitization Transactions involving Trade Receivables so long as
the Net Proceeds Amount from each Qualifying Securitization Transaction under
this clause (ii) is applied to a Debt
E-4.4(b)-31
<PAGE> 32
Prepayment Application within 120 days after such Qualifying Securitization
Transaction.
Section 10.3.Restricted Subsidiary Debt. The Company will not at any time permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, have outstanding, or otherwise become or remain directly or
indirectly liable with respect to, any Debt other than:
(a) Non-Recourse Debt of a Restricted Subsidiary not in
excess of $60,000,000 incurred in connection with a Qualifying
Securitization Transaction provided that such Debt may not be extended,
renewed or refunded except as otherwise permitted by this Agreement;
(b) Debt of a Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(c) Debt of a Restricted Subsidiary outstanding at the time
such Restricted Subsidiary becomes a Restricted Subsidiary, provided
that (i) such Debt shall not have been incurred in contemplation of
such Restricted Subsidiary becoming a Restricted Subsidiary, and (ii)
immediately after such Restricted Subsidiary becomes a Restricted
Subsidiary no Default or Event of Default shall exist, and provided,
further, that such Debt may not be extended, renewed or refunded except
as otherwise permitted by this Agreement; and
(d) Debt of a Restricted Subsidiary in addition to that
otherwise permitted by the foregoing provisions of this Section 10.3,
provided that the total amount of all Debt of all Restricted
Subsidiaries outstanding pursuant to this subparagraph (d) does not
exceed 15% of Consolidated Net Worth.
Section 10.4.Priority Debt; Qualified Securitization Transaction Debt. (a) The
Company will not permit, as of the last day of any fiscal quarter of the Company
beginning with the fiscal quarter ended June 30, 1998, Priority Debt to exceed
20% of Consolidated Net Worth.
(b) The Company will not at any time permit the outstanding
Debt of the Company and its Subsidiaries incurred in connection with
Qualified Securitization Transactions to exceed $60,000,000.
Section 10.5.Fixed Charges Coverage Ratio. The Company will not, at any time,
permit the Fixed Charges Coverage Ratio to be less than or equal to 1.25 to 1.
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<PAGE> 33
Section 10.6.Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such Restricted Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom or assign or otherwise
convey any right to receive income or profits (unless it makes, or causes to be
made, effective provision whereby the Notes will be equally and ratably secured
with any and all other obligations thereby secured, such security to be pursuant
to an agreement reasonably satisfactory to the Required Holders and, in any such
case, the Notes shall have the benefit, to the fullest extent that, and with
such priority as, the holders of the Notes may be entitled under applicable law,
of an equitable Lien on such property), except:
(a) Liens for property taxes and assessments or governmental
charges or levies which are not yet due and payable or the payment of
which is not at the time required by Section 9.4; and Liens arising by
operation of law of landlords, carriers, warehousemen, mechanics,
materialmen and other similar Liens in each case, incurred in the
ordinary course of business for sums not yet due and payable or the
payment of which is not at the time required by Section 9.4;
(b) Liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Restricted Subsidiary
shall at such time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such
appeal or proceeding for review shall have been secured;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (i) in connection with
workers' compensation, unemployment insurance and other types of social
security or retirement benefits, or (ii) to secure (or to obtain
letters of credit that secure) the performance of tenders, statutory
obligations, regulatory, contractual or warranty requirements
(including rights of offset and set-off), surety bonds, appeal bonds,
bids, leases (other than Capital Leases), performance bonds, purchase,
construction or sales contracts and other similar obligations, in each
case not incurred or made in connection with the borrowing of money,
the obtaining of advances or credit or the payment of the deferred
purchase price of property;
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<PAGE> 34
(d) minor survey exceptions or minor encumbrances, easements
or reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the use
of real properties, minor irregularities in title thereto and other
minor Liens arising in the ordinary course of business and not in
connection with the borrowing of money, which are necessary for the
conduct of the activities of the Company and its Restricted
Subsidiaries or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not
in any event materially impair their use in the operation of the
business of the Company and its Restricted Subsidiaries or materially
detract from the value of such property;
(e) Liens existing on the date of this Agreement and securing
the Debt of the Company and its Restricted Subsidiaries referred to in
items 3, 4 and 5 of Schedule 5.15;
(f) any Lien created to secure Capital Leases, or to secure
all or any part of the purchase price, or to secure Debt incurred or
assumed to pay all or any part of the purchase price or cost of
construction, of property (or any improvement thereon) acquired or
constructed by the Company or a Restricted Subsidiary after the date of
the Closing, provided that
(i) any such Lien shall extend solely to the item or
items of such property (or improvement thereon) so acquired or
constructed,
(ii) the principal amount of the Debt secured by any
such Lien shall at no time exceed an amount equal to the
lesser of (A) the cost to the Company or such Restricted
Subsidiary of the property (or improvement thereon) so
acquired or constructed and (B) the Fair Market Value (as
determined in good faith by the board of directors of the
Company) of such property (or improvement thereon) at the time
of such acquisition or construction,
(iii) immediately after giving effect to the
incurrence or assumption of such Debt, the Company and its
Restricted Subsidiaries would be in compliance with the
provisions of Sections 10.2, 10.3 and 10.4 hereof, assuming,
for purposes of determining such compliance, that the date of
such incurrence or assumption was the last day of a fiscal
quarter of the Company, and
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<PAGE> 35
(iv) any such Lien shall be created contemporaneously
with, or within 90 days after, the acquisition or construction
of such property;
(g) any Lien existing on property of a Person immediately
prior to its being consolidated with or merged into the Company or a
Restricted Subsidiary or its becoming a Subsidiary, or any Lien
existing on any property acquired by the Company or any Restricted
Subsidiary at the time such property is so acquired (whether or not the
Debt secured thereby shall have been assumed), provided that (i) no
such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person's becoming a Restricted
Subsidiary or such acquisition of property, and (ii) each such Lien
shall extend solely to the item or items of property so acquired;
(h) Liens on property or assets of any of the Restricted
Subsidiaries securing Debt owing to the Company or to another
Restricted Subsidiary;
(i) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (e), (f) or (g) of this Section 10.6, provided
that (i) the principal amount of Debt secured by such Lien immediately
prior to such extension, renewal or refunding is not increased or the
maturity thereof reduced, (ii) such Lien is not extended to any other
property, and (iii) immediately after such extension, renewal or
refunding no Default or Event of Default would exist;
(j) Liens on Trade Receivables arising in connection with a
Qualifying Securitization Transaction in an amount sufficient to
support up to a $60,000,000 Qualifying Securitization Transaction and
any equipment, collections, accounts and other property relating
thereto, provided that, immediately after giving effect to such
Qualifying Securitization Transaction, the Debt secured thereby is
permitted pursuant to Section 10.2, assuming, for purposes of
determining whether such Debt is permitted, that the date of such
Qualifying Securitization Transaction was the last day of a fiscal
quarter of the Company; and
(k) other Liens not otherwise permitted by paragraphs (a)
through (j), inclusive, of this Section 10.6 securing Debt of the
Company or a Restricted Subsidiary, provided that the total amount of
all Debt of the Company and its Restricted Subsidiaries secured by
Liens permitted by this paragraph (k) does not exceed 15% of
Consolidated Net Worth.
Section 10.7.Merger, Consolidation, etc. The Company will not, and will not
permit any of its Restricted Subsidiaries to, consolidate with or merge with any
other corporation or
E-4.4(b)-35
<PAGE> 36
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person (except that a Restricted
Subsidiary of the Company may (x) consolidate with or merge with, or convey,
transfer or lease substantially all of its assets in a single transaction or
series of transactions to, the Company or another Restricted Subsidiary of the
Company, provided that, immediately after giving effect to such transaction, the
Company or such other Restricted Subsidiary would be in compliance with the
provisions of Sections 10.2, 10.3 and 10.4 hereof, assuming, for purposes of
determining such compliance, that the date of such transaction was the last day
of a fiscal quarter of the Company, and (y) convey, transfer or lease all of its
assets in compliance with the provisions of Section 10.8), provided that the
foregoing restriction does not apply to the consolidation or merger of the
Company with, or the conveyance, transfer or lease of substantially all of the
assets of the Company in a single transaction or series of transactions to, any
Person so long as:
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Company as an
entirety, as the case may be (the "Successor Corporation"), shall be a
solvent corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia;
(b) if the Company is not the Successor Corporation, such
corporation shall have executed and delivered to each holder of Notes
its assumption of the due and punctual performance and observance of
each covenant and condition of this Agreement and the Notes (pursuant
to such agreements and instruments as shall be reasonably satisfactory
to the holder or holders of a majority of the principal amount of the
Notes then outstanding the approval thereof not to be unreasonably
withheld or delayed), and the Company shall have caused to be delivered
to each holder of Notes an opinion of nationally recognized independent
counsel, or other independent counsel reasonably satisfactory to the
holder or holders of a majority of the principal amount of the Notes
then outstanding, to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their
terms, subject to customary qualifications as to creditors rights and
equitable matters; and
(c) immediately after giving effect to such transaction:
(i) no Default or Event of Default would exist, and
E-4.4(b)-36
<PAGE> 37
(ii) the Successor Corporation would be in compliance
with the provisions of Sections 10.2, 10.3 and 10.4 hereof,
assuming, for purposes of determining such compliance, that
the date of such transaction was the last day of a fiscal
quarter of such Successor Corporation.
No such conveyance, transfer or lease of substantially all of the assets of the
Company shall have the effect of releasing the Company or any Successor
Corporation from its liability under this Agreement or the Notes.
Section 10.8.Sale of Assets, etc. Except as permitted under Section 10.7, the
Company will not, and will not permit any of its Restricted Subsidiaries to,
make any Asset Disposition unless:
(a) the portion of the Net Proceeds Amount for such Asset
Disposition consisting of cash or cash equivalents is greater than or
equal to 75% of the total Net Proceeds Amount for such Asset
Disposition;
(b) in the case of any Asset Disposition exceeding
$2,500,000, in the good faith opinion of the Board of Directors of the
Company, the Asset Disposition is in exchange for consideration having
a Fair Market Value at least equal to that of the property exchanged
and is in the best interest of the Company or such Restricted
Subsidiary;
(c) immediately after giving effect to the Asset Disposition,
no Default or Event of Default would exist; and
(d) immediately after giving effect to the Asset Disposition,
the Disposition Value of all property that was the subject of any Asset
Disposition since the date of the Closing would not exceed 15% of
Consolidated Assets as of March 31, 1998.
If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application or a Property Reinvestment Application within 365 days after such
Transfer, then such Transfer, only for the purpose of determining compliance
with subsection (d) of this Section 10.8 as of any date, shall be deemed not to
be an Asset Disposition.
Section 10.9.Sale-and-Leasebacks. The Company will not, and will not permit any
Restricted Subsidiary to, enter into any Sale-and-Leaseback Transaction unless
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<PAGE> 38
(a) immediately after giving effect thereto, the aggregate
amount of all Attributable Debt of the Company and its Restricted
Subsidiaries does not exceed 15% of Consolidated Net Worth determined
at such time, provided, however, that if the Company completes a
Sale-and-Leaseback Transaction with respect to its facility in Avon
Lake, Ohio within two years after the date of the Closing, the
Attributable Debt relating to such Sale-and-Leaseback Transaction shall
not be included as Attributable Debt for purposes of this clause (a);
or
(b) immediately after giving effect thereto, the Company and
its Restricted Subsidiaries would be in compliance with the provisions
of Sections 10.2, 10.3 and 10.4 hereof, assuming, for purposes of
determining such compliance, that (i) Attributable Debt was Debt and
(ii) the date of such Sale-and-Leaseback Transaction was the last day
of a fiscal quarter of the Company; or
(c) the Net Proceeds Amount received by the Company or such
Restricted Subsidiary in respect of such Sale-and-Leaseback Transaction
is applied within 60 days of the consummation thereof to a Debt
Prepayment Application.
Section 10.10.Restricted Investments.
(a) Limitation. The Company will not, and will not permit any of its
Restricted Subsidiaries to, declare, make or authorize any Restricted Investment
unless immediately after giving effect to such action:
(i) the aggregate value of all Restricted Investments of the
Company and its Restricted Subsidiaries (valued immediately after such
action) would not exceed 15% of Consolidated Net Worth; and
(ii) no Default or Event of Default would exist.
(b) Investments of Restricted Subsidiaries. Each Person which becomes
a Restricted Subsidiary of the Company after the date of the Closing will be
deemed to have made, on the date such Person becomes a Restricted Subsidiary of
the Company, all Restricted Investments of such Person in existence on such
date. Investments in any Person that ceases to be a Restricted Subsidiary of the
Company after the date of the Closing (but in which the Company or another
Restricted Subsidiary continues to maintain an Investment) will be deemed to
have been made on the date on which such Person ceases to be a Restricted
Subsidiary of the Company.
E-4.4(b)-38
<PAGE> 39
Section 10.11.Guaranties. The Company will not, and will not permit any
Restricted Subsidiary to, become or be liable in respect of any Guaranty, except
Guaranties by the Company which are limited in amount to a stated maximum dollar
exposure or Guaranties which constitute Guaranties of obligations incurred by
any Restricted Subsidiary in compliance with the provisions hereof.
Section 10.12.Line of Business. The Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in any business if, as a result, the
general nature of the business in which the Company and its Restricted
Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Company and its
Restricted Subsidiaries, taken as a whole, are engaged on the date of this
Agreement as described in the Memorandum.
Section 10.13.Transactions with Affiliates. The Company will not and will not
permit any Restricted Subsidiary to enter into directly or indirectly any
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than with the Company or
another Restricted Subsidiary and other than any Investments in CTP), except in
the ordinary course and pursuant to the reasonable requirements of the Company's
or such Restricted Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Restricted Subsidiary than would be
obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
Section 10.14.Changes in Status of Subsidiaries. (a) So long as no Default or
Event of Default shall have occurred and be continuing, the Board of Directors
of the Company may at any time and from time to time, upon not less than 30
days' prior written notice given to each holder of Notes, designate a previously
Unrestricted Subsidiary (including a new Subsidiary designated on the date of
its formation) as a Restricted Subsidiary, provided that immediately after such
designation and after giving effect thereto no Default or Event of Default shall
have occurred and be continuing, and provided, further, that the status of such
Subsidiary had not been changed more than twice.
(b) So long as no Default or Event of Default shall have occurred and
be continuing, the Board of Directors of the Company may at any time and from
time to time, upon not less than 30 days' prior written notice given to each
holder of Notes, designate a previously Restricted Subsidiary (that is not
Material Subsidiary) as an Unrestricted Subsidiary, provided that such
designation is treated as a sale of assets subject to the provisions of Section
10.8 and immediately after such designation and
E-4.4(b)-39
<PAGE> 40
after giving effect thereto (i) no Default or Event of Default shall have
occurred and be continuing, (ii) such previously Restricted Subsidiary does not
own, directly or indirectly, any Debt, shares of capital stock or any other
Securities of the Company or any Restricted Subsidiary and (iii) the Company and
its Restricted Subsidiaries would be in compliance with the provisions of
Sections 10.2, 10.3 and 10.4 hereof, assuming, for purposes of determining such
compliance, that the date of such designation was the last day of a fiscal
quarter of the Company, and provided, further, that the status of such
Subsidiary had not been changed more than twice.
(c) Any notice of designation pursuant to this Section 10.14 shall be
accompanied by a certificate signed by a Responsible Officer of the Company
stating that the provisions of this Section 10.14 have been complied with in
connection with such designation and setting forth the name of each other
Subsidiary (if any) which has or will become a Restricted Subsidiary or an
Unrestricted Subsidiary as a result of such designation.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note for more than five Business Days after the same becomes due
and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6,
10.7, 10.8, 10.9 or 10.10 and such default is not remedied within five
Business Days; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); or
E-4.4(b)-40
<PAGE> 41
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in
default (as principal or as guarantor or other surety) in the payment
of any principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of at
least $5,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Restricted Subsidiary is in default
in the performance of or compliance with any term of any evidence of
any Indebtedness in an aggregate outstanding principal amount of at
least $5,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment; or
(g) the Company or any Restricted Subsidiary (i) is generally
not paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any of its Restricted Subsidiaries, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
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<PAGE> 42
Restricted Subsidiaries, or any such petition shall be filed against
the Company or any of its Restricted Subsidiaries and such petition
shall not be dismissed within 60 Business Days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of 5% of Consolidated Assets are rendered against
one or more of the Company and its Restricted Subsidiaries and which
judgments are not, within 45 Business Days after entry thereof, bonded,
discharged or stayed pending appeal; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under Section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under ERISA Section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall
exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
any Restricted Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Restricted
Subsidiary thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually or together with
any other such event or events, could reasonably be expected to have a
Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1.Acceleration. (a) If an Event of Default with respect to the
Company described in paragraph (g) or (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause (vi) of
paragraph (g) by
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<PAGE> 43
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of not less than 51% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (x) all accrued and unpaid
interest thereon and (y) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2.Other Remedies. If any Default or Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
Section 12.3.Rescission. At any time after any Notes have been declared due and
payable pursuant to clause (b) or (c) of Section 12.1, the holders of more than
51% in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind
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<PAGE> 44
and annul any such declaration and its consequences if (a) the Company has paid
all overdue interest on the Notes, all principal of and Make-Whole Amount, if
any, on any Notes that are due and payable and are unpaid other than by reason
of such declaration, and all interest on such overdue principal and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of Default
and Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
Section 12.4.No Waivers or Election of Remedies, Expenses, etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
reasonable costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1.Registration of Notes. The Company shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes of each
series.
Section 13.2.Transfer and Exchange of Notes. Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written
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<PAGE> 45
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver within five Business Days from the date of surrender, at the
Company's expense (except as provided below), one or more new Notes (as
requested by the holder thereof) of the same series in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of the series of Notes
being surrendered as set forth in Exhibit 1-A, 1-B, 1-C or 1-D, as the case may
be. Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $100,000. No holder of a
Note shall transfer such Note to a person that such holder knows is a Competitor
without the consent of the Company unless an Event of Default shall have
occurred and be continuing. Any transferee of a Note, or purchaser of a
participation therein, shall, by its acceptance of such Note or participation be
deemed to make the same representations to the Company regarding the Note or
participation as such holder has made pursuant to Section 6.2, provided that
such entity may (in reliance upon information provided by the Company, which
shall not be unreasonably withheld) make a representation to the effect that the
purchase by such entity of any Note or participation will not constitute a
non-exempt prohibited transaction under Section 406(a) of ERISA; provided,
however, that such transferee or purchaser of a participation will not be deemed
to have chosen the options set forth in Section 6.2(b), (c) or (e) unless such
transferee or purchaser of a participation shall have made the disclosures
referred to therein at least five Business Days prior to its acceptance of such
Note or participation and shall have received prior to such acceptance of such
Note or participation the certificate provided for in the penultimate paragraph
of Section 6.2 and such certificate shall contain the statement set forth in
either Section 4.3(c)(i) or (ii), as applicable; and provided, further, that,
such transferee or purchaser of a participation will not be deemed to have
chosen an option set forth in Section 6.2(b), (c) or (e) unless the applicable
Class Exemption referred to therein remains in effect at that time or another
similar Class Exemption is then available. The Company shall exercise reasonable
due diligence as is necessary to respond to any such disclosure, provided that,
if the Company shall not respond within five Business Days following receipt of
any such disclosure, it shall be deemed to have made the statement set forth in
either Section 4.3(c)(i) or (ii), as applicable.
E-4.4(b)-45
<PAGE> 46
Section 13.3.Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $10,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver within five Business
Days of receipt of said evidence, in lieu thereof, a new Note, dated and bearing
interest from the date to which interest shall have been paid on such lost,
stolen, destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest shall have been paid thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1.Place of Payment. Subject to Section 14.2, payments of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in Rocky River, Ohio at the principal office of the Company in
such jurisdiction. The Company may at any time, by notice to each holder of a
Note, change the place of payment of the Notes so long as such place of payment
shall be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
Section 14.2.Home Office Payment. So long as any Purchaser or such Purchaser's
nominee shall be the holder of any Note, and notwithstanding anything contained
in Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the method and at the address specified for such purpose for such Purchaser
in Schedule A, or by such other reasonable method or at such other address as
such Purchaser shall have from time to time specified to the Company in writing
for such purpose, without the presentation or surrender of such Note or the
making of any notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or prepayment in
full of any Note, such Purchaser shall surrender such Note for
E-4.4(b)-46
<PAGE> 47
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. The Company will afford the benefits of
this Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by any Purchaser under this Agreement and that
has made the same agreement relating to such Note as such Purchaser has made in
this Section 14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1.Transaction Expenses. Whether or not the transactions contemplated
hereby are consummated, the Company will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by each Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save each original Purchaser harmless
from, all claims in respect of any fees, costs or expenses, if any, of brokers
and finders (other than those retained by such Purchaser or holder).
Section 15.2.Survival. The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or
E-4.4(b)-47
<PAGE> 48
on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between each Purchaser and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAIVER.
Section 17.1.Requirements. This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used therein), will be effective as to any Purchaser unless consented
to by such Purchaser in writing, and (b) no such amendment or waiver may,
without the written consent of the holder of each Note at the time outstanding
affected thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest or of the Make-Whole Amount on, the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2.Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof or of
the Notes unless such remuneration is
E-4.4(b)-48
<PAGE> 49
concurrently paid, or security is concurrently granted, on the same terms,
ratably to each holder of Notes then outstanding whether or not such holder
consented to such waiver or amendment.
Section 17.3.Binding Effect, etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4.Notes Held by Company, etc. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or such Purchaser's nominee, to such
Purchaser or such Purchaser's nominee at the address specified for such
communications in Schedule A, or at such other address as a Purchaser
or such Purchaser's nominee shall have specified to the Company in
writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company
in writing, or
E-4.4(b)-49
<PAGE> 50
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Chief Financial
Officer, or at such other address as the Company shall have specified
to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any holder of any Note by or on behalf of the Company
or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
such holder as being confidential information of the Company or such Subsidiary,
provided that such term does not include information that (a) was publicly known
or otherwise known to such holder prior to the time of such disclosure, (b)
subsequently becomes publicly known through no act or omission by such holder or
any person acting on such holder's behalf, (c) otherwise becomes known to such
holder other than through disclosure by the Company or any Subsidiary or (d)
constitutes financial statements delivered to such
E-4.4(b)-50
<PAGE> 51
holder under Section 7.1 that are otherwise publicly available. Each holder of
any Note will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by such holder in good faith to protect
confidential information of third parties delivered to such holder, provided
that such holder may deliver or disclose Confidential Information to (i) such
holder's directors, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by such holder's Notes), (ii) such holder's financial
advisors and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor
to which such holder sells or offers to sell such Note or any part thereof or
any participation therein (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 20), (v) any Person from which such holder offers to purchase any
security of the Company (if such Person has agreed in writing prior to its
receipt of such Confidential Information to be bound by the provisions of this
Section 20), (vi) any federal or state regulatory authority having jurisdiction
over such holder, (vii) the National Association of Insurance Commissioners or
any similar organization, or any nationally recognized rating agency that
requires access to information about such holder's investment portfolio or
(viii) any other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to such holder, (x) in response to any subpoena or other legal
process, (y) in connection with any litigation to which such holder is a party
or (z) if an Event of Default has occurred and is continuing, to the extent such
holder may reasonably determine such delivery and disclosure to be necessary or
appropriate in the enforcement or for the protection of the rights and remedies
under such holder's Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee or any other holder that shall have
previously delivered such a confirmation), such holder will confirm in writing
that it is bound by this Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Affiliate, shall contain such
Affiliate's agreement to be bound
E-4.4(b)-51
<PAGE> 52
by this Agreement and shall contain a confirmation by such Affiliate of the
accuracy with respect to it of the representations set forth in Section 6. Upon
receipt of such notice, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall be deemed to refer to such
Affiliate in lieu of such Purchaser. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
such Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "Purchaser" is used in
this Agreement (other than in this Section 21), such word shall no longer be
deemed to refer to such Affiliate, but shall refer to such Purchaser, and such
Purchaser shall have all the rights of an original holder of the Notes under
this Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1.Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and permitted assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
Section 22.2.Payments Due on Non-Business Days. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
Make-Whole Amount or interest on any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
Section 22.3.Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 22.4.Construction. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
E-4.4(b)-52
<PAGE> 53
Section 22.5.Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 22.6.Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
Section 22.7.Consent to Jurisdiction and Service of Process. (a) To the extent
permitted by applicable law, the Company (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the Supreme Court of the State of New York, New
York County (without prejudice to the rights of any holder of a Note to remove
to the United States District Court for the Southern District of New York) and
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement, or the subject matter hereof or any of
the transactions contemplated hereby or thereby brought by any holder of the
Notes, (ii) hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such New York State court or, to
the fullest extent permitted by applicable law, in such federal court, and (iii)
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding any claim that is
not personally subject to the jurisdiction of the above-named courts, that the
suit, action or proceeding is improper or that this Agreement, or the subject
matter hereof may not be enforced in or by such court.
(b) A final judgment obtained in respect of any action, suit or
proceeding referred to in this Section 22.7 shall be conclusive and may be
enforced in other jurisdictions by suit or judgment or in any manner as provided
by applicable law. The Company hereby consents to service of process by
registered mail, Federal Express, or similar courier at its address set forth in
Section 18, it being agreed that service in such manner shall constitute valid
service upon or its respective successors or assigns in connection with any such
action or proceeding only; provided, however, that nothing in this Section 22.7
shall affect the right of any holder of the Notes to serve legal process in any
other manner permitted by applicable law.
(c) Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY
IN
E-4.4(b)-53
<PAGE> 54
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
* * * * *
E-4.4(b)-54
<PAGE> 55
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth.
Very truly yours,
LESCO, INC.
By
------------------
/ss/
------------------------------
[Title]
Accepted as of June 15, 1998
CANADA LIFE INSURANCE COMPANY OF AMERICA
By
Its /ss/
------------------------------------
PACIFIC LIFE INSURANCE COMPANY
By
Its /ss/
------------------------------------
By
Its /ss/
------------------------------------
E-4.4(b)-55
<PAGE> 56
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
By
Its /ss/
------------------------------------
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF
AMERICA
By
Its /ss/
------------------------------------
PHOENIX AMERICAN LIFE INSURANCE COMPANY
By
Its /ss/
------------------------------------
THE TRAVELERS INSURANCE COMPANY
By
Its /ss/
------------------------------------
E-4.4(b)-56
<PAGE> 1
Exhibit (10)(r)
SIXTH AMENDMENT
TO
CREDIT AGREEMENT
This Sixth Amendment to Credit Agreement (this "Amendment"), dated as
of June 25, 1998, is entered into by and among LESCO, INC., an Ohio corporation
("Borrower"), NATIONAL CITY BANK, NBD BANK, and PNC BANK, NATIONAL ASSOCIATION
(together the "Banks") and NATIONAL CITY BANK IN ITS CAPACITY AS AGENT of the
Banks ("Agent") for the purposes of the Credit Agreement referred to below and
the Related Writings.
WITNESSETH:
WHEREAS, the parties have entered into a Credit Agreement originally
dated as of September 30, 1994 (as amended from time to time, the "Credit
Agreement"; all terms used in the Credit Agreement being used herein with the
same meaning), which sets forth the terms and conditions upon which Banks have
advanced term loans to Borrower and upon which Borrower may obtain revolving
loans from time to time; and
WHEREAS, the parties desire to amend the Credit Agreement to modify the
negative covenant concerning borrowings contained in subsection 3D.03 to permit
a private placement of unsecured debt in the amount of $50,000,000;
NOW, THEREFORE, in consideration of the premises above and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION I - AMENDMENT TO CREDIT AGREEMENT
-----------------------------
Subsection 3D.03 of the Credit Agreement is hereby amended and restated
to read as follows:
"3D.03 BORROWINGS -- No Company will create, assume or have outstanding at
any time any indebtedness for borrowed money or any Funded Indebtedness of
any kind; PROVIDED, that this subsection shall not apply to
(i) the Subject Indebtedness,
(ii) any Subordinated indebtedness owing by Borrower,
(iii) any borrowing owing by a Company to a Company,
(iv) any existing or future indebtedness secured by a purchase
money security interest permitted by subsection 3D.04 or
incurred under a lease permitted by subsection 3D.04,
(v) the industrial development revenue bonds issued in the
aggregate principal amount of approximately five million eight
hundred and seventy-five thousand dollars ($5,875,000) in
connection with Borrower's acquisition of a plant in Martin's
Ferry, Ohio, or the loan obtained in connection therewith from
the State of Ohio in the principal sum of one million dollars
($1,000,000),
<PAGE> 2
(vi) any existing indebtedness fully disclosed in Borrower's
Most Recent 4A.04 Financial Statements or in the Supplemental
Schedule or any renewal or extension thereof in whole or in
part;
(vii) unsecured indebtedness initially privately placed to The
Canada Life Assurance Company of America, Pacific Life
Insurance Company, Provident Mutual Life Insurance Company,
Providentmutual Life and Annuity Company of America, Phoenix
American Life Insurance Company, and The Travelers Insurance
Company (and other affiliates of such entities or their
respective nominees) in the principal amount of $50,000,000; or
(viii) any other indebtedness so long as (a) the same is
unsecured and (b) the aggregate unpaid principal amount of such
other indebtedness does not exceed twenty million dollars
($20,000,000) at any time."
SECTION II - CONDITIONS PRECEDENT
--------------------
It is a condition precedent to the effectiveness of this Amendment
that, prior to or on the date hereof, such documents as Agent may reasonably
request to implement this Amendment and the transactions contemplated hereby
shall have been delivered to Agent (in form and substance acceptable to Agent).
SECTION III - REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to each of the other parties to
this Amendment that
(A) none of the representations and warranties made in the Credit
Agreement has ceased to be true and complete in any material respect as
of the date hereof; and
(B) as of the date hereof no "Default Under This Agreement" has
occurred that is continuing.
SECTION IV - ACKNOWLEDGMENTS CONCERNING OUTSTANDING LOANS
--------------------------------------------
Borrower acknowledges and agrees that, as of the date hereof, all of
Borrower's outstanding loan obligations to Banks are owed without any offset,
deduction, defense, claim or counterclaim of any nature whatsoever. Borrower
authorizes each Bank to share all credit and financial information relating to
Borrower with such Bank's parent company and with any subsidiary or affiliate
company of such Bank or of such Bank's parent company.
SECTION V - REFERENCES
----------
On and after the effective date of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", or words of
like import referring to the Credit Agreement, and each reference in the Subject
Notes or other Related Writings to the "Credit Agreement", "thereof", or words
of like import referring to the Credit Agreement shall mean and refer to the
Credit Agreement as previously amended and as amended hereby. The Credit
Agreement, as previously amended and as amended by this Amendment, is and shall
continue to be in full force and effect and is hereby ratified and confirmed in
all respects. The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Agent or Banks under
the Credit Agreement or constitute a waiver of any provision of the Credit
Agreement except as specifically set forth herein.
SECTION VI - COUNTERPARTS AND GOVERNING LAW
------------------------------
2
<PAGE> 3
This Amendment may be executed in any number of counterparts, each
counterpart to be executed by one or more of the parties but, when taken
together, all counterparts shall constitute one agreement. This Amendment, and
the respective rights and obligations of the parties hereto, shall be construed
in accordance with and governed by Ohio law.
IN WITNESS WHEREOF, the Borrower, Agent and the Banks have caused this
Amendment to be executed by their authorized officers as of the date and year
first above written.
Address: LESCO, INC.
20005 Lake Road
Rocky River, Ohio 44116 By: /ss/
--------------------------------
Printed Name: Ware H. Grove
Title: Vice President / Chief
Financial Officer
Address: NATIONAL CITY BANK, AGENT
1900 East Ninth Street
Attn: Multinational Division By: /ss/
Cleveland, Ohio 44114-3484 --------------------------------
Printed Name: Terri L. Cable
Title: Senior Vice President
Address: NATIONAL CITY BANK
1900 East Ninth Street
Attn: Multinational Division By: /ss/
Cleveland, Ohio 44114-3484 --------------------------------
Printed Name: Terri L. Cable
Title: Senior Vice President
Address: PNC BANK, NATIONAL ASSOCIATION
1375 East Ninth Street
Suite 1250 By: /ss/
Cleveland, Ohio 44114-3103 -------------------------------
Printed Name: David Williams
Title: Vice President
Address: NBD BANK
611 Woodward Avenue
Detroit, Michigan 48226 By: /ss/
--------------------------------
Printed Name: Paul DeMelo
Title: Vice President
3
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0
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